Number

Mark Sprague, of Independence Title in Texas, forecasts that the cost of labor will rise as much as 25% in the next year or so. Let’s think about it: the entire Texas coast and inland for 75 miles or more, was damaged/destroyed by Hurricane Harvey. All those homes and buildings need repair and replacement. That requires lots and lots of workers, right? More need for workers= rise in wages to lure those workers to the task at hand. This also means that more people will have money to buy stuff. Perhaps goods and services that you and I provide?

Already, the cost of building a new house is rising because of labor cost. I am thinking that if you, or someone you know, were planning to buy a new home anyway, now is the time.

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Kitchen in a Lennar home that a client and I were looking at this weekend.

The Measure of Things*

* Or, ‘Why square footage listed on the MLS points toward the truth, but might not be truth itself’. 

Just me being silly before leaving for my “What is ANSI?” class at Austin Board of Realtors

I am pretty sure the 100-foot tape measure in the video is older than I am, by the way.  Here’s bringing you information from Friday’s class on measuring square footage…

Where does that square footage number come from on a home-for-sale listing? It will say something like “according to tax records” or “according to owner”. But, really where did the county appraisal district or the owner get that number?

If the house was originally built as part of a subdivision of houses going in pretty much all at once, the builder probably had blueprints for 4 or 5 different house designs and the house in question came from one of those blueprints. Did the builder follow that blueprint exactly, or are there variations in the homes that all came from the same blueprint? Who knows? But, the county probably used the builder’s blueprint numbers to assign a square footage to the house in question.

If a house has no blueprint that is available, the county tax appraiser can come out and, using a wheeled device running along the ground, measure the footprint of the foundation to the nearest foot and calculate the square footage of the foundation from those measurements. (How exact do you think that is?) And, if the house has a second story, the footprint number is doubled to represent an approximation of the size of the house. Imagine if the upstairs portion of the house is a loft with only half the square footage of the room below. Or, imagine rooms under the sloping roofline that are scarcely high enough to stand up in. The county appraiser does not know these things just by looking at the house from outside, so the square footage calculation might be off considerably from the area a person can actually walk on inside the house.

Even square footage that was calculated by a licensed appraiser hired by a previous seller or by a previous lender might be a deceptive number. Until fairly recently, there was no standardized way of measuring square footage. Some measurements would include the thickness of interior walls in the total square footage and some would not. Some would include staircase space, some not. Some older measurements might include square footage of upstairs rooms with only 6-foot ceilings, while newer measurements would not. And so on and so forth.

A licensed appraiser is required now to use methods spelled out by the American National Standards InstituteWhich is a good thing, because we can compare two different house sizes measured recently by licensed appraisers.

But, if we are looking at the work of an appraiser from years ago, we simply don’t know how the square footage was calculated at that time.

Are you starting to be a little skeptical about how personally important that number is on the builder’s marketing material, or on the MLS listing? Yeah, me too. That’s why you always hear me answer the square footage question with exactly what we know, “1843 square feet according to the tax records“, or “5220 square feet according to the builder.” I am not trying to evade the question as much as I am emphasizing the approximate nature of that number we’re all looking at.

How does this affect you? Buyer or seller, you are gonna want the buyer’s lender to see an appraisal that matches what the buyer is offering for the house, right? I mean, what if the appraiser comes up with square footage that is considerably less than the square footage that has been on the county tax records all these years? The appraisal might not match what everyone has been thinking that amount of square footage should be worth! Either the buyer coughs up more funds from her pocket, or the deal falls through, ‘cuz no lender is going to make a loan greater than the ascribed value of the house.

Two lessons:

  1. If you are a seller and the square footage listed on the tax records, or from another source when you bought the house, seems really off from what you are observing when you are in the house, you might want to hire your own appraiser to make the calculation using the most up-to-date methods. Why risk going down a long road toward closing a sale when the whole thing comes to a screeching halt because the buyer’s appraisal is lower than the contract amount?
  2. If you are a buyer and you are running around trying the get the most square footage for the dollar, how are you going to know when you’ve found that touchstone? Can you trust the exact number you are seeing on the listing?

Buyers: calculating the value of a home in your mind should not begin and end with price per square foot. I hope you see by now that this is not a trustworthy number! Like I said, that number is a signpost that points toward truth, but it is not likely to be Truth itself.

Sources: Candy Cooke’s class on “What is ANSI?”

Square Footage- Method For Calculating: ANSI Z765-2013 from Home Innovation Research Labs

 

Dripping Springs Opportunities

Today, right now, at 1:31 pm, there are 130 new, under construction, or to-be-built-soon homes on the MLS (Multiple Listing Service) in the Dripping Springs school district. They range in price from $247,250 to $1,499,000, and a few even have acreage. There is even one cabin-style wood house on acreage out in the Henly area. By the way, there are some homes with an Austin zip code which are zoned to Dripping Springs, and there are houses in Driftwood, too, which are zoned to D.S.

Dripping Springs Independent School District

Now if it’s recreation you want in the DSISD, there are 22 homes on the MLS, of various ages, which have…. pools AND horses allowed. Sign me up! Oh, and the prices range from $525,000 to $3,197,700.

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See the baby? This was the end of May- I wonder what this little fawn looks like now? They are all starting to lose their spots.

Lynn Bridge 512-970-9121

Glass ‘n’ Me

Did NOT think I could get excited about a pane of window glass. Wrong, wrong, wrong! We have started replacing double-paned window glass at our house and got the first set installed yesterday. I keep staring out the windows in complete appreciation and awe of what just happened!!! It is the difference between squinting through dirty eyeglasses at the sunny landscape and looking boldly through expensive sunglasses- suddenly the view is clear and crisp, yet not glare-y.

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Before

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After

So here’s the deal about double-pane glass: the less reliable the glue between the layers and the less careful the process, the faster that factory seal will fail, ruining the vacuum between the panes. How do you know a seal has failed? You start seeing moisture between the panes of glass; moisture that cannot be removed from inside the house or from the outside. Or, you start seeing a whitish film on the window that cannot be removed because it is between the panes. Or, you see dirt between the panes.

We compared some prices, then called in Fair and Square Glass Repair, a local business that travels widely in the Austin/San Antonio area. They came out and we talked about the situation, and Trey Doran, the owner of the business, educated me on the type of window frames we have and the type of glass we have. He gave me a tutorial on how our particular windows function and on how I can best care for them. Then, I made a spot decision which windows I wanted to change out first. This is not a cheap project, but we had moved into this house with some milky panes, and I knew that it was a repair/update that I wanted to accomplish and enjoy. We decided to do it a little bit at a time. We are also replacing torn and damaged screens with Fair and Square, upgrading the glass panes and the type of screen while doing it.

About a week after Trey took the measurements, he and his son returned with glass and new screens in hand. I am sorry to say that I had to leave during a lot of the procedure, but I took a few pictures at the beginning.

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He popped out these strips that hold the panes from the inside.

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Using a strong suction device to hold the old glass in order to remove it to the outside.

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I don’t know about you, but I’m seeing a torch and a scraper sitting on the outside ledge. Missed this part, but it must have been exciting.

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Oooooo, cleaning up those beautiful new panes!

Aside from the tremendous pleasure that looking through clean glass brings, these panes are highly energy-efficient and they block 95% of the sun’s ultraviolet rays. You know how your fabrics, paintings, and furniture fade near windows? Yeah, well, not with this glass. Not in my lifetime, anyway.

Although we have been pretty prompt on needed repairs to our homes and on decorating to our taste, we have a track record of putting off updating certain features that are still functional until suddenly we decide to put our house on the market. Then, we go into high gear and do all sorts of things to the house that we could have done years before and actually ENJOYED ourselves before we decided to move. We have made a plan for updating and upgrading this house so that we won’t be in a bind, or leave money on the table if we should decide to move, or if some circumstances force a move.

Here’s a question for you: if my house is on the market and my neighbor down the street has her house on the market, which windows are going to give a better impression when  buyers walk in- the milky windows down the street, or my clear, high-definition view of nature?

 

 

Buyer Questions

Here are some buyer questions I hear a lot:

  1. What is a typical timeline for making an offer?
  2. How many offers will I have to make on homes before I have one accepted?
  3. Why are the ‘for sale’ prices so different from what the county tax appraisal says?

love these questions! Question #2 especially indicates to me that the buyer is savvy about our particular market.

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1. What is the timeline for making an offer? After further questioning, I find that the buyer usually means ‘How much time is there between looking at houses and going under contract? How much time from having a signed contract until I own the house?’ 

A couple of generalizations about this set of questions: are we talking about Austin? Or, are we talking about one of the surrounding cities? What is the price point?

Austin is generally the fastest-moving market because there are so many more buyers than there are available properties (hint, hint, Potential Sellers!). If you are not ready RIGHT NOW to make an offer and show the seller your ability to pay down payment, closing costs, and get a loan, you could be a day too late in getting the house you want. Once you start shopping, you could be getting an offer accepted in the next couple of days.

If you are looking in an outlying area, you might have days or weeks before you find what you want and have an offer accepted, BUT some situations require you to act as fast as you would in Austin. If it is a fabulous property at an appealing price, be prepared to act that very day, or it could be gone!

The next generalization about this question is: what is your price point? In general, the lower price-points, say $600K and lower in Austin and the lake area, and $350K and lower in outlying areas are highly sought-after and you will have lots of competition for that house. The price points higher than that tend to last longer on the market, but it is still true that a fabulous property at an appealing price will go quickly, especially if the price is under a million dollars for a truly million-dollar property and/or location.

If you have a cash offer accepted, you can close quickly- you will be waiting on the results of your own inspection, the title company’s commitment to what the property being passed to you legally is, and possibly, the seller’s schedule of when they can vacate the premises. I have heard of closes in just 4-5 business days, but it is typically 10 days or 2 weeks, realistically.

If you have a loan that needs underwriting, your close won’t happen in less than three weeks after you have a contract, although about 4 weeks is more typical. If you have a lender who is not motivated to get you to the closing table, it can take longer.

2. How many offers will I have to make before I have one accepted? The answer to this is dependent on the price range in which you are looking and on how close to your personal upper limit are you looking. The lower prices, say $250K and below, are full of buyers looking and making offers. I know many ways to make the offer really great for the seller, besides the sales price. BUT, the sales price you are offering is still the most important part of what you ‘lay on the table’ for the seller.

Which leads us to the second part of the question- how close are you to your personal upper financial limit in the homes you choose to look at? If you are already close to the top, you won’t have room to offer more, sometimes much more, than the asking price. Some of these properties receive 10, 20, or 30 offers in a couple of days. Being able to offer a lot more than the asking price becomes important, or you just lose out to someone who can. People looking at close to their upper limit in price might lose 5 or 6 offers before they finally have a contract on a house.

3. Why are the ‘for sale’ prices so different from what the county tax appraisal says?

The way I have had this explained to me in my real estate classes is this: there are three prices on a house; the price the county puts on the property, the price an appraiser says the property is worth, and the price the open market says the property is worth.

a. County appraisers are not necessarily trained, licensed appraisers. They might be people hired to drive around to see if there is anything obvious that has changed about the property since the last drive-by, and then the next year’s value is slapped on the property based on what the last year’s assigned value was, plus whatever increase in revenue the county might need to keep paving the roads, paying the sheriff, etc.  Often, the county’s appraised value is lower than actual market value.

b. An appraiser has been trained to use algorithms plus experienced judgment to interpret the results in order to arrive at a value for the property. Your lender will hire an appraiser from the appraiser pool to calculate a value for the property before the loan is approved. You will pay for the appraisal at closing and not all lenders are careful to hire an appraiser who truly knows the peculiarities of the local market. I encourage you to use a lender whose policy is to “hire local” when it comes to appraisers.

c. The open market (available through exposure on the multiple listing service) will place a value on property for you. Given enough exposure, the current pool of buyers will select a price at which a property will be purchased. If the property you are looking at is listed by a competent agent who has been able to convince the seller of the reality of the market [both important caveats], the price you are looking at on the glossy brochure or pretty website is somewhat close to what a buyer will pay at this particular time. An exception would be if the seller, assisted by the listing agent, calculates that putting a lower price on a home will produce many more offers from which to choose. In this case, the listed price may be lower than you could expect to pay.

There is, of course, a lot more I could say about each of these questions, but this will get us started.

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Photo from 2006, when I was with a church group that worked on new post-Hurricane Katrina homes for the musicians of New Orleans. These were built to be appealing, safe, and affordable to build up the community again.

Negotiating

It could be that growing up an ‘only child’ gave me a foundation for intuiting a lot about negotiation. After all, I perceived the world as myself “against” two parents (who had my best interests at heart), but whose decisions I saw as overly-restrictive. I am sure I argued them out of their minds! But, over time, I did start becoming more sophisticated about ‘reading’ those parents of mine.

With age and experience, I have a completely different perspective on the goals of negotiation. I no longer want to win just for the sake of winning. I am interested in figuring out what the opposite party wants and needs and in seeing a way to align those interests with the wants and needs of my side. I must remain clear and communicative about the needs on my side, especially because perceived needs are usually more fluid than we like to think they are.

When I am on the buyers’ side of a negotiation, I have learned to ask lots of questions of the other agent in a transaction to find out as much as I can about the sellers’ situation. I also pick up clues from the listing, from the photos, from the house itself, from their expressed timelines. I pick up a lot of clues and often, I’m not even sure how I know what I know. That’s intuition.

A real estate buy/sell negotiation starts at the very first contact with my own client. That is when I start setting the tone for how I do business through negotiating with the client on the terms under which we will act in concert to achieve what they need to achieve.

On the buying side, each contact with a listing agent in setting up an appointment to view a property, in letting the agent or the occupant know when we leave the property, in letting the agent know positives and negatives of my buyer’s and my thoughts about the property sets a standard for a later negotiation, should the buyers decide to make an offer. Being unfailingly courteous and respectful toward the other agent and their clients helps them understand that we are not out to ‘get the best of them’, to fool them, or to be arbitrary in our approach. This relaxes everyone, which reduces fear and defensiveness in later discussions.

When I am in a position in which the opposite party tries to bully me or my client, I take this as a sign that his position is weak and the only tool he has left is to try to force his will onto me or my client. Or, that she is pathological! Bullying behavior sends me into my hyper-calm exterior, hyper-alert interior mode in which I see the possibilities and strategies for disarming the bully and forcing her to face the realities of the situation. Working with reality is more productive than dancing around imagined wrongs and slights with power-moves.

Working the seller’s side is interesting because they have had the time and inclination to build a fantasy world of how the market works before I even talk with them about real estate. My job is to give them the experience of market reality so that they can start moving away from notions and into the actual world. And my job is to walk away from the relationship, if it appears that the sellers are not going to face reality in price or in preparation for a sale.

Being in a position to calmly walk away from a negotiation is gold. Knowing the bottom line frees all parties to search earnestly for a way to work together, if both have a stake in the result, and both realize that the other party can and will end the negotiation if there is no positive movement.

On the selling side, it helps that I am familiar with a buyer’s perspective, and I can help the seller understand that perspective, too, in order to remove as many barriers and negotiating points as possible before the house even goes on the market. Imagine if there are only two or three points of contention in a contract, rather than ten! How much less time and annoyance we all expend when we have taken into account a buyer’s perspective ahead of the negotiation!

On the buying side, it helps that I am familiar with a seller’s perspective; all the time and preparation that has gone into getting a house ready for market, and sometimes, even legal issues that have had to be resolved in advance of listing the home, as well as the ongoing inconvenience or even financial stress that comes from having  a home on the market.

Our Texas residential contracts are set up to be very much to the advantage of the buyer, as if the seller is a business or corporation which might be trying to fool the unsuspecting buyer into acquiring a ‘dog’. Of course, there is an element of that in a sale, and I believe in being vigilant in observing potential problems when buying a house. But, unlike a business or corporation, most sellers are emotionally attached to their property and their dignity, and honoring that impulse really helps a buyer’s side in a negotiation about any part of the contract.

I really love negotiation. I love the feeling of being emotionally calm and mentally charged. I love the flow of intuiting the unspoken and using all clues to reach what the parties feel is a satisfying, or at least fair, outcome.

I love when my buyers pay less than their lender’s appraiser says the property is worth. I love when my buyers win with their offer, even when it is less money for the seller than other offers. I love when a seller gets above-asking price for their home, especially when the house has been priced in accordance with what houses in similar condition have been sold for in the neighborhood. And I love when even the people on the other side of the transaction feel satisfied and free to move into the next phase of their lives unencumbered.

There are two or three basic theories I’ve read about how negotiations should be conducted, but my experience shows me that my best approach is to use intuition coupled with adjustments in my side’s response based on the results of each step we take, learning the hidden parts of each parties’ needs and tolerance as we go, until we reach a satisfactory conclusion.

I’ll be happy to negotiate on your behalf, starting with our first contact.

Ruth Marie was about 14.

Esteemed teacher and young student.

There is a lot of unspoken AND spoken negotiation in playing music together. If one player has a strong idea about which way to take the mood, the tempo, even the pitch, it is well that others adjust, or persuade that outlier otherwise, all in real-time! 

Undercover Detective

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Quick- what is this person doing?

If you said, “looking for where the main sewer pipe exits the house to go out to the street”, you’d be right! Ding, ding, ding…

Why do we care about a sewer pipe we can’t even see? Because old sewer pipes can rust from the inside out, develop cracks and leaks, and allow tree roots to invade and clog up the system.

How do you know this has happened? When your sewer line stops working and your toilets and sinks back up. Fun, huh?

The solution, of course, is to install a new main sewer line from the house to the street, digging up the yard.

What if the sewer line now travels through the roots of a large, desirable tree? Some companies are experienced in using a water-and-air shovel to delicately dig through the roots without harming them.

Costly, but necessary.