Ten Things I Look For When I’m Helping You Buy a Home*

  1. In Austin: Are there any open permits for previous additions, swimming pool, HVAC updates, electrical updates? Why this matters: In the past couple of years, the City of Austin has gotten very strict about not issuing new building permits (including plumbing, electrical, HVAC, etc) until the old permits have been inspected and approved. There is no such thing as permitting in arrears. Pool built five years ago with no permit? Sorry- it has to go before the home gets another permit for anything. (This actually happened to someone!)
  2. What is the foundation? Why this matters: If pier-and-beam, I want you to use an inspector who understands these systems in this environment.  Because pier and beam has not been common in our area since the 1950’s, there are fewer of these homes, and they are not as well-understood by the average inspector as are the more common slab homes. Some inspectors really make a study of the pier-and-beam situations. And, we have two very different soil types in our area, each of which has an effect on the foundation.
  3. How are the neighboring properties zoned, or who or what owns them? Why this matters: You don’t control what you don’t own. For example, you can buy a home that is backed up to what looks like a beautiful greenbelt, but guess what? If it isn’t public land, the use can change and you can have a whole new subdivision just beyond your back fence. If you bought your home for peaceful privacy, you might not appreciate all the neighbors.
  4. Does the home have a septic system, and does it use well water? Why this matters: It is imperative that you have these systems thoroughly inspected by a specialist. There are lots of ways to mistreat a septic system, and you want to know what you are getting into before you buy. Same for the well water. You will want to get a well specialist in to check the system and you will want to assess the water quality and what it is going to take to upgrade a current treatment system, if necessary. Inadequately treated well water can ruin your dishwasher, your clothes washer, your house plumbing, your tubs, your toilets, your clothes, your dishes and drinking glasses. You get the idea. You need to be prepared; that’s why you have me by your side.
  5. What do you see on the survey and what does the title insurance commitment except? Why this matters: I am not a lawyer. Let me repeat that: I am not a lawyer. But, I have looked at a title commitment or two and a survey or two, and if you don’t already have your own lawyer looking everything over related to your home purchase, I will happily point out some things I see that you might want to get further professional help in understanding. Sometimes the survey is obviously not accurate. Sometimes there are puzzling aspects to easements on the property.
  6. Is the property in some category of flood zone? Why this matters: Even though flood zone maps change around here regularly, not everyone has had experience with a flooded home. I would like to help you understand what flood recovery entails, if you are thinking about buying in a flood zone. Also, a previously-flooded house can be harder to sell in the future, so that is something I would want to explore with you.
  7. If the home is in a condominium association, especially, but, also, just a property owners association, we want to look carefully at those documents. Why this matters: In both cases, the health of your purchase is closely tied to the health of the entity that oversees most aspects of the dwelling and the neighborhood. If it is a new condominium association, there is no history to look at, and so you want to ask lots of questions. If it does have a history, you want to examine it carefully, see what lawsuits or special assessments it might be facing; figure out if you want to be tied to the situation. Yes, we will make a point of being out and about to meet potential neighbors and ask them about the association. I am not shy about doing stuff like that to keep you in the know.
  8. What is surrounding the neighborhood you are interested in? What zoning is there? What businesses might be moving in? Why this matters: For example, if you are buying a lower-end home in a neighborhood that is about to welcome the new location of a huge source of employment, you could be in for some good luck ahead when you want to sell, due to demand. Or, if your new neighborhood is one that is about to be bordered by a new toll road, your property could be harder to sell in the future because of noise. Location matters.
  9. What is the sales history of the home? Why this matters: by looking at the dates of sales, as well as the buyers and sellers, we can guess at whether or not this home has been purchased in poor condition and fixed up for resale. Some “flippers” do a wonderful job and you will be glad to live in your remodeled gem. Some “flippers” do a minimal job, putting lipstick on a pig, so to speak, and you could run into foundation problems, water incursion problems, or other expensive problems down the road, even though the amenities look shiny right now. We want to do some research!
  10. What is the local school like? Why this matters: Of course, I will link you with the Great Schools website, but I can make contact with local principals and neighbors with children so that you can hear about school from the people who know. Even if you have no children, a home in a district with a reputation of one kind or another can take on that reputation, too, making it easier or harder to sell in the future.

Because Keller Williams Realty is my brokerage, I have access to lots and lots of other people’s experiences in real estate transactions. I don’t just have to learn from my own experiences; there are about 900 other agents in my brokerage and I can find out what has happened in their experience, too. Not only do I see other agents at weekly meetings, classes, and coaching sessions, we have our own closed Facebook group from which I learn every single day. And, when I take continuing education classes, I don’t do it online. No; I go to the Austin Board of Realtors for my classes so that I am in a room and in discussions with 20-60 people from various brokerages, and I hear about their experiences. I have a buncha stuff filed away in this brain, and I have the purpose of helping to keep you safe in your transaction.

*Of course, there are more than ten, but this is a good start, and it illustrates some things a lot of people wouldn’t think to check.

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How buildings get built fascinates me. I can’t count the number of times I have participated in  building projects just over the border in Mexico. Here is the early stage of constructing a medical clinic.

West of Weird

Guess ‘weird’ is a matter of opinion, but I went on my first “West of Weird Property Tour” with lender Trey Powers today. ‘Weird’ is a self-proclaimed descriptor of Austin, and Dripping Springs is west of Austin, so…. you get the idea.

The big draw for me was a twelve-and-a-half acre property with large home right in the middle of the new Arrowhead Ranch subdivision. This is close in, and I mean Close In to ‘downtown’ Dripping Springs. The ranchette and subdivision are beautiful, with live oaks, wet-weather streams, and rocky outcroppings.

The ranchette is the remnant of the ranch which contains the main house, built in 2000, with horse barn and amenities. Somebody has GOT to buy this for a bed-and-breakfast or related retirement project right in the middle of the town which calls itself the “Wedding Capital” of central Texas. Please call me if you know someone who wants to buy this jewel.

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Entry

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View outward from the front of the house

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Nice pool off the outdoor kitchen, no?

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Yes, that’s a library with fireplace through the door in the center of the photo.

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Example of good planning: the antler chandelier can be lowered by pulley for cleaning.

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These were the ones that weren’t standing in the middle of the road when we were leaving.

While we’re on the subject of views, the first home we looked at this morning is lovely- spacious and only one story with this view from the back verandah:

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The title company could find no restrictions on what could be built on this property, so you could have your own business and a lovely home. But, please keep in mind that if you have no restrictions on your property use, your neighbors have none on theirs. Anyone up for a little acreage on a hill with a beautiful Texas hill country view from the house?

You can find me at 512-970-9121.

EXTRA: Here’s something to do this weekend. I am the president of The Austin Mosaic Guild and I am always promoting this art and this organization of wonderful people. We were invited to exhibit with the Texas Society of Sculptors at its annual Sculptfest, so, if you feel like dining at The Oasis this weekend, you can see and purchase indoor or outdoor sculptures to complement your new hill country views.  Here is the link with photos and hours and address:

Sculptfest 2017

More Than a Credit Score

Roberta and Jimmy at home in Kerrville

A Blast from the Past- Kerrville, TX

I was updating my home-buyer’s packet, and I reached out to a knowledgeable lender, James Dowis, of Infinity Mortgage here in Austin, to ask him what I need to tell people to prepare before they go home loan shopping. James, being the ever-helpful person he is, promptly responded with these suggestions:

For all pre-qualifications:

 

  • 2016 & 2015 W-2’s and/or 1099’s.
  • If you are a business owner please provide your 2015 and 2016 K-1’s
  • 2016 & 2015 Filed Personal Tax Returns, all pages and schedules
  • Most current 30 days paystubs
  • Most current 2 months bank statements, including account number, name and address, all pages
  • Copy of your driver’s license
  • Copy of your existing mortgage statement and most recent property insurance bill, if you currently own a home and plan on retaining it

 

When I first talk with the borrower I ask questions including if they have been involved in a foreclosure / bankruptcy /divorce and I alter my document requests to possibly include the following:

 

  • Copy of your divorce decree and child support orders, if applicable
  • Copy of the Trustee Deed from when your foreclosure was finalized
  • Copy of your bankruptcy documentation showing your discharge date

 

For underwriting, we would also need:

 

  • Explanations of large non-payroll deposits.  “Large” typically means 25% or more of gross monthly income.
  • Transaction log from bank statement showing the earnest money check was cashed.

 

All deals, every one, require different documents based on the unique scenarios.  If gift funds are received we need documentation on that.  If the borrower is married but the spouse will not be on the loan there are documents needed for that.  So, we collect the basic items, review them along with the application and then ask for the remaining items.

I hope this helps you buyers out there on this “Mathematical Monday”. Thanks, James!

 

Stuff to Know About Buying a House

IMG_0097I love to insert into this blog photos I’ve made over the years!

You can get lots of information on the internet about buying a house, selling a house, maintaining a house, etc. Much of the information is even correct. In some state. Under some circumstances. At some point in time.

I start reading about ‘How to sell a house’, or ‘How to buy a house’ and I think, “Yes, but not in my state…. That’s not the way it’s done here.” We have personally bought and sold homes in three states, multiple times, over decades. Each state is very different, and things change within one state over time. Every two years, after the Texas Legislature meets, we have new laws to follow.

The first thing to know about buying a home in the Austin area in April 2017 is that, if you are going to need to borrow money to buy the house, you must tend to that first thing. REALTORS® keep lists of lenders they’ve worked with and whose clients have had a good experience. Interview some REALTORS®, pick one, and ask about lenders.

Lenders will pre-qualify you for a loan, which means that they ask in person, or online, for your numbers and information, crank it through an algorithm, and spit out a pre-qualification, if your numbers pass the test. Because it is based on self-reporting, and doesn’t go in-depth with your complete financial picture, a pre-qualification doesn’t carry much weight with the seller of a home, especially a nice home in a ‘hot’ neighborhood.  Your REALTOR® is not likely to show you very many homes until you have a more substantial loan work-up done than pre-qualification.

Special note: if you cannot get pre-qualified for a loan, there are companies that can guide you through your journey to financial stability; a good lender might very well partner with a company that can help you in this way; and some lenders offer this service. All is not lost if you don’t qualify right away.

The next level is a pre-approval by the lender. This means that the lender has checked your background information, such as your credit scores from the three major reporters; Experian, TransUnion, and Equifax, has seen copies of your pay stubs, etc. A pre-approval is as far as most lenders will take you before you have a signed contract to buy a house. For the purposes of most home sellers, a buyer with a pre-approval is good enough to sign a contract with.

A few lenders will actually take you through the underwriting process before you even sign a contract to buy a house. Underwriting means a specialist has rooted through your work life, your banking and financial life, your credit history, and your related personal life enough to agree to loan you up to a certain amount of money to buy a house, providing the house you choose passes muster. Going into contract negotiations with a home seller after you have been underwritten for a loan is a strong position, provided your offer is one that makes the seller happy.

Okay, next subject is paperwork. There is a lot. I have been told, and have seen evidence,  that appropriate paperwork provides some legal protection for the following parties: 1) YOU, the buyer, 2) the seller, 3) your real estate brokerage, 4) the agent or REALTOR® looking after your interests on behalf of that brokerage, 5) the agent and brokerage on the seller’s side, 6) the title company insuring clear title on your purchase, 7) the lender, 8) the property owner’s association, if there is one, 9) the builder, if it is a new home purchase, 10) any lien holders on the property in question, 11) the government entities under whose jurisdiction the property falls, 12) any inspectors you employ to assess the property for you, and 13) anyone else who is breathing and walking, rolling, or slithering  nearby your real estate transaction. There is gonna be a lot of paperwork, and it’s my job to make sure it all gets negotiated where possible, filled out properly, and signed.

Because there is a lot of paperwork that gets looked at and signed at various points along the way from agreeing to hire a particular brokerage to work for you to completing the buyer transaction and taking possession of your new home, you must plan to be available during the time-intensive periods

Also, in this still-hot market, you must plan to be available to look at homes and make decisions in short-order. In most cases, you won’t have time to mull over a situation during the buying process; the home you want will be under contract with someone else that day. The time for big, mulling-over decisions is before you go looking at homes. Your REALTOR® can help you think through your situation and decide on your must-haves, your bottom line, and your contingencies before going into battle.

While we’re talking about going into battle, let me touch on the subject of negotiations. I have found that negotiating on behalf of a client works so much better when we all treat each other with utmost respect. I aim to be unfailingly polite and respectful, no matter how the seller approaches things- not only does it make work more satisfying, but I am able to be more successful in getting you what you need as a buyer.

Some of you have heard the opening salvo in a negotiation- the selling price on an item- and then offered a low bid, followed by going back-and-forth with the seller until you eventually meet in the middle.  In home-buying, there is an element of that strategy. However, it pays to understand the psychology of what happens with a house offer. Sellers are usually quite invested in their price and their home, and they don’t respect a low-ball offer on their prized possession. Not to mention, in this market, a lot of times the offers start at the list price and go upward from there. No, it would not be unusual for a low-ball offer to have the effect of cutting off any possible negotiation. You could end your chances before you even get started.

There are other considerations besides price. The standard one-to-four family residential resale contract has 9 pages, not counting additional disclosures, addendums, and ammendments, so you can imagine how many other points there are for a buyer and seller to agree on besides just the selling price. Your REALTOR® can help you put together an offer package that is appealing to the seller. Maybe even appealing enough for the seller to sign a contract with you!

Now you have signed a contract to buy a pre-owned home. Congratulations! Except in unusual circumstances, you will want to pay the seller an amount of money for the privilege of keeping the home off the open market long enough for you to hire professionals to inspect the various systems of your home and give you a report. You need to be reasonably certain that you know what you are getting into. The money you pay the seller for this purpose is called the “option money” and it will be a direct payment. If during your option period that is specified in the contract you decide not to buy the home, the seller has no obligation to return the option money. After all, you paid her the money to let you sign a contract, yet still spend time re-examining your future purchase, and possibly deciding against it. That keeps her home off the market for days, and could be a real liability for her.

You will also pay an amount of money called “earnest money” to show that you are indeed serious about following through with the home purchase, provided there are no nasty surprises that weren’t evident in the home after first inspection by you. This earnest money does not go to the seller; it goes to the escrow officer, usually at the title company you and the seller have agreed to use. Or, it may go to a lawyer’s office and be held in escrow there. This money is recoverable, as long as you follow all the agreements in the executed contract. If you buy the property, the escrow money may be used toward your transaction at closing. Earnest money is typically about 1% of the agreed-upon selling price of the house, but this is one of the many negotiable points between you and the seller.

In most cases, one of your expenses as a buyer will be the appraiser’s work. In a loan situation, the lender will order an appraisal by a licensed individual to give that appraiser’s best assessment of what the value of the house is. In this market, sometimes the agreed-upon sales price is higher than what the appraiser says it is worth. One of the decisions you, as a buyer, will be making ahead of the home-search process, is whether or not you can afford to make up the difference between what you contract to pay for a house (higher amount) and what an appraiser says the home’s value is (lower amount). There are also acceptable ways to provide the appraiser with information about the neighborhood and local sales that she might not have access to through standard channels when she is doing her work.

There are many expenses that a buyer will have in closing a purchase transaction. Some of them the seller might agree to pay, but many more will be your responsibility. Someone will pay for title insurance. Someone will pay title company and county recording fees. Someone will pay loan origination fees. Someone might even pay for a new survey to be made of the property. These costs are something your REALTOR® will help you grasp before you start your transaction and, if you will be getting a loan, your lender will take them all into consideration when they are looking at whether or not you are a good credit risk for them. They will help you understand the costs of closing a transaction.

Part of the transaction cost that is ultimately shared within the selling price by both parties will be paying your real estate broker and the seller’s real estate broker their commissions to cover the work done on behalf of both you and the seller. This is another reason for you to hire carefully when you hire a REALTOR® to work for you- the commission cost is not insignificant, and you want to make sure that the brokerage you hire will serve your needs to the fullest, and then some.

I know I have given you just a bare outline of what goes on from the buying side. In other posts, especially those tagged ‘buyers’, you can see more specifics that might answer some more of your questions. I keep writing these posts as a service to the community, because I know the feeling from my own pre-licensing days of being completely confused and in the dark about what was happening during my own real estate transactions. I want to shed as much light as possible on a complex and important topic.  I always welcome suggestions left in the comment section of this post, or other posts on this blog.

If you are reading this on a device other than a computer, scroll down to see links, more pages, and to subscribe to this blog by email.

Cost-savings for Borrowers

I love sending my home buyers who are planning to borrow to an in-person local lender. I love the personal touch. However, in the world of online everything, I do have a great online option for my homebuyers: Keller Mortgage. Keller Mortgage is new, and our Southwest Market Center has been the testing ground. It is licensed only in Texas right now, but will soon expand. The first loans have been closed speedily, with rates equal to, or better than, competitors’ rates.

Keller Mortgage is partnered with Keller Williams agents as a way of producing a product for our clients that is more than competitive. The business model is based on the best of the traditional lender model (talking with actual people) and the best of the internet model (very low brick-and-mortar costs because the loan center is all in one place), plus an advantage of no advertising and marketing costs. This means that Keller Mortgage is able to charge the borrower no fees AND the borrower gets a credit of $1000, which can save the borrower several thousand dollars on a closing. Other lenders may do something similar, but then raise the interest rate on the loan to make up the difference. The Keller Mortgage business model is based on a large volume of loans from the clients of its many agents, as well as the re-sale of the loans after they are closed.

Keller Mortgage is offering other advantages, too, including starting the appraisal process as soon as the home-buying contract is signed. If you decide not to buy the house during your option period, you do not pay the $450 or so for the appraisal; Keller Mortgage does. Also, you can be underwritten for the loan even before a home buying contract is signed, saving you time in the trip through the closing process. (In multiple offers, this can look good to a seller whose home you are hoping to buy!) You can be underwritten in 24 hours from the time you get all the requested documents to the lender.

I have installed the Keller Mortgage app on my phone and I can use it to help you compare rates to make a decision about which lender you are most comfortable using. If I list your home to sell it, a potential buyer using Keller Mortgage for a home loan could financially make the difference for that buyer between being able to buy at your price point or not. It is certainly something to think about.

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AJ Berzsenyi of KW Mortgage explaining the company’s value for clients

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Went on a property tour this morning in the Dripping Springs area. Lenders and title companies often arrange these affairs on a regular basis for real estate agents and brokers who want to see a sample of what’s available ‘this week’.

It was rainy today. Really rainy. Not too many of us on the property tour. But, you know what? I love to tour properties in the rain, whether with clients, or just for my own education. That’s how you know what the drainage issues are. It’s fun to see how drainage problems have been solved, or forestalled, by French drains, dry streams, foundation grading, walls, etc. It’s also illuminating to see what hasn’t been solved: creeks over sidewalks, water running close to the top of a foundation.

Rainy weather when house-hunting also makes you super-aware of which roads are likely to be impassable in a storm. A phone app I like to use is ATXfloods.com. Shows me a map of all the low-water crossings in the area and which have been closed. Especially important in the hills!

It’s helpful to go house-shopping in the rain so that you can see if there are drainage issues.

By the way, I saw some properties on the market in Dripping Springs this morning that ranged from perfectly charming to gorgeous.

Ideas For Getting Into the Home-buying Market

Hello, First-time Home-shoppers, Parents of First-Time Home-shoppers, and Friends of People Who Don’t Have a Lot of Money to Spend!

On Friday, I met with a lender for Guild Mortgage, Joani Wilson, and she gave me the run-down of Austin-specific programs and area loan types that benefit people who are figuring out how to buy a home in the hot Central Texas market.

Joani Wilson and her borrower booklet

A USDA loan (United States Department of Agriculture) has income requirements on the borrower, as well as property location requirements. This is a loan oriented toward middle-income borrowers. USDA loans are meant to keep rural areas developed and thriving, so that is why there is a property location requirement. The maps on the USDA website linked above will be your first stop to see if a property qualifies for this type of loan. 100% financing is available and the seller is allowed to contribute up to 6% of the amount of the loan toward closing costs, so a buyer could make the purchase with virtually no money up front.

There are also various down-payment assistance programs in the area, so it is possible to get into a home using various FHA (Federal Housing Administration), VA (Veteran’s Administration) , and even conventional loans coupled with the DPA program.

Down payment assistance in Austin

Hill Country Home Down Payment Assistance Program for any area in Travis County

From the website:

  • Per FHA guidelines, all homebuyers qualifying for down payment assistance with credit score of 660 or higher will receive 4% of the original loan amount to be used for down payment and closing costs, which includes lender compensation of a 1.5% origination fee.
  • Per FHA guidelines, all homebuyers qualifying for down payment assistance with credit score ranging between 640 and 659 will receive 5% of the original loan amount to be used for down payment and closing costs, which includes lender compensation of a 1.5% origination fee.
  • The origination fee can be paid by the borrower or the seller.
  • This assistance is a gift/grant and does not require repayment at any time.

Southeast Texas Housing Finance Corporation (known as “SETH”)

Right now, from the website:

  • Current Rate / Offerings Lock Rate FICO     DPA     Effective Date 
    GOVERNMENT
    Option 1– FHA 5.50% 660 w/6% 3/9
    Option 2a– FHA 5.00% 660 w/5% 12/15
    Option 2b– FHA 640 or 660 w/Manual UnderWriting 640 or 660 w/4%
    Option 2c– FHA w/Manual UW 640-659 w/3%
    Option 3– FHA 4.875% 660 w/4% 4/10
    Option 4a– FHA 4.50% 660 w/3% 4/10
    Option 4b– USDA-RD, VA  640
     CONVENTIONAL-FREDDIE MAC
    Option 5– HFA Advantage 5.125% 640 w/4% 3/22

Texas Department of Housing and Community Affairs 

I enjoyed visiting with Joani because she is so enthusiastic about her job, and she obviously enjoys figuring out how to get people into homes.