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.

IMG_1319
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.

20170531_184559

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

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!

 

If You Really Want to Move Now, “Price It Right”

I’m looking at the March 2017 Austin Board of Realtors Market Report from the Real Estate Center at Texas A&M University this morning. Focusing on the zip code 78620, which is the Dripping Springs area. Because A&M is using the Austin Board of Realtors Multiple Listing Service data, I can look at any zip code I want to in the central Texas counties. If you want different area stats from the ones here, just ask me.

In the existing homes category, there are 2.8 months of inventory. Because a market considered ‘balanced’ in which there are about as many people wanting to sell homes as people wanting to buy homes is about 6 months of inventory, we are clearly still in a seller’s market overall. There are more people who want to buy homes than people who want to sell homes.

OK, class, what does this do to price? Yes, that’s right… the market forces keep the prices up. Existing homes are in demand.

Here’s something interesting: the new builds have an inventory of 9.3 months in this zip code. Also, the average selling price of existing homes is $482,145 vs. $430,550 for new homes.

In no category of home; single-family, townhouse, condominium, both new and existing, does the selling price average equal 100% of the listing price average. The ratio is hovering around 94%-95%. On average, sellers are not getting their full asking price for their houses.

However, if you are clever, you will find a REALTOR® who looks at the statistics for your particular neighborhood or area and finds out what the hyper-local market is doing. Amenities, features, well-considered upgrades, location, and landscaping are all factors! With this knowledge you’ll have a better idea of how to price your house.

Remember, the aggregate of buyers who are looking for your type of home, in your price range, in your market is what determines the likely selling price of your home. And, in turn, the aggregate of buyers is influenced by all kinds of forces, from financial, to emotions about the economy and government, to work opportunities, to weather patterns to local government policies and private sector opportunities. And so on.

To put it a different way, if you want to sell your home in this ‘buyer’s market’, it is best not to get too cocky and think that you can pick your own price. I have watched homes sit on the market for weeks and months without very many showings and zero offers. Why? Price per square foot that looks reasonable for the neighborhood and amenities that look good on paper, BUT the fixtures and finishes are dated, or the layout that was suitable for the wants and needs of a family in 1985 is no longer relevant or desirable, or the amenities are not as glam as a typical buyer in 2017 expects to see. In short, a home that was pretty wonderful 30+ years ago has lost its edge and must be priced to attract a smaller set of real buyers. (Real buyers are the set of people who would REALly buy your home.) This is not personal. This is business!

When you price your home too high for what price the market puts on it, you are selling the home down the street, or around the corner, that IS priced right for its market. Buyers see both homes and immediately realize which is the better bargain. And it’s not yours.

By the way, when you and I interview each other about selling your home, I will ask you what you know about any homes that have sold off market around you. That would be homes that have sold by the owner without ever being on the MLS, and homes that were going to go on the MLS, but the owner accepted an offer from a buyer before the MSL thing happened. Having this information helps me to help you price your home right for your hyper-local market.

2011 04 20 002

 

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.

IMG_3807

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

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.