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.

What I’ve Been Thinking About Today

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Yes, kitchens do become dated, and most buyers in our market long for acres of luxurious countertops rather than a dog trot breezeway on which to churn their butter.

In advising people who have been in their homes for a long time and are thinking that they might be moving into a smaller place, or into an assisted-living apartment* in the next couple of years, I realize that folks get information on How To Sell A House from  a variety of sources. Those sources are often national in scope, and are helpful in a way, but never specific enough to a market or micro-market to be completely believable.

In planning home renovations with an eye to a home sale, there is no substitute for consulting with someone who has local market expertise and has walked the walk with a multitude of buyers, hearing their comments and feelings about homes they see. Just because you think you know that most buyers want certain features in a kitchen, or a bathroom, or a certain flooring choice, does not necessarily mean that you will do yourself a favor by spending a lot of money following through with that type of renovation.

When I do a thorough market analysis, I look at every home in your neighborhood, and sometimes, other similar neighborhoods, to see what has sold in the past few months, what those homes looked like inside and out, where they were situated in relation to through streets, scenic views, neighborhood amenities, noise sources, as well as the prices they brought to their sellers. In a neighborhood in which many of the “perfectly good” homes are being torn down to be replaced with a modern version of home, your beloved home might become a tear-down, or a major remodel project, too. If that seems likely based on what the market is telling us right now, it would not be prudent to spend a lot of money updating your home for a sale. It would be more prudent to adjust your expectations to accommodate what the buying public is telling us about price, and for you to put a sales price on the home that reflects what is actually happening in the market.

Please, please do not set off to modernize a badly-dated kitchen or bathroom without getting a pair of expert eyes in to advise you on the likelihood of payoff from such a project.

Much better to keep an eye on home trends all along and periodically make judicious upgrades to your home as you are able. You want to be able to enjoy the fruit of your labor while you are living in the home, right?!?!

*Some of these apartment centers I refer to as “party barges” because the residents live in a stimulating atmosphere of slumber party pranks, laughter over wine and parlor games, endless field trips and educational adventures, and the occasional nap thrown in.

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Happy birthday to this fabulous country of ours, home of beautiful mountains, vast skies, innovative thinkers, and generous hearts. What a great experiment our founders flung out into the world, and may we continue that experiment with creative and supple minds and bodies, that all who enter will sense an awakening to possibilities and promise for everyone and everything contained within these 50 states.

(Almost) Every House is Unique

Cat video. You’re welcome.

Recently, I have found myself consulting with a number of different people about future moves that are not necessarily imminent. I think this time spent together with potential clients is rewarding! Every situation is different and every house is unique in that it is situated in a particular place in the city, in a neighborhood, of a certain age, amount of updating, and is experiencing street changes, or street stability, according to what’s happening in the market.

After asking lots of questions about goals, future desired location, amount of support- family, and otherwise- financial strengths and weaknesses, and determining which emotions are most at play, I put together a suggested plan for tackling all the issues, including prepping the house, for that future move.

Before our meeting, I drive the neighborhood carefully, even if I already know the area well, looking for signs of change, looking for clues to what’s happening. If I see on the MLS that an older home that is mostly in original condition has recently sold, I’ll check from the curb to see what it looks like now. If it is in an area where older houses are being torn down to make way for new ones, I want to know if this particular older home has met that fate, or if it is still being used as a home. Toys and playthings in the front yard six months after the sale are a pretty good indication that this home isn’t being replaced this year.

In advance of my neighborhood drive, I study the MLS and all the properties that have sold in the past six months, or year, depending on the area, searching for sold prices, condition of homes, location in neighborhood, etc. I study the photos that the listing agents put up on the MLS to see the condition of the interiors. I look for homes that might be comparable to the home I am scheduled to visit. I make graphs and charts of market activity in that neighborhood or that feeder district to a particular high school, depending on which parameters I think are most relevant to that house in that location.

When I show up at the door, I already know a lot about the situation, and I bring my graphs, information on comparable homes, a Seller’s Disclosure that the owner will have to fill out sooner or later, and other useful papers. After we sit down and talk about the personal situation, I walk through the house, taking snapshots and noting things that need to be repaired and/or updated.

Depending on the house and the micro-market it inhabits, I use one or more sets of these eyes to examine the property: the flipper-investor eyes, the buy-and-hold investor eyes, the move-up buyer eyes, the downsize buyer eyes, the coming-from-a-different-state eyes, the moving-out-of-the-city eyes, the second-home eyes. The recommendations I make to prepare the house for sale are usually based on the least amount of stuff the homeowner can do to make the house desirable. Of course, price of the home and price of updating and repair is a big factor, too.

Some homes merit new faucets, new flooring, new paint, etc., because through these improvements the homeowner is likely to make a quicker sale, or sell at the higher end of a reasonable price range. Some homes will be purchased by a flipper and price is the only thing that will matter to those folks. Even within my written recommendations, I make two tiers- one is “must do” and the other is “would be nice to do, if possible”.

Here are three short samples from some write-ups I’ve done recently:

The two most important points at which we must capture a buyer’s imagination are from the street and then again just outside and just inside the front door. Those are our ‘hooks’. People have no clue when looking at your neighborhood from the street that there is an amazing view behind the privacy fences, so we have to pull them up and in until they arrive where we want them to be.

The goal of any effort put into your home between now and putting it on the market is to transform it from your ‘home’ into a ‘house’. In other words, it will become a commodity when it hits the market. Your best chance for getting the highest price the market will offer is to get as many buyers aware of its existence as possible (that’s my job) and to pull them from the curb and into the front door (your job and my job). What I am describing now is changes you can make to the real estate to help pull those people in. Staging, our last effort before taking pictures and putting it on the market, will come later.

Because you are looking at a limited time for owning and enjoying the house (5 years is your general estimate, but it could be much less), you will only make changes which, if not made, will result in more days on market to sell your house, or will make the price lower than it needs to be. The changes you elect to make to upgrade the house in the eyes of future buyers must be changes you would enjoy, too, for the length of time you own the house.

Now… why the cat video?  Today I met with a friend and fellow agent who has recently marketed and sold a house that was home to an elderly couple with dozens of rescued cats! What a feat! (It took a village.)  Our rescues in the video? There are only 11 and they are well-loved and cared for. But, I hope we don’t have to move anytime soon!

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.

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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

Second-string

In the Austin market, there are pockets where a home at the right price will be under contract in a day, or two, or three. Happens all the time- far more buyers than sellers= higher prices and fewer houses to buy.

If you, as a buyer, can’t be the winning offer that gets the signed, executed contract, then you can try for second-best. Here’s what you do: you tell your REALTOR® that you want to submit a back up offer, just in case the accepted offer falls through. Your REALTOR® will call the listing agent to make sure the seller is/ still is accepting back up offers. If so, then everything is done exactly like a first offer, except there is an ‘Addendum for “Back-up” Contract’ attached.

The gist of the addendum is that the signed, agreed-upon back-up contract is not in force, unless the first-place contract ‘falls through’ for some reason. At that point, the second-string goes out onto the field to play ball, becoming the first-string in the process. That would be you.

Once the back-up offer is accepted and signed, you still shouldn’t hold your breath, waiting, because your transaction is probably not gonna happen. However…. every once in awhile…. it does (!), and you feel like everything’s coming up roses.

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Thematic Thursday- What I Wish Buyers Knew

Thursdays are devoted to the theme- the heart of this blog- real estate transactions and all things REALTOR®. BTW, a REALTOR® is a licensed individual who belongs to the National Association of REALTORS® and subscribes to a higher code of ethical behavior than the state licensing boards require.

Whether this is your first home purchase, or the last in a long string, you can be sure that this transaction is at least a little bit different from any other you have experienced. In fact, I have fellow agents who have been in the business for decades tell me that they are still surprised by the unexpected in purchases and sales. Sometimes the curve balls come from changes in law, but more often they come from changes in practice. People are always thinking up new (sometimes unethical) ways of doing things, and the area of real estate changing hands is no exception. I am thrilled to say that I work with a brokerage that provides deep expertise from generous fellow agents and brokers who are willing to share their discoveries and knowledge with me, so if something ‘smells funny’ in a transaction, I have plenty of people from whom I can get second, third, and fourth opinions.

If yours is one of the approximately 30% of central Texas transactions that is to be a cash purchase, you have a huge chunk of work behind you already. In paying cash, you do not circumvent the range of emotions that you will feel during the course of a purchase, but you will not also be playing the waiting game to see if you AND your chosen property will qualify for a loan. Whew!

For the other 2/3rds of you who will be acquiring a shiny new loan along with your dream home, the very first action you will take is to find a great lender. A great lender is a detail-oriented individual who stays up-to-date on all sorts of loan possibilities, including even local grants (!) that some borrowers are eligible for. A great lender works for a home loan institution that is motivated to get its background work done in a timely manner, and get you to the closing table on time with the least amount of drama. A great lender is a masterful communicator who will calmly talk you through all the details of what will be required of you, and who has an eye on the clock and on the calendar to keep the process flowing.

YOU, my friend, must pay attention to this great lender and pedal as fast as you can to come up with the information, documents, proof, identification, numbers, whatever, that the lender needs in order to get your business done for you. You will have your financial life examined like you can’t believe, but a lending institution, like a doctor, has seen so many bank account records/naked bodies that yours is no surprise. Now is not a good time for you to clam up and feel all embarrassed. A good REALTOR® has a few great lenders they have worked with, and can suggest that you meet with more than one of them to make your own decision. If you are thinking about using an online lender, please check with your real estate agent to see what her experience has been with other clients borrowing through the same online lender. They are not all created equal.

Now why would I be talking about a lender before you have even looked at properties? Isn’t the house the most important part?!?!? Here’s why: in current conditions and practice in our area, a smart seller would not entertain an offer from someone who doesn’t even officially know how much she can afford to pay, and would definitely not appreciate a REALTOR® taking you into his home and possibly wasting his time. You are not a ‘real’ buyer in anyone’s mind until you have been at least pre-approved for a loan, and better still, underwritten for an amount that equals or exceeds the price of the home you are making an offer on. In many areas around central Texas, there is still a high probability that you will be competing with other buyers when you make an offer on a home. You lose if you are not prepared to move quickly in offering and in executing a contract.

If you are in the 1/3rd group who will be paying cash, your financial institution needs a heads-up to prepare a statement to give to a seller that proves you can pay for the home you are making an offer on. Some sellers might be fine with making a phone call to your institution to hear it from the horse’s mouth, but other sellers might only consider you ‘real’ if you have it in writing.

Okay, now that you have been pre-approved, or underwritten, or you have your proof of funds letter, how are we going to work together to find you the home you have dreamed of? Let’s sit down together, if we haven’t already, and sign the paperwork that puts me to work for you. Did you know that, if I am showing you houses and helping you to buy one, I am legally working for the seller, unless we’ve signed a buyer’s representation agreement? Do you really want me working for the seller? No, I didn’t think so.

Most buyers have already spent untold hours looking at houses online and driving through neighborhoods. This is fine for starters, but let me share some secrets: those beautiful and alluring websites you are probably looking at aren’t up-to-date with the latest information. Very often, a house you love has already been sold. And, please don’t, that is, DO NOT believe the automated value that some algorithm somewhere has assigned to a property. Sellers, I am talking to you, too, here! Those values can be far, far off from the actual market for that particular property.

We will set you up on a search according to the criteria I elicit from you in directed conversation and written “homework”. We will suit your needs and wants as closely as we can match them in the market. I can change the search, if you decide you want to be in a different area, or if you realize you need something a little different from what you started out wanting. The story in your head about how you live your life comes into clearer focus through the buying process, and the plot might change a bit as we go along. Perfectly normal.

Back to looking at homes- have you ever read or heard about studies on choice and satisfaction? It seems as if the more homes we find to look at, the freer we feel to make the best choice, right? Apparently, uh-uh.  Seems it doesn’t work that way. Too many choices just confuse and discourage us, even to the point where we procrastinate and don’t make a choice at all. Knowing this about the brain, we will look in the multiple listing service (updated every few minutes) at all the homes that fit your criteria: neighborhood, price, size, features, etc., and we will pick the 5 or 6 that you like best. I will make appointments to see them, one right after the other, if we can, and let you compare and contrast without brain overload.

You might decide on one that very day, and we’ll discuss the offer you want to make, and we’ll fill in the contract for you to sign and me to send over to the listing agent to present to the seller. On the other hand, after that first day of house-hunting, you might have a different perspective on what you want/need, and we’ll discuss this in a direct manner before we go on the prowl again. Occasionally, your will “lose” a house, or several houses, to other buyers who had offers more attractive to the sellers than yours was. There are ways other than more money to make an offer more attractive to some sellers, and if this is what you need to do to get your dream home, then that’s what we’ll do.

The last thing I’ll mention here is the emotional side of buying a home. Even the most facts-and-numbers-driven person has feelings that need to be recognized and handled in order to go from one stage of home-buying to the next. Real estate agents joke among themselves that one hat we wear is the therapist hat. Of course, for most of us, that isn’t literally true, but part of our job is to get you from the state we meet you in- a person without a new home- to the point at which you have closed on your home, moved in, and beyond, easing you through the myriad decisions and feelings that will come up. This is rewarding work!

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