How To Best Determine The Value of Your Home

The best tool I have for determining the value of your home is called the Comparative Market Analysis (CMA). When performing a CMA, there are three big questions that I attempt to answer: a) At what price are homes actually selling?; b) What is the competition seeking in terms of price?; and c) How much is too much? The answers to these questions come from three different types of data.

Homes recently sold will give you an answer to the first question. You normally will find a range of sold prices. At the low end are homes that were not in very good condition, and in a neighborhood that is rejuvenating, this may in deed be the value of the lot. At the middle of the range are homes that are structurally sound but still need cosmetic updating. At the high end of the range are the homes that have been remodelled.

The answer to the second question comes from active properties. Here you can see where the competition is priced. In a neighborhood undergoing rennovation, it is very important to at least see pictures of these homes to determine the improvements that have been done.

The final question is answered by homes that have expired. Generally, these homes expired because the seller was asking more in price than the market would bear for a home in that condition. They were asking too much.

The art is to now place your home in the spectrum described. If your home is fully updated with new kitchen, baths, flooring, etc and is great structural shape then you belong at the top of the price list. In older neighborhoods I have heard these homes referred to as 1958 on the outside, 2011 on the inside.

If your home is in average condition, meaning that it has been very well maintained, is clean, and may have a few updates then the value of your home is at or just above the average home value in the neighborhood.

A final clarification on this process. It is vitally important to start with the right set of comparable homes. I generally define a neighborhood by looking at the boundaries formed by large roads, creeks, train tracks, utility easements or other barriers that suggest the edge of the neighborhood. In terms of the actual homes, I try to select homes that are within about 500sf of the target with a similar bed/bath count.

What is the Difference Between Broker and Agent?

A real estate BROKER is licensed to conduct a real estate transaction between a Buyer and a Seller and must be present in every transaction where real estate agents are involved. Most frequently, this person is the head of the real estate office where the agents work.

A real estate AGENT is a professional with a license that must be sponsored by a real estate broker. They are the people that you as a consumer will encounter in the transaction. They work for the real estate broker, and can not complete a real estate transaction without the broker’s oversight.

This creates an apprenticeship in the industry. In most states, a newly licensed professional must work for a broker for a certain number of years before they can qualify to become a broker themselves.

There are also many very experienced agents who have never chosen to pursue a broker’s license. They like working “in the field” as real estate agents, rather than running an office as a broker. They can be very experienced and may have amassed as much or more real estate knowledge than the broker that they work for, but prefer the job of working directly with Buyers and Sellers to that of an office administrator.

So to make a long story short, the broker is the person that runs the real estate office. The agents are the people who work directly with the consumers in the transaction.

Finally, there are some people who are licensed as Brokers, but still perform the role of an agent. This is usually the result of a preference for field vs. office work – at least that is the case with me.

Multiple Offers Vs. Multiple Contracts

Who will win the contract race?

I have encountered this question a few times recently, so I thought I would write a brief explanation.

First, let me clearly say that in the great State of Texas, there can only be one fully executed contract on a property at a time.

Now for the part that seems to create confusion. When dealing with residential real estate, an offer is generally submitted on a contract form and the agents have a habit of referring to offers as contracts. So you may hear that “we have received multiple contracts on this property”. What is really being said is that there are multiplte offers. An offer, even though it is submitted on a contract form, does not become a contract until both Buyer and Seller agree to every term and fully execute the document. Then, to remain a valid contract, the terms specified in the contract must be executed. On of the first of these terms is the deposit of earnest money.

So, when I represent a Buyer and I hear that “there is a contract on the property”, I always ask if it has been fully executed. If the answer is “no”, then it is only an offer, and there may still be a chance for my Buyer to get into the mix.

Now for the multiple offer scenario. As a listing agent, it is always my objective to attract multiple offers on a property. This creates a bidding war environment. When I receive the first offer, I will call other agents who have expressed interest in the property and let them know that we have received an offer. My hope is that it will move their client to action to also submit an offer. If we can get two or more in play at the same time, the outcome is usually better for the Seller.

As a Buyer’s agent, I extend offers that ask for a very quick response to keep the above scenario from happening. If my Buyer’s offer is the only offer in play, that tends to make the negotiation go better for the Buyer.

But at the end of the negotiations, there is only one contract that will get fully executed. The other party may wish to enter into a back-up position. If the first contract does not close, the back-up contract immediately moves into first place without the property going back to market. Finally, there can be only one back-up contract.

After a back-up contract has been executed, any other offers received remain “in limbo” until something happens to the first contract. If the first contract fails to close, the back-up contract moves into first place. If there are still other offers that have come forward, one of these can be selected to go into the back-up position. This continues until the property sale closes.

It is rare to have this much interest in a property, but occasionally it does happen. I have had success in closing back-up contracts from both the Listing and the Buying position.

I hope this provides some clarity on the issue. There can be only one fully executed contract at a time, and the rules for forming a queue behind this contract are very clear – one at a time.

What Does an HOA Do?

The idea of an HOA is that all of the neighbors join together to maintain infratstructure that they all enjoy. HOAs take two forms, voluntary and mandatory.

In a voluntary HOA, membership is just that, voluntary. Each home decides whether or not to participate. The HOA usually does some community building activites, may form a crime watch, and sometimes does little beautification projects like planting flowers by the neighborhood sign.

A mandatory HOA exists when a neighborhood is built with additional community infrastructure such as a community pool, private parks, gated entrance, etc. Membership is mandated in the deed to each property. There are guidelines established for how the HOA is to run, how dues are determined, etc. These HOAs are frequently managed by professional companies and take care of the maintenance of all of the common grounds.

Fees for voluntary HOAs are usually very small – less than $100/yr. Fees for mandatory HOAs all depend on the amount of common infrastructure in the neighborhood and can range from $50 to hundreds of dollars per month.

Wild Lease Scam – Can the Market Get Any Crazier?

I love the real estate market – there’s always a great story to be told, and a new experience to be had. Just when I thought things couldn’t get any crazier, they did. Here’s the story…

I recently represented a young lady in the purchase of her first home. Being a first time home buyer, we were looking at small homes that were financially distressed – we were bargain hunting. We found the perfect home in east Dallas, a 1950’s era 3/2 that was in short sale for about 60% of the value it had appraised for just two years ago. As we toured the home, we could not access the garage – it was locked and the key did not fit. When I later inquired about accessing the garage, I heard the craziest story ever:

After the owner vacated the property, a person we’ll call Joe ConMan noticed that it was vacant. He proceeded to pose on the internet as the owner of the property. He entered into a lease agreement with a unsuspecting young couple, newly married with a small child. He collected the first month’s rent and the damage deposit. On move-in day, the Tenant could not get access to the house. Joe Conman has the Tenant call a locksmith, and then meets them at the property. He cons the locksmith into believing that he is the property owner, gets him to open the house, and then leaves – vanishing to never be seen again.

The Tenant begins moving into the house when a neighbor comes over to investigate. Having not seen either the owner or the owners agent, he calls the listing agent to confirm that the house had been leased. A very surprised listing agent then called the police. The Tenant was forced to vacate the property, and lost the damage deposit and rent they had paid to Joe ConMan.

I learned a couple of lessons from this story. First, get to know the neighbors around your listings, especially if they are vacant. The actions of a consciencious neighbor kept this situation from getting any worse. Second, keep a close eye on your vacant property listings – you never know when something crazy like this might happen to them.

All ARM’s Are Not Evil

2011 Mortgage Interest Rates from http://mortgage-x.com/

I just got a great present in the mail!! I was notified of the annual adjustment to the interest rate on my Adjustable Rate Mortgage. It was reduced by 0.5% for the upcoming year and now has the stunning rate of 3.000%.

I originally took out the ARM 10 years ago. It is a 7/1 ARM meaning that the rate was fixed for the first 7 years, and adjusts annually after that point. The rate is based on a defined index with a 2.25% premium.

I chose this mortgage 10 years ago with the idea that it was highly unlikely that I would own this house for 7 years. The longest I had ever lived in a home previously was 4 years. I truly thought that I would have sold and relocated long before the rate ever adjusted.

However, in selecting the loan, I did make sure that future adjustments were based on a defined index and that the high end of the rate scale was capped. Although I didn’t expect to get this far into the term, you never know for sure.

As the loan started to adjust, I watched the market. With interest rates in steady decline, I have seen no reason to refinance. I will refinance as rates start to rise, which means that I will miss the bottom of the market. Had I already refinanced, I also would have missed the bottom of the market – I think we just got there.  I’ll take a close look next Fall and see if refinancing will be beneficial, or if once again, I will let the rate on my loan adjust.

In the end, the strategy of using an adjustable rate mortgage is going to work well for me. Properly utilized, I don’t think all ARM’s are evil. In the right market conditions, they can be a very useful tool, and I believe there will be a resurgence in their use once interest rates inevitably rise to more historically normal levels. Given the current interest rates, an ARM may be a great product again if your borrowing needs have a short horizon.

After the Tax Incentive

So what was the effect of the First Time Homebuyer Tax Credit? It may still be a bit early to tell, but one phenomenon is easy to identify. The number of properties placed under contract in May 2010 was at its lowest level in years. However, this should not be surprising. Buyers in the market for the first time, or the first time in a long time, had plenty of incentive to get their contracts executed before May. The net effect was to accelerate what would normally have been May contracts into April.

If this were indeed the case, then April contract should have been at an all time high. And, yes, they were. April’s new contract numbers are larger than they had been in recent memory, validating the “hurry up” mentality in the market.

But this does not answer the larger question of whether or not the First Time Home Buyer Tax Credit achieved its purpose. The purpose was to stabalize the housing market and housing prices across the country by adding pruchase demand to the economy. The increased demand fueld by the tax credit should have placed housing prices in check. If this incentive had achieved its purpose, housing markets would stabalize and the incentive could be removed. The US government decided that the end of April was a good point to check this correction.

I think it will be late summer to early fall before we get a true reading on the full effect. I hope it worked, but I have the sinking feeling that it did not run for quite long enough. Jobs reports continue to be suspect with claims that the private sector is now paying the lowest percentage of wages since the Great Depression. This does not bode well for increased housing sales. Bully for the average American, savings rates are rising across the country, indicating that people have learned at leasst a partial lesson for the time being. However, that too means that large expenditures are being placed on hold.

I believe the housing market in total will continue to be fragile. But what about your home? What if you have to move?

The news can get better. While the housing market is fragile, it is also starved for quality product. I can’t tell you how disappointed I am with many of the homes that I tour. There are a number of inexpensive repairs that can be done to a house to get it ready to bring to market. New carpet and paint, a deep cleaning and decluttering, inexpensive cosmetic updates, cleaning the yard, timming the bushes, removing debris, etc.

If you need to sell, please give me a call. I would be happy to schedule a walk-through and show you some of the easy things that will make your home sell quickly, even in a less robust market.

For those inclined to move up, this remains the best of markets to increase your home size.

IF – Rudyard Kipling

Reconnected with an old friend on Facebook and found this poem on his blog (Running Tyler to Ehningen). IF I can teach these lessons to my sons, then I will have been a successful father. Andre, thanks for reminding me how much I enjoy this verse:

[IF]

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream–and not make dreams your master,
If you can think–and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ’em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”

If you can talk with crowds and keep your virtue,
Or walk with kings–nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And–which is more–you’ll be a Man, my son!

–Rudyard Kipling

Dallas County Taxable Home Values Decrease

Here’s a Spring present for all you homeowners. As usual, the Dallas Central Appraisal District (DCAD) is lagging the market. Just as real estate values and activity are increasing, The Dallas Central Appraisal District has announced that sixty percent (60%) of homeowners will see a decrease in their taxable property value this year – YEAH! That means that most of us will be receiving a decrease in our property tax bill for 2010. Enjoy the break – I believe it will reverse next year!!

The Dallas Central Appraisal District also stated that approximately twenty percent (20%) of home values will rise. I suspect a number of these are homes which had permitted improvements accomplished over the last year, or are recent sales of previously undervalued real estate. The final twenty percent (20%) of values will remain constant.

That’s a fairly substantial move for the Appraisal Distict to have made, adjusting the values of about eighty percent (80%) of the homes in Dallas County.

For a complete report on this issue, please see the Dallas Morning News article.

Veterans: Consider a Zero Down VA Loan

US Military Logos
Link to VA Home Loan Benefits

First, if you have served in the armed forces, thank you for your service! I am proud to have served with the US Navy as both a Surface Warfare Officer and as a recruiter. During my service as a recruiter, I bought my first Dallas home using a VA loan. At closing, I wrote a check that was between $100-200 and got the keys to my brand new home. I also took advantage of a small loan from the Texas Veterans Land Board. Together, these benefits of military service helped me to achieve the dream of home ownership.

I recently received an e-mail with information on obtaining a VA Loan from VA Mortgage Center.com. As they are one of the leading service providers for VA loans, I wanted to share their information with you. Hopefully this will help you achieve the dream of owning a Dallas home.

More than 1.7 million veterans reside in Texas, and about 38,000 live in Bell County where Fort Hood fulfills the role of the largest active duty armored post in the U.S. Yet it’s highly unlikely that all these veterans take advantage of the VA home loan program since less than 10 percent of the nation’s 24 million veterans capitalize on the program.

The VA loan program is one of the last remaining home-buying options that lets borrowers put no money down. Compared to conventional loans, VA home loans tend to offer lower interest rates and eliminate the private monthly mortgage insurance. As a result, borrowing veterans’ monthly payments are greatly reduced.

Fort Hood is full of starter homes that veterans could buy with the help of a VA loan. In 2007 and 2008, homes that cost between $100,000 and $159,999 accounted for 44.3 percent and 45.2 percent of homes sold in the Killeen-Fort Hood area, according to Texas A&M’s Real Estate Center (REC). Even during hard economic times, homes in the Killeen-Temple-Fort Hood area appreciated about 2.5 percent in late 2008 compared to 2007. In the same area, the REC found that the annual average rate for a 15-year fixed mortgage was about 1.2 percent, which is quite borrower-friendly.

By the end of 2008, homes in the U.S. began to depreciate, but Texas’ home values did not, according to the REC. The median house or condominium value in Texas in 2008 was $126,800.

Veterans who want to make use of a VA loan to buy a home in Texas need to confirm their eligibility first. For the most part, veterans who are in one of these categories may have va loan eligibility:

-Military members who’ve served 181 days on active duty or three months during war time
-People who have spent at least six years in the National Guard or Reserves
-Spouses of those killed in the line of duty

The maximum VA loan limit in Texas is $417,000, but it’s important to note that VA does not issue loans, it simply backs about one-quarter of the loan. Because of that insurance, lenders, such as the VA-certified VA Mortgage Center.com, are often happy to help veterans get a loan.

Pages: Prev 1 2 3 4 5 6 7 8 Next