A Word From Jeff
This seems like a pivotal time to reach out, so I want to share some thoughts with you about what I currently see in the housing market. For those of us in the residential real estate world, it seems like we went from going at breakneck speed before COVID, to a total shutdown, and now we are surging to warp speed. With limited inventory due to concerns about exposure to the virus, a now unflinching demand has led to extraordinary stories of multiple offers. Buyers, while frustrated, are generally willing to visit occupied homes and cope with the COVID showing protocols, which often include masks, gloves, booties, and signed COVID statements / releases. In short, we are working hard to keep everyone as safe and it seems to be effective.
In a market as tight as ours, it is critical that buyers and their agents craft their offers to be as creative and competitive as possible. This is where the experience of the agents AND their clients can be of a great benefit. If you are interested in a property, but are concerned about seeing it in person or convinced that you will simply be out bid, I am available to discuss the various strategies we use to enhance offers.
On the other hand, if you have been holding off on selling due to COVID, I would urge you to reconsider. Now is absolutely the time to move any residential property while inventory is almost non-existent. This period is offering sellers a rare moment in time. As for selling your personal home, we have made great strides in safely marketing occupied homes. If you would like more information about our company protocols, please do not hesitate to call. In the meanwhile, please stay safe and healthy!
Jeff Stewart, CCIM
PLEASE READ: Texas law requires all real estate licensees provide the Information About Brokerage Services (IABS)
to prospective buyers, tenants, sellers and landlords. Please see the link above.
The Travis Central Appraisal District (TCAD) is not going to re-appraise residential properties for 2020. Marya Crigler, the Travis County Chief Appraiser, has stated that the county only has access to roughly 15% of the home sales and that is insufficient to appraise most areas. TCAD had been buying Austin MLS data in violation of the MLS vendor’s contract with the Austin Board of Realtors. All MLS data is copyrighted and owned for the exclusive use of its members. The vender, CoreLogic, and TCAD were issued cease-and-desist orders by the Board and the transfer of MLS data was stopped. As mentioned before, this is a risky tactic that is likely to fail.
The unprecedented step of freezing tax values presents a number of questions. First, will tax agents have no work in Travis County? Will owners protest in 2020, if they did not last year? Or, second, will TCAD have no timely comparable sales that they can use in a arbitration hearing to combat protest challenges?
ProTax, a well-known firm which contracts with property owners to protest their real estate valuations, has changed their business model from charging a success fee of 40% of the saving to charging a base fee of $150 per property and the same success fee. One has to wonder if they are of the opinion that frozen tax valuations will automatically be too low to reduce further?
The TCAD position also makes one wonder if many of the currently employed appraisers in that office will be told they are no longer needed. It will all be very interesting as we move into something I have only seen once before in Hays County.
In the late 1980’s, it appeared that Hays County’s hierarchy mad the decision not to re-appraise residential properties since the values were in free-fall. Some of the values had not been lowered once in the three years of sharply declining values. Since I had built and sold many homes in the Norther Hays area, I was very familiar with the actual values and Anna and I started a tax agent business. We represented 55 families. During the course of all the many meetings I had with HCAD, it was finally acknowledged that the values were left artificially high in order to fund the schools. I believe the comment was something like, “If we drop the appraisals to the real values we might have to close some schools.”
It was during my time protesting tax values at HCAD that I discovered something worth sharing. The state law is adamant that the valuations and taxes shall be equitable. In the case of HCAD, it was easier to get them to lower the improvements than it was the land for the simple reason that technically the lots were to stay roughly the same value. The rare exceptions were homes next to detention ponds, hones on the corner of a busy entrance, or some other unique issue that justified a reduction in valuation.
In any event, I am betting that this issue of full disclosure is a hot topic in the Legislature again.
Each year a great deal is made of the fact that Texas, like 11 other states, does not require the public disclosure of real estate sales prices. This year the discussion of the pros and cons of full disclosure will be intensified. The Travis County Chief Appraiser, Marya Crigler, has taken the unprecedented step of announcing that she is going to freeze the 2020 home valuations at the 2019 tax values. This announcement has caused a great deal of angst with local officials who have to prepare the budgets for everything in Travis County from school districts to the county expenditures. It was a clear orchestration to put intense pressure on the Austin Board of Realtors.
One aspect of a boom like Austin is experiencing is that the local politicians can usually brag that they, “held the line on tax increases.” Of course, this is seldom true. It is often the case that the taxing entities decide to “hold the line” on the tax rate, but with rapidly rising values we end up with significant tax increases. This happens so often in Travis County that the various taxing entities count on the revenue bump . . . as if it is a built-in tax increase that they did not have to approve. It provides the politicians with a degree of cover, all the while netting the revenue increases that they seldom own up to.
About a year ago the MLS discovered that our vender, CoreLogic, had been secretly selling our MLS data to the Travis Central Appraisal District (TCAD). This was blatant breech of the contract and once it was discovered the MLS immediately sent the district a cease-and-desist order.
Cut off from the surreptitiously acquired sales data, the chief appraiser has announced that there is no way for her to do her job without MLS data and that TCAD will not change any residential tax values in 2020. This leads me to two specific points. First, I knew Art Cory when he was the chief appraiser and he had to scratch and fight for sales information as well, but he found ways to fulfill the role of appraising all the property in Travis County. Second, like Art, Ms. Crigler is facing an uphill battle without the MLS data, but she is trying a novel approach in an effort to gain full disclosure.
By announcing that TCAD is freezing values for 2020, Ms. Crigler is waging war on the Austin Board of Realtors and the MLS. It is a risky tactic. I cannot imagine what the taxing entities are telling her, but it cannot be pleasant. They were expecting their politically free revenue increase. If this freeze holds, many elected officials will find themselves on the hotseat if they have to vote to increase tax rates to balance their budgets.
Clearly Ms. Crigler is betting her employment on successfully creating enough bad press for Realtors that we acquiesce or the elected officials finally alter the non-disclosure rules. I doubt either will happen, which will be interesting for Ms. Crigler’s future.
WANT TO BE A LANDLORD?
The HGTV channel continues to excite people’s interest owning residential real estate, including rental property. I have seen more interest the past few years than in several decades. The biggest development in home rentals (besides Airbnb, which is huge in itself) has been the national firms buying and leasing single family homes. In addition to that we now have what I believe is our first completely new single family rental subdivision in Southeast Austin. (More on this later.) All this competition has to make it more difficult for the small investor to find deals . . . not impossible, just more challenging.
It is one thing to find a good rental property to buy, but another thing entirely to secure financing. Now most lenders require landlords pay 25% down, as well as charge approximately ¼% more than the going rate for homeowner occupied loans. Most lenders also require a valid signed lease prior to closing, which can prove challenging. On top of that, most lenders limit small investors to no more than four investment property mortgages.
Despite all financing challenges, I am still a strong proponent of owning a rent property or two. In fact, I often suggest that young people consider purchasing their first home with the ultimate goal of moving in a few years and converting the initial homestead into a rental unit. It is a reasonable way to begin investing with more advantageous financing. While very difficult to find in this market, a duplex is usually a great choice for a first home. The other side provides an income and the duplex homeowner gets the important hands-on experience of dealing with a tenant and property ownership. That is exactly how we learned the landlord business.
Yet, I should qualify all of this by stating the obvious: not everyone should be a landlord. And for those folks who have an interest in real estate but no spare time, they can still successfully own rental property, but they probably should engage a professional property management company. Needless to say, good property management comes at a cost.
As for the owners wishing to personally manage their rental property, I tell my clients they should know several things upfront. First, it can be time consuming. I may go several months without a problem, but dealing with vacancies and make-readies can take time. Sometimes it seems that air conditioners are almost guaranteed to go out while you are on vacation! You have to have contractors you can truly trust.
Second, landlords need some degree of “do-it-yourself” ability. I still try to personally see any problems in order to understand the scope and severity before calling out service people. Often, the tenants are mistaken about what is a problem really is.
Third, it helps to be a people person. Landlords are in the service business. Renters are our customers and it is expensive to lose them. Successful landlords are fair, but firm. I believe in clearly setting expectations before tenants move-in.
Finally, I recommend to my clients that they strongly adhere to a policy of requiring excellent credit. People with near perfect credit conduct their lives responsibly. They pay their bills, they follow the rules, and they do what they say they will do. Admittedly this policy can lead to a longer marketing time, but I find it is worth it in the long run. A number of companies make screening tenants much easier now. National Tenant Network is a long-established firm that researches my applicants. A newer, on-line company, Cozy (Cozy.co), does screening, payment processing and much more.
Rent property is truly a path to financial freedom for the people who are willing to put in the effort. It is like a combination of a monthly savings account and an appreciating asset. In essence, the goal is to buy something with borrowed money and let the tenants pay it off.
I looked back and in December 2009, I wrote an article suggesting it was a great time to buy a rent house. In that same newsletter, I wrote that the median price house in Northwest Hills was $258,333! What will it be in another ten years?
If you have an interest, give me a call and I will be glad to help you decide if this is for you.
Jeff Stewart, CCIM
The MLS data for September is out and late summer sales were very strong. Sales, compared to one year ago, were up in four of the five counties of the Austin MSA. Only Bastrop saw a drop-off in transactions, but median sales prices were up across the board. Median sales prices were as follows:
City of Austin Median Price $406,000 Up 11.9% From Sept 2018
Austin – RR MSA Median Price $320,000 Up 6.7% From Sept 2018
Williamson Co. Median Price $ 295,000 Up 6.1% From Sept 2018
Hays Co. Median Price $ 269,950 Up 5.2% From Sept 2018
Bastrop Co. Median Price $ 258,000 Up 11.2% From Sept 2018
Caldwell Co. Median Price $ 206,930 Up 6.1% From Sept 2018
As one would expect, Texas is a strong property rights state in every meaning of the term. Yet, I can guarantee that almost no Texans are aware that the State of Texas has a Landowner’s Bill of Rights. I was recently given a copy which was prepared by the office of the Attorney General of Texas. These rights pertain to any attempt by a government or private entity to take a landowner’s property. The ten specific rights according to the Attorney General are:
- You are entitled to receive adequate compensation if your property is taken for a public use.
- Your property can only be taken for a public use.
- Your property can only be taken by a governmental entity or private entity authorized by law to do so.
- The entity that wants to take your property must notify you that it wants to take your property.
- The entity proposing to take your property must provide you with a written appraisal from a certified appraiser detailing the adequate compensation you are owed for your property.
- The entity proposing to take your property must make a bona fide offer to buy the property before it files a lawsuit to condemn the property – which means the condemning entity must make a good faith offer that conforms with Chapter 21 of the Texas Property Code.
- You may hire an appraiser or other professional to determine the value of your property or to assist you in any condemnation proceeding.
- You may hire an attorney to negotiate with the condemning entity and to represent you in any legal proceedings involving the condemnation.
- Before your property is condemned, you are entitled to a hearing before a court appointed panel that includes three special commissioners. The special commissioners must determine the amount of compensation the condemning entity owes for the taking of your property. The commissioners must also determine what compensation, if any, you are entitled to receive for any reduction in value of your remaining property.
- If you are unsatisfied with the compensation awarded by the special commissioners, or f you question whether the taking of your property was proper, you have the right to a trial by judge or jury. If you are dissatisfied with the trial court’s judgement, you may appeal that decision.
Landowners in Hays County have been learning the hard way about the ins and outs of condemnation as many have been fighting the recent pipeline. Before that, landowners were incensed across the state as LCRA erected transmission lines to reach the wind turbine installations. In my limited experience with condemnation proceeding, I can honestly say that I have seen very few landowners get full value without the assistance of professionals.
Football practice, back-to-school nights, homework and more early morning traffic. It is that time again. Once the opening day of school looms near, the annual housing market slow down begins. Actually, a fellow Stanberry broker did the numbers and found that the seasonal slowdown actually started just after July 4th. The good news for sellers is that the while demand slows as school begins, so does the amount of competition. New listings drop off considerably.
On the other hand, buyers are more likely to find a deal. For the last several weeks, the number of new listings has been exceeded by the number of price reductions on existing listings.
So that begs the question, is the market slipping or did that many sellers over-price their properties? I would say it is the latter. In the spring and early summer, more than 50% of the new listings in the entire MLS sold in two weeks or less. Demand was red hot for competitively priced homes . . . over-priced, not so much.
For decades, I told my sellers that we needed to revisit the asking price if we did not sell in thirty days. That is no longer good advice. With the advances in online sales marketing and instant notification of new listings, we agents usually know within ten to fourteen days if the market has determined we are too high. Too many days on market hurts a property more than most sellers realize. I tell my sellers that the two questions my buyer clients ask first are, “How much is this house?” and “How long has this been on the market?” With the ability to receive near instant notification of new listings, and almost unlimited photos, buyers often know all there is to know in the first twenty four hours. Sellers have to realize this and act quickly if it appears they missed the market.
WHAT IS A CCIM?
CCIM stands for Certified Commercial Investment Member. Members are awarded the designation and allowed to wear the CCIM pin once they have completed an extensive regime of graduate level course work and demonstrated an extensive level of experience in the commercial real estate industry.