HOW TO RESPOND TO LOW-BALL OFFERS

 Low-ball offers are rather uncommon in a hot market like we have had in the Austin area the past few years, but they are not unheard of.  So let’s take a look at how one might choose to respond in hopes of eventually getting to a price where we might make a deal.

First, it is critical to confirm that the buyer is actually qualified for more than the low offer.  If the buyer is qualified for enough to make a better offer, I suggest to sellers that they consider taking an approach that is a little different.  Many sellers choose to refuse to respond to low offers, and others often respond with slightly less than full price counteroffers.  Neither approach is likely to move toward a contract. I suggest a third option, which is to send back a response on a form that is referred to as “Seller’s Invitation to Buyer to Submit New Offer.” I have found that this form is a more “gentle” way to refuse an offer, but possibly keep the buyer interested.  The form is not a counteroffer, and clearly says so.  It allows the seller to send the buyer a message that the offer has been refused, but has a space to outline what terms would be more acceptable. It still allows the seller to accept other offers. It is a refusal, but a refusal with the possibility of a dialogue.

Some personalities (and cultures) absolutely believe the first offer has to be an extremely low one.  Their motto is, “Hey! Nothing ventured, nothing gained.”  Sometimes it takes a seller standing firm, but without attitude . . . which I admit is difficult when it seem so personal because it is the home you have loved for years.

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.

Jeff Stewart, CCIM, SRES

Stanberry & Associates, REALTORS

jstewart@stanberry.com     jeffstewart.stanberry.com

Understanding the Real Estate Cycle By Jeff Stewart, CCIM, SRES

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Today we have a pop quiz.  Please have a sharp #2 pencil ready.  I must say from the outset that the older generation will have a definite advantage when taking this quiz.  Extensive experience is a real plus in determining the answer to my one question quiz.

The graph at the top of this page is a well-known and widely accepted representation of normal real estate cycles. Real estate cycles are a fact of modern life. I admit, when I was in my twenties and thirties, I argued with my dad that the modern Texas economy was not subject to such trends.  People were moving here in droves and we were not “making any more land.” That was several recessions ago. Like the stock market, the overall trend is upwards; but we have had down times interspersed in there as well.

So your assignment today is to take your pencil and circle that point on the graph that best represents where you think we are today in the Austin real estate cycle.  Be honest.  The interesting part of this quiz is that we will not know what the correct answer is until we are well past the current stage, whatever that is. If you are expecting to sell or buy a property in the next year or so, this is more than just an academic exercise.

Having been through several lesser booms, but nothing as crazy as what we have experienced the last couple of years, it is my opinion that we are slightly past the “Euphoria” stage. In fact, I find it remarkable that the Austin economy has sustained the euphoric atmosphere for such a prolonged period. So what is the point of this discussion? Well, it may be helpful to discuss a few common sense strategies.

First, are you planning to sell a property in the next year or so? Depending on the stage you believe we are at  on the chart, now would surely be an ideal time to maximize the value while the market remains poised at the top of the business cycle.  But what about buying at the top of the market?  I get that question a lot now.  Good real estate deals can always be found at any point in the real estate cycle. The key is to fully understand the fundamental value of the property rather than relying on some pie-in-the-sky, hoped-for appreciation which may not come until the next business cycle.    When buying at the peak of the market, there is little room for error.  Incomes may be less than expected and hold times may be much longer.

When near the top of the market, it may be time to take a profit or at least diversify to reduce the rick of a soft real estate market. It was a real shock to me in the late 80s to discover that a diversified real estate portfolio was NOT different colored duplexes in South Austin.  Who knew?  I regularly have investors tell me that they like to keep their properties clumped in one neighborhood. That is certainly one strategy, but it comes with some risks.

In summary, it is time to make a careful judgment regarding our local economy and the real estate market.  It might be time to put a plan into motion rather than reacting after the fact.

Time’s up.  You may put down your pencils now.

 

Jeff Stewart, CCIM    Stanberry & Associates   jstewart@stanberry.com

 

Austin Residential Market Report

Home sales dip in Austin, increase across Central Texas in September 2016

Austin Board of REALTORS® releases September 2016 Central Texas Housing Market Report

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AUSTIN, Texas – Oct. 18, 2016 – Single-family home sales increased across the Austin-Round Rock Metropolitan Statistical Area (MSA), but declined throughout the City of Austin in September, according to the September 2016 Central Texas Housing Market Report released today by the Austin Board of REALTORS®.

Aaron Farmer, 2016 President of the Austin Board of REALTORS­® said, “Housing is at the center of all economic development. Nowhere is this more evident than at the intersection of housing affordability and mobility. As more and more homebuyers look outside of Austin’s city limits to find an affordable home, our region’s infrastructure is increasingly strained and the overall costs of homeownership rise because of the increased cost to commute.”

In September, less than one in three homes sold in the Austin-Round Rock MSA and less than one in five homes sold in the Central Texas region were sold within Austin’s city limits. City of Austin single-family home sales declined 4.5 percent year-over-year in September 2016 to 746 home sales, while home sales across the Austin-Round Rock MSA increased 1.3 percent year-over-year to 2,576 home sales. Across the Central Texas region, single-family home sales were up 6.1 percent from September 2015.

During the same time frame, the median price for City of Austin homes increased 10.6 percent year-over-year to $345,000. Across the five-county MSA, the median price for single-family homes was $275,250, an increase of 7.5 percent from September 2015.

In June, the Austin Board of REALTORS® announced its support for the City of Austin’s $720M mobility bond proposition, applauding the proposed investment in major corridor improvements, plans for regional roadways  that will bring immediate congestion relief and implementing pedestrian pathways that enable safe routes to schools for all school-age Austinites.

“Austin’s traffic congestion worsens every day. Our city cannot afford to keep putting off much-needed infrastructure improvements while waiting for the ‘perfect plan’ to come along,” commented Mayor Adler. “As mobility throughout our region is impacted, so is the quality of life for all Austinites and our reputation as a place to live, work and do business. The time to act is now.”

“Both Austin’s current housing stock and infrastructure are not sustainable for our region’s projected population growth, which is expected to double by 2040,” added Farmer.

In September, housing inventory throughout the Austin-Round Rock MSA increased 0.1 months year-over-year to 2.7 months of inventory, far below the Real Estate Center at Texas A&M University’s estimation of 6.5 months in which the supply and demand for homes are balanced. Due to increasing housing demand outside of Austin, housing inventory levels in Williamson County are now equivalent to inventory levels in the City of Austin. In September, the housing inventory for both Williamson County and the City of Austin was 2.4 months.

Single-family homes in surrounding markets also continued to spend less time on the market in September 2016. In Williamson County, homes spent three less days on the market, or an average of 44 days. In Hays County, homes spent an average of 48 days on the market, one day less than September 2015.

“Austin has the opportunity next month to vote for meaningful, much-needed transportation funding that can finally bring congestion relief to our region,” concluded Farmer. “Solutions for Austin’s transportation challenges cannot be delayed any longer. The Austin Board of REALTORS® urges Austin residents to vote “yes” for the $720M Mobility Bond on Nov. 8.”

For more information on the 2016 Mobility Bond, please visit www.MoveAustinForward.org. For additional housing market statistics and infographics for the Central Texas region; Austin-Round Rock MSA; Hays, Travis and Williamson counties; and the City of Austin, please visitABoR.com/StatsSep16.

The Austin Board of REALTORS® (ABoR) builds connections through the use of technology, education and advocacy to strengthen the careers of its 11,000 members and improve the lives of Central Texas families. We empower Austin REALTORS® to connect their clients to the region’s most complete, accurate, and up-to-date listings data. For more, contact the ABoR Department of Public Affairs at marketing@abor.com or 512-454-7636. For the latest local housing market listings, visit AustinHomeSearch.com.

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

 JEFF STEWART, CCIM  

STANBERRY & ASSOCIATES, REALTORS

jstewart@stanberry.com

 

BUILDERS DESERVE A CLOSE LOOK        By Jeff Stewart, CCIM

Name almoBlue Pin, 3/5/02, 5:49 PM,  8C, 1122x1416 (1806+134), 100%, bent 5 stops, 1/100 s, R72.2, G66.2, B79.7st any list for the hottest market and Austin is near the top, if not number one. Just like during the early 1980s, this attracts home builders and contractors from all over the country.  Some will no doubt have staying power, but many will not.  So what does that mean for the consumer?

When considering builders, I urge clients to consider two important factors before committing.  First, how good is the builder’s product?

New housing is in the pipeline in many areas surrounding Austin.  As during the early 1980s, we have and will continue to see an influx of new or out-of-town builders.  Having seen the results of such a trend back in the 80s, I caution buyers to do their homework when choosing a home builder.  in particular, I urge clients to focus on two primary areas of concern.  First, it is vital to understand the quality of the builder’s product.  A model home may not remotely reflect the workmanship or materials used in the builder’s other homes.  When I used to evaluate builder applicants for a local warranty company, I wanted to see some of the builders’ homes while in various stages of progress so that I could determine the following:

  • Quality of materials and workmanship
  • Degree of on-site supervision
  • Is the jobsite neat and organized?
  • Is work was being done in the correct sequence?

A stalled job is often a sign of financial problems, as is a clear drop off in the quality of subcontractors.

The second area of concern is the one most ignored during good economic times . . .  how is their service after the sale?  Today’s younger buyers have not experienced a severe economic downturn and few have given much thought to the longevity of their chosen home builder.  Some of today’s buyers are going to be shocked in a few years when they cannot find a trace of the firm that built their home.  Once a builder is under serious consideration, buyers would be wise to contact a reasonable number of their past customers to find out if they have been satisfied with the builder’s efforts before and after the sale.

Typically, the builder is responsible for all materials and workmanship the first year.  The second year the builder is responsible for “systems” and structural.  Finally, the builder is responsible for major structural defects for years three through ten.  The final eight years is where I have seen the most disputes.  What the homeowner may believe to be a structural defect, seldom rises to the accepted level of a “major” structural problem.

While far from the perfect solution, I suggest buyers attempt to obtain from the builder a written ten-year warranty from a strong national home warranty company. Hopefully the warranty company will still be in business even if the builder goes away.

Jeff Stewart, CCIM

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

Stanberry & Associates, REALTORS

jstewart@stanberry.com

 

EXTRA SELLER PROTECTION By Jeff Stewart, CCIM, SRES

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SELLER PROTECTION             By Jeff Stewart, CCIM

A local Austin legal firm has come up with an interesting idea for added protection for home sellers. We had a presentation today from attorney Boone Almanza on the particulars of the new product they have named Sellers ShieldSellers Shield, which costs $240.00, is designed to provide sellers with legal support after the sale in the event of a lawsuit or demand letter from the subsequent buyers.  The agreement states that the coverage begins after closing, is for a two year period, and is limited by some conditions and exclusions.

Boone represents a number of real estate firms in Austin and is very tuned in to the types of disputes that unfortunately end up in court.  He stated that the vast majority are related to the state-required seller’s disclosure.  In fact, the first exhibit filed in court, according to Boone, is usually the seller’s disclosure.  Few Sellers realize how critical it is that they give in-depth details in their written disclosure.  Several of my attorney friends have told me that if a client asks if something should be disclosed, then the answer is yes . . . period.

In his explanation today, Boone stressed that ANY known problem should be disclosed.  This included the problems that were believed to have been solved years ago and even any problems that might have predated the current seller.  The old adage in real estate was location, location, location.  The new one may be disclose, disclose, disclose!

All of this reemphasizes the need to sell with a good home warranty.  Years ago, a national real estate firm conducted a study.  They learned that 80% of the lawsuits that they or their clients had been involved in might have been avoided with a simple one year warranty.  Indeed, Boone told us that most of the lawsuits he has seen over single family residences have been settled for less than $6000.

None of us wants to look over our shoulder after a sale.  These two important products can provide some peace of mind for sellers for less than a combined cost of $750. Considering how expensive Austin real estate is, that does not sound too bad.

PLEASE READ: Texas law requires all real estate licensees provide the following Information About Brokerage Services (IABS) to prospective buyers, tenants, sellers and landlords. To review document click on this link: IABS

Jeff Stewart, CCIM

Stanberry & Associates

jstewart@stanberry.com

Were December Sales Really Up? By Jeff Stewart, CCIM

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DECEMBER SALES SHOW UPTURN ?   BY JEFF STEWART, CCIM

In my January newsletter, I wrote to clients that the steep slide in home sales for the month of November would likely continue in December . . . unless it didn’t.  Well, the slide did not continue as the chart shown here shows.  Can that be?  Virtually any agent in town will attest to the fact that December sales were as weak as November or worse. So to what can one attribute this sharp, largely unseen, increase in sales?  The answer was clear to me almost immediately.

In this case, the numbers are both accurate and inaccurate depending upon the time period.  December sales were decidedly flat.  A quick search of the MLS reveals that a disproportional amount of the December sales were builder homes. Not all builders are the best at changing their listing information in the MLS in a timely manner.  It would appear that a good number of the December sales were actually closed earlier, but only reported at year end.  Therefore, the annual sales numbers are correct, but the monthly numbers are probably a little inaccurate . . . especially December.

Statistics never lie . . . it is just that sometimes we do not ask the right questions.

Jeff Stewart, CCIM

Information About Brokerage Services Jeff Stewart

Stanberry & Associates

jstewart@stanberry.com

Residential Sales By Jeff Stewart, CCIM

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So how has residential real estate in 2015 compared to 2014?  In short, more of the same.  Assuming that our current December sales track the earlier years as we expect them to, we will see few changes.  The limiting factor is not demand or interest rates.  The overwhelming constraint on home sales is the lack of inventory.  As of this writing, the residential inventory is only a 2.6 months supply. For comparison, the Texas A&M Real Estate Center considers a balanced housing market to have a housing inventory of roughly 6.5 months.  We have become so accustomed to almost no inventory that six months of inventory would feel like a glut of unsold homes!

Chart

The dip of the red line on the chart (2015) is indicative of what we have seen the past several months.  November was very quiet.  The historical chart shows a sharp increase in sales in the past three Decembers.  I question if we will see that same rise when we finally have the sales figures for December 2015.  It is too soon to know for certain, but I get the feeling that most sellers are biding their time and are hoping to time the market and hit the spring feeding frenzy that we have seen the last few years.

ODDS & ENDS

¨ Timing.  Take another look at the chart above.  It tells me two things: a) right now is the perfect time to look for a house, and b) wait until late February or March before putting a home on the market.  Yes, the inventory is down during the holidays . . . but if buyers can find that perfect property, they should have better odds of making a deal.  On the other hand, it clearly makes sense to wait to list a house in early spring when sales are surging.

¨ Section 8.  I failed to mention in my last letter that the state legislature passed legislation that overrode the Austin ordinance that effectively required Austin landlords to accept Section 8 renters.  The Austin ordinance had been written such that it was illegal to discriminate against rental applicants on the basis of where they received their income. It was a rather backdoor effort and the legislature decided it was out of line.

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”

                                                      Bill Gates

¨ Public records.  Property taxes are public record . . . well, mostly.  The recent attack on Judge Kocurek serves as a horrible reminder of why certain parties should have confidential tax records. While it is possible to search the Travis Central Appraisal District (TCAD) data base for property records, Tax Code Section 25.02 allows certain parties to request that the tax office restrict any information about the party’s name and address.  This is typically the case for law enforcement officers, judges, and a number of other public servants who might be at risk.    Property Tax Form 50-284 spells out who is eligible for such confidentiality and contains the required application.

¨More flood stuff.  We keep learning more and more with each flood. If a property is debt-free and the owner decides to buy FEMA flood insurance or if a buyer is purchasing a property with cash, the new flood policy does not go into effect for 30 days.   Also, few owners realize that the policies only cover flood events that flood two or more houses or more than two acres if it is entirely on the insured’s property.  In other words, in a limited flood event, it is wise to take photos that demonstrate the extent of the flooding in case of a filed claim.

¨ Blue Santa. My sincere thanks to those of you who chipped in with help for Blue Santa.  I always love volunteering on delivery day.  If you joined us on that Saturday, you probably got to meet the “real” Blue Santa and his helper Debbie Stone   Debbie is a Stanberry agent and the 2015 president of Blue Santa.

Speaking of Foundations By Jeff Stewart

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There was a time in the late 70s and early 80s that most Austinites thought of a cracked slab as a catastrophic situation.  Just the term “cracked” implied something that could not be repaired.  Fortunately, the public now better understands that slabs are not fine china and the effects of settling can usually be reversed.  That is the good news.  The bad news is that our recent cycle of extreme drought to extreme flooding can be quite problematic for foundations, especially in areas with expansive soil.

When fluctuating moisture content in soil causes the ground to shrink or expand, that expansion is defined by what we refer to as the plasticity index (PI). Bedrock would have a PI of close to zero.  Extremely expansive clay might have a rating closer to 30.  In theory we would hope that all foundations are engineered according to the PI of the specific site, but realistically that has not always happened.

Even when slabs have been well-designed, the addition of extreme moisture can create settling problems.  Here are just a few of the moisture problems I see regularly:

  • Runoff – rainfall does not quickly drain away from the slab. Water is allowed to effectively penetrate under the slab.
  • Broken water or sewer pipes in or under the foundation.
  • AC condensation lines creating pools of water next to the slab.

I compare the problem of too much moisture to mud pies. Add enough water and dirt becomes a liquid.  The same thing can happen to the soil supporting a foundation . . . especially in the case of a pressurized water leak.  In the case of a major water leak, the slab may heave as the soil swells . . . or it may do exactly the opposite, and sink as the soil turns to a liquid state and can no longer provide support. Luckily, most moisture related problems are curable, with perhaps the exception of underground springs or floodwater.

Once the water problems are corrected, most slabs can be repaired with engineered piers.  Foundation companies now utilize a number of different methods to install piers for slab stabilization:

  • Drilled piers – Pier holes are actually drilled and piers are created by installing rebar and pouring concrete. If no bedrock is found, then the piers can be made with bell-bottoms.
  • Concrete pressed piles – Concrete cylinders are stacked and pressed into the soil until they reach the point of refusal.
  • Steel pressed piers – Short pieces of 2.5″-3″ steel pipe are fitted together and are pressed into the ground until they hit a point of refusal.  Steel piers can be pressed deeper into the soil than the concrete pilings.

Concrete pilings are the most common in the Austin market, but there are shortcomings.  First, I have seen the 6″x12″ concrete cylinders shatter during installation . . . it sounds like a small grenade.  Second, due to the larger diameter and increased friction, the concrete piers may not penetrate as deep as other types of piers.

Recently I listed a home that had extensive interior settling . . . despite the earlier installation of thirty-six piers.  The perimeter of the house had no cracks, but the interior of the home was very broken up.  The homeowner informed me that the foundation repair company did not install the interior piers as the engineer required.  Another foundation company was hired to complete the work per the engineered plan and the successful result was remarkable.  I mention this because occasionally homeowners choose to only do part of the work recommended by the structural engineers. If they are occupying the home, they may not want the chaos caused by the installation of interior piers. That usually results in more problems, not less. It pays to have the engineer closely monitor the work while it is in progress.

Jeff Stewart, CCIM, SRES

Stanberry Commercial, REALTORS

jstewart@stanberry.com

A PERSONAL MILESTONE    By Jeff Stewart, CCIM, SRES

Blue Pin, 3/5/02, 5:49 PM, 8C, 1122x1416 (1806+134), 100%, bent 5 stops, 1/100 s, R72.2, G66.2, B79.7As strange as it seems to me, on the 2nd of January I will celebrate forty years as an Austin REALTOR.  I joined the Austin Board of REALTORS on January 2, 1976.  Now before you jump to conclusions, I am not seventy-five years old.  I was actually one of the youngest agents, if not the youngest, in the city at the age of twenty three.

As one does when nearing such a milestone, I have been reflecting on the incredible changes I have seen in our industry.  Some of the developments in technology would have seemed like pure fantasy in 1976.  A great example is property tax information.  Young agents would never believe that we had to first locate the property on a map . . . a gigantic scroll, actually . . . in the tax office downtown.  We literally scrolled down on the ten foot wide and ten foot high scroll on the tax office wall.  Once you located the property, it took a while to ascertain the parcel number.  With the correct parcel number, you could then go to the card directory and pull the field card.  It was pretty exciting stuff – and very time consuming.  Now anyone with Internet access can pull up TCAD information in just seconds.

The MLS book has changed as well.  First, there is no longer a book – period.  Bill Stanberry did away with the actual printed book years ago and launched the web-based MLS system when he was president of the Austin Board of REALTORS. When I joined the MLS, they had just recently upgraded to a printed book that was published every two weeks.  Shortly before I became a member, the MLS data was simply three-ring binders with loose leaf listings.  The agents were responsible for organizing their own binder.  The MLS book listings were limited to a single, really bad, black and white photo of the front of the property.  Bill Stanberry decided we needed to embrace the digital age and the MLS became available only through the Internet.  Many older agents just knew this was the end of the world and that our industry would totally collapse.  Of course, the opposite occurred.  Bill recently reminded me that one older agent told him that the MLS would “only be on the Internet over her dead body!”  Bill smiled and wondered out loud as to whatever happened to her.

Some of the biggest changes over forty years are a mixed bag.  When I began as an agent, our sales contracts, the listing forms, and most residential leases were on one page.  Not one page front and back, just one page.  We more or less adlibbed the rest, which is what led to the hundreds of law suits which led to the constantly growing length of the contracts we now have. (I had a residential deal recently with 19 pages.) Also, we did not have third party inspections.  Instead, the standard wording we inserted in the contracts was, “All heating and air, plumbing, and electrical systems to be in good operating condition.”  That was it . . . the honor system.  With time, we realized Pres. Reagan had the better idea – “Trust, but verify.”  Thank goodness for inspections!

Of course, one reason that we did not have inspections was a result of something that would shock consumers today . . . ALL agents worked on behalf of the seller. That was how the MLS system worked. Unfortunately, almost no buyers were ever aware that their agents were not technically working in their best interest.   The fatal flaw of this system was that agents were A) not disclosing their true fiduciary relationship, or B) they were working in the best interest of the buyer (family?) in direct conflict with their MLS contracts.  Fortunately, this system collapsed when the federal government required that we give prospects written notice of whom we represent.  Only then did we finally get true representation for both buyers and sellers.

Despite all the changes in technology, legislation, marketing, and values, one tenant remains true.  The National Association of REALTORS has a motto that sums it up – “Under all is the land.”  And another corollary should be attached to that motto – “And they are not making any more of it!”