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Older neighborhoods are back in style!
The backlash I predicted last year has happened. New-home building has concentrated on the area north (for example, Stone Oak), northeast (Cibolo, Schertz, and Converse), and west (Westover Hills) of Loop 410 and the outer loop 1604. Now for many reasons, people are returning to the inner suburbs. Perhaps it's become too far for people to commute, or they don't get the feeling of community in a new subdivision, or they want a bigger yard and some shady trees.
Here is a chart from the San Antonio Express-News showing appreciation in various neighborhoods around the city closer to downtown:
Traffic here is not nearly as horrendous as in Houston, or even Dallas, so the commute times are still quite low. It's easy to get around in San Antonio. But you just can't get that Alamo Heights or Deco District vibe out in the 'burbs! And with Rackspace relocating to the former Windsor Park mall and bringing lots of new jobs, Windcrest homes are poised to get some new residents.
San Antonio: something for everyone
San Antonio is the place to be if you're going to school
Enrollment of students at colleges and universities is projected to grow by 8.4% in the next 5 years across the US, and by as much as 15 percent in Southern states, including Texas. Many of those students will be headed to San Antonio. San Antonio has eight accredited universities, including the University of Mexico and the National Autonomous University of Mexico, and an accredited college with four branches. There is little dormitory space, so students seek out rental units.
San Antonio's rental market is growing geographically, thanks to new apartment construction on the north/northwest side of the city. However, older rental units can offer some attractive features, such as hardwood floors and high ceilings, to successfully compete with new units.
San Antonio is the place to be if you're planning to retire
Of course, you don't have to be young to go to college. And even if you're not a student, San Antonio is still a great place to live. Del Webb, of Sun City fame, in conjunction with Pulte Homes is building a $45 million "active-adult" community in the Hill Country just northwest of San Antonio. You have to be at least 55 years young to live in the Hill Country Retreat, which will offer garden homes starting at $120,000; larger homes starting at $160,000; and homes over 2,700 square feet starting around $250,000.
For the retiree and retiree wannabe, San Antonio offers world-class health care, shopping and services, and convenient access to recreation in the form of lakes, rivers, and parks. There are more golf courses than you can shake a club at, including six municipal courses, and numerous high-rated, private, public, and resort courses.
San Antonio is the place to be if you're working or investing
So forget about age; you get a lot for your money in San Antonio. In July 2006, the average price of a single-family home went up by 7% over last year's, to $160,000. However, the median price of $135,000 is quite a bit lower than the national median price of $218,000. It's even lower than the median price of $139,900 for the rest of the state. Unlike Dallas, Houston, and Austin, San Antonio has always avoided the peaks and troughs of real estate fluctuations and remained a steady, stable market.
San Antonio has a well-rounded and growing economy. Besides education, major sectors include tourism and conventions, four military bases, research and development, and health care. The health care and bioscience industry contributes nearly $13 billion annually to the city's economy, and accounts for 14.5% of employees.
With a low unemployment rate (4.1% in September 2007) and a steady influx of military transferees, medical personnel, and students, San Antonio presents lots of opportunities for rental properties besides single-family homes. The overall occupancy rate is around 91%. Prices for multi-family properties on San Antonio's more-popular north side average from $120,000 to $300,000. Most of San Antonio's multi-family inventory is at least 20 years old, up to 80 years old in some neighborhoods, and will need repairs. But well-kept units in older neighborhoods command good rents, and can be quite attractive to tenants because they tend to be in well-established neighborhoods and school districts, and closer to the city center.
Looking for a single-family rental property to buy and hold? There are plenty of 3-bedroom, 2-bath homes in good neighborhoods and school districts, with central heat and air, a garage, and big, shady back yards. With prices ranging from $100,000 to $130,000, these are just the kind of homes that appeal to working families. Numerous affordable tract homes are being built on the far west and east areas of town. A favorite area for single-family investment properties is the northwest, close to the Medical Center, University of Texas at San Antonio, and insurance/financial services giant USAA. Other good areas to consider are those close to Lackland and Randolph Air Force Bases or near Fort Sam Houston, another of the city's largest employers.
Enrollment of students at colleges and universities is projected to grow by 8.4% in the next 5 years across the US, and by as much as 15 percent in Southern states, including Texas. Many of those students will be headed to San Antonio. San Antonio has eight accredited universities, including the University of Mexico and the National Autonomous University of Mexico, and an accredited college with four branches. There is little dormitory space, so students seek out rental units.
San Antonio's rental market is growing geographically, thanks to new apartment construction on the north/northwest side of the city. However, older rental units can offer some attractive features, such as hardwood floors and high ceilings, to successfully compete with new units.
San Antonio is the place to be if you're planning to retire
Of course, you don't have to be young to go to college. And even if you're not a student, San Antonio is still a great place to live. Del Webb, of Sun City fame, in conjunction with Pulte Homes is building a $45 million "active-adult" community in the Hill Country just northwest of San Antonio. You have to be at least 55 years young to live in the Hill Country Retreat, which will offer garden homes starting at $120,000; larger homes starting at $160,000; and homes over 2,700 square feet starting around $250,000.
For the retiree and retiree wannabe, San Antonio offers world-class health care, shopping and services, and convenient access to recreation in the form of lakes, rivers, and parks. There are more golf courses than you can shake a club at, including six municipal courses, and numerous high-rated, private, public, and resort courses.
San Antonio is the place to be if you're working or investing
So forget about age; you get a lot for your money in San Antonio. In July 2006, the average price of a single-family home went up by 7% over last year's, to $160,000. However, the median price of $135,000 is quite a bit lower than the national median price of $218,000. It's even lower than the median price of $139,900 for the rest of the state. Unlike Dallas, Houston, and Austin, San Antonio has always avoided the peaks and troughs of real estate fluctuations and remained a steady, stable market.
San Antonio has a well-rounded and growing economy. Besides education, major sectors include tourism and conventions, four military bases, research and development, and health care. The health care and bioscience industry contributes nearly $13 billion annually to the city's economy, and accounts for 14.5% of employees.
With a low unemployment rate (4.1% in September 2007) and a steady influx of military transferees, medical personnel, and students, San Antonio presents lots of opportunities for rental properties besides single-family homes. The overall occupancy rate is around 91%. Prices for multi-family properties on San Antonio's more-popular north side average from $120,000 to $300,000. Most of San Antonio's multi-family inventory is at least 20 years old, up to 80 years old in some neighborhoods, and will need repairs. But well-kept units in older neighborhoods command good rents, and can be quite attractive to tenants because they tend to be in well-established neighborhoods and school districts, and closer to the city center.
Looking for a single-family rental property to buy and hold? There are plenty of 3-bedroom, 2-bath homes in good neighborhoods and school districts, with central heat and air, a garage, and big, shady back yards. With prices ranging from $100,000 to $130,000, these are just the kind of homes that appeal to working families. Numerous affordable tract homes are being built on the far west and east areas of town. A favorite area for single-family investment properties is the northwest, close to the Medical Center, University of Texas at San Antonio, and insurance/financial services giant USAA. Other good areas to consider are those close to Lackland and Randolph Air Force Bases or near Fort Sam Houston, another of the city's largest employers.
Buying or building a new home
If you're thinking of buying a new home, you might want to read this article from Realty Times.
The author discusses some issues that aren't customary in San Antonio (real estate attorneys aren't commonly used here; their work is done by title companies, for instance), but gives some excellent advice.
The author discusses some issues that aren't customary in San Antonio (real estate attorneys aren't commonly used here; their work is done by title companies, for instance), but gives some excellent advice.
10 things I will tell you
I found the following undated article called 10 Things Your Real Estate Broker Won't Tell You on the Yahoo Real Estate website. I don't think it was written by a real estate professional, and I felt that it needed a response (shown in blue).
1. "Your open house is really a party for me."
Hire a real estate broker to sell your home and one of the first things he'll likely suggest is hosting an open house, so potential buyers can casually check out your property on a weekend afternoon. While open houses are promoted as a great way of finding a buyer, a National Association of Realtors study found that their success rate is a mere 2%.
No matter. Having an open house serves another important purpose - for the broker. "It gives him a database of clients," says Sean McNeill, an independent real estate broker based in New York City who says that he buyers. "At open houses, you get all kinds of people walking in. Some are [trying] to see how much they should sell their own places for; others just want to get a look at what's out there." All are perfect pickings for a broker looking to increase his roster of buyers and sellers. "Think about it," McNeill says. "The broker is devoting a couple hours of a weekend. He won't do that unless it helps him in a big way."
RR: Some party! An open house is work, and an inefficient marketing tool to boot. It exposes a property for sale to only a small number of prospective buyers, typically, the neighbors, people who are looking for decorating ideas, and people who happen to drive by (if they’re interested, they’d call the number on my for-sale sign anyway).
1. "Your open house is really a party for me."
Hire a real estate broker to sell your home and one of the first things he'll likely suggest is hosting an open house, so potential buyers can casually check out your property on a weekend afternoon. While open houses are promoted as a great way of finding a buyer, a National Association of Realtors study found that their success rate is a mere 2%.
No matter. Having an open house serves another important purpose - for the broker. "It gives him a database of clients," says Sean McNeill, an independent real estate broker based in New York City who says that he buyers. "At open houses, you get all kinds of people walking in. Some are [trying] to see how much they should sell their own places for; others just want to get a look at what's out there." All are perfect pickings for a broker looking to increase his roster of buyers and sellers. "Think about it," McNeill says. "The broker is devoting a couple hours of a weekend. He won't do that unless it helps him in a big way."
RR: Some party! An open house is work, and an inefficient marketing tool to boot. It exposes a property for sale to only a small number of prospective buyers, typically, the neighbors, people who are looking for decorating ideas, and people who happen to drive by (if they’re interested, they’d call the number on my for-sale sign anyway).
Instead, I market the home on the MLS, my website, Realtor.com, the local paper, and numerous other real estate websites, such as Yahoo, Point2, and Trulia. My job is to get the best price and terms by marketing the property to the highest number of potential buyers. When a seller asks me if I will do an open house, I explain that I will be happy to do one if they want me to, but it is more likely to net me a couple of future clients than a buyer for their home.
2. "My fees are negotiable."
Brokers like to make it sound as if their fees are engraved in stone, but that's rarely the case - especially in a brisk market, when brokers fiercely compete for properties they can unload fast. This past summer one broker in the Midwest says he lowered his fee by a full percentage point because there was so much demand for good properties that he needed leverage. Indeed, says the broker, who asked not to be named, sellers should shop around for broker's fees. He suggests these negotiating tactics: "If somebody's willing to commit to me for selling one place and buying another, I give a discount. If you're in a particularly desirable neighborhood with a house that will bring a lot of traffic" - say, at an open house - "that can be used, because the broker will use the flow of people to get potential customers. And with some [smaller] brokers, all you need to do is ask and they'll lower the commission."
RR: I set my fees like any consultant would: using a combination of what is the norm in the marketplace and what returns the best compensation for my time, experience, knowledge, and expenses, since I am a self-employed businessperson. I offer a couple of commission alternatives for sellers. This is my business, and I believe I provide good value for my fees.
3. "Think you've had no offers? Actually, there've been several."
Legally, the broker you hire to sell your home is obligated to tell you about all offers that come in. In reality, some don't. Perhaps he thinks the offer is insultingly low for you, but more likely, "the broker thinks it's too low for his own purposes. He wants to hold out for a bigger commission," says McNeill. Or else there's an outside broker (or "co-broker") circling your house, and the primary broker is waiting for one of his own clients to make an offer so he can keep the full 6% to himself.
"You must be clear with your broker that you want to be informed of all offers," McNeill says. "Otherwise, you may be leaving him to make decisions that you should be making." Check the listing agreement drawn up when you hire the broker; if the promise to disclose all offers isn't listed explicitly, insist that it be added.
RR: The broker who does not inform their client that there has been an offer on the property is dishonest and deceptive. Not only is this unethical, but it’s cause for action by the client. I also won't represent buyers of any of my listings, since it is perceived as a conflict of interest, so I won't be "keeping" the full commission. I refer buyers to another professional so they can be represented fully as well as my seller.
4. "I talk about you behind your back."
You spot your dream house as you're driving through a neighborhood and call the broker listed on the For Sale sign. That's how a lot of buyers stumble on a broker - who, in turn, happily shows you other houses, asking about your needs, laughing at your jokes. It's easy to get loose-lipped and forget whom you're dealing with: someone else's agent. "Legally, brokers are obligated to provide their sellers with any information that can help them get the best prices for their homes," says Stephen Israel, president of Buyer's Edge, a Bethesda, Md.-based company that represents homebuyers. "If you tell the broker that you're willing to pay $500,000 but want to offer $450,000, they'll pass that on to the seller. They have to."
Also, some brokerage companies encourage prospective buyers to get preapproved for loans. While that can make a buyer more attractive to a lender, it also tells a broker whether a buyer can afford a $600,000 house when he's trying to haggle on a $400,000 property. "When somebody asks for [a preapproval], find out who they're representing," says Israel, acknowledging that such details can short-circuit your negotiating leverage. "If they represent a seller - or someone in their office does - they shouldn't have it. The broker may tell you she will be impartial, but how can she be?"
RR: I find out at the beginning if someone is working with a buyer’s agent. If not, I will determine whether I want to work with them. If I am representing the seller of a listing they are interested in, I'll show it to them. I will also let them know that right away and tell them if they decide to make an offer on my listing, I will find another professional to represent them. Otherwise, I would need their permission in writing, as well as that of my first client, the seller, to represent them both.
As far as getting pre-approved for a mortgage, I now insist that my clients do this because I will not waste my time and theirs (as well as getting sellers’ hopes up) showing them homes they cannot afford. On the other hand, if they want to spend $400,000 when they’re qualified for $600,000, that's their business. It would be just plain silly for me to push them into a higher price range to try to get a higher commission--and risk losing a sale completely. Whatever my client tells me they want to spend is gospel to me.
2. "My fees are negotiable."
Brokers like to make it sound as if their fees are engraved in stone, but that's rarely the case - especially in a brisk market, when brokers fiercely compete for properties they can unload fast. This past summer one broker in the Midwest says he lowered his fee by a full percentage point because there was so much demand for good properties that he needed leverage. Indeed, says the broker, who asked not to be named, sellers should shop around for broker's fees. He suggests these negotiating tactics: "If somebody's willing to commit to me for selling one place and buying another, I give a discount. If you're in a particularly desirable neighborhood with a house that will bring a lot of traffic" - say, at an open house - "that can be used, because the broker will use the flow of people to get potential customers. And with some [smaller] brokers, all you need to do is ask and they'll lower the commission."
RR: I set my fees like any consultant would: using a combination of what is the norm in the marketplace and what returns the best compensation for my time, experience, knowledge, and expenses, since I am a self-employed businessperson. I offer a couple of commission alternatives for sellers. This is my business, and I believe I provide good value for my fees.
3. "Think you've had no offers? Actually, there've been several."
Legally, the broker you hire to sell your home is obligated to tell you about all offers that come in. In reality, some don't. Perhaps he thinks the offer is insultingly low for you, but more likely, "the broker thinks it's too low for his own purposes. He wants to hold out for a bigger commission," says McNeill. Or else there's an outside broker (or "co-broker") circling your house, and the primary broker is waiting for one of his own clients to make an offer so he can keep the full 6% to himself.
"You must be clear with your broker that you want to be informed of all offers," McNeill says. "Otherwise, you may be leaving him to make decisions that you should be making." Check the listing agreement drawn up when you hire the broker; if the promise to disclose all offers isn't listed explicitly, insist that it be added.
RR: The broker who does not inform their client that there has been an offer on the property is dishonest and deceptive. Not only is this unethical, but it’s cause for action by the client. I also won't represent buyers of any of my listings, since it is perceived as a conflict of interest, so I won't be "keeping" the full commission. I refer buyers to another professional so they can be represented fully as well as my seller.
4. "I talk about you behind your back."
You spot your dream house as you're driving through a neighborhood and call the broker listed on the For Sale sign. That's how a lot of buyers stumble on a broker - who, in turn, happily shows you other houses, asking about your needs, laughing at your jokes. It's easy to get loose-lipped and forget whom you're dealing with: someone else's agent. "Legally, brokers are obligated to provide their sellers with any information that can help them get the best prices for their homes," says Stephen Israel, president of Buyer's Edge, a Bethesda, Md.-based company that represents homebuyers. "If you tell the broker that you're willing to pay $500,000 but want to offer $450,000, they'll pass that on to the seller. They have to."
Also, some brokerage companies encourage prospective buyers to get preapproved for loans. While that can make a buyer more attractive to a lender, it also tells a broker whether a buyer can afford a $600,000 house when he's trying to haggle on a $400,000 property. "When somebody asks for [a preapproval], find out who they're representing," says Israel, acknowledging that such details can short-circuit your negotiating leverage. "If they represent a seller - or someone in their office does - they shouldn't have it. The broker may tell you she will be impartial, but how can she be?"
RR: I find out at the beginning if someone is working with a buyer’s agent. If not, I will determine whether I want to work with them. If I am representing the seller of a listing they are interested in, I'll show it to them. I will also let them know that right away and tell them if they decide to make an offer on my listing, I will find another professional to represent them. Otherwise, I would need their permission in writing, as well as that of my first client, the seller, to represent them both.
As far as getting pre-approved for a mortgage, I now insist that my clients do this because I will not waste my time and theirs (as well as getting sellers’ hopes up) showing them homes they cannot afford. On the other hand, if they want to spend $400,000 when they’re qualified for $600,000, that's their business. It would be just plain silly for me to push them into a higher price range to try to get a higher commission--and risk losing a sale completely. Whatever my client tells me they want to spend is gospel to me.
5. "Sometimes I forget whose side I'm on."
The past 10 years have seen the proliferation of the buyer broker, agents who are supposed to work strictly in the buyer's interest, helping him get a fair price on a home as well as avoid pitfalls along the way. Unfortunately, things don't always unfold so nicely. While buyers may think they're getting a broker who isn't commission-hungry, many buyer agents are just that: They usually get about 3%, the same amount any broker typically earns when he gets involved with another agent's listing. "Buyer brokers are sometimes too focused on closing the sale and getting that commission," says Max Gordon, an Overland Park, Kan.-based real estate broker and attorney, so it's often in their best interest to see you pay as high a price as possible.
Even worse, some brokers who call themselves buyer advocates are actually working for companies that also represent sellers. "Brokerages offer bonuses to buyer agents if they sell an in-house listing," says Israel. A good way to get a broker who has no such conflicts of interest: The National Association of Exclusive Buyer Agents, whose Web site (www.naeba.com) can help you find a buyer agent near you who pledges to help you get the best deal possible and has no ties to sellers' agents; many even work on a fee structure rather than on commission.
RR: Buyer’s agents, especially in investment or commercial properties, can get a smaller percentage of the commission than listing agents, usually in return for doing a lot more legwork, in my opinion. Of course, it’s in my short-term "best" interests for my buyer clients to pay the highest price possible, just as it’s in your attorney’s best interests to drag a lawsuit out as long as possible or your stockbroker’s best interests to switch you in and out of funds to collect fees for churning. Does your CPA or stockbroker belong to an organization requiring them to subscribe to a code of ethics? I do. And I think my best interests are better served by doing an excellent job for my clients so they’ll trust me with future business and referrals, not by trying to get an extra few hundred dollars in commission and then never hearing from that client again.
I have no ties to other agents. There’s a good chance I don't even know the listing agent, and I’m still working on my client’s behalf to get them the best deal. Of course, some agents are more pleasant to work with than others; also, there have been times when I have had to do the other agent's work as well as mine. An honest, efficient professional on the other side of the transaction helps both parties in making the transaction go smoothly.
I enjoy working with buyers, and am an Accredited Buyers Representative, but since I do represent sellers as well, I’m not planning to join the NAEBA. In fact, I think my knowledge of what buyers want gives me a huge advantage when I counsel sellers on how to prepare their home for sale. I've previewed and shown hundreds of homes and listened to what buyers say about them.
6. "I know zilch about zoning."
Real estate agents love to suggest big ideas to prospective buyers - say, removing trees to enhance a view, or even squeezing a rental unit out of a roomy garage - meant to happen once the deal is done and they're out of the picture. "We had a client who bought a dilapidated house with a beautiful piece of property on a marshland," recalls Manhattan-based architect Mary Langan. "The broker told him that he could fix the house up however he wanted, insisting that this was a sleepy little town where nobody would care what he did. He put up a $15,000 shed in his backyard, pulled down trees, filled in some of the marshland. Now the town is making him put things back because of environmental zoning regulations." The lesson: Before you buy into your broker's creative thinking, check with your local zoning commission.
RR: Zoning and rezoning isn’t my specialty area, but I never “insist” to my clients that they do speculative work on a property or represent that I know exactly what will happen in the future. That’s just common sense.
7. "I won't let termites - or pesky inspectors - kill a deal."
If a broker is selling a house, you figure he knows the place pretty intimately - after all, he talks a good game about the new kitchen, the big closets, the heated garage. What you need to worry about, though, are the home's features that he keeps to himself. Steve Van Grack, chairman of the Maryland Real Estate Commission, says, "We have had cases where [brokers have] been deceptive about termites and flood damage."
You'd figure that the home inspector, who comes to check out the place before you close the sale, might notice those things. And he will - if he's not in cahoots with the broker. "Realtors give potential homebuyers lists of home inspectors," says S. Woody Dawson, a structural inspector in Connecticut. "Those are people who will rubber-stamp the house" in return for repeat business. As one who works outside those lists, Dawson says that he sometimes butts heads with overly controlling brokers. "One time I had a broker tell me that unless I told her the results of my inspection - which is confidential between myself and my client - she wouldn't let me get up on the roof. I got out my ladder and told her that unless she was big enough to stop me, I was going up there. She wasn't big enough."
RR: My clients often choose to work with an inspector I know who finds everything, but everything, wrong with a property. In the early days, a couple of sales did fall out because my buyers were so scared by his incredibly detailed reports.
But I think it’s important for my clients to have as much information as possible about the property, even though I think a couple of the homes that went back on the market didn’t deserve to. I don’t know anything about a seller's property except what I’ve seen at the showing, what the seller has told me or disclosed, and what the inspector has found.
8. "I'm not a lawyer, but I play one in your house."
Most states strictly regulate the contracts used in real estate transactions, stipulating the use of boilerplate agreements that offer little room for creativity - but some brokers can't keep their clause-adding instincts in check. "I see [brokers] pushing the envelope all the time with amendments and addenda," says Gordon. "They draft language that can have consequences without really understanding it - but they want to keep the sale going."
For example, Gordon points out, it's fairly common for "a transaction to close on one day but possession doesn't happen until a later date, in which case the buyer rents the house back to the seller for those days." Gordon warns that issues of responsibility for the house require more than a couple lines from the broker's pen. If a clause is worded improperly, you as the buyer could end up liable for damage done by your "rental tenant." Same goes for purchases of non-real-estate items (such as patio furniture) and owner carryback (in which the seller provides some of the financing). "In both cases payment terms might not get spelled out clearly," Gordon says, "and can result in one party taking advantage of the other." Whether you're the buyer or the seller, it's worth the legal fees, he says, to get the offer contract reviewed by your lawyer before you sign.
RR: I don’t revise or strike out clauses in the state forms I’m required to use unless my client specifically instructs me to do so, and even then only with great reluctance and after checking with a real estate attorney or title company representative. Just about every real estate situation has been covered by those forms, which are updated regularly by teams of attorneys. So far I haven’t run across anything so unusual that there’s not a form to deal with it.
9. "My Web site is a dead end."
Considering that over 50% of house hunters look on the Web, according to the National Association of Realtors, sellers might assume that using a broker with a site can help make a sale happen. But some brokers' sites are better than others, and you need to look beyond a well-designed home page to figure that out.
One common flaw: posting houses that sold long ago. While the mistake can be simple negligence, others think that it's a bait-and-switch-style ploy. "It brings people in, but it gets them upset when they find out that the property's [gone]," says Frank D'Ostilio Jr., president of William Orange Realty in the New Haven, Conn., area. "If a broker has to advertise properties that are already sold, it tells you that he doesn't have enough inventory to keep his [roster of houses] full."
Aside from checking up on a site's prominently placed listings, prospective sellers should also make sure that a site is easy to navigate. Roger Lautt, a Chicago-based broker with Re/max Exclusive Properties, has had his own site up for the past five years. "You want to use a broker who keeps himself relatively high on the search engines," advises Lautt, adding that he pays a Webmaster to make sure this happens for his site, which is linked with Realtor.com, Yahoo! and the Re/max site. "One of the big things a broker should have on his site is community information," Lautt says - schools, recreation facilities, commuting options, maps - "which attracts people who are thinking of moving to the community."
RR: When I sell one of my listings, I show it as sold on the MLS and my website immediately. When one of my clients’ investment properties has been leased, I immediately display it as RENTED. This is to show my prospective investment clients the type of rental property I typically sell.
8. "I'm not a lawyer, but I play one in your house."
Most states strictly regulate the contracts used in real estate transactions, stipulating the use of boilerplate agreements that offer little room for creativity - but some brokers can't keep their clause-adding instincts in check. "I see [brokers] pushing the envelope all the time with amendments and addenda," says Gordon. "They draft language that can have consequences without really understanding it - but they want to keep the sale going."
For example, Gordon points out, it's fairly common for "a transaction to close on one day but possession doesn't happen until a later date, in which case the buyer rents the house back to the seller for those days." Gordon warns that issues of responsibility for the house require more than a couple lines from the broker's pen. If a clause is worded improperly, you as the buyer could end up liable for damage done by your "rental tenant." Same goes for purchases of non-real-estate items (such as patio furniture) and owner carryback (in which the seller provides some of the financing). "In both cases payment terms might not get spelled out clearly," Gordon says, "and can result in one party taking advantage of the other." Whether you're the buyer or the seller, it's worth the legal fees, he says, to get the offer contract reviewed by your lawyer before you sign.
RR: I don’t revise or strike out clauses in the state forms I’m required to use unless my client specifically instructs me to do so, and even then only with great reluctance and after checking with a real estate attorney or title company representative. Just about every real estate situation has been covered by those forms, which are updated regularly by teams of attorneys. So far I haven’t run across anything so unusual that there’s not a form to deal with it.
9. "My Web site is a dead end."
Considering that over 50% of house hunters look on the Web, according to the National Association of Realtors, sellers might assume that using a broker with a site can help make a sale happen. But some brokers' sites are better than others, and you need to look beyond a well-designed home page to figure that out.
One common flaw: posting houses that sold long ago. While the mistake can be simple negligence, others think that it's a bait-and-switch-style ploy. "It brings people in, but it gets them upset when they find out that the property's [gone]," says Frank D'Ostilio Jr., president of William Orange Realty in the New Haven, Conn., area. "If a broker has to advertise properties that are already sold, it tells you that he doesn't have enough inventory to keep his [roster of houses] full."
Aside from checking up on a site's prominently placed listings, prospective sellers should also make sure that a site is easy to navigate. Roger Lautt, a Chicago-based broker with Re/max Exclusive Properties, has had his own site up for the past five years. "You want to use a broker who keeps himself relatively high on the search engines," advises Lautt, adding that he pays a Webmaster to make sure this happens for his site, which is linked with Realtor.com, Yahoo! and the Re/max site. "One of the big things a broker should have on his site is community information," Lautt says - schools, recreation facilities, commuting options, maps - "which attracts people who are thinking of moving to the community."
RR: When I sell one of my listings, I show it as sold on the MLS and my website immediately. When one of my clients’ investment properties has been leased, I immediately display it as RENTED. This is to show my prospective investment clients the type of rental property I typically sell.
I work very hard to keep my website informative and current, and my clients tell me that I’m successful.
10. "You may not need me at all."
Brokers like to create a lot of mystique about selling homes, insisting that the process is complicated and best left to professionals with multiple listings and loads of house hunters. Not so, say homeowners who have sold their homes themselves (about 20 to 30% do so each year). William Supple, publisher of the sale-by-owner real estate magazine Picket Fence Preview and author of How to Sell Your Own Home, says that "properly priced and advertised, a house sells itself," adding that sellers should plant a yard sign and post online ads with local sites aligned with print publications (call current advertisers to see if the given site is effective). After all, when it comes to the inevitable negotiations between buyers and sellers, Supple figures that brokers and their commissions get in the way: "Usually, the haggling occurs over a 5 to 10% difference, and that is, more or less, the broker's cut of the sale price. You don't need him."
Just be sure you price your home well. The way most self-sellers hurt themselves, Supple says, is in setting either an unreasonably high or tragically low asking price. "Hire an independent appraiser for $200," he suggests, "and he will tell you [the parameters of] what to charge." In a strong market with low interest rates, he adds, the asking price can be 10 or 15% above what the appraiser thinks it will go for; in a weak market it might be wise to price at or below the appraisal.
RR: Of course you don’t "need" me. Nobody needs me except my two cats!
My job is to make your life simpler and help you get what you want. All without your having to do everything yourself, while also trying to work and take care of your family. You might save money by re-roofing your home yourself, or replacing your car’s transmission yourself, or representing yourself in court. I could do my own taxes, but I'd rather pay somebody else to.
If you decide to sell your home yourself, please reconsider the advice given above to set your asking price above what an appraiser tells you your house is worth. Appraisers represent lenders, not home buyers, and they set a different value on a property than what a buyer is willing to pay.
10. "You may not need me at all."
Brokers like to create a lot of mystique about selling homes, insisting that the process is complicated and best left to professionals with multiple listings and loads of house hunters. Not so, say homeowners who have sold their homes themselves (about 20 to 30% do so each year). William Supple, publisher of the sale-by-owner real estate magazine Picket Fence Preview and author of How to Sell Your Own Home, says that "properly priced and advertised, a house sells itself," adding that sellers should plant a yard sign and post online ads with local sites aligned with print publications (call current advertisers to see if the given site is effective). After all, when it comes to the inevitable negotiations between buyers and sellers, Supple figures that brokers and their commissions get in the way: "Usually, the haggling occurs over a 5 to 10% difference, and that is, more or less, the broker's cut of the sale price. You don't need him."
Just be sure you price your home well. The way most self-sellers hurt themselves, Supple says, is in setting either an unreasonably high or tragically low asking price. "Hire an independent appraiser for $200," he suggests, "and he will tell you [the parameters of] what to charge." In a strong market with low interest rates, he adds, the asking price can be 10 or 15% above what the appraiser thinks it will go for; in a weak market it might be wise to price at or below the appraisal.
RR: Of course you don’t "need" me. Nobody needs me except my two cats!
My job is to make your life simpler and help you get what you want. All without your having to do everything yourself, while also trying to work and take care of your family. You might save money by re-roofing your home yourself, or replacing your car’s transmission yourself, or representing yourself in court. I could do my own taxes, but I'd rather pay somebody else to.
If you decide to sell your home yourself, please reconsider the advice given above to set your asking price above what an appraiser tells you your house is worth. Appraisers represent lenders, not home buyers, and they set a different value on a property than what a buyer is willing to pay.
If you miraculously find buyers who will pay for an overpriced house, they will be very unhappy when their appraiser comes back with a lower value. Since they can only get a loan based on the appraised value, not the higher sales price, they will have to come up with the difference out of their pocket. Their first move will be to ask you to lower the price to the appraised value. By that time, the buyers may be so upset at having spent money on an appraisal, loan fees, and/or a real estate inspection that they may want further concessions or even to end the contract. This has happened on a couple of transactions in which I represented the buyers—but I know how to deal with this situation and get it back on track.
And that’s one of the many things I get paid to do: handle those stressful phone calls and tense negotiations so that my clients don't have to. They invariably take place on a Friday evening right before closing; and after the movers have been scheduled to deliver the furniture!
That's what this particular broker will tell you. And if you want to know anything else, just ask me!
San Antonio is last on the list
Of cities in Western states that may experience price declines in real estate over the next couple of years, that is. This ranking by CNN/Money online showed Denver to be at a 16.9% risk of declining prices, followed by Las Vegas and Austin/Round Rock at 13.0 and 11.6, respectively. Last on the list was San Antonio, with a mere 6.8% risk of heading downhill any time soon. The ranking was obtained by analyzing housing prices and affordability, as well as economic conditions of the various cities.
Past performance is no guarantee of future returns, but San Antonio real estate has always been on a more even keel than that of other Texas cities. Dallas, Houston, and Austin have had their booms and busts, while San Antonio’s market merely rose and dipped slightly. With its diverse economy, an occupancy rate of 93%, and the prospect of adding thousands of jobs over the next year, the outlook for real estate investment is bright.
San Antonio real estate prices may not have had an exciting roller-coaster ride in the past, but if you want stability and steady growth, put San Antonio first on your list.
Past performance is no guarantee of future returns, but San Antonio real estate has always been on a more even keel than that of other Texas cities. Dallas, Houston, and Austin have had their booms and busts, while San Antonio’s market merely rose and dipped slightly. With its diverse economy, an occupancy rate of 93%, and the prospect of adding thousands of jobs over the next year, the outlook for real estate investment is bright.
San Antonio real estate prices may not have had an exciting roller-coaster ride in the past, but if you want stability and steady growth, put San Antonio first on your list.
The tax advantages of buying a home
When buying a home, Uncle Sam plays a big role, offering a variety of tax breaks for homeowners. But taxes are messy and they can be complicated and arcane. So learn all about the benefits, the pitfalls and how to file the paperwork properly.
More than 75 years ago, the U.S. government decided to award homeowners with a lucrative tax break, permitting home loan interest to be deductible from personal taxable income. Most states that have income taxes permit the same deduction.
This benefit is particularly useful to first-time home buyers because during the early years of the loan most of each monthly payment going to pay interest, which is deductible. Very little principal is paid back. For example, at the end of the first year of a 30-year fixed mortgage at 8 percent, less than 1 percent of the principal is repaid. The longer you pay on an amortized loan, the more of each monthly payment goes to pay the principal. Less of each monthly payment goes toward interest. You lose some of your interest write-off as you build equity in the property.
Remember you can only take these tax deductions if you switch from the standard deduction, which all taxpayers are entitled to, to itemized deductions. If your itemized deductions, including mortgage interest and property taxes, do not exceed the standard deduction amount, you are better off taking the standard deduction.
TIP: The longer the term of the mortgage the higher the tax savings, because there is more interest on a 30- or 40-year loan than there is on a 15-year mortgage. The higher the amount of interest paid, the larger the tax deduction. However, even when you take the tax savings into account, a 15-year loan will probably cost you less in the long run.
What is deductible?
- Interest on your mortgage, whether paid to a lender or to a home seller or another party, as long as it is for debt secured by real property.
- Property taxes are completely deductible, but special government fees such as water or sewer assessment may not be.
- For a purchase mortgage, loan points are fully deductible in the year that they are paid. In a refinance, the points are written off in increments over the term of the loan.
What is not deductible?
- Home improvement expenses
- Closing costs other than prorated property taxes and points on the home loan
- Real estate commissions paid to real estate or loan brokers
- Home inspections, appraisals or loan application fees
- Homeowner and co-op dues
- Insurance expenses
IRAs and Real Estate
You cannot use a conventional IRA account or 401-K plan for a downpayment without paying steep penalties and taxes on the gains that were made while the money sat in the savings plan.
But if you are saving to become a first-time home buyer, check out a Roth IRA. The Taxpayer Relief Act of 1997 created a new type of individual retirement account called a Roth IRA, which allows penalty-free withdrawals for first-time homebuyers.
But read the fine print carefully.
- Deduct income not contributions: Contributions to a Roth IRA are not deductible, but no taxes are paid on qualified distributions.
- Must wait five years: To be qualified for a Roth IRA, a distribution must be made five taxable years after the first contribution to the account was made. In addition, the distribution must meet at least one of the following conditions:
- Limits on the contribution: Up to $2,000 a year can be contributed to an account, but only by single tax-filers with adjusted gross income of less than $95,000 and joint-filers with combined income below $150,000.
- Convert your existing IRA carefully: The new tax law permits you to convert your existing individual retirement account into a Roth IRA if your adjusted gross income is less than $100,000 and the conversion is made before Jan. 1, 1999. But any amount that would have been taxable as income when withdrawn from the existing account will be taxed, but the tax liability can be spread out over four years. Importantly, the traditional 10 percent penalty on early withdrawals will not be levied on taxpayers who convert their current IRA into a Roth IRA.
The three deductibles at closing
Three closing costs are tax-deductible in the year of the sale: points, prorated mortgage interest and prorated property taxes. Lenders collect enough money at closing to cover the interest owed and property taxes from the closing date until the next payment period. This is called proration. Make sure that you keep a record of this figure. At the end of the year, the lender will send you a 1099 form (for your income tax filing) which indicates the amount of interest you paid for the year. This 1099 form might not include the pro-ration of interest you paid at closing.
Capping capital gains
The Taxpayer Relief Act of 1997 allows married couples who sell their primary home to keep up to $500,000 in profits tax-free and lets single-filers keep up to $250,000. If the sale exceeds that amount, capital gains taxes of 20 percent must be paid. When a rental property is sold, the seller is obligated to pay capital gains tax. The IRS also allows property owners to defer capital gains liability if they buy another rental property and meet the requirements for a 1031 exchange. The IRS does not allow property owners to defer their capital gains tax from the sale of a rental property if they use the proceeds to buy a personal residence. The proceeds must go into another rental property.
—From Inman News
Equal Housing Opportunity. This material is based on information which we consider reliable, but because it has been supplied by third parties, we cannot represent that it is accurate or complete and should not be relied on as such. This offering is subject to errors, omissions, change of price or withdrawal without notice.