Monthly News
Wimberley Valley News & Views, Aug. 09
What You See, May Not Be What You Get
Selling a house with an as-is agreement attempts to place all the risk of purchasing the property on the buyer. According to John McGill/Hancock & McGill LLP, “the attempt contradicts the provisions of the Texas Deceptive Trade Practices Act. An effective as-is agreement is a combination of contract wording and the totality of the circumstances surrounding the transaction”. Contrary to what some Sellers may think, an as-is sale is not an excuse for the Seller to avoid disclosing existing defects and does not relieve them of all liability. A Seller may find himself in a compromising position if undisclosed repairs turn up after closing.
Reasons why sellers can sell as-is: A. Sellers who do not know about the condition of the property because they do not live there (estate sale) B. Foreclosures C. Third Party Relocation Companies
Sellers want to sell as-is: A. Seller can not afford or does not want to make repairs. B. Seller is not physically and/or mentally capable to make repairs. C. Seller wants the convenience to walk away.
How Buyers may avoid buying a money pit: A. Exercise the Option Period, making the offer contingent on the Buyer’s approval of a professional inspection by a licensed inspector. B. Discuss any surprise defects or extensive repairs with the inspector. C. Thoroughly inspect all aspects of the property. D. Get professional bids on the major repairs. E. Negotiate for reasonable allowances. The Buyer can negotiate for a repair allowance and make the repairs after closing according to their own standards. Or, the Buyer can negotiate to have the repairs done before closing.
Seller precautions when selling a house as-is: A. Obtain a professional home inspection before listing the home for sale and make it available to the Buyer to review. This takes away the element of surprise and anticipation during the Option Period. B. Disclose all defects on the Seller’s Disclosure. C. Make as many repairs prior to listing the property as possible and then let the buyers decide whether to buy it or not.
Cautions: In an as-is sale, the Seller will probably have to reflect the cost of repairs in a reduced sales price. The seller will have to find a Buyer who will accept the risk and the responsibility of making all repairs.
An as-is Sale is legally more complicated than it sounds and has liability risk for both Seller and Buyer. The use of a lawyer to prepare an as-is agreement is generally advised.
Information Sources: Austin Real Tour® Legal Topics: John McGill/ Hancock & McGill/ Attorneys at Law.
Wimberley Valley News & Views, July 2009
Land Appreciation Slows to a Trickle
Land markets tend to change slowly rather than with a bang. The typical dynamic is a dwindling activity level with rising prices as buyers concentrate on fewer high-quality properties, leaving the more ordinary land to linger.
Dr. Gilliland, a research economist with the Real Estate Center at Texas A&M University, states that this has proven true now that we are at the end of the second quarter of 2009.
During 2008 the volume of land sales lagged 31% behind 2007 levels. Ranch land sales dropped 30% or more. Buyers are now resistant to current prices and properties are sitting on the market far longer han anticipated, even after price reductions.
Historically, uncertainty in financial and investment markets compels people to seek a safe haven for their capital. Investors may gravitate toward land in the current economic environment, just as hey did after 9/11. As the national recession drags on into 2009, Texas is experiencing the painful reality of a declining land market. The extent of the exposure lies partly in the financial strength of current owners to hold the land until the market turns. Gilliland observes, “The potential for a long-term correction in land markets has increased substantially. Market observers predict sales volume will diminish and prices will stagnate in the short term.”
How does this affect you if you don’t own a ranch or acreage? Many residents of Wimberley have two or more acres included in their homestead. In the last few years I have watched some land double in price. Hays County tax valuations have doubled and tripled in some cases. The structure of the house has a 10% cap on the amount that the tax valuation can be raised for one year. Not so for the lot or acreage land valuations. If you did not protest your taxes this year, prepare for next year.
If you are considering selling your property, most of your property appreciation in the last few years is a result of your land holding it’s value to a greater degree than the house structure. This makes a difference in the appreciation to relatively two equal houses, one on a .25 acre and the other on five acres. The land values have carried the Wimberley area appreciation.
Investing in land consistently seems to be the stable, slow to appreciate and slow to depreciate investment for long term value. As in all real estate investments, timing is everything.
Credits: Tierra Grande Magazine, Jan.2009. Texas A&M Real Estate Center. Austin and Central Texas MLS Systems.
As of June 15th, 2009, Jackie was #1 in Dollar Volume Sales and #1 in Units Sold in the HW area. Stats from the Austin MLS System. With over 20 years of experience in real estate, Jackie brings local knowledge and a dedication to her clients and her real estate business in Wimberley.
Wimberley Valley News & Views, June 2009
Appraisals Define Our Market
Sometimes you just don’t know how good things are until they change. The way Appraisals are ordered and the regulations Appraisers have to follow have changed. The Home Valuation Code of Conduct (HVCC) is an agreement entered into by Fannie Mae and Freddie Mac and their regulator the Federal Housing Finance Agency and went into effect on May 1, 2009. This has affected the outcome of several of my recent sales for the buyer and the seller.
The last 6 months of recorded sales is very low. This can make it difficult to satisfy the FNMA/FJLMC guideline that requires 3 comparable sales within the last 6 months. Appraisers must use one true “like” comparable. For example, if your subject property is a 2 bedroom house, the appraiser must use a least 1 other 2 bedroom home that has sold in the past 6 months. The most recent sale located the closest to the subject property sets the bar for the next appraisal. Value adjustments are watched very closely. These are percentage adjustments appraisers make when comparing homes. Typical adjustments are for acreage, views, type of garage, condition, to name a few. Each line adjustment cannot be more than 10% of the sales price. The Net adjustment cannot be more than 15% of the sales price. The Gross Total adjustment cannot be more than 25% of the sales price.
The new Home Valuation Code of Conduct (HVCC) regulates lender’s appraisal practices more closely. Lenders cannot ask appraisers to pull comparables before they complete the appraisal. Mortgage brokers will have to use an appraisal management company to order their appraisals. Gone are the days when an agent could meet the appraiser with comparable sold property information in hand, or could call and offer help to an appraiser who was having a hard time making the value of a sold property. Gone is the ability to choose your own appraiser if you are the Buyer. Gone are the days when Buyers could depend on an appraiser knowing the area market and the quirky valuations that occur in Wimberley.
A request for a field review appraisal is becoming more common. This is a second appraiser who reviews the first appraisers’ work. The review has to be originated by the underwriter if there are issues with the first appraisal. Of course, a second appraisal involves time, expense and may not produce the result you want.
A helpful regulation is that the Borrower is required to have his appraisal for review at least three days before their closing. Change has come very fast to the Real Estate industry so stay informedand do not be caught off guard by assuming every house is going to appraise for what the buyer and the seller agree the sales price should be.
