How Your Real Estate Broker Can Help You Build a Home

With affordability/ availability in mind, many Buyers are flocking to the outskirts of the metro area to build their next (or first) home.  Buyers may want a home without the burden of having to make improvements or repairs associated with older houses. Some folks like knowing that a new house is a blank slate–no skeletons in the closet so-to-speak.  But if you’re not going to see resale homes, then how can your Realtor/ Broker/ Agent be of value? Isn’t trusting the Builder enough? The answer is that your Broker will be the single most helpful advocate during the process and Builders aren’t always as altruistic as you’d want. A Builder’s job is to build and sell houses–they are in business to achieve their best outcome much like a conventional house Seller. They can stand to break a few eggs to make an omelette. Your Realtor is in business to achieve Your best outcome.  The best part is the VAST MAJORITY of Builders will pay a commission to Your Realtor to help you; much to their own chagrin.

Although the process doesn’t start in the same way as finding a resale home it ends like all other real estate transactions.  In fact, the process can be more involved than a traditional resale. Right now there is a surge of new-build developments cropping up everywhere. With this comes not only the traditional hurdles of finding the right location and floor plan, but also the added pitfalls of overseeing a brand new build that takes course over many months–sometimes a year. And at the end you want a perfect product, right?  That’s what your Realtor is charged to accomplish.  They can assist in the following areas:

Which Builder is right for you? Realtors have either experienced first-hand or heard of the reputation of Builders in the area. We have the resources to find the right one for you. Realtors know what traits to look for when choosing Builders.

Which community? Amenities, parks, geography, HOA dues, proximity to roads & business, TAX RATES, etc are all important factors to consider.

What and Who Should you Ask? Realtors are natural detectives, and a seasoned pro knows what to ask and when throughout the course of the build. We also help keep track of the players on the Builder side–its not always easy to know who is in charge of what at the construction site.

Which Lot do you choose? Think about elevation, drainage, what surrounds the Lot, etc.

How long does it take to build and where do you live in the meantime? Some new home Buyers have to Sell or Lease before the new house is finished–Your Realtor can help!!

When and how should you negotiate? Many Buyers overestimate and underestimate their ability to negotiate on new builds.  A seasoned Realtor knows what to do and when to get you the best deal possible.

When should you inspect the Building Process? Its a mistake to assume that the Builder will build the house perfect the whole way through. At certain times, its key to have a professional inspector or certain vendors inspect components of the house so that you don’t get stuck with a problem as soon as you sign the closing documents. Once the deal is done, its done.

Blue Tape? Toward the end of the process, your Realtor is an extra set of eyes.  We know what what is supposed to be right and what’s not. When it comes time for the Blue Tape final walk through, you’ll be glad your Realtor is with you to spot mistakes that need to be corrected before closing.

Traditional transaction aspects? Besides the build, Buyers still need help navigating Lenders, Title Companies, Closings and Documents.  Your Realtor is there to help you make sense of it all.

Building is a HUGE process! Why not have help from your trusted Realtor in one of the biggest purchases and processes you’re likely to go through in life?  If you’re considering building as an option for you and your family, contact Ascension and we’ll help you get to the closing table unscathed!

How to Protest Your Property Taxes (2017)

Every year in Texas, real estate owners are faced with a tax burden based on their properties’ value to fund the state and local government.  In January, an appraisal is performed on a property and a value is determined.  The appraisal value multiplied by the tax rate determines the amount of taxes owed.  However the county’s method of appraisal isn’t wholly accurate. Texas is a “non-disclosure” state; meaning that sales information does not have to be disclosed to the state and counties aren’t privy to complete sales data for the area.  They have to rely on an algorithm and the voluntary sales data submitted by property owners.  Increases in value are computed across an entire area rather than on an individual property basis. This means an appraisal could be wrong, and its up to the property owner to protest the evaluation every year. Because the county’s information isn’t wholly accurate, nor can their systems account for all the complexities of real estate, its a good idea to protest; whether you do it yourself or not.  Otherwise, you could be paying much more in taxes than necessary.  If you have purchased property in Austin within the past 5 years, you’ve probably noticed assessments make significant jumps annually. Doing it yourself will be good for perspective, but if you don’t have the time, you might try a company called Texas ProTax (*not an endorsement; there are other companies*) who will get paid based off a percentage of what they save you.  Their office is actually right next door to the appraisal district HQ.  Here is their website: texasprotax.com
Also, see your county’s appraisal district website for info:
Travis
Williamson
Hays

Should you decide to do it yourself, check out this explanatory article by the Statesman.  It runs through the process, gives good tips, and I found it to be very helpful.  You will also be mailed some information from the county appraisal district explaining what to do and how to prepare. You will be given two dates in which to protest and the option to protest online.  Protesting online is quicker, but gives you less ability to persuade and have a back-and-forth negotiation.  If you don’t have a lot of time, this might be a good option .  The earlier hearing date is the “informal hearing” in which its a 1-on-1 conversation with you and an appraiser–much easier and relaxed.  The later date is the “formal hearing” in front of an Appraisal Review Board–these people are tired, annoyed and forced to listen to belligerent property owners all day.  You’ll have better chances at the informal hearing.

Key concept when protesting:  The appraisal is for the county’s perceived value of your property as of January 1 this year.  Any sales data occurring after January 1 will not be relevant, and you will want to look toward sales stats occurring within 3-4 months prior.

At the hearings, its the taxpayer’s burden to present an evidence packet.  Please see my attached protest template that I’ve used for my property for the past 3 years. I’m not a protest professional *or a tax specialist* but my template covers most of what they are expecting to see based on what is expressed in the info packets.  Augment it to suit your property.  Be sure to print off the recommended number of copies (5+). If there were any conditions that you had to repair close to January 1 or just after, be sure to input them in the template packet with invoices. If your house had a roof replacement, then that would affect the value of your home at the time they assigned a value.  You should consider disclosing anything that might lower the property’s perceived value. Seems counter-intuitive but its about saving money.
Property Protest Template

I recommend being on time to the appointments, and  be firm but nice.  If you need any more advice, let me know!

Investment Analysis: (Cap)italization Rates

There are many ways in which someone could analyze a property’s investment potential, and through that, determine a relative value.  Some methods are more accurate than others.  It really depends on how much information you put into the equation and what type of property/ investment is the subject.  For instance, when evaluating rental properties, a common method for analysis and comparison is the Capitalization Rate or “Cap Rate.”  Capitalization rate shows the potential rate of return on a real estate investment over 1 year.  It can be used to compare return among multiple properties and it can also be used as an indicator for the market–if you view cap rates in an area over time and cap rates are shrinking, it could mean the values are being bid up and the market is heating up.

In order to determine Cap Rate:

  1. Determine the Gross Annual Income for 1 year
  2. Subtract total Operating Expenses for 1 year
    • Operating Expenses include: Marketing & Advertising, Property Taxes, Insurance, any Utilities paid, Property Management, Expected Repairs/ Maintenance, Accounting & Legal
  3. Divide by the Sales Price/ Market Value

Net Operating Income (NOI) is the Gross Annual Income subtracted by the Operating Expenses.

Cap Rate = NOI / Sales Price

For simplicity, assume a building’s price was $1,000,000 and its annual income, minus expenses, was $100,000.  Then,  $100,000 / $1,000,000 = 10% = Capitalization Rate

Most seasoned investors have an idea of what Cap Rate they desire and seek properties that fall within that general range; then negotiate to get closer to that target.  In general, a lower cap rate indicates less risk associated with the investment (maybe because of an increase in demand). Less risk means less return.  Higher cap rates might indicate higher risk alternatives.  However, more risk could generate higher returns on investment.

Some shortcomings of using capitalization rates are:  1) It only views the current year.  Market rents could be different than the currents rents the property is receiving, for better or worse. Also, it only analyzes a property for 1 year versus a longer term.  2) It doesn’t account for debt service from a lender. 3) Cap rates are good for investments with simple, stabilized income, but are bad for properties with complex, irregular income–i.e. not great if the plan is to AirBnB.

How to File your Homestead and other Exemptions (2017)

Most new homeowners undergo paradigm changes within the first year of ownership.  It’s different when you’re the owner of your residence.  It’s different when its YOUR money on the line.  One thing people tend to change their stance on is taxation because (in Texas) property owners must pay property tax directly every year to the county appraisal district. In Austin, property taxes are tied into the affordability of the area.  The median home in Austin has a tax bill of $4813.  There was an 8.7% increase in taxable value for Travis County in 2016, and increases can happen every year. There are different ways to reduce your tax burden, but the main way is to file a Homestead Exemption for your home.

You are eligible as of January 1st  for a HOMESTEAD EXEMPTION on your property taxes if you recently purchased a home in 2016 (or earlier), and if it qualifies as a “homestead.”  A homestead is the house and land which a homeowner declares in writing to be their principal residence. It can be a separate structure, condominium or a manufactured home located on owned or leased land and can include up to 20 acres. So long as the homeowner owns the land, it can be used as a yard or for another purpose related to the residential use of the homestead.

Homestead laws were developed to grant a surviving spouse, minor children, and/or unmarried children of a deceased homeowner the right of occupancy, to afford a reduction on property tax, and also to protect a home from creditors. Typically, when people refer to a homestead exemption, they are referring to the tax reduction/exemption or the exemption from debts or discharge from debt payments. Homestead laws do vary from state to state.  In Texas,the exemption removes part of your home’s assessed value from being taxed, ultimately lowering your property taxes since they are derived from the property value. The benefit of the homestead exemption is a significant amount of savings! We’re talking hundreds if not THOUSANDS of dollars.  **Note:  Send in your application as soon as possible.  You’ll want to have filed your exemption with the taxing county before April 30th  because the county sends out your value assessment in May.
Travis County Residents
Williamson County Residents
Hays County Residents

For any further questions and to see how much of an exemption you’re eligible for, see the State Comptroller’s Website.  Here’s also a general explanation of different exemptions–see if you’re eligible!  Let me know if there’s anything I can do to assist.  Keep Ascension in mind if you have friends or family looking to purchase or sell this year!  Happy 2017!

The 7 Essential Questions to Ask a Lender when Buying a Home

When you plan to buy a home you’re confronted with the decision to purchase with Cash or to finance through an institution like a bank, credit union, private lender or mortgage broker.  Most people tend to finance because it leverages your limited money by using an investor’s surplus.  However, no one wants to make the wrong choice when financing because a lot of money is on the line.  People want the right loan for their scenario and the best rates, they don’t want unfortunate surprises along the way, and they don’t want to get bamboozled by an inept or unethical lender.  It’s a good idea to check with different lenders when beginning the process to find the right one for you.  I even advocate solidifying your lender choice before looking for homes–today’s market requires speed and confidence in your numbers in order to seize opportunities.  Without knowing your numbers, its difficult to optimize your deal and negotiate properly.  Here are some questions that I normally suggest my Buyers to ask when interviewing Lenders:

  1. Interest Rates.  How does their company compare to others?  Why? (Remember: when comparing one lender’s interest rates to another, its necessary to ask on the same day because rates can fluctuate by the day.  What’s possible on Monday may not be possible on Tuesday. More important is to find out about their fees/ costs. See below)
  2. What are closing costs?  How are they different from down payment? How much are closing costs?
  3. How quickly can they close after a purchase contract is signed?
  4. Is their office local?  Are their underwriters local or contracted outside of the city/state?  (Underwriters are the people in the background who prepare your loan after going under contract.  Your Lender’s ability to communicate/ coordinate with them easily is important.)
  5. Are there any incentive programs that you might qualify for?  What are the trade offs?  (In other words, is this an actual discount in fees or does it displace fees for interest rates?)
  6. What should be considered when buying condominiums? (If applicable.)
  7.  I’m stuck between you and this other lender.  Why should I choose you?

While usually “choosing a lender” and “choosing a realtor” are interchangeable beginning steps in the process, I recommend choosing your Realtor first.  Why?  Because a seasoned real estate professional can give you extra tips and insight on who might be best to go with.  It’s not our decision, but we do know more lenders, who is easier to work with (also their track record and reputation in the marketplace), and which lender might have the right tool in their toolbox that fits your scenario.  Want to know more or who I think is the best??  Contact me!! 😉 – Justin