Everybody loves Austin. Or so it seems. If the recent Forbes article “Austin Envy” wasn’t enough (though it mistakenly claims we still have Austin Hippies – we don’t. And, please, NOBODY refers to Austin as “Silicon Hills”), the final proof was in the finale of The Office, in which Jim and Pam decide to leave Scranton PA, bound for, of course, Austin, TX.

This makes sense. I mean, what other U.S. city could they have decided upon? Pittsburg? Phoenix? Orlando? No, the writers of The Office got it right. Jim and Pam are likable characters. We want the best for them. They’ve paid their dues in the decaying armpit that is Scranton PA, and they are deserving of a bright and optimistic new life. Austin is the only U.S. city for which this “new beginnings” story line would work. Fans can cheer the decision to move to Austin like they can no other city. It requires no explanation. It’s, like, “of course”. Self-explanatory. And we can feel good about that for them.

And what should Jim and Pam expect when they get here? Where will they live?

The Austin home sales market has gone crazy. Home prices, though “affordable” when looking at the entire metro area ($200K median), are rising quickly in the central areas of Austin ($400K median value) that make it unique and cool.

Most parts of Austin are, in fact, Anywhere USA. Traffic is terrible, and getting worse. The most affordable outskirt areas have “toll road overhead”, higher property taxes, and higher utility costs than Austin proper. Throw in cookie-cutter DR. Horton housing – the same stuff you’ll see in Las Vegas or Phoenix – which represents the antithesis of the “Austin Vibe” and, well, those areas are not that special. The prices are cheaper out yonder, but the total cost of living is not as cheaper as people think, once all costs are properly factored in. And your daily living experience, save for forays into Austin proper, is nothing unique.

So where will Jim and Pam end up?

Since money will be tight with Jim working in the start-up, and Austin is the perfect stay-at-home mom town for Pam, and they’ll need good public schools for the kids, I predict Jim and Pam end up in Pflugerville. It’s reasonably close to downtown, has some good schools, and recently, in an article I read, was referred to as “becoming hip”. Hmmm.

Either there or Maple Run in SW Austin if they can afford a home for $225K or thereabouts. My vote would be for Maple Run, in the 78749 zipcode, but they’ll have to battle against other buyers in multiple offer situations before getting a home.

But,  glib joking aside, it’s a serious question. Where do young couples with small kids who don’t want cookie-cutterville but need good schools, and want to experience living in Austin go now? Where can they afford to live?

The areas of consideration are increasingly shrinking. I’m sad about that. Sylvia and I benefit from a strong healthy real estate market as our business thrives, but I worry about my own kids, now 17 and 20, and whether or not they’ll be able to afford to raise their future families in the same neighborhoods they grew up in.

Both were born in Travis Heights. Then we moved to Cherry Creek in South Austin, off Westgate, then Oak Hill for 11 years in 3 different homes, then to Westlake for the high school years. Our modest neighborhood of 1970s tract homes has exploded in value the past 12 months such that a typical 1,800 sqft 1978 rancher is now worth $500K. That’s more than $100K higher than the prices 3 or 4 years ago.

In 2010 , I listed a Plain Jane 3 bdrm 1 bath house in 78704 that failed to sell. We couldn’t give it away. The hand-wringing parade of crybaby buyers had a litany of objections. It was a different market then with buyers, unsure, unwilling. I advised the seller to pull the listing and wait a few years. We recently relisted it for $275K and, after the multiple offer dust cleared, it was under contract for $331K cash in 36 hours. That’s crazy. But in 2 years, that will seem like a great price, so these buyers, in my opinion, were smart buyers. But there goes the “affordable” central housing stock. It’s all disappearing toward the upper end of pricing.

The affordability train, what’s left of it, is leaving the station in Austin. Jim and Pam better hurry up and get here if they don’t want to end up in Pflugerville.

Does your Austin Realtor know how to show houses? Maybe not. Ask him or her what “Call and Go” means. The answer might be embarrassing to the agent, once you read this article.

I asked my 10th grade daughter what she thinks “Call and Go” might mean as a showing instruction in Austin MLS listings. She’s not a Realtor and doesn’t know much about the business other than what she absorbs through osmosis from Sylvia and me. But her tart teenage retort was, “well, obviously, if that’s what it’s called, you call and then you go… is this one of your trick questions?”

No, it wasn’t a trick question, but I did have a recent experience which revealed that many Austin Realtors actually DO NOT KNOW what “Call and Go” means as a showing instruction.

I had a new listing for which I expected a tsunami of showings and a quick contract at or above list price. Since the seller was departing on a weekend trip the same day I was entering the new listing, I didn’t want him to be bothered or troubled with tons of showing calls and voicemails during the trip. So I entered my own GoogleVoice voicemail number into the listing as the “call and go” number instead of the seller’s. Thus, the listing had agent showing instructions of:  ”Owner Occupied”, “Call and Go”, “Key in Lockbox”.

C&G is by far the most common showing method for Austin MLS listings, and the best way to encourage the most showings. The only status that provides easier showing access is “Vacant and Go”. Other parts of the country don’t do this and instead have elaborate appointment setting logistics. Some are even appalled that we have something called “Call and Go”, as they can’t imagine a buyer’s agent having the seller’s phone number. But it’s common in Texas, where we’re not all uptight and where we actually want our homes to be easy to show and sell. Call and Go does the trick.

Call and Go, as you no doubt assume,  means simply that you call the number, tell the seller when you’re coming, or leave a voicemail saying when you’ll be showing, then you just go. No appointment or other conversation is needed. No return call or confirmation is required. It’s simply “call and go”, just as the name implies.

We Get it. So what?
What I learned when my voicemail number became the call  and go number, was that an astoundingly high percentage of Austin Realtors, almost half in this particular instance, do not know how to show a home per the listing instructions. Almost half did not understand what C&G means.

Example voicemails…

Example Agent 1: “Hi, uh, this is, uh, {agent name} with {agent company}, just checking to..uh,  see if it’d be ok to show your home on {street name} later, like maybe around 2 I think. Uh, OK. Just give me a call back and let me know”. (hangs up without leaving phone number).

Example Agent 2: (Simply sends a text) “Can I show your house today at 1?”
No name or phone number. Doesn’t identify himself as a Realtor in the text. Then calls later to leave a message “Just checking to see if you got my text. I wanna show your house today at 1. I’m at {phone number}, if you could call or text back and let me know if it’s ok, I’d appreciate it”.

What makes “Example Agent 2″ such a blue ribbon dunce is that the MLS comments said, first words, “Open House Noon-3PM Sat”. So, not only does this agent NOT know what C&G means, he doesn’t read the listing comments where the opening comments say “Open House Noon-3PM Sat”, thus going at 1PM would be doubleOK!

And so it went, many cringe-worthy messages similar to the above. Agents acting like the showing required “appointment with owner” or an imaginary “permission from owner” prior to showing. All of these messages required me to call back and say “it’s Call and Go, just go”. Then I would wonder, worriedly, what it would be like working a deal with an agent who doesn’t even know how to schedule showings for his buyer.

The good news (using the term loosely) is that more than half, (if just barely more), left the same basic message script I use:
“Hi, this is Steve with Crossland Real Estate. I’ll be showing your home today between 2 and 3PM. No need to call back unless that’s a problem. You can reach me if needed at {cell number}. I’ll leave a card so you’ll know I was there. Thanks!”.

This is the best script for Call and Go. Short, to the point, unambiguous, clear. Many agents add the “no need to call me back” because, like their confused agent counterparts, many sellers also do not know what C&G means. After hearing the message, they call back to talk about it. Or, unfortunately, to reschedule or try to control the showing by telling us someone else is already coming at that time. To which I reply, “that’s ok, we’ll work that out when we’re there. Thank you”. But that’s another topic – overly helpful sellers who impair their own sales effort by making the home hard to show.

Conclusion
If you’re an Austin Realtor, be at least as smart as my 16-year-old daughter who has no real estate experience. Do as the name implies. “Call and Go” means what it says. And think about what you’re going to say before you dial, whether the call is answered live by the seller, or you reach voicemail. Don’t leave a voice message in which you sound like an idiot who can’t form a complete sentence. You might want that seller to pick your buyer’s multiple offer, and you’re letting your buyer down and hurting her chances when you fumble the first impression.

Many of the aforementioned showing voicemails I received were disastrously inarticulate. If it wouldn’t be inappropriate, I could put together a compilation of the messages that were left for me by Austin Realtors on this particular Call and Go listing. It would be more than embarrassing to our profession. The solution? Get a short, easy script, such as mine above, and practice saying it until you at least sound smarter than a 10th grader. Seriously.

We need to do better as an industry. Is knowing how to show a home too much to ask of the average Austin Realtor?

Austin Buyers, when trying to win a multiple offer situation on a home in Austin, how much is “too much” to pay? It’s a hard question to answer because it’s both personal and subjective. One buyer’s “too much” may another’s “good deal”. One buyer’s “perfect” floor plan may be another’s “it’s just ok”.

That said, if you’re about to write your 5th offer having lost the last 4 multiple offer situations over the past 2 months, you have to wonder if the 4 buyers who beat you were all fools. Were they? Probably not. They all have a house now, and you don’t.

And when you finally do get your own home under contract, you may have to pay relatively “more” than it would have required to win one of those 4 lost bid efforts a few months earlier. That’s ok though. Losing out on multiple multiple-offer situations is a progressive, education process. Losing out on homes does provide value and context as it toughens your resolve going forward, and makes you smarter and, more importantly, braver. Hopefully you have a good agent keeping you sane too.

But here’s how I look at paying “too much” for a home in Austin. There are two kinds of “too much”. There is “irresponsibly too much“, and “responsibly too much“. Or, boiled down to its essence, “responsible risk” vs “irresponsible risk”.

We all make these decisions in life, not just in housing, but in many areas, whether it’s picking one job opportunity over another, or one college over another. Spending $2,500 to repair the 12-year-old car vs buying a new one. Even who you marry.

Sometimes, you have to pull up your A-Game, check your gut, and make the best decision you can in that moment. But in doing so, you are taking a “risk”. And you don’t get to find out of you were “smart” until later, at some point in the future, once all the data becomes known and the dust settles.

For risk tolerant “fools” like me, these risks are exciting. The reason for living. We LOVE dilemmas and hard decisions. We love “trusting our gut” and making decisions with incomplete information. This is the game of life. We’ve accepted that we are capable of boneheaded decisions, but having made many, have also discovered that some of our best outcomes in life resulted from “going for it” and making decisions which were not completely supported by facts at the time.

Meanwhile, we also note that some very carefully, thoroughly thought-out plans, based on careful evaluation and supported by “all the facts”, resulted in big “fails”.

In other words, those of us who are “risk tolerant” expose ourselves to more opportunity, both to succeed and to fail. But I don’t think overly “risk averse” people succeed more because of their caution, nor do they fail less. In fact, I think they often let “fear of failure” hold themselves back and lose out on what they really want in life. Like a new house that they’re afraid to pay “too much” for.

This is a hard concept to come to terms with. Not only for our “Engineer” buyers but also those who simply fear making a bad decision, or disappointing someone else. But I return again to the first question – were the 4 buyers who beat you in the last 4 multiple-offer situations you lost all fools who paid too much?

I paid “too much” for a house I bought in Oak Hill in 2007, right before the real estate market went soft in Austin. The house was listed for $162,500. There were 5 offers, I wrote an “escalation clause” into my offer, (before TREC told us it was illegal) which said I would beat the next highest offer by $1,000 and take the home “as-is”.

The agent called and told me there were 5 offers and the highest offer was $167,500 and asked did I mean what I said, and want to raise my $165K offer to $168,500 and take the house as-is with no inspection? “Absolutely”, I said. I got the house, paying 3.7% over list price and getting nothing back for repairs because I waived the inspection. Pretty risky. Some might have called it “dumb”.

I’m refinancing that house now, 6 years later, and waiting for the appraisal to come back, which should value the home at around $225K, which is 5% annual appreciation, most of which happened the past two years. It rents well and is located in an awesome SW Austin neighborhood. Had I been “smarter” and “more careful”, I would not have bought this home. Yet it turned out to be an excellent investment. The refi to a 15 year note at 3.5% interest means I’ll have it paid free and clear when I turn 65. Another great addition to the rental/retirement portfolio. But I had to be “stupid” to be “smart”. I had to be willing to take a risk.

On the other hand, I invested in some vacant lots the same year in Oak Hill. That deal was much more carefully thought out. I spent months thinking it over. I eventually decided it was a “can’t miss” investment. Yet I got hosed and lost money because the high-end market tanked even harder than the rest of the market in Austin, and these lots were in a high-end neighborhood.

That was a “smart” buy that made perfect sense at the time and seemed very “low risk” to me. I eventually sold the lots for what I paid, after paying interest-only mortgage payments and property taxes for 5 years. But I don’t regret the decision. It’s ok. In real estate investing, you just need the singles, doubles, triples and home runs to outnumber the strikeouts. This was a strikeout, but that’s ok.

So, in helping buyers and investors, I bring this context with me. The fact that I know you simply can’t eliminate all risk in a real estate purchase, nor can you assure yourself of positive upside. And in a competitive seller’s market such as we now have in many areas of Austin, both the risk and rewards are higher.

If you’re going to beat the stampede of other buyers for that home you really want in SW Austin, you have to be willing to, perhaps, be a fool. But before you learn if you were a fool or not, you’ll get to enjoy being a “winner” of those multiple offers. You may have had to bid 3% to 5% over list price, and/or 3% to 5% over the value that your Realtor’s CMA placed on the home, but you’ll be a “winner” before you’re a fool.

And if the market in Austin appreciates 8% to 12% this year, as I think it will, so what if you paid “too much”? You got the house, and you gave away a half-year of appreciation. So what? You got the house. You’re done looking, the stress is over. Enjoy! If you bid 3% to 5% over list, I put that in the group of those paying “responsibly too much”, or “responsibly risky”.

I know it’s hard, emotionally, to think like this. But the world is ruled by risk takers, not the safe and careful. And that’s true of the Austin housing market at present. Nobody in the year 2020 is going to say 2013 was a “stupid” or “risky” year to buy real estate in Austin, even if you responsibly paid “too much”. There will be some who look back from 2015 and regret that they let the competition scare them off though, and kept renting.

If you’ve tried to buy a house in Austin lately, in an area of high demand and low inventory, such as Southwest Austin, you may have run into some competition. In fact, you most likely have. As of this writing, there are 43 Active listings and 84 Pending listings in SW Austin. I won’t go into a breakdown of what that means statistically, but let’s just call it a Mega-Seller’s-Market and leave it at that.

Other buyers want the same house you want, often the first day it hits the market. A new listing in South Austin 78745 that I showed a buyer a few days ago had a parade of buyers waiting in line when I got there, and more when we left. An offer I wrote today for a SW Austin home that came on the market 3 days ago has multiple offers and we’ll see how ours did tonight or tomorrow. It’s really, really crazy out there.

This type of market changes the way you have to approach your home buying effort in Austin. You are no longer “shopping” for a home, you are competing for a home. You are not a home buyer, you are a contestant. You are not trying to negotiate an acceptable offer with a seller, you are trying to beat your opponent(s), the other buyers, by making a better offer. Suit up, game on. And you’re not able to know what it will take to make your offer “better”, you can mostly only guess, then decide how high you want to jump.

This is disconcerting and frustrating for those unaccustomed to the stress. It can tie you in knots emotionally. It’s too much for some buyers, and they simply bow out of multiple offer situations, not wanting to compete at all. Others get it right away, put on a game face, and bring their A Game to the first offer, crushing the competition and “winning” a home on the first try. Still others, go through several failed offer attempts before they can muster up the fortitude and grit to throw down a wining offer. If you’re one who keeps losing, read How to Win Multiple Offers in Austin for some tips that will help you and your agent increase your chances of coming out on top.

Are we in a Bubble?
I’m not ready to call this a “bubble”, but this marks about 12 months now of very strong demand and shrinking inventory in many areas of Austin. Many homes have been driven up 3% to 5% or more above list price. That said, appraisals are putting a damper on some of these, as the home will sometimes not appraise for the sales price. When that happens, buyer and seller will usually renegotiate.

There simply are not enough homes coming on the market to supply all interested buyers, and that’s what’s causing the flurry. This is not true in all areas of Austin, but it is in most ares of Austin where the location and/or schools are deemed “good”. NW Austin is strong. Central, SW, East and South Austin too. And up into Cedar Park, some of the new home builders are experiencing the strongest foot traffic and sales since 2006. Many have waiting lists for new sections not yet released.

So where does that leave you as a buyer? Unfortunately, depending on your specific circumstance and personality, it leaves you needing to step up your game. You may not want to be a “housing contestant”, but the sooner you accept that reality, the more ready you’ll be to “win”.

And you better have a good agent. Sorry if that sounds like “Realtor Hype”, but I’m astonished at the number of Austin Realtors who can’t even write a mistake-free offer, much less offer top shelf strategy advice to their buyers. Don’t hook up with a Dummy Realtor. Find a veteran. A Black Belt Realtor.

Get your financial and loan stuff in order, create the most flexibility possible with regard to your moving time window. Have a “Plan B”. Be willing to offer the seller a lease-back, which is perhaps the second most powerful advantage (next to price) that you can give your offer. Get ready to possibly or probably pay over list price.

It’ll be ok, paying “too much”. We have plenty of running room ahead of us with this upswing in the market, and your low interest rate itself is worth more to you than a lower price would be. Do the math compared to being back at 6 or 7 percent interest rates. Put things into perspective. Decide what it will mean to you to NOT have a new house, and decide if you’re willing to accept defeat. If not, get out there and compete to win.

But is there a Limit?
Yes. All that said, I’m still advising buyers to walk away from some of these deals. Not every multiple offer situation is worth your best effort. Don’t get sucked into the hysteria on every deal. Be prudent. This is a subjective decision you’ll need to make, specify to each home. But some of the older homes built pre-1990s have a lot of embedded condition issue costs. It may not be worth paying over list AND absorbing the near-term expenses of curing what we call “deferred maintenance”. You have to factor in whether the roof, HVAC, electrical, plumbing and foundation represent possible “big ticket” expenses waiting to happen, and add that amount to what you’re paying. That’s when you need an experienced agent who can size up a house and spec out a range of costs for you and help you understand the true costs of a particular home. If the numbers don’t make sense, let someone else win that one.

Good luck! Feel free to comment with your own recent Austin home buying or selling experience.

I have found showing feedback to be essential and extremely helpful in the sale of my listings. Feedback provides insight into issues or factors that I might have overlooked or not considered important enough to affect pricing. Obtaining good feedback from showing agents takes some preparation and follow through though. Here’s what I do.

First, every listing has a “supra” lockbox. This lockbox electronically records every showing, and sends me an email when it is opened by an agent. The email has the day, time of showing and the contact information for the showing agent.

I then go into my MLS login where I have a standard letter that I send to the agent with a link to the listing. I greet the agent by name and thank them for showing the listing at “specified neighborhood” on “specified address”. I ask if there is anything about the price or condition that they can give me feedback on for this specific home. I think the personalized email is vastly more effective than the robotic auto-requests that so many agents set up. Some agents, including Steve, won’t take the time to complete a multi-question online feedback form sent by a robot, but they will respond to a personal email or phone call from the listing agent.

I ask, “did the buyer’s like it?”, “are they considering making an offer?” I also explain that the seller’s disclosure and survey is online attached to the MLS listing for their convenience. Also, to refresh their memory, I provide a link to the listing. After this I thank the agent for his or her hard work.

I truly understand how much hard work goes into showing houses and working with buyers. I also say that I would be happy to return the favor to them in the future. This is so important. We as agents are all working together to do the best job for our clients. It is so important to be courteous and thoughtful to all agents because you may (and probably will) be working with them again down the road

With this strategy, I have found 80% of the time, I get a response to the initial email. Sometimes it is a very short “they didn’t like the kitchen”. Other times it is very detailed and specific. I always thank the agent for taking the time to provide the feedback. If the agent does not respond to my feedback request email within a day, I will give them a call and talk to them on the phone. If they do not answer, I leave a message and suggest that they respond to my email if that is easier, or give me a call back.

Eventually I get responses from agents probably 95% of the time.

Sometimes feedback is helpful and I try to remedy the situation if it is something we can change or alter. Feedback like “there is a strange odor” is one that can be remedied. Sometimes others smell things that I don’t. “The house is too dark” is something else we can do something about, by putting in brighter bulbs or opening windows. “The price is too high” is feedback that we definitely take into consideration if a pattern emerges about that. I’ll do another CMA and try to make sure we have the home at the right price.

Other times, we cannot remedy the problem. “I don’t like the busy street” or “the floor plan just does not work for my clients”. These are all common feedback responses and after awhile, the only remedy is a lower price to offset a busy street or awkward floor plan.

I feel it is my job to interpret the feedback and figure out if there is anything we can do, other than lowering the price to overcome the objection. In this way, between buyers, sellers and the real estate community, we can achieve a “win-win” for everyone involved.
Sylvia

One of my buyers wrote an offer on a new home the other day. Not a completed “spec” home, but a “to be built”. While we can write an offer for a resale home in 15-30 minutes, signed, sealed and delivered (which sometimes isn’t fast enough in this Austin market), a new to be built home is a long, arduous sit-down in the builder’s onsite rep. We were there for over three hours. And this already knowing exactly what the buyer wanted except for just a few exterior items and colors. It just takes that long to write everything up, print it and go through it all.

Anyway, at some point going through the massive stack of builder contract paperwork with my buyer, a nasty little addendum emerged, the likes of which I’ve never personally seen. “Whoa, what’s this?”, I say.

It’s a document that imposes requirements on the private third party inspector that the buyer may hire to inspect a home. It requires that the inspector sign a document called a “Access Agreement for Home Inspection”. The access agreement requires that the inspector have:

Proof of General liability Insurance of at least $1,000,000
Proof of Auto Liability Insurance of at least $100,000
Proof of Worker’s Compensation Insurance equal to the “statutory minimum”.
Proof of Employer’s Liability Insurance of at least $1,000,000

So I dialed up my new home inspector while we sat there and asked about this. He said it’s total BS. A ploy by builders to limit inspections. He doesn’t meet the requirements, nor do most Texas Real Estate Inspectors (TREC requires $100K liability, so most carry the minimum), much less the Code Inspectors you want to be using on a new build.

Does this mean my buyer can’t use my over-credentialed, highly competent and trustworthy inspector? The builder was happy to offer a list of inspectors they have who do meet the requirements. No thanks. I want my buyer to have my inspector, not yours. So now what?

I emailed the builder (who shall remain unnamed until my deal closes in July or August 2013) this morning asking that my inspector be approved to inspect my buyer’s home. I want them to waive the rule and allow my inspector. I sent a copy of his insurance, which is actually 3x the state required amount ($300K), but still less than $1M. We’ll see how it goes.

I believe my buyer has the unrestricted right to inspect the home he is buying and to do so using any licensed Texas Inspector. Telling a buyer that he can’t use a licensed Texas Real Estate Inspector who meets all the state licensing requirements to be an inspector is, to me, intimidation.

I know probably 1/3 or fewer of “new home” buyers even get an inspection. Builders should be happy and pleased that the average home buying consumer is actually that dumb. Just think of all the shoddy work that goes undiscovered that they never have to fix. I’ve not had one single new home inspection not reveal problems and issues that the builder then fixed for my buyer. But builders should be happy that so few of their homes actually get inspected, and not then try to tilt things even more to their favor by setting an arbitrary high bar for those buyers who are smart enough, or well represented enough, to obtain inspections during the build process.

Hopefully my email letter does the trick. I find this tactic shameful and reprehensible. There can be no other reason for imposing a high bar on buyers and their inspectors than to further reduce the number of homes built that actually receive a proper inspection. A builder should be proud of its work and its quality, not afraid to have it checked out.

Our dishwasher needs replacing. It is old and worn out and as I am choosing appliances, it seems stainless steel is still the color of choice. What is the next big color in appliances? … I wonder?

I Googled this and came up with a few answers, but nothing that seems to dominate the stainless steel.

It seems people like the sleek, industrial look of the stainless steel “like you are in a commercial kitchen”. One of the best articles I read on the subject was “After Stainless What Now” by Ellen Byron of the Wall Street Journal.

What do the manufacturers say about a demand for new colors: 

Whirlpool is rolling out a “new” color which it calls “Ice white”. Wow, that is creative! “White is the new stainless” Whirlpool says.

Meanwhile, General Electric has unveiled a new color in their microwaves, refrigerators and dishwashers in muted gray tones called “slate”. They believe this will appeal to “cost conscious” consumers because it will still blend with the stainless steel colors.

Miele is about to introduce some high glossy tones in the near future. They are keeping quiet about what it is going to be, but watch carefully, maybe we will see something more exciting coming from them.

Even while there are several colors and tones said to be on the horizon, many manufacturers say that 80% of their sales are still stainless steel.

So as I review all this information, I still decide to order that new KitchenAid stainless steel dishwasher.

As 2012 draws to a close, it’s been a wonderful year in Austin for me, Sylvia and our family. Shelly is doing well in her sophomore year at TCU. Caroline is doing well in her (also) sophomore year at Westlake High School. Our business finally picked up in 2012 to our busiest since 2008. And I, Steve lost 30 lbs! More on that below.

Thanks goes out to all of our friends, family, clients, customers, acquaintances and others. Without you, our lives would not be as wonderful as they are. We end 2012 with much gratitude.

Now for my shameless plug and request for support. No, it’s not about business or leads or referrals. Something much more important. It’s about health, fitness and curing cancer. Please read on …

I spent most of 2012 getting into better shape. I was becoming a fatty again, and as I approached age 50 in 2012, I wanted to get serious about my fitness and health. I started cold turkey in March 2012 getting up at 5AM (yes, 5AM!), 5 days a week, and going to the gym for morning workouts. I have continued that schedule ever since. Through exercise and better eating, I’ve lost 30 pounds and feel great as 2012 comes to an end.

But as 2013 begins, I feel like I hit a fitness plateau. The routine is getting old, and I feel myself slipping back to old habits. I want to push myself to another level. I need a new challenge for 2013.

I was not sure what that challenge would be, until New Years Eve, 2012. I’m going to run the LiveStrong half marathon in Austin this February!

A friend of mine, Kate Voth, has been battling melanoma for 8 years and recently learned that because of her cancer treatment, she may never be able to run again. Her passion in life is distance running. So, since Kate cannot run this race, a group of her friends decided to form a team and run it for her. I have now also joined Team Kate.

My personal goal is to raise $1,000 $2,000 (I broke $1,000 in less than an hour. Wow!). I’m proud to have joined Team Kate to help raise money to fight cancer, and to challenge myself in my own fitness quest.

The money I raise will go to support programs and services, which inspire and empower people affected by cancer. If you or someone you know is diagnosed, these resources will help face the challenges of cancer, head on, and live life on your own terms.

Please support me as I make a difference in the cancer fight through my participation in Team Kate and LIVESTRONG.
Here is the link to make a donation, if you so choose.

My LiveStrong Page is here.

If you want to go directly to the donate link, click here.

Thank you again for a wonderful 2012!

Ever wonder what the “We Buy Houses” signs really mean? You see them all over Austin, usually in middle to lower priced neighborhoods, and older transitional areas with a lot of fixers. Often the signs seems homemade and haphazardly placed. The words “fast” and “cash” are on most. If you were to call this sign, would you really receive an offer to close fast, for cash?

Maybe, but probably not.

The signs, called “bandit signs”, are actually a lead generation tool used by real estate wholesalers and flippers. Some of these guys are actually legitimate real estate investors looking for motivated sellers with dumpy homes who want or need to sell fast. Most of the sign placers are “bird dogs”, who find the motivated sellers then turn the deal over to the investor for a finder’s fee.

Either way, the main goal is to make you an offer and get the home under contract at a price that will produce a profit on either a wholesale resell (selling the contract) or a rehab/flip.

What sort of offer will these guys (or gals) make you?
The formula is fairly universal and straight forward. 70% of market value minus repair costs. Market Value, also known in the business as “After Repair Value” (ARV), is the value of the home if it were in retail sales condition and able to sell to a buyer using a conventional mortgage.

So, let’s say you inherited an old junker in South Austin that would sell for $225,000 in good condition, but it has a bad slab, bad roof, major plumbing problems, severe neglect and multiple trailer loads of junk to haul out of the rat infested back yard. And let’s say it would cost $100K to bring the home up to par, including the investor’s holding time costs, interest, insurance, utilities, risk factors, etc.

That home would be worth (0.70*225,000) – $100,000 = $57,500.

I’m over-simplifying the formula, and there are a lot of other components that go into the “repair costs” part, but this is an accurate “quick and dirty” computation. Also, the terms of the deal will often not be “all cash”, but instead some sort of creative financing. And, these deals are very, very hard to find.

Will this investor make money if he can buy such a house at this price, owner financed? Maybe, maybe not. Many don’t.

Many flippers over-estimate the after repair value and under-estimate the repair costs and time required to complete the project. Add in some bad timing, such as anyone who bought a flipper in east Austin in summer 2007, and it can sink the deal pretty fast. If the house ends up only selling for $200K, and the repair costs end up being $125K, the deal won’t be profitable (unless using just the gross numbers like the TV Flip show liars do). But it should be profitable for an experienced, veteran investor who knows how to size up property quickly and knows the resale values in the neighborhood.

If you were the owner of this house is it really a good deal to sell it for what seems like a really, really low price?
Maybe. If you just flew in from Ohio for the weekend, it’s an inherited property owned by a recently deceased relative, you don’t have time to mess with it, and don’t need the money, etc. Then yes, it’s probably not worth your time and effort to fix it up yourself and net a higher price.

You are the investors dream seller, and in this case, it’s probably a win/win, assuming the investor makes a reasonable profit. Also, a happy end-buyer gets a professionally remodeled home, refreshed and ready for move-in. The neighbors win too, if the home was previously an eyesore. This would be the ideal outcome.

But for most sellers, you can do better to avoid fire-selling your home like this. Many “unsalable” homes can be made salable for less than you’d think, barring chronic mechanical issues such as in my example. There are also some pretty good consumer rehab loan products that allow a buyer to purchase a junker and factor the repairs into the purchase loan, provided a licensed contractor is brought into the deal to spec out the work and manage the remodel.

And not all of these “We Buy Houses” signs are targeted toward junker homes. Drive out to any starter home neighborhood, like Hutto or Kyle, where first time buyers are upside down on their mortgage, and you’ll see these signs. Often they promise to “save you from foreclosure”, or “get rid of your payments”. If the owner is upside down, then the home is a short sale candidate. The investor may try to get it under contract for a very low price, and run the deal up the flagpole as a short sale. Months later, when the bank says “no”, the deal is off and the investor moves on.

If there is a small amount of equity, but not enough to cover commissions and costs of a traditional retail sale through MLS, the investor may try to obtain the home through a “mortgage assignment”, which is essentially taking over the payments, then sell it “owner financed” to a new buyer at enough of a higher price to pocket the new buyer’s downpayment as profit. Then the new “owner” takes over the original owner’s payments, and the investor moves on.

In almost all cases, the signs seek sellers for whom time or the “situation” is a bigger problem than foregoing top sales price. Sylvia and I don’t seek out these deals, but we’ve stumbled upon a few over the years, where the seller cared more about timing and hassle avoidance than fetching top dollar. I’ve bought several of these type of deals, but always only when it made sense for the seller’s circumstance.

Be careful though. I think the “We Buy Houses” signs may create more victims than rescues. That’s because it’s not a regulated business, and you don’t even have to have a real estate license to do it. Nor do you need money. So all the risk is usually on the seller unless actually getting cash at closing.

Austin Xeriscaped Path

Steve and I took a GRI class last week in pursuit of more knowledge about current real estate trends and practices. I always find these educational courses to be informative and helpful.

My biggest “take away” from this class was when one of my fellow classmates, who drove over 900 miles from El Paso for the 4-day class, shared with us the current landscaping requirements in El Paso. ALL new homes there are now being required to use xeriscape landscaping in the front yards because of the water shortage.

I wonder how long before the same requirement comes to Austin?

So Saturday as I was taking my buyer clients around looking at different houses, I was pointing out features that I may have overlooked in the past. One home had full gutters and a rain barrel capture system in place which I highlighted as a plus. Also, in the very small fenced in front yard where there was mostly Bermuda grass,  I suggested, “You can take this grass out and put in xeriscape with native Texas landscaping”.

This whole idea of “no grass” front yards has really got me thinking.

Why do we have all our front yards full of St Augustine and other grasses that need so much water to maintain? Why not take out all or at least some of the grass in our front yards and replace it with xeriscaping which will be much more beautiful and need much less water?

“What is xeriscaping?” you may ask. Here is Wikapedia’s definition:

“Xeriscaping and xerogardening refer to landscaping and gardening in ways that reduce or eliminate the need for supplemental water from irrigation. It is promoted in regions that do not have easily accessible, plentiful, or reliable supplies of fresh water, and is gaining acceptance in other areas as climate patterns shift. Although xeriscaping may be an alternative to various types of traditional gardening, it is usually promoted as a substitute for Kentucky bluegrass lawns.”

With the population of Austin expected to double by 2030 to over 3M people in the metro area, and water supply quickly becoming  a bigger issue, we are going to see a lot more landscaping requirements and watering restrictions. It might be a good idea to be prepared and get ahead of the game starting to invest in more native and drought resistant plants now. Looking at my own yard, it’s mostly lawn like, most of our neighbors’ yards as well. I’m already starting to think of some design ideas.

One of my favorite sources for landscaping plants and supplies and knowledgeable attendants that can answer any of your questions about your project large or small is The Natural Gardener Located on Old Bee Cave Road. Here is a link to their website: http://www.naturalgardeneraustin.com.

Sylvia and I just refinanced our Austin home. When we bought the home in 2010, 4.75% interest on a 30 year loan was the lowest interest rate we’d ever had on any real estate loan, ever. Yesterday we refinanced at 2.75% for 15 years. Bottom line, this will save us about $40K in interest payments and chop 13 years off the life of the loan. Let’s take a look at some numbers:

The above numbers are taken from my October mortgage statement for the old loan, and the first December payment for the new loan, so they will actually grow more favorable over time.

OK, first let’s look at the bottom right box where you’ll see that our monthly payment increases $444 over the previous payment. I don’t care about that, and neither should you, unless you can’t afford the increase. All I care about is my Net Worth spreadsheet that I update monthly, tracking our progress toward financial freedom aka retirement. Everyone should have one of these spreadsheets and update it monthly. It helps you focus on what really matters, which is the growth of your net worth.

So how can I be adding to my net worth if I just increased my payment by $444 per month? Aren’t I “losing” $444 per month now? I assume most readers (hopefully) think that’s a stupid question after looking at the chart, and you already know the answer. But I’m surprised by the number of otherwise pretty smart people who do in fact think of a monthly payment as just one number. So, the explanation is that the interest portion of the payment decreased drastically (by $420/mo) while the equity paydown portion of the payment increased drastically (by $864).

So, almost the entire extra $444 monthly payment is actually saved with a smaller interest payment while the equity paydown is accelerated and the loan will be fully paid off in 2027 when I’m 65 years old instead of 2040 when I’m 78 years old. This is the $40K in interest savings and 13 year sooner “free and clear” date.

But I want to talk about the concept of “monthly payment” a bit more, because it bothers me that we live in such a payment driven society and that so many consumers, including real estate buyers and owners, think in terms of monthly payment instead of wealth building.

I just started reading the new book “HOLD: How to Find, Buy, and Rent Houses for Wealth“, which is the final in the three-book “Millionaire Real Estate Investor” series by Gary Keller. I love these books and I have great respect for the authors of the book but I stopped after the 2nd chapter because I disagree with the “cash flow” drumbeat beaten into the reader. I’ll probably continue and eventually finish, but the “cash flow is king” mantra is something I totally disagree with. Otherwise I would not have just refinanced my home because, in fact, doing so just reduced my family cash flow if we want to think about it that simplistically. The book holds forth as a deal breaker, any deal that produces even a dollar of negative monthly cash flow, and I think that will cause many readers to not see the bigger picture and to make bad purchase decisions because it focuses them on the wrong thing.

While I understand and don’t disagree with the idea that it’s better on some level to own positive cash flow real estate, I have personally seen how grasping for positive cash flow in a real estate investment search causes many real estate investors to “chase cash flow” out to the hinterlands and buy lousy investments that look good on paper but perform poorly in real life, especially when the market turns sour. Instead, we advise buyers to buy quality homes in good stable areas that attract quality tenants, even if that property that attends Mills Elementary in Westarn Oaks doesn’t produce as good of cash flow as a cheaper starter home in Hutto. To me, the cash flow home in Hutto or Kyle is a dumb buy, while the home in SW Austin is a smart buy.

So, what I encourage all home owners and real estate investors to do is break apart your monthly mortgage payment, run a comparison on your payment using a calculator such as this one at bankrate.com. If you can refinance at a below-3% rate and chop down the payoff years off your loan, doing so deserves a serious look, even if it increases your monthly payment. But don’t just look at the monthly payment, look at the components of the payment and how they affect your Net Worth spreadsheet going forward. Think like an investor focused on building wealth quicker.

Next, I’ll probably refinance some of our investment properties, even if it means they might go from positve 30-year-loan cash flow to negative 15-year-loan cash flow because, at these rates, the reduction in lifetime interest payments coupled with the reduction in payoff years of the loan will far outstrip any monthly “negative cash flow” that might result. Run the number(s) on your own property and see what you come up with.

One of my favorite pastimes while driving in Austin is listening to Bloomberg News on my XM Radio. More specifically, I enjoy hearing interviews and discussions with people who explain and justify the positions they take on a wide range of (mostly) business topics. This includes small business, the economy, politics, real estate, etc., but also more specific micro topics such as the current and future outlook for farm tractor sales. And, thankfully, Bloomberg Radio is free of the bluster, yelling and arguing heard on the other XM Radio news stations. These are, for the most part, reasoned subject matter experts giving their honest take on things.

Call me nerdy, wonky, or whatever, but I really dig listening to this sort of stuff. When not listening to it, I’m reading about it. I believe it helps me better understand my own life and business. And it helps fulfill one of my ongoing goals, which is to never stop learning.

Recently, a dating expert was being interviewed about the business of match making sites and the state of modern “mate seeking”. She also discussed the mistakes she sees made by most aspiring romantics. Turns out there are a lot of frustrated romantics unable to find what they want in a mate. This despite the fact that finding and “connecting” with good, quality candidate dates has never been easier. I was struck by how similar her points were to the typical “match seeking” efforts of real estate buyers looking for the “perfect” home.

The quote that stuck with me most was related to how many daters reject someone who actually possesses more than 85% of what the seeker says she “must have” in a mate. To that point, she said. “Do you know how hard it is to get to 85%?  If you find someone who meets 85% of your most important criteria, you should be running, not walking, to the alter with that person”. That’s what she said. Run, don’t walk to the alter.

Daters, apparently, allow too many small, picky “deal breaker” distractions into the evaluation process. “I don’t want to date a guy with thin hair” or “I can’t see myself with a guy who would wear a checkered shirt”. But if the guy loves horses, wants kids, and appreciates and “gets” her sarcastic irreverent humor, he’s going to make the great husband she says she wants because he meets the most important set of criteria. Even if he’s only average looking and a little too short.

Dating is more complicated than house hunting because the three (and only three) most important criteria a mate seeker should be evaluating will differ from person to person. House hunters, on the other hand, have had the same three static criteria forever – Location, Price and Condition (which includes age/size). It’s really not complicated at all. But modern buyers have made it so, by allowing too much information and data into the equation.

So, why do so many Austin buyers reject homes that are priced right, in the desired location, and of acceptable condition/size? Are Austin real estate buyers too picky? Yes. And many are just as frustrated as the single 34-year-old gals that dating expert was talking about.

In my opinion, many Austin buyers are too picky. I see this from both the listing side and the buyer rep side. Saying this may seem self-serving Realtor gibberish, but it’s not. I really want buyers to feel good about the homes they buy. And feeling good about the home you buy is about having realistic expectations, not finding the “perfect” home that meets your unrealistic expectations. And, yes, there is in fact a very thin line between being appropriately patient and careful, and being picky, overly critical and unrealistic.

As the dating woman on the radio put it, and I’m paraphrasing, “too many women hold out unrealistic hope for a self-constructed ‘Mr. Right’, who doesn’t exist, while letting too many ‘Mr Good Enoughs’ get away”.

Many of the “Mr. Good Enough” types being those who posses 85% or more of the most important factors desired. The guy who really does love horses, wants kids and will roll on the floor laughing at the same irreverent humor you love. Or whatever your “big three” criteria happen to be.

Same with houses. Let’s look at the three criteria I think should still be the sole determiners of fit.

Location
In Austin, this should be based on cultural, commuter or school track considerations.

I believe most people are happiest living less than a 20 or 30 minute drive from work. This is supported by research that I’ve read and/or heard also. I know it’s true for me, and for most of the buyers we work with. So the commuter component is important and helps narrow down geographic areas within which you will search.

But for some, those under 35 without kids for example, or empty-nest baby boomers, it may be more important to live near where you play. To be closest to your social life and the cultural and lifestyle aspects you want. The Central Austin culture is a huge draw for the “Cultural Creatives” who drive the things that make up the “Austin vibe”. For this mainly “Central Austin” lifestyle, many are willing to pay more and live in a smaller space than preferred. In other words, location trumps price and condition.

For parents with kids, seeking a specific school, this becomes easier because your boundaries are actually defined for you. If you want a home that attends Mills Elementary, then that narrows it down to a specific set of homes in SW Austin. But we might ask you why another equally good elementary is eliminated and help you broaden your search if you can’t find what you want.

For me and Sylvia, we live walking distance to Westlake High School, which was a “must have” for us. We sacrificed on the size and condition of our home because the location, and the walkability to and from school for our kids, trumped everything else. In our case, the side benefit is being back in Central Austin again, which we enjoy greatly and take advantage of regularly.

The important thing about “Location”, is to really understand how the location adds value to your life in ways that bring measurable and quantifiable happiness. For example, a husband buyer might say “by living 15 minutes from home, I can come home for lunches several times a week and see my wife and baby instead of leaving each morning before 7AM and getting home after 6:30PM like I did in California”. This gets to a meaningful core value of family and togetherness.

For one of my 20-something single tenants, living in a downtown Austin condo, she told me, “other than driving to work, I never need my car for anything. I can walk to everything I want to do after work and on weekends, including grocery shopping”. This satisfies her core value of wanting to immerse herself in the cultural offerings of Austin and live an urban lifestyle. This brings happiness.

Price
Let’s face it, if you live in Round Rock, Leander, Cedar Park, or even one of the closer-in suburbs of Austin proper, you are somewhat living in “Anywhere USA” as you drive past Lowes, B&N, PetSmart, Starbucks, Target, and the other countless chain stores that dot the landscape of all US Metro Areas. But you’re living out there because you had a budget of $250K and you wanted a newer home of at least 2,000 sqft, and good schools.

You didn’t want to spend $250 per square foot on an older Central Austin home that attends crappy schools. In Round Rock, SW Austin, Leander, etc., you get a nicer, newer home for less money ($100-$135 per sqft). If you’re  a stay at home mom, there is probably a thriving neighborhood Mommy Group and morning buggy brigade. So you have a lot of the social aspects that fit into your stage of life. The schools are good and the commute is acceptable for Dad.

You’ve found that perfect balance, even if you really wanted something more “Austinie” . You can drive into Austin occasionally to get your “Austin vibe” fix, if that’s important to you. For many people, it’s not though.

Condition
Condition is a broad term for “the home itself”, and includes age, size, floorplan, finish-outs, yard size, etc.  This is where I see the greatest degree of emotional pickiness in buyers. This is the category in which we most often see “perfect” become the enemy of “good enough”. In other words, a perfectly good home, of the right size, location and price range, will be rejected over attributes that ought not be allowed to be deal breakers.

“I don’t like red brick” is one I’ve heard. This is like the dater who rejects a guy because he’s wearing a checkered shirt in his profile photo. Get over it! “The home seems a bit dark”. Curable. “I don’t want popcorn ceilings“. Curable. “I don’t like the brown floor tile”. Curable for an additional $1.25 per sqft when you replace the flooring.

Aside from things which I term “misfit attributes” (functional obsolescence or chronic problems/issues), there is essentially nothing cosmetic about a house that can’t be cured with money OR an open mind.

Yet, in which category do most of the deal breaker issues I observe fall into? Subjective, cosmetic conditions that are curable and which would represent a source of genuine happiness for only the most shallow of people.

That is to say, how shallow do you have to be to allow red brick to define your ability to be a truly happy human being? A house, perfect in every other way other than red brick, ought not be rejected for that reason alone. This is not to discount or dismiss the value of architectural and color appeal that can enhance the beauty and enjoyment of homes, but I doubt anyone’s therapist has ever prescribed “paint that red brick sage green and we’ll be able to get you off the Zoloft”.

Conclusion
The Austin market is going to really tighten up. It’s already happened, and I don’t see any turning back. We have a good, 5 to 7 year up-cycle ahead of us, with increased demand and restricted supply. Meanwhile, buyers seem to be getting pickier and more demanding. Something’s going to have to give, and it ain’t gonna be the market.

As a buyer, sit down and take personal inventory of what’s really important to you in life, and how the balance of price, location and condition of a home can support and add to the things you value most in life. This will help you stay focused on what you want instead of distracted by what you think you don’t want. In turn, this will open up more possibilities, giving you greater choice and freedom in your Austin home search.

As a general rule, I don’t forward emails from other agents to my clients. Instead, I filter the communication and distill it into what my client needs to know. I rephrase, reframe, boil down and summarize. This benefits my clients by keeping them focused on the relevant information and protecting them from irrelevant, irrational and emotional dialogs that can derail and harm the progress of a real estate transaction.

Not every Austin Realtor follows this approach. In fact, so many forward emails directly to clients that, when composing an email, I automatically assume the other agent’s client will read it unfiltered, as a forwarded message. Thus, when writing emails to other agents, I do so assuming that the agent’s client will read it also. This benefits my clients by allowing me to state the case directly to the other party in a way I hope will seem reasonable, unemotional and persuasive.

My refusal to forward emails to and from my own client so infuriated another agent once, that she accused me of “not presenting” a proposed Amendment. This was a typical listing, under contract after multiple offers. Then came the post-inspection proposed Amendment from the buyer’s agent, which said in the email.

Attached please find the amendment for the above transaction.  We have asked for additional closing costs in lieu of repairs as we know your seller is out of state.  I have also attached the inspection for your seller to review.  There are many delayed maintenance concerns that need attention, for example:  trees have not been cared for and have caused damage to the roof, missing smoke detectors, front door lock is broken, many areas of wood rot, air conditioner needs servicing and the sprinkler system needs repair.

Please feel free to call me in the morning if you have any questions otherwise we look forward to moving to the next step.

I didn’t look at the inspection report, nor did I forward the email or inspection report to my seller, or even tell him what the agent said.

What I took from the above was “buyer wants $2,500″, because that’s what the proposed Amendment would have accomplished. The reasons and rationale did not matter to me, or my seller, at this point. But I did personally find the inspection repairs amount to be ridiculously high and unreasonable. (see Austin Repair Negotiations – What is Reasonable?)

I sent the following to the seller:

The Buyers are asking for an additional $2,500 in closing costs to offset what they perceive as repair issues resulting from their inspection. I haven’t looked at the inspection. You guys have a good sense of the condition of your house.

Every buyer asks for something following inspection, so don’t get too upset about it or take it personally. Best thing to do is to just decide on an amount to counter with that you can live with.

I had helped the sellers purchase this home a few years earlier, and it produced a clean inspection report at that time, and had been well cared for and upgraded since then. The items mentioned in the agent’s email were small potatoes, no major mechanical issues or problems. Just normal, expected, lightweight stuff, overstated at that. After seller and I discussed by phone, seller decided to offer $500 as a good faith response, even though he felt there was no justification even for that amount.

To the agent I sent the following:

Sellers are willing to increase para 12(a)1b by an additional $500.

The home is in better than average condition for a home that age in that area. Sellers spent a lot upgrading the kitchen counters with the granite and feel that the home is a great value at the contract price.

Hopefully your buyers will agree. Send back an amendment with a $500 increase in 12(a)1b and I’ll get it signed off today.

Agent responded with outrage and became frustrated.

She resubmitted the exact same Amendment with no changes to the $2,500. Seller responded with the exact same $500. No progress made on the second round. Meanwhile, other agent, instead of focusing on working toward a number that both sides could live with, tried to dictate and control how the communication would be handled, how the seller would respond to the Amendment, and even demanded to deal with Sylvia instead of me.

This is just a few excerpts from her email rant to me and Sylvia:

…Since Sylvia is the listing agent I would like to communicate directly with her during negotiations to ensure timely and accurate responses….

I would like us to come to a win-win here at the amendment stage and look forward to your response.  If we can’t come to agreement by early afternoon we will have to extend the option period to the end of the week thus allowing my clients more time to gain additional bids to see if the home is still of the same value to them….

I am also requesting the buyers hear directly (via email-forwarded by you) from your seller as to the reasons why they are only agreeing to $500.00 or have your sellers counter and sign the proposed amendment to show proof of delivery and their counter of $500.  I understand your clients feel they spent money in upgrades however that isn’t a reason to delay much needed household maintenance that could potentially cost more than the upgrades themselves.

…

And there was a lot more, none of it helpful toward getting the buyer and seller closer on a number they could both live with. To me, it was an incompetent agent unable to manage the process on her end, and unable to help her buyers bring the right set of expectations to the inspection process.

And I would consider myself incompetent if I forwarded such rantings from a hysterical agent to my seller.

The only thing my seller ever knew was that we were still working toward a number. But we don’t let sellers send formal written counter-offer Amendments (unless a simple admin item), nor do we get sucked into tit for tat arguing about the contents of an inspection report. If it’s a bad roof or something like a major mechanical failure, sure, we talk about that specific item. But not small garden variety stuff that doesn’t change the value of a home.

As I told the agent via email, in summarizing and distilling where we were in negotiation:

Buyer requested $2,500 and Seller responded with $500. Seller is not going to agree to repairs or extend the option period, so it’s best to focus on finding a number both buyer/seller can live with. Seller can live with $500. If buyer wants to counter with a different number, I’ll present it.

Agent then became accusatory:

Just to clarify your sellers position:   your seller will not counter back to us in writing?  We must counter back to him?  Is that correct?  Do you have this in writing from the seller so I can share this with my buyers so they will be assured their original amendment was presented to your clients?  A forwarded email from your seller would suffice and in the meantime I will prepare a counter amendment as you have requested.   Please help me settle my buyers concerns.

Uh, seriously? Good grief. Just let your buyers know that the seller isn’t going to give back $2,500 but is willing to give $500. Then find out what your buyer wants to do next and send it over.

Buyer’s eventually came back with a lower number, seller came up a bit, buyer came back again, seller budged again and they settled on a number they could all live with it. The Amendment was complete.

Seller never saw the inspection, nor did I. Seller was never exposed to the rantings and irrational diatribes of the other agent. None of his emails to me were forwarded to the other agent (and thus her buyers). On our side of the deal, we stayed focused on a number only. Just a number. We’d received multiple offers and the seller was willing to let the buyer walk away if they insisted on a $2,500 repair credit. Seller didn’t owe further explanation or anything else to the buyer at all.

None of the surrounding drama would have benefited the transaction or helped my seller. I do suspect my emails to the agent were forwarded to the buyers though, which is why I kept them short, factual and simple.

At the conclusion of the Amendment process, the other agent offered the following:

 … I have never had this much trouble in my life getting an amendment signed. ….

I offered the following response to her:

… As to your difficulties with this Amendment process, I don’t understand what specifically you think a listing agent representing a seller should do differently, but just so you’ll know where we’re coming from:

1) We never let a seller sign anything until the buyer is completely done. (with some minor exceptions)

2) We don’t negotiate repairs on a final amendment, we negotiate dollar amounts only. (with some rare exceptions)

You perhaps do things differently for your sellers, and that’s fine. But you seemed to be trying to bully us and our seller into doing things your way. Maybe that works for you most of the time and you’re frustrated that we wouldn’t grant your requests for forwarded emails, etc.

I’m still scratching my head about that. You actually think I should share my private agent/client communication? Or, you think a seller has an obligation to provide written narratives and explanations in response to requests for money? If so, we’ll just have to agree to disagree, because I do not believe a seller has any such duty or requirement.

I never received a response.

The point of hanging all this dirty laundry out here is so that, as a Realtor, you might come to agree with me that it’s not in your client’s best interest for them to be exposed to unfiltered email communication, or even full blown recounting of phone conversations. Stick to the basics. The facts and negotiation points.

I’ve had agents say things like “the seller was very offended by your buyer’s request”, or “I’m just trying to calm the buyer down after that response”, etc. None of this is appropriate or helpful. I never tip off the emotions of my clients (and,  yes, I have emotional clients, like everyone else) because it doesn’t matter and doesn’t help the deal.

Even worse, is when an Austin Realtor allows his or her personal emotions to enter into a deal. “I’ll present this, but frankly, I’m a bit insulted and I’m sure the seller will be also”.

Really? Then you suck as a Realtor because it’s not your place to feel personally insulted. Just present the offer. If you allow your personal emotions to infect a deal, you are a failure as a Realtor. Your professional guidance, experience and knowledge is what your client needs, not your emotional leakage.

And if you are a buyer or seller, you might want to consider what you say in emails to your agent, especially if, unbeknownst to you, the agent is forwarding your emails directly to other agents who then forward to their clients.

Conclusion

I believe Agent-Client communication is personal, between client and agent. It’s ok to say things like:

“seller thinks the price is fair and already takes into consideration the needed repairs”.

Or “buyer really likes the house, but when we add in the cost of a new roof, new HVAC and water heater, they no longer think it’s a good value and are going to terminate and move on if we can’t work something out. We need some help on those costs”.

Or, “we really appreciate the offer, but it’s well below what the seller is willing to consider at this point, but tell the buyer thanks, that we really do appreciate it and would welcome a new offer closer to the list price”.

Communicating a viewpoint, or basis for a request or stance is perfectly fine. But sending entire emails to do so is, in my opinion, lazy, stupid, ineffective and unprofessional. Don’t be that agent. Austin Realtors need to be better than the excerpts I shared above. Many are not. Be the one who is. Your client will be better served,  and your transactions will be less likely to come unraveled because of something your client heard about or read that they never should have.

Sylvia and I have two children. We didn’t want three, only two. So after the second daughter, I visited Dr. Chopp (really his name) and that was that. Although I admire and love my friends with bigger families of 3, 4 and 5 kids, I like having just two offspring. We didn’t want a third, for many reasons.

What’s this got to do with iPads? Well, I don’t want a 3rd digital device to haul around either. I have a laptop and an iPhone. I don’t want a 3rd electronic thing, simple as that. Enough is enough. I have enough digital overload, I don’t need something else to plug in and care for. I refuse to add a third device, period.

That said, the geeky side of me really, really wants an iPad, but I can’t match the emotional desire to have one with any relevant productivity benefits. To me, it would have to prove itself as a productivity tool, first and foremost. I don’t need a toy. Until a tablet can function like a laptop replacement, I have no use for one.

Does this hurt our productivity as Realtors? If you believe all the hype, yes. But as I’ll explain in this article, no, there is nothing that Sylvia and I need to do as Realtors that would get done better, faster or easier with an iPad.

Let’s look at some of the benefits of iPad for Realtors that I see and hear about most often.

Listing Presentations Tool
In the old days, Realtors used notebooks and flipped the pages while sitting with a seller. Later, PowerPoint came along, which required a laptop. And now, agents can dazzle prospective clients with presentations on the iPad.

Question: Do Realtors using iPads for listing presentations win more than their fair share of listings? For that matter, do sellers and buyers want to see canned presentations at all anymore? I would need to see the data to be convinced that an iPad presentation results in more clients choosing the agents who use them.

I don’t “present” at listing appointments. I just show up and ask questions, look at the house, listen, and help the prospective client decide if what I do might be a good fit for what they need. I don’t have any presentation materials at all. Not one single thing. I even ran out of business cards for about 6 months last year. Didn’t matter.

So I don’t need an iPad to help win more listings. Sylvia may be a bit more willing to consider an iPad as a listing presentation tool, because her personality type and presentation method is less freestyle than mine. But I remain unconvinced of the effectiveness of canned presentations. I don’t think most people want to suffer through that. I think most people prefer a consultative, eye to eye, discussion.

Write buyer’s offers on the spot, in the Property
This is another one I just scratch my head about every time I read about it. “With the iPad, when my buyers find the home they love, we can start writing the offer right there, in the property”, is a typical proclamation of the iPad’s greatness.

Oh brother. What problem does writing an offer “right there, in property” solve? If I thought it was important to be able to do that, I’d carry around blank paper contracts and do it that way. I can write an offer faster on paper than any agent can get it done on an iPad. But I’d rather go to a nearby coffee shop to do it. I don’t want the seller, or another agent with buyers walking in on us writing an offer, so I think it’s best to leave the house to write offers, not stay there pecking on an iPad.

In 20+ years of real estate, I have yet to have a buyer say to me inside a home, “I want it! Can we write the offer right here and now, in the house?” So, I don’t feel like I’m missing out on that iPad “benefit”.

Use as Home Tour instead of Printed Sheets
As outlined in this blog article, another hyped benefit I hear about a lot is:

“With an iPad in hand, you no longer need to print MLS sheets for showings. Instead, save the sheets as a PDF and either email them to yourself or put them in your preferred “cloud” (aka online) data storage system. Dropbox and box.net are commonly used. Once at a home you are viewing, use an app such as iAnnotate, Noterize or PDF Expert to open the PDF and take notes directly on it.” 

Sounds complicated to me. Then what do you do with those notes anyway? And what notes anyway, on 90% of the homes I show? The buyer didn’t like it, isn’t interested, it’s off the list. I don’t usually need to make any notes about that. We’re done, and on to the next home.

Printing is cheap and easy. The consumption costs for our monochrome Brother laser printer/copy/scanner are about 2.4 cents per page. I don’t even have a color printer anymore. I print the listings in showing order, along with a map showing all the listings, staple the map on top and have a copy for me and a copy for the buyer. We average about 8 listings per showing tour, so that’s less than $0.50 per outing in paper costs. An insignificant amount, especially compared with the cost of gas. When we meet to see homes, I hand the buyer her packet to keep, and I use mine to stay organized and to know where I’m going next.

If any notes are needed, they are scribbled on the paper listing. Sometimes I’ll write stuff on mine, something like “stinks like dog”, or “over priced, poor condition, small yard”, or “very nice but priced high”. Then I keep my packet in my pile of stuff on my desk for reference, mainly for “showing feedback” inquiries from listing agents. After about a week, it goes into the shredder.

I don’t see any benefit in replacing the above system with an iPad, and fumbling around with that every showing. Plus, if I drop my paper packet, no biggie. And it folds up in my back pocket. And where do you agents put the iPad when you’re fumbling with the electronic lockbox key to get into the house? Sorry, to me it just seems dumb and inefficient compared to my paper way.

Summary
There are a host of other iPad “benefits” for Realtors that I read and hear about. I’m not going to list and rebut them all, but if you think there’s one that can’t be ignored, I’m all ears. Please leave a comment and convince me.

I’m patient. The Windows 8 tablet may actually be a practical laptop replacement device. I fiddled with one at the Microsoft Store at the Domain a couple of weeks ago. Eh, it was ok. Sort of confusing to me. But I want to see the full production version coming out later this year.

Also, an ultrabook with 4G running Windows 7 would, to me, be a more robust and capable productivity tool than an iPad.

Meanwhile, we will have an iPad in the house next week. My 10th grade daughter will be issued one from Westlake High. All high school students at Westlake will have iPads this year. This is a wonderful application of this technology, for students, as I’ve been to the demonstrations on how they are utilized in the classroom and by students at home.

My older daughter in college at TCU says she doesn’t see many iPads on campus. Everyone has laptops and smartphones. I offered to get her one if she thought it would help her be a better student, but she said she doesn’t need it, that her laptop and iPhone combo are fine. Like father like daughter I guess.

I’ve been buying and selling stuff lately other than real estate. Mainly with Craigslist ads. Washer/Dryer left over from a sale. A Fridge too. Bought a used car for my daughter, and we’re selling our minivan. It’s funny how the non-real estate inquiries differ so much from real estate inquiries.

First up, I’m selling our trusty 2007 Honda Odyssey. It has 107,000 miles now, and we no longer need it. Our oldest daughter is in college and youngest in high school. We just don’t haul around gaggles of kids to parties, playdates, etc. anymore. Plus, the van is a 16 mpg gas hog. As a replacement, we bought Sylvia a 2012 Hyundai Sonata Limited, which achieved 38 miles per gallon driving our daughter up to TCU in Ft Worth last week! It’s a neat little car. GPS just like the Honda, and built in blue tooth connectivity for the phone. So, when driving and the cell rings, Sylvia just taps a button on the steering wheel to answer and start talking hands free. It’s roomy inside and nice enough for taking clients around, but more economical and easier to drive and park than the minivan.

Anyway, if real estate buyers were like auto buyers from Craigslist, and you were selling a home, let’s say, for $285,000, you might receive a text message saying “wil u take 235 I buy today“, and similar gibberish. What sort of dummy thinks this method of engagement is an effective initial communication for a purchase discussion? After enough of these pings, all of which I ignored, I altered my ad to say “Calls only. DO NOT TEXT. Text messages will not receive a response“.

So now I just get calls, thankfully, from intelligent people . For the Odyssey, the buyers all ask the the same opening question: “Has the timing belt been replaced?” Huh? No it hasn’t. But after enough of those calls I took it down to Howdy Honda to get the timing belt replaced. It’s just an $800 preventative maintenance thing that’s recommended at 7 years or $100,000 miles. I just figured a new owner would get it done, but that’s not working. These Honda buyers are tough! Way tougher than house buyers.

And, if house buyers acted like Honda Odyssey buyers, and you were selling a 15-year-old home, the first questions would be: “I see it’s 15 years old, have the HVAC, water heater and roof been replaced? What about the appliances?” But buyers don’t ask those questions.  Instead they look at pictures online. “Look honey, it has granite countertops and a walk-in shower!”

Auto buyers are much more focused on the mechanical integrity of the car they are buying, right out of the gate, than they are colors or other “emotional”" attributes.

Real estate buyers look for a home to fall in love with, then they get an inspection to find out about the condition, sometimes with very disappointing results.

That’s backwards. I wish Texas real estate consumers would buy into the value of pre-inspections, but it’s just not a common practice in Texas. Homes are sold as-is, and it’s 100% the buyer’s responsibility to determine the condition and then negotiate repairs with the seller. If you have a good buyer’s agent, you’ll be prepped and warned about the 12-18 year old home and the “end of life” mechanical issues the inspection will reveal. Also the code issues and other issues with even older homes.

On the flip side, I was also a recent used car buyer. I bought my older daughter a used car to take back to college. I called one Craigslist ad, set an appointment. Before meeting the seller, I did some online research about the car, found it to be a suitable candidate, with pretty good consumer reviews on Edmunds.com.

I looked at that one car, bargained for a better price, and bought it on the spot with no inspection. I did this, with no inspection, because, after talking to the seller first on the phone, then in person, I judged that the car had been meticulously maintained by this original owner. It’s a 2007 Ford Focus with 37,000 miles, and in like-new cream-puff condition. Candy-Apple Red. A total “chick car”. Perfect for a college girl.

The seller was an engineer, smartly dressed and,  to me, seemed honest and possessing the character type of one who takes good care of things. Plus, I didn’t want to spend much time shopping for a car, which is a real time sync and a major hassle, so I was willing to trade any risk of foregoing an inspection for the convenience of just being done with it that fast.

After we went to the bank and I gave him the Cashier’s Check, his wife came back in with a small portable hand vacuum that they had used to keep the car clean. She gave that to my daughter. And they also gave me a CarFax report which they had purchased to show interested buyers the maintenance history, but which I hadn’t seen yet. It confirmed my guess that this was a meticulously well cared for automobile.

Which brings up another point.

Meticulous people take good care of their homes and cars. If you buy a house or a car from a slob,  it’s going to have problems that haven’t been addressed. I always love those homes being sold by older sellers where you open the HVAC closet door and there, taped to the back of the door with old yellowing tape, is an exhaustive history log of maintenance and repairs to the system, dating back to 1973. Sweet. When you see that, you know the owner took care of the entire house. You can also tell this by looking at people’s yards, and the amount of or lack of weeds.

A perfect yard free of weeds tells me the home has been well maintained also. This is confirmed when you look in the garage and it has a painted floor, a Honda Accord or Toyota Camry, and a super organized wall of household tools and garden implements.

When you see those houses that are staged well, but the yard is rough, then you go into the garage and it’s stacked to the rafters with junky furniture with cat hair all over everything, get ready for a rough inspection. These people haven’t done any preventative care or maintenance to the home. They only take care of stuff after it breaks. And that perfume smell in the home is hiding something as well.

Not sure where I’m headed with all this so I’ll end it by saying that, when buying houses or cars, you can in fact judge a book by its cover more often than not.

One thing I have noticed lately while showing and listing houses is Buyers like COLOR!

No longer are the neutral tones the best advice for someone putting their house on the market. My last buyer clients went under contract on a home with colors they fell in love with. This home was painted a soft yellow in most of the living areas and a pale blue in the master bedroom. They absolutely loved it.

Another home I recently listed which received multiple offers within a week had a vivid red/orange chair rail in the entry hallway! No longer am I telling sellers when I list the house to paint everything neutral. Neutral is OUT!

The Front Door is Very Important
Another interesting observation I have made is the importance of the front door color. I used to recommend red, always. Now with the hot weather, I am recommending painting the front door a soft shade of teal (greenish/blue).

Cool colors on the front door are very soothing. A buyer and their agent stand in front of the door for 30 seconds to a minute, waiting for the lockbox to open. Sometimes we even wait for someone to answer the door.

In these 100+ degree days a cool color can make all the difference in your perception of the home once you are inside. Here is a link to Kelly Moore Paint’s “Top Color Picks to Enliven Neutrals“.

So if you are thinking about selling your house on the market, don’t neutralize everything. Leave some color at least in accent walls. Consider happy lively colors in the living areas and soothing colors in the bedrooms and baths.

Below is the breakout of the Austin real estate market year to date, through June 2012 compared to the same period 2011. The format is as follows, which shows the entire market.

The color coding at the bottom of each MLS Area summary indicates whether that measure improved or slid back. In the “All Areas” example above, all of the measures improved. That is, # Sold, Avg and Median sales prices, and Avg price per sqft all increased on a market-wide basis, while days on market decreased. Average sqft size is not color coded because I don’t see how a slight change in average size up or down is either good or bad.

A quick summary of some stats results:

Fastest selling: The fastest selling area in the Austin MLS market area is Southwest Austin (MLS Area SWW) which has an average days on market of 29, and a median of 10. Yes, half the homes in SW Austin have sold in 10 days or less so far in 2012. There are a lot of other MLS areas with median days below 20, which you’ll see in the full chart below, but no area is as hot as SW Austin in terms of demand. MLS area SWW includes subdivisions such as Circle C, Legend Oaks, and Villages at Western Oaks.

Highest Price Increases: There are 44 MLS areas shown in the chart below. 12 of those have avg price increases of over 10%. 12 areas (though not the same 12) have median sold price increases over 10% from last year. Most of the highest increases are in closer in areas of Austin proper, though Cedar Park/Leander North (CLN) and Georgetown West (GTW) are in that group, as well as dark horses Manor and Elgin, which have been perennial low performers in the market.

The full chart is below. As usual, questions and comments are welcome.

If you are not familiar with Austin MLS Areas, and Austin MLS map is below.

The Austin real estate market has found its traction this selling season. Good for sellers, frustrating for buyers. And there hasn’t been any let up. Sylvia and I personally had a record June. July has been extremely busy as well. We’re encountering multiple offers, backups offers, and several listings we’ve sold from “Coming Soon” signs that never made it into the Austin MLS.

That said, we still see that this good market isn’t yet showing up for every home or in every neighboirhood. So, for now, the rising tide is floating most boats, but not all. I’ll have a neighborhood breakdown in a following post.

I have several charts and graphs below that give visual representation to the market. The first is my recurring 1999 look-back graph. I like this one because it puts into context our market for the past 13 years.

Next is June 2012 compared to June 2011. The left column shows the previous month, for reference. The right colum is color coded, red for downward movement, green for upward movement in the particular market measure. As you can see, everything is green.

The number of homes sold this June is up a whopping 50% from same month last year. Average sold price is up 4.55%, median sold is up almost 12%. Average days on market is below 60 days, and median DOM is below 30 days. Very strong numbers. Expired/Withdrawn listings (Not Solds) are down substantially from June a year ago, dropping from 33% of listings to 23% this year.

The following chart is Year to Date numbers for the first half of 2012 compared to first half 2011.

Year to date 2012, the numbers are strong but less so than the month of June alone.

The number of homes sold this YTD 2012 is up a strong 17% from same month last year. Average sold price is up 2.5%, median sold is up an impressive 7%. Average days on market is 67 days, and median DOM is 35 days. Good numbers. Expired/Withdrawn listings (Not Solds) are down substantially from first half a year ago, dropping from 37% of listings to 27% this year.

Conclusion
If you’re a buyer, reset your expectation and be prepared to compete for a listing if you’re looking in a hot area. Expect to pay more and to accept fewer repair concessions. The good news is your interest rate. 2.75% for a 15 year loan, less than 3.5% for a 30, as of this writing. Those are awesome interest rates, at historic lows. If you do the math, a lower interest rate is worth more, long term, than a lower price.

If you’re a seller… it depends. Most of our listings are doing very well, but some are not. I just listed one in Great Hills 78759 that sold immediately and we have a backup on the way. I have one in East Austin 78702 that never made it into the MLS, sold from the “Coming Soon” sign. One of Sylvia’s listings in Western Oaks 78749 went under contract almost immediately as well, for a price higher then the sales comps suggest.

But I also have the best priced listing in 78704 , a 2/1 for $225K, completely remodeled and awesome. It’s not getting shown, hardly at all. That one’s a head scratcher. Sylvia has a listing in Pflugerville that hasn’t received any showings at all. And our Lake listing on Dry Gulch (uh, Pedernales River) has had 2 showings in 9 months.

So it’s still a spotty market. The biggest mistake we can make as listing agents or sellers is to read too much into the market strength, and overprice a listing. Buyers are not going to over pay for a home. Even the “hot” neighborhoods have homes that, for what ever reason, don’t attract a buyer. There is one down the street from us like that that I think is priced very well (below $400K in Eanes) and it’s still available. It suffers from the “1970s floorplan curse”.

Still, after 3 years of slow market conditions, it’s good to see this level of vitality in the Austin real estate market.

Being a Realtor in Austin, or anywhere, is an interesting and rewarding profession. And often frustrating. It’s a profession where the two most visible components of the job – the screwups and the easy deals – are what the public sees the most. On the back-end though, there is a lot going on that is not visible and sometimes remains unknown to the parties because the agents just take care of it. Still, a lot of deals crater because of problems. Some for good reasons, others that could have been saved with better efforts and more tenacity, but were not because the seller, buyer or the agents involved were not able to find resolution and solve the issues (or emotions).

Thus, real estate transactions in Austin are often much more difficult to complete than most people realize. I’ll use two of my recent buyer closings as examples.

Example 1 - Underwriter Wants a Paystub
Buyer moving to Austin for new job. Solid credit, income, etc. Years of industry experience in the same profession as the new job. We go through pre-approval, get the lender letter, find a house, get it under contract, then find out the lender actually can’t do the loan until the underwriter has the first paystub. A signed employment contract is not good enough,  it turns out. It use to be, so now I know.

I argued this with the lender from every angle I could think of, tried different lenders, but that’s just how tight things have become, even for good, quality buyers. Since the new job wasn’t going to start for several months, and the old job income couldn’t be used because he was leaving, this catch-22 meant buyer had to drop that deal.

So, end result, instead of finding a home to move into prior to the relocation, buyer would have to come to Austin and bunk up with family, start the job, then find a house.

Fast forward 3 months. Buyer starts new job and is bunking with family. We find new house and get it under contract. First paystub is short, because, well, it’s the first paycheck and is for less hours. The lender’s underwriter doesn’t like this. Wants to see a “full” paycheck. Logic and common sense is irrelevant. The deal seems like it could actually crater or have to be postponed. We never like to add time to a deal. Time is our enemy. We want things to close on time, as agreed. Ultimately additional documentation made it pan out but not without a lot of effort.

Underwriters are really, really picky lately. This is hurting the market as underwriting has over-corrected from the boom days when anyone who could fog a mirror and tell a lie could get a loan. Today, well qualified buyers are being thwarted, or run through the ringer. It’s really unfortunate.

Example 2 – Appraisal Comes up Short
You’ve probably heard about “short” appraisals. This is happening more and more in the Austin real estate market as some areas are experiencing steady price increases. Appraisals generally lag the market. On this particular deal, I had the home (my listing) under contract pre-MLS for full list price of $175K. My seller paid $168K in 2008, so $175K in a rising market was the right price, and we all knew it (buyer, seller, agents), thus the contract price.

The FHA appraisal came in at $160K.  Oh brother. At first I thought the other agent was joking when he called to tell me. “Am I being punked? $160? Surely this is a joke”.

It wasn’t a joke. I had the other agent send the sales comps being used by the appraiser, so I could investigate. Sure enough, these dud comps stunk up our deal bigtime, and undervalued the home. Both me and the other agent knew the contract value was good, but we didn’t have any recent comps to prove it. This happens sometimes. There can be “holes” in the recent sales comps, but experienced agents “know” the value of homes in certain areas. The fact that it was snapped up pre-MLS confirms this, but is NOT a fact that an appraiser can use.

So I started looking at the Pending sales to see if there might be some “comps in waiting”, so to speak. There was one which would support our value which had gone Pending 45 days earlier. Surely that one would close soon. Found another one that was 30 days Pending. That one would work also, provided the contract price was close to list.

The other agent contacted the listing agents on both Pending listings. One home had actually already closed and the agent just forgot to  change it to Sold status in the MLS. Done. One down.

The other was closing very soon. The appraiser agreed to hold off on final appraised value and review these new, more recent  comparable sales once the second one closed. Still, after all that, he still only came up with $170K.

This is when a buyer and seller have to decide if they want to make the deal work or not. Buyer gave up some of the closing costs built into the deal. Seller gave up $1,400 in net proceeds, and it was worked out.

It would have been a gamble for the  Seller to try to find a new buyer and a higher appraisal. FHA appraisals stick with a property for 6 months, so he would need a non-FHA buyer in a neighborhood where most sales go FHA. The buyer didn’t want to start from scratch either. So compromising made sense for both buyer and seller.

I was lucky to have an experienced, capable agent on the other side of the deal who was able to walk the careful line of interfacing with the appraiser without seeming to try to “influence” or “puff” an appraisal. This is a delicate task. Remember, puffed up appraisals contributed greatly to the real estate bubble and bust nationwide not that long ago.

Realtors are in fact allowed to talk with appraisers, ask about the comps used, offer additional information about which the appraiser may not be aware, etc. In this case, we had real, verifiable information that the appraiser agreed would change the value if available, and indeed, he wanted the home to be given the proper appraised value. Lucky, again, he wasn’t one of those “Little Napoleon” appraisers who get his chest hairs all standing on end when the appraisal is questioned. Had that been the case, there is still formal appraisal appeal process, but that takes time and more effort.

Both of the above deals, in addition to everything I described, also included the typical other “garden variety” hiccups and inspection issues on top of the bigger problems. But we’re use to those and they usually don’t kill a deal, if everyone is calm and reasonable.

Finally, “luck” is very important, as is patience and tenacity, when trying to salvage a deal that takes a wrong turn. It only take one difficult person, whether the buyer, seller, agent, inspector, appraiser, lender, buyer’s mom, etc., to make resolution even harder to achieve. When everyone works toward the common goal of a successful outcome, and egos and emotions don’t cloud the process, even the toughest deals can be worked through to completion.

What I tell every client, both buyers and sellers, is that “something is going to go wrong, or not as planned with your deal. I don’t know what it is yet, and hopefully it won’t happen at all, but when it happens, we’ll deal with it and get through”.

And that’s usually what happens.

I just did something for which I am, on one level, ashamed. I entered a sales listing into the Austin MLS that is not properly cleaned, prepared, staged or photographed. The yard isn’t groomed. The photos are crappy 4-year-old rental listing photos I took when I started managing the property for the owner. The tenants moved out Monday, and it’s now live in the Austin MLS in tenant “move-out dirty” condition.

Have I gone mad? Perhaps.

I called the owner today and simply said, “look, this may sound crazy, but I think we should go on the market right away, without delay, and not spend any of the $2,000-$3,000 budget I told you to be ready to spend on yard grooming, landscaping, repainting the interior, preventative maintenance, repairs, etc., because I have a feeling the house may just sell as-is really quickly without doing any of that”.

Then I confessed that this advice goes against every grain of professionalism I have. We always fully prepare our listings before placing on the market. I curse and ridicule listing agents who don’t. It’s an embarrassment to show an unprepared listing to buyers. Yet, I just entered one.

After clicking “submit”, a full 3 minutes elapsed before the first Realtor called to ask about it. 3 minutes.

The final outcome of this experiment will determine whether I’m smart or just overconfident. But let me put into context the events that led up to this decision.

• I closed the sale of a listing Monday April 30 that never even made it into the MLS. Sold as-is, no repairs.
• Sylvia put another South Austin listing under contract tonight, full price, sold from the “Coming Soon” sign before we could finish prepping it or enter it into the Austin MLS. Something is going on here.
• My listing is a small 3 bedroom with a garage in 78704 listed for $225K. The next cheapest 3 bdrm w/garage in 78704 is $350K.
• There is, at present, only one other listing cheaper than mine in 78704, period. And it’s a foreclosure with 2 bedrooms and no garage.
• I talked to my friend and fellow Realtor, Carry Bills yesterday, who is a 78704 expert, and she said buyers simply can’t move fast enough.
• Data analysis aside, I have a gut feeling about this. I trust my gut more than my brain, usually.

The Austin real estate market has shifted. That doesn’t mean every home sells fast and without proper preparation. We have some listings in Belterra and South Austin, and one in North Central, that don’t have buyers beating down the doors yet, even though they are well staged, professionally photographed, priced right and show great. This is a market of shifting pockets and neighborhoods rather than a monolithic market moving in unison. Austin agents in a shifting real estate market have to change our thinking a bit, when circumstances dictate.

What kept bothering me was the possible outcome of having a seller, based on my standard advice that I give every seller, spend money to prep a home that may sell just as fast for full price with no prep at all. That is a very real possibility. I think it’s my responsibility to explain that to an owner and suggest that we try it.

If you’re a buyer with a search portal set up by your agent or elsewhere, waiting for a 3 bedroom with a garage to come on the market in 78704 for less than $349K, you should have already received your email alert, just like the agent who called me after 3 minutes. There is now a total of 1 listing that matches that particular search. And it’s in a great location on a huge pie shaped culdesac lot for $225K.

Is $225K too low a price?
Why not prep it well and try $235K or more? No, this home comps out at $200K to $220K in this particular location. We add value for a rising market and price it just past the top end of the range. Even a hot market has its limits, as do appraisals. If the price is right in that sweet spot, buyers will react and compete for the listing. Too high and it might get a lot of quick showings, but no offer. It’s tricky hitting the right price, and easy to miss the mark if overexuberance plays a role, but I think we’re there.

If I’m wrong about this, we can always pull the listing after 10 days, mark it “T” for Temporarily Off Market, do the prep and go live again with the good photos and all. There is plenty of selling season in front of us and the Austin real estate market just keeps getting hotter.