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The Crossland Team
Sylvia Crossland, Broker Steve Crossland, MPM (512) 301-5811 |
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When Should an Inspection Kill a Real Estate Deal?
August 31, 2006
I had a deal bust last week over repair items revealed in the inspection. After the property inspection, the buyer asked for certain things to be remedied by the Seller, and the Seller refused. The buyer terminated the contract and we found them another house.
Who is dumber…a buyer who walks away from a good home over a few thousand dollars in repairs, or a seller who let’s a buyer walk away from a deal over a few thousand dollars in repairs? It depends. In this case, the seller is the dumb one.
In this particular deal, our buyer was already paying a price that was slightly above market value, which is ok in a hot area and a rising market, but after adding a bad roof and the cost of curing other items to the price tag, I felt the home was no longer a good value. The other factor is that a substitute property in the same neighborhood came on the market which was newer and priced at market value instead of slightly above. Had we been able to negotiate a better price up front on the first house, there would have been a higher level of tolerance for inspection items. The second house was newer, priced better, and ultimately had way fewer problems revealed on the inspection.
Where does this leave the seller of the first house? Now the seller of the first house has put the property back on the market and must disclose to all prospective buyers those defects and conditions that he is now aware of as a result of our buyer’s inspection. New buyers are not going to be any more accepting of those conditions than our buyers were. The seller is going to have to cure some or all of those issues anyway, or discount the price of the home to reflect its needed repairs. Either way, letting my buyers walk away over these things was not the smartest move.
Buyers can be equally dumb though when walking away from a good deal over nominal repair items. We’ve seen this happen too. If a buyer has negotiated a good price on a home and the repair items are normal and expected for a home of that age in a particular area, then we advise the buyer to stick with the deal even if the seller is stubborn about making needed repairs.
Our California buyers tell us that things are done differently in California. Apparently, they have a certain class of repairs that a seller has to make. Not so in Texas. All homes are sold as-is. Sellers may refuse to make inspection repairs but do so at the risk of having the buyer terminate the deal prior to the end of the Option Period, as happened in this case.
Stevie Ray Vaughan - 16 years ago today
August 27, 2006
Stevie Ray Vaughan died in a helicopter crash 16 years ago today on August 27, 1990. Hard to believe it’s been that long. Sylvia and I went down to Zilker Park that night for the memorial gathering. It was a sad day in Austin. We had just seen him live at Auditorium Shores earlier that summer. I first saw him live in 1985 at Auditorium Shores right after moving to Austin. Sylvia saw him the first time at “Club Foot” in Austin in the early 80’s. I went to his shows whenever I could. We both remain big fans.
I enjoy finding videos of Stevie Ray performances at. There are quite a few online there. Here is an interview below of Stevie Ray and Double Trouble (tales a while to load, but worth the wait). Of all things, Stevie, Tommy and Chris are being interviewed for a Japanese TV station. It’s still early in their fame and they’ve just cut their second album. They do a little bit of playing (Stevie on a Gibson “V” which isn’t his usual guitar) and they talk about being in the band. Stevie Ray, among others, helped give credence to Austin being the “Music Capital of the World”. He is missed.
Austin Sales Stats - July 2006
August 23, 2006
I’ve put together some stats for July 2006 sales. Homes only, no condos, townhomes, etc. Usually I just grab the chart that ABOR puts up in the Realtor area of the abor.com website, but that chart doesn’t break things down into different areas, so this month I decided to do something different. Looks like the average sales price in the Austin MLS overall has increased about 8% since last year, but look at the breakdown of different parts of Austin and you’ll see that, with a 12% increase, Austin proper is still outperforming all other areas except Westlake, which has a whopper of an increase at 49% (the smaller sample size may account for this spike, but Westlake is no doubt a very desiearble area with the best schools in Central Texas).
Looking at the areas I’m always telling buyers and investors to stay away from, we see why. Hutto/Manor/Elgin, the cheap areas northeast of Austin with tons of cheap new homes have 0% appreciation the past year. Pflugerville surprises me though. I was talking with some agents the other day who told me sales in PF are very slow. One had a new listing that received its first showing after 3 weeks on the market. So I’m not sure how to explain the 8% increase in average sales price. I’ll have to dig deeper and see if there is a new home neighborhood up there driving up the average and hurting the resale activity. That’s my first guess.
Otherwise, a 12% increase in Austin is exactly what we want. We don’t need 15% to 30% appreciation, though many new investors are hoping for that. Measured, steady growth and appreciation is much better in the long run.
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June 2006
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July 2006
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July 2005
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Yr % Change
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| # Sold |
2839
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2531
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2382
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+6%
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| Avg List Price |
$251,663
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$255,035
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$236,292
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+8%
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| Median List Price |
$189,075
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$183,000
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$175,000
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+5%
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| Avg Sold Price |
$246,407
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$248,324
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$230,440
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+7.8%
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| Median Sold Price |
$183,990
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$179,990
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$172,500
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+4.3%
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| Avg Size SQFT |
2155
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2122
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2120
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+0%
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| Median SQFT |
1977
|
1934
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1927
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+0%
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| Avg $ per SQFT |
$114
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$117
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$109
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+7.3%
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| Avg Days on Mkt |
57
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59
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62
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-4.8%
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| Median Days on Mkt |
32
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35
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39
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-10%
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Austin July 2006 Average Sales Breakdown by City/Area
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June 2006
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July 2006
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July 2005
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Yr % Change
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| Austin |
$297,481
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$304,975
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$271,783
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12%
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| Round Rock |
$194,497
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$200,844
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191,344
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5%
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| Cedar Park/Leander |
$173,627
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$175,734
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$166,679
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5%
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Hutto/Manor/Elgin |
$158,334
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$145,961
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$145,406
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0%
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| Kyle/Buda |
$162,106
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$155,731
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$153,521
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1%
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| Dripping Springs |
$324,889
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$349,232
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$314,506
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11%
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| Lake Travis ISD |
$450,339
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$473,672
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$450,748
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5%
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| Pflugerville |
$153,397
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$154,613
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$143,813
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8%
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| Westlake/Eanes ISD |
$655,599
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$945,397
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$635,022
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49%
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| Georgetown |
$213,436
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$205,727
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$193,859
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6%
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Model Home Has Fake Family
August 17, 2006
Here is an interesting clip I saw. While our sales market in Austin is strong, California and other places are slowing down. To stir things up a bit, Centex homes in San Diego staffed a model home with a fake family to give the place a more homey feel. Sounds like like fun, especially when they have visitors to the open house helping the “family” sing Happy Birthday to “Mom”, but I don’t know how effective it will be in converting lookers into buyers. See the story from the San Diego Tribune below.
A Little Improv Goes a Long Way in Selling a Home
Centex Homes has begun staffing model homes with actors in hopes of stimulating the once-sizzling San Diego. Calif.-area new-home market.On a recent Sunday open house, Mom, Dad, and the two kids chatted about Grandma visiting as they interacted with would-be buyers, serving them fresh-baked cookies and showing off their rooms in a $700,000 model home in Ventura County, Calif.
Centex calls it an “improvisational theatrical model home experience.”
“Think of it as a docented tour, a combo of Williamsburg village and `Desperate Housewives,’ ” says Centex’s publicist, Jim Garfield. “Staged homes tend to be so cold. We’re looking for a way to put the heart back in the home.”
Some home shoppers, including Ventura resident Filomena Silva, thought the idea was an entertaining approach. “It makes you feel right at home,” Silva says, after joining in to sing “Happy Birthday” to Mom.
Source: San Diego Union Tribune
Economist: Austin will add 20,800 jobs in the next year
August 15, 2006
More job growth and real estate news as reported by the Austin Business Journal today. I don’t have much to add, just wanted to share this.
The growth of the Austin economy will continue to outpace the rest of the nation over the next year, according to a forecast from one Texas economist.
Mark Dotzour, chief economist at Texas A&M University’s Real Estate Center, predicts that the U.S. economy will slow in coming months–in part the result of forces such as increased global construction costs and the rising price of oil. But Austin is likely to add 20,800 new jobs over the next 12 months, a 2.9 percent increase in employment that will significantly outpace national job growth, he says.
Austin Real Estate Appreciation
August 14, 2006
We’ve heard and read a lot about Austin’s hot real estate market lately. Usually we see a broad overview presented in a news story or article showing number of sales, average and median prices, days on market, etc. Lately, this has all been good news for sellers and owners, as median and average home prices are moving up in the Austin area.
The problem, however, with looking at all-inclusive stats for the overall real estate market in Austin is that it doesn’t truly represent the appreciation for existing homes over time, and it doesn’t distinguish between the different submarkets that the Austin MLS represents.
If you are purchasing a home in Austin today, and plan on living in it or holding it as investment for 5 or 10 years, you’ll be selling what will then be considered an “older home”. By “older”, I mean it won’t be less than 5 years old, which is what most of our buyers consider to be a “newer home”.
I took a look at typical homes that sell in the Austin area - homes in a specific age and size range - to see what the appreciation has been on these over the past 7+ years. I selected homes that are 1600 to 2200 square feet in size, at least a 3 bedroom, 2 bath with a 2 car garage, and built from 1990 to 1995. This represents a true “bread and butter” home in Austin, and removes new homes from the equation. Let’s see what the numbers say about appreciation for these existing homes.
Here is a breakdown of appreciation for each year.
Austin tops for relocating businesses
August 14, 2006
I just read this in todays Austin Business Journal news briefs. More good news for Austin, and our real estate market. Job growth drives a healthy real estate market more than anything else, and Austin continues to land at the top or near the top of the various “Best of ..” lists with regard to business climate, quality of life, and affordability.
Expansion Management magazine puts the Austin area first among U.S. cities in the magazine’s fourth annual Mayors Challenge rankings of the best cities for future business locations.
Austin ranked No. 1 overall out of 362 metro areas across the country in seven categories, including education, health care, quality of life, logistics, number of knowledgeable workers, legislative climate, and a poll of 80 prominent corporate site consultants.
Texas led all states in the rankings, with seven metros earning its “5-Star Business Opportunity Metro” distinction.
Virginia was next, with five, followed by Michigan, with four metros that earned top honors. Arizona, California, Iowa, Missouri, Ohio, Pennsylvania and Washington each had three metros that made the “5-Star” list.
In all, 33 states had at least one “5-Star Business Opportunity Metro” on this year’s list.
“Among today’s big-city mayors, attracting businesses — and the new jobs and tax revenue they bring with them — is priority No. 1,” says Bill King, chief editor of Expansion Management. “Competition among cities is fierce and, despite their notoriety, incentives are not the difference maker when it comes to why businesses choose one city over another. Being able to satisfy a company’s long term business requirements is much more important, and the most successful cities realize that fact.”
Expansion Management is a bimonthly magazine for executives of companies actively looking for a place to expand or relocate their facilities within the next one to three years.
Source: Austin Business Journal
Austin Rental Market - July 2006 Update
August 5, 2006
July shows an upswing in rents for single family homes in Austin compared to July a year ago and June of this year. The number of homes leased through the Austin MLS increased 7% over a year ago - from 692 to 741, a much smaller increase than last month, but a notable increase nonetheless. The average Leased Price increased more than 4% compared to a year ago from $1254 per month average to $1307 per month. In the month before (June 2006), the average leased price was $1269. The average square foot size increased and this caused an actual drop in the average leased price per square foot from $0.70 to $0.68. Most notable is the decrease in Days on Market. Homes are leasing much faster overall than a year ago, averaging 47 days on the market in July. The median days on market was 36 days, meaning half of all rental homes leased in less than 36 days, and half took longer.
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June 2006
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July 2006
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July 2005
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Yr % Change
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| # Leased |
741
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741
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692
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+7%
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| Avg List Price |
$1278
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$1317
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$1265
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+4%
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| Median List Price |
$1195
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$1200
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$1175
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+2%
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| Avg Leased Price |
$1269
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$1307
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$1254
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+4.2%
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| Med Leased Price |
$1150
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$1200
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$1150
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+4%
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| Avg Size SQFT |
1841
|
1913
|
1791
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+7%
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| Median SQFT |
1750
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1804
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1750
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-+3%
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| Avg $ per SQFT |
$0.69
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$0.68
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$0.70
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-3%
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| Avg Days on Mkt |
48
|
47
|
69
|
- 32
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| Median Days on Mkt |
38
|
36
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51
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- 29%
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So, is the rental market in Austin finally coming out of it’s 5 year slump? It’s too soon to get excited. If you’re a renter, you’re still able to rent single family homes in Austin for less than what you would have paid in 1999. Not a bad deal. As of June’s mid-year update last month, the year-to-date rental totals in Austin were still slightly below 2005. 2006 could still end up being the 5th consecutive year of declining rents in Austin. It’s going to take more than a strong July to bring things around overall. But this is good news for landlords nonetheless. Any month where rents increase and days on market decrease is a good month, but 1 month is not enough to declare a trend. I’ll need to see sustained, month after month increases before I’ll believe the Austin rental market downturn to be at an end. See additional charts below.