Archive Monthly Archives: August 2006

When Should an Inspection Kill a Real Estate Deal?

Austin Home Inspection

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.

Posted by Steve
10 years ago

Stevie Ray Vaughan – 16 years ago today

Stevie Ray Vaughan

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.

Posted by Steve
10 years ago

Austin Sales Stats – July 2006

House Sold Sign Photo

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.

 

Austin Sales Stats July 2006
Previous Month and Year Comparison
All MLS Areas – Houses Only
June 2006
July 2006
July 2005
Yr % Change
# Sold
2839
2531
2382
+6%
Avg List Price
$251,663
$255,035
$236,292
+8%
Median List Price
$189,075
$183,000
$175,000
+5%
Avg Sold Price
$246,407
$248,324
$230,440
+7.8%
Median Sold Price
$183,990
$179,990
$172,500
+4.3%
Avg Size SQFT
2155
2122
2120
+0%
Median SQFT
1977
1934
1927
+0%
Avg $ per SQFT
$114
$117
$109
+7.3%
Avg Days on Mkt
57
59
62
-4.8%
Median Days on Mkt
32
35
39
-10%
Austin July 2006 Average Sales Breakdown by City/Area
June 2006
July 2006
July 2005
Yr % Change
Austin
$297,481
$304,975
$271,783
12%
Round Rock
$194,497
$200,844
191,344
5%
Cedar Park/Leander
$173,627
$175,734
$166,679
5%
Hutto/Manor/Elgin
$158,334
$145,961
$145,406
0%
Kyle/Buda
$162,106
$155,731
$153,521
1%
Dripping Springs
$324,889
$349,232
$314,506
11%
Lake Travis ISD
$450,339
$473,672
$450,748
5%
Pflugerville
$153,397
$154,613
$143,813
8%
Westlake/Eanes ISD
$655,599
$945,397
$635,022
49%
Georgetown
$213,436
$205,727
$193,859
6%

 

Posted by Steve
10 years ago

Model Home Has Fake Family

Family in a home

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

Posted by Steve
10 years ago

Economist: Austin will add 20,800 jobs in the next year

Job Growth in Austin

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.
Read more …

Posted by Steve
10 years ago

Austin Real Estate Appreciation

Austin Real Estate Appreciation

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.

Austin Real Estate Appreciation Graph

Here is a breakdown of appreciation for each year.

Read more …

Posted by Steve
10 years ago