The Austin real estate market is chugging through the summer and producing some interesting stats. By that I mean that the stats shown below look better than some of the actual outcomes we are seeing in the market. Some homes are selling fast, at or close to list price, and others are not moving. In years past, I could find segments of the market or trends to point to. We still have some of those – some general rules of thumb – but we see a lot of activity, or lack thereof, with no rhyme or reason.

Lets start with the Year to Date chart through July 2010. You’ll note that almost every row shows improvement over the same period a year ago.

Volume (number sold) is up 5%, Avg Sold price is up 3.5%, Median is up 1%, Days on market (DOM) is way down, and the number of Not Solds is down slightly. In other words, it’s all good news.

But for a lot of sellers, and buyers too, it doesn’t feel like “all good news”.

Many sellers are saying “where are the buyers?” and many buyers are saying “I’m just not finding anything I like”. And the deals we are getting done almost all seem to have “down market” obsticals, mostly grounded in trepidation about the market and whether the price is right. We see more often that a seller is convinced that the agreed sales price is way too low, and at the same time the buyer is laying awake wondering if they are paying too much. I don’t think I’ve ever seen a market with so much simultaneous buyer remorse and seller remorse  – about the same house!

Let’s take a look at the July stats for just the month of July.

For July 2010, we’re seeing incredibly strong Austin home price increases over the same period a year ago, but we’re also seeing a spike in the number of listings that fail to sell. 51% of the listings that departed the MLS in July did so as a failed sales listing. This is the cross-current I was referring to above, where the market seems to be producing stats that are not congruent. Normally, price increases are a result of increased demand. Increased demand would normally create fewer, not more, failed sales listings. But here, we see both.

Also, we still see a lot of homes selling for less than the 2007 value, which indicates sluggish prices still, yet check the graph below, showing the average and median sales prices in the Austin sales market from 1999 through July 2010 and note the uptick in pricing for 2010.

I need to dig around the stats a bit more, but I think the increase in sales prices is a result of fewer lower priced homes selling (tax break hangover) and an increase in higher priced homes selling (more $1M+ homes are selling), thus creating the illusion that prices overall are rising when in fact it’s just a shift in price range activity.

As usual, questions and comments are welcome.

Take a look at this chart showing the number of homes that go under contract, or “Pending”, in Austin each month over the past several years. The green line is 2010. I could almost stop writing at this point and just let the chart tell the entire story. But have a careful look at the Austin real estate market behavior for the past several years, and then see what our government caused to happen in April and May with the $8K tax credit.

The writing was on the wall last month when I wrote about the Tax Credit Effect on the Austin Real Estate Market. We had a record number of homes go Pending in April, and May was looking pretty slow, and that didn’t change. So we end up with a record high followed by a record low month in terms of number of homes going under contract.

And in June, the hangover persists. As we head into the last weekend of what is historically the second busiest month of the year, the Austin real estate market is getting ready to lay another rotten egg. Thanks Tax Credit, for sucking the life out of the market, even with interest rates yesterday at 50 YEAR LOWS!. At present, we have about 1250 homes that have gone Pending in June, so even if we have a brisk next 6 days, you can look at the chart and see that June will remain substantially below the expected level under normal conditions.

What does this look like out in the field?

Well, it’s the old Tale of Two Markets. Some homes, not many, but some, seem to have had the proverbial magic faerie dust sprinkled on them and they are selling just fine. Sellers of these homes should thank God for picky buyers who get emotionally attached to one home. Other listings seem stranded, stagnant and dead in the water, even after huge price drops.  Of the homes that went Pending in May and closed, the median days on market was 43, meaning half of all sold homes sold in 43 days or less. Not many sellers would complain about that. But the Sold to List Price (Original List Price) ratio was 93%, indicating bigger than normal price drops averaging over 7%.

So where do we go from here?

It’s hard to say. The slow summer was something we assumed would happen because of the tax credit, but I’m surprised at the severity of the high/low swing. The other counter-intuitive thing that might happen though, is a busier Fall. We can only guess at this, but our Austin real estate market has been moving in off-cycle ways for over a year now, making it hard to predict trends. If that happens, the green line on the chart above may actually cross over the other three and finish Oct-Dec higher than preceeding years. This may be wishful thinking on my part, but I still thinks it’s a distinct possibility if jobs and the economy pick up by September in Austin, and interest rates start rising.

Sylvia and I do receive gobs of “Huge Price Reduction” emails from other listing agents daily though. One yesterday dropped from the high $600Ks to below $500K. Curious, I ran a CMA on the property and, based on sold comps, the high $600Ks didn’t seem over-priced at all. So pricing has become very difficult for sellers and listing agents. The sold comps mean less than they normally do and we instead have to look at absorption rates and competing home prices.

We thought interest rates would have started ticking up by now (which, oddly, will increase buyer activity when it does happen). The trouble in Greece and Europe actually caused our interest rates to drop instead, and now it seems rates could stay below 5% for the rest of they year, which wasn’t supposed to happen. Meanwhile, tighter lending rules, caused by government incompetence (like “accidentally” eliminating owner financing for non-owner occupants, and letting FEMA flood insurance expire such that no flood insurance can be written at all – stalling or killing the sales of homes for which flood insurance is required – including one of our listings), keep eliminating more and more quality buyers due to the over-correction of lending standards and stupid new rules. We have no investors to speak of because even quality borrowers are having trouble with the new ratio requirements. And many otherwise qualified buyers who would move up are instead stifled by these onerous new underwriting rules. Again, our government making things worse than it would be if it did nothing.

Bottom line:
Sellers and listing agents must increase the margin of error accounted for when pricing homes. My margin of error use to be 0%-3% on listing/sold price. Three years ago if I told you I could sell your home for $295K, the worst that might happen is a sale for $285K. Of that, I would be very confident.

Today, because things are so sluggish and hard to read, the margin of error is 0%-12%. Yes, 12%.That’s embarrassing. If market data indicates your home should sell for $295K, it might very well do so, but it would astound none of us if it ended up only fetching $260K. For sellers, that sucks. For smart buyers, that rocks.

I just finished adding one of our new listings to the Austin MLS. Years ago, this took about 15 minutes. There was far less data included and only 8 photos with no comment space for photos, no pdf attachments, and far less space to type the general description of the property.Today, a nearly overwhelming amount of data, photos and attachments must be included with a properly entered MLS listing, and it takes a while to enter it all in.

How long do you suppose it takes today to enter a real estate sales listing into the Austin MLS, from start to finish, sitting down at the computer with photos, files and info all ready to go? This includes 25 photos to upload and type in comments for, several pdf attachments, 512 characters of description (both agent-only and another 512 for the public sites), and (I haven’t actually counted) what must be well over 100 fields and data-points, including driving instructions to find the property right down to trivial data such as whether the 2-car garage has one door or two and which compass direction the property faces.

The one I just completed took me about 70 minutes. I started at 7:42AM and completed it at 8:50. It’s best to do it late night or early morning to reduce interruptions. Sometimes it can take as much as 2 hours, or longer if interruptions occur, or sometimes we have to save as “incomplete” and finish later before posting live.

But it’s important to get it done, start to finish because not all of the listing feeds update properly. This means that if I add a half dozen photos to start with and decide to finish the rest later, the initial data feed that sends listings to the vast array of public facing websites will send out an incomplete set of photos.

Some photos will update later, but others will not, and those sites will retain only the initial set of pics. So, in the case of adding a new listing, first impressions are literally the only impression in many instances. So it’s important that your listing agent knows how to gather everything needed ahead of time, including all 25 of the best photos to be used, virtual tour links, and all of the data points needed so that every photo and every field on your listing is correct right out of the gate.

An impatient seller might ask, “what’s the big deal. Can’t we hurry up and get the listing in this weekend and add the better photos later?

Not a good idea. Remember that many buyers also have “search portals” set up by their agents which notify them daily, or sometime instantly, of new listings that match their auto-search. When the buyer clicks that listing link from inside her email inbox, you want the buyer to see ALL the photos, not a temporary shot of the front of the house with a car in the driveway and a trashcan sitting at the curb. This might be the one and only look they have of the home, at which time they dismiss it as not interesting enough.

Sad but true. Buyers are often ADD with short attention spans, and they give undeserved weight to the initial perceptions created by the photos. Your listing better capture their attention immediate if you want them to look further and call their agent to schedule a showing instead of getting back on Facebook or sending their next tweet.

So how long does it take, all tasks included, to actually list a home, including appointments, phone calls, CMA time, staging, scheduling virtual tours, downloading via ftp the photos and tour, gathering the data and making sure it’s right, chasing down the seller for loose ends, namely missing disclosures, the survey, survey affidavit, HOA info, utility company info, drives to the property, walk-throughs, etc?

I’m just guessing since I’ve never actually tracked it, but I’d say by the time a listing goes live in the Austin MLS, we probably have 8-12 hours of time invested, and about $500 in professional photos and staging, for a typical home.

I once spent about 5 months helping a seller prep the home, including hauling multiple loads in my truck to Good Will, scheduling repair vendors, landscapers, etc. Other listings are fairly easy and quick and are almost ready to go as-is, just because the seller takes great care of the home, keeps it clean, and has nice furniture. Those are nice but rare. In the end it all averages out.

I just received my property tax appraisals from Travis Country Appraisal District (TCAD)  and Williamson County Appraisal District (WCAD) for 2010. Doesn’t look like I’ll need to protest any property values this year. Some properties are borderline high, but not worth the time and effort to dispute because a) they are close enough, within a percent or two of my estimate, and b) some are low enough to offset the overage on the others, in my mind, and c) I still traumatized by my exposure to the utterly moronic and incompetent panel of idiots at my formal tax protest hearing last year. I need another year of recovery before I subject myself to that type of abuse again.

But as a home owner with only one property, even if your value is only a little bit high, it may be worth the effort to keep the value down so that the basis for future increases remains lower. And remember, if it’s your homestead, the value upon which you are taxed can’t rise more than 10% per year. This year, many of you will see an actual decrease in appraised value.

Each year Sylvia and I perform an increasing number of free comparative market analysis (CMA) for property owners seeking value guidance, or evidence to use in a property tax protest. That deal still stands. We did almost 100 of them last year, which actually benefits us as much as you because we get to really hone our CMA skills and see what home values are doing in many different parts of Austin. And many of you have turned into clients, which we really appreciate.

And here is a list of useful links to help you self-educate about the tax appraisal protest process at TCAD or WCAD in case you do decide to seek a reduction in appraised value.

Travis County Appraisal District Property Search
This is the County website where you can look up your property address and see what your 2010 appraised value is.For Williamson County Appraisal District, click here.

How to Protest Your Property Value at Travis County Appraisal District
This is the article I wrote a few years ago, in 2007, about how to protest your appraised property value at Travis County. I need to update it a bit now that TCAD allows an online protest for certain property owners. But the article still provides a complete overview of the basic factors you should consider before protesting, and the steps to follow to increase your chances of success.

Free Comparative Market Analysis (CMA) for your Austin Area Home
This is the request form I set up after the above article started generating so many emails asking for help. Just complete the info and we’ll run a market analysis of your home and provide you with the results, including the comparable sales you would use as evidence at your hearing.

Austin Value Map – Find your Austin home value in 10 seconds
If your home is located in a homogeneous area of similar homes, and you’d like a quick automated value check, I set up this free tool to provide a fast, free, easy value check. It’s not 100% accurate, so don’t rely on this tool alone, but it will provide you with an estimated value and show your nearby homes that have sold and that are for sale. The algorithm uses actual MLS sold data as well as other factors, so it is, in my opinion, far superior to Zillow or other online valuation tools. To see a discussion of this tool and feedback from those who have tested it, check out this blog article about it.

Finally, below are links to some pretty good articles in this morning’s Austin Statesman about tax appraisal process and the new online protest that will be offered to some.

Travis launches online appraisal protests for some homeowners
How Your Home is Taxed
Williamson appraiser to use last-minute sales prices

Feel free to add your comments or ask questions.

With the April 30th expiration of the home buyer tax credit, it’s time for buyers, Austin sellers and Austin Realtors to figure out what happens next. Austin Sellers who didn’t get offers might wonder, “are the buyers all gone now?” Austin Buyers who didn’t get their act together and claim the tax credit might wonder, “did I miss the boat?” Realtors in Austin are wondering if business might dry up as the market takes a breather while the hangover wears off. Here’s what I think.

Sellers
Many Austin Sellers in the sub-$250K price ranges placed homes on the market earlier this year, sooner than they otherwise would have, hoping of course to catch the wave of tax credit buyers. This is something we encouraged, and rightly so, as many of these homes did in fact sell. These “timing opportunist” sellers include both motivated sellers and fair weather “let’s see what happens” sellers.

The latter group of sellers with unsold homes will start removing homes from the market fairly quickly as they’re already experiencing the early stages of  “seller fatigue”, and might now feel discouraged. They don’t really have to sell anyway, but would have if the right offer had come along. It just didn’t happen. If I’m right about this, the May real estate market stats for Austin will show a spike in Expired/Withdrawn listings.

The former group, those who still really need to or want to sell, will remain on the market, perhaps with price adjustments, but not necessarily. They may have less inventory to compete against as other withdraw, and that could hold prices up. It would be prudent for those sellers to remain patient and see what happens with showing traffic at least through June when the market would normally be in full swing.

Buyers
Not every buyer is a first timer, and not every first timer was motivated to enter the fray early just to capture a tax rebate. Thus, as the normal, traditional selling season of May-August begins, it would be a mistake to think that the window has somehow been closed on good deals just because the tax credit has ended.

Interest rates remain at about 5%, which ought to be motivation enough in normal times not only for first time buyers but for move-up buyers as well. Fewer buyers will presumably be looking in the near term as, even with the tax credit motivation, some were unable to find a suitable home and will now stop looking entirely. So remaining buyers may have few buyers to compete against.

Also, I expect further price slippage in Austin this year before a sustained price increase cycle begins next year. It may be that those buyers who waited until this summer to buy might find fatigued and motivated sellers with whom to cut a deal. On the other hand, Austin sellers have remained surprisingly unwilling to capitulate en masse, as evidenced by the large number who simply withdraw from the market after saying “no thanks” to a string of lowball offers.

Other Factors
The tax credit was quite lengthy. The longer a government stimulus effort runs, the less “hangover” impact we see when it ends. The tax credit, notwithstanding the final rush to the finish line, had really begun petering out for the most part, and home prices in Austin have fallen every month (from the month before) this year even as the number of sales increased.

Timing is good. Though I griped on this blog about the stupidity of creating artificial off-season, off-cycle buyer demand, the expiration of the tax credit is timed perfectly with the beginning of the normal selling season. This should lessen the impact of the expiration of the tax credit.

Interest rates remain at historic lows. But rates will start to rise soon, if not immediately. As mentioned above, a 5% interest rate is an unbelievably extraordinary interest rate which, in and of itself, would normally excite buyers (both new and move-up) and get them out looking at homes. People under the age of 30 don’t know that, historically, 7% to 8% is a decent mortgage interest rate. Austin buyers have become so desensitized to a 5% rate that it is not, at present, serving as the motivational catalyst that it should. The government actions that have kept interest rates artificially low have also ended, and there is universal agreement that rates are on the way up. Once this sets in, and buyers begin to fear losing the opportunity for a rate in the fives, it will motivate buyers to get off the fence. By this time next year, rates should be in to 6%+ range.

Buyer Sentiment is improving. As national economic and real estate news heads toward a tipping point of net positive, this affects the mood of buyers. People are feeling that better times are closer ahead than before. Though odds of a double-dip fall in national home prices and the economy are high enough to postpone celebration, Austin will turn the corner this year and start adding jobs at an increasing rate, which will drive our real estate values higher by next year at the latest, and possibly sooner if interest rates rise faster and inventory shrinks quicker than expected.

Austin has a shortage of developed lots. Builders in Austin have already kicked up the home starts in anticipation of improved buyer demand moving forward. The pull back 3 years ago was such that we are left now with a shortage of developed lots in the pipeline. This, along with increasing materials costs will drive prices up new homes prices eventually, and resale home prices will follow. As with interest rates, the typical consumer responds better to fear of missing the train than they do the realization that things have already bottomed out and are really great right now. So when values start looking like they are entering a sustained climb, along with interest rate increases, this will generate buyer activity.

Those are my thoughts, somewhat rambling, somewhat contradictory. Still a lot of guesswork and unresolved factors to play out.

The Austin real estate market for March 2010 saw a not surprising 22% increase in the number of sales compared to the same month a year ago. Average sold price was up 2.22%, median sold was slightly down at -0.66%. Before we call that “good news”, it would help to know that March 2009 was the lowest point in average/median sales prices in the past 2+ years. March 2010 average sales price is still lower than March 2008, two years ago, so average values are still treading water at best.

The Not Solds (expired/withdrawn) are down to 37% from 42.5% a year ago and 44% last month. First time buyers seeking the $8,000 tax credit are creating higher than normal demand. The question is what the market will do after the April 30th end date for tax credit buyers.

Year to date, through March, average sold price is up about 2%. Number sold is up 10%. Other stats are relatively unchanged.

Below is a graph of Austin TX average and median sold values from 1999 through March 2010. Values are about where we were in 2008, which is about where we were in 2006 also.

Finally, Austin sales market month to month for last 25 months. Average sales price has dropped every month this year from the month before, probably because of an increase in cheaper homes being sold to first timers.

As usual, comments or questions welcome.

(Used with permission)
Risk of Major Home Price Decline Low in Texas, By David S. Jones, senior editor, Real Estate Center, Release No. 19-0410

COLLEGE STATION, Tex. (Real Estate Center) — A new study from the Real Estate Center at Texas A&M University explains why Texas’ housing market fared far better than other states during the current downturn. It also suggests why the state’s economy is expected to continue to do better than the rest of the nation in the coming months.

“Texas’ lower-than-national-average housing cost is one reason for the state’s higher-than-national-average growth rate,” said Dr. Ali Anari, a Center research economist and one of the study’s authors. “When Texans are able to spend more on nonhousing goods and services, the state’s economy is strengthened and more people attracted.

“These results illustrate one of the key reasons the Texas economy outperforms the United States in terms of job growth almost every year,” said Center Chief Economist Dr. Mark Dotzour. “The fact that Texans pay less of their income for housing means they have more to spend on other things that add to the overall quality of life. Texas offers a lower cost of living than many places in the United States.

“This allows Texas employers to be able to attract workers at a reasonable wage rate that allows them to compete successfully in the global economy,” said Dotzour.

Since 1987, the average annual expenditure for shelter per consumer increased in every major American metropolitan market.

Texas data for the study came from the Dallas-Fort Worth and Houston-Galveston-Brazoria metro areas because they are among the major metropolitan areas for which consumer expenditure data are available. These two metros accounted for 60.3 percent of Texas labor force last year and 64 percent of Texas GDP the previous year.

“Houston and Dallas consumers spent the smallest shares of their incomes on shelter in 2008 (18.6 percent),” said Anari.

The two Texas metros in the study had virtually no increase in their shelter expenditure shares from 1987 to 2008. Houston’s share rose 1 percent while Dallas’ share increased 2.2 percent.

According to the National Association of Realtors, Houston was the only metro in the study to post a home price appreciation, albeit a small one. Dallas had the nation’s smallest home price decline (-3.8 percent).

“It is not surprising that the two Texas regions are experiencing normal home price fluctuations,” said Anari. “The risk of a home price decline in Texas is low.

“The study found that the larger the share of housing expenditures in the consumer’s budget, the more home prices in their region have fallen since 2007,” said Anari, who conducted the study along with Center Chief Economist Dr. Mark Dotzour.

“Consumers allocate their income among various goods and services,” said Anari. “By doing so, they determine the quantities produced and prices of consumer goods and services.

“Regardless of income level, the most important items in a consumer’s budget are food, shelter and clothing. However, no matter how important an item, its share of a consumer’s total expenditures cannot continually increase for a long time.”

When expenditures in a particular category in the consumer’s budget take larger and larger shares of total expenses, consumers look for less expensive substitutes, which can lower demand for more expensive goods and services, leading to lower prices for those goods and services. “For example,” said Anari, “if the price of beef gets too high, people eat more chicken.”

Consumers have two basic shelter choices: buy or rent. Shelter expenses run the gamut from rent to mortgage interest, to property taxes, to insurance, to repairs, to security and other expenses.

“Even when on vacation, consumers have shelter expenses,” said Anari, “from costs on vacation homes to hotels and motels. Family members in college must be housed, and that’s another shelter expense.”

Anari points out that home price changes affect expenditures and wealth. Lower housing costs allow consumers to spend more on other goods and services, leading to higher regional economic growth, increased growth rates, a larger labor force and more demand for goods and services.

“At the same time,” he said, “lower costs and prices of real estate properties can significantly increase economic productivity, lead to more investments and increase economic growth rates.”

Where were shelter shares of income highest? California. San Diego-Carlsbad-San Marcos led the nation with 30.8 percent of income going to shelter.

Spending by U.S. consumers accounts for about 70 percent of the nation’s gross domestic product (GDP). Consumer expenditures are critical to the nation’s economy, and since 1980, the U.S. Census Bureau has conducted the Survey of Consumer Expenditures for the U.S. Bureau of Labor Statistics.

As we head into the final weekend preceding the final work week of April, and the $8,000 1st time homebuyer tax credit winds down (thank God), I’m seeing a surge of new Austin real estate listings coming on the market each day as well as a huge increase in the number of showings for most of our own listings.

In other words, supply and demand are in a foot race with each other, and both have kicked in the after-burners.

This has caused us, as real estate agents, to behave in abnormal ways as we advise buyers and sellers. I had to tell a seller last week, “I think it’s better that we get your home on the market right away in ‘good enough’ condition rather than burn up a week of market time putting it into ‘perfect’ condition”. Mainly, I didn’t want to burn through one of only two remaining weekends waiting for new flooring to be installed or our professional stager and photographer to do their thing.

Instead, Sylvia staged the house herself, the seller bought some mulch and plants, we left some worn out old sheet vinyl on the kitchen floor, didn’t have the carpets shampooed, and I took my own photos, which look ok but not great. We got that sucker listed and in the MLS 2 days after I first met the seller at the property. Met on a Monday, had it in the MLS on Wednesday. Had our first offer that weekend, though that one didn’t pan out because it was too low.

Why the rush, and is this the right thing to do? I don’t know.

I think it’s probably the right approach, but as I said in an email to one of my sellers, “I confess that government intervention in the real estate market has rendered me stupid. These are my best guesses”.

Normally, we’d never rush a listing onto the market. We always preach that it’s best to NOT go on the market until the home is fully and completely prepared, landscaped, staged and professionally photographed because first impressions matter. But with the tax credit ending, buyers are swarming the cheaper listings. Would it therefore be unwise to forgo a week of market exposure in favor of prettying up the place a bit more? Yes, I think having the home available for buyers to see for a longer period of time is more advantageous to the seller than coming late to the party impeccably dressed.

How do we make decisions under abnormal circumstances? We try to make the best judgement calls possible. That means asking the right questions. For me, it’s easier to ask “which wold be worse?” rather than “what’s the best approach?”. To me, losing market exposure hurts more than anything else. We know the tax credit is ending. On May 1st, if we have no offer, we can always hit reset and re-prep a home if needed. So wasting 5 or 7 days and one of the last two weekends seems like the worse choice to me.

And I don’t like not knowing what will happen May 1st. Is the market going to come to a screeching halt that day, or have we given too much credit to the amount of activity being generated by the tax credit buyers? Are these first timers 10% of the showings or 50% of the showings? On listings priced less than $200K, I’m betting a high percentage of buyers are motivated by the tax credit simply because no other obvious motivation exists. If not for the tax credit, what other economic news or condition would be causing gobs of buyers to be out looking at cheaper listings?

So my best guess is we’re going to see a record April and a dead May. Just my guess. Who knows for sure? But if you’re a seller thinking of getting your sub-$200K home listed in the coming days, better get after it. The final weekend for first time buyers is upon us.

You’ve no doubt heard of Zillow, and know how inaccurate its Austin real estate valuations can be. That’s not completely the fault of Zillow because Texas is a non-disclosure state, meaning when you sell your house, it’s nobody’s business what you sold it for, or what the buyer paid.

This results in limited sold data being available in public records. Thusly, it’s more difficult for third party estimation tools such as Zillow, Trulia and Yahoo to produce an accurate home value estimate. In most states, all real estate sales data is public record and thus there is more data from which to draw conclusions about a particular home value. Not so in Texas. So, with the exception of lower valued homogeneous neighborhoods where value ranges fall within a fairly tight range of size, age and condition, estimates from Zillow (or Zestimates as they call them), can be all over the map, sometimes grossly inaccurate.

Lately I’ve been experimenting with a new valuation tool that mashes up public data with actual Austin MLS sold data. This is called Value Map and is provided by our Austin MLS to its members. I have mine it set up at AustinValueMap.com because the default url is long and ugly.  It’s free, no signup required. And so far, I’m finding it to be surprisingly accurate, though of course not perfect. You can also sign up for alerts when a property similar to yours and within a two mile radius is sold. For some reason, though provided by our Austin MLS, you can type an address from anywhere in the U.S., not just Austin. Try it out, let me know what you think about the accuracy of the value for your property, even if you’re not in Austin.

Lending and appraisal companies seem to be trending toward automated valuation system. The Value Map product is used by banks and appraisers all over the country. It uses a proprietary algorithm to determine values. Often, when we sell a house, the bank trusts the value produced by this methodology and won’t even order a full appraisal, opting instead for a “drive by” appraisal, where an appraiser drives by to make sure the house is indeed there, but doesn’t go inside or perform the full appraisal. I think this is dumb.

On the other hand, though it might be inaccurate, the valuation tool won’t commit purposeful fraud, as many appraisers and lenders did during the most recent real estate boom. So it may be, from a bank/lender perspective, the benefit of fraud elimination outweighs the occasional over-appraising of a home. And probably, if the value is way off from the contract price, they’re going to order a full appraisal anyway.

But as a buyer or seller, will there ever come a day when you simply type in your address and it spits out the true market value of your home (what a buyer would pay)? No (except by coincidence), and here’s why.
Let’s take a 15 year old home in Circle C for example, like one we recently encouraged our buyers to walk away from after the inspection revealed over $20K in needed work.

This particular home had all original mechanical equipment, including the roof. One of the A/C systems had a coil leak and need replacement. The other was functioning ok but at the end of it’s useful life. Ductwork was deteriorating, the roof was baked (literally, from poor ventilation and design), and there was a basket of miscellaneous repairs on top of the big ticket stuff, such as original water heaters and appliances, plus more small stuff.

So, if you’re a buyer of a home in the 12 to 18 year old range, with all original equipment, you have to assume that you will be paying to replace all of that stuff very soon, and you thusly, it would be prudent to mentally add the cost of doing so to the price you’re paying so you can know what the home is really going to cost you. In the case of a 2500+ sqft home with two HVAC systems, roof, water heaters, some siding, we’re easily talking over $2oK to replace a roof and two A/C systems. If you don’t make adjustments to what your willing to pay, you will in fact be paying $20K too much for that home. On a $250K home, that’s more than 8% of your purchase price. Figuring it costs 8% to 10% of sales price to sell a home, if you buy the home in its depreciated condition, you’ll need to see almost 20% appreciation in value before you get to break even. Not a smart buy.

And since there is no valuation tool that can know the age and condition of the major component items of a home, there will NEVER be a valuation tool that can accurately predict market value of a home. Also unknown to a valuation tool are the “look and feel” attributes of a home and its surroundings. For example, two identical homes, same builder, same floorplan, two blocks apart, can easily sell for more than a 10% difference in price.

This could be, for example, because one home has all of the aforementioned component items updated and replaced and sits in a culdesac lot with trophy oak trees in the front and back yard backing to a greenbelt, while its identical twin two blocks away backs to a busy street, has a plain lot, no trees, and needs complete replacement of roof, HVAC systems, water heater and appliances. Add an updated kitchen with granite and stainless appliances to the first, and original outdated kitchen in the second, and these two homes will not be valued anywhere close to each other by ordinary buyers and experienced agents. But an automated valuation tool would spit out the same or similar values for each.

So while I think we will continue to see adoption of automated real estate valuation tools, and they’re fun to play with, if you really want to know what a house is worth, you have to go inside and have a look, have it inspected, and have a Realtor who knows the neighborhood run a CMA with appropriate age and attribute adjustments.

If you have a second, type in your address in the Austin Value Map and leave a comment here or otherwise let me let know how close it came to what you think your home is really worth. (NOTE: For homes currently listed for sale, it may return the list price value, which is sort of weird, but that’s what it seems to be doing)

The $8,000 First-Time Home Buyer Tax Credit will end April 30th. By “end”, I mean Friday April 30 is the last day to write a contract that qualifies. The transaction must also close by June 30th, which should be plenty of time.

But an interesting thing will start happening May 1st, 2010. Buyers who miss the April 30th deadline to be under contract might wonder if the purchase contract can just be back-dated for April 30th, 2010, thus allowing them to still claim the $8,000 tax credit. In Texas, the “Effective Date” of the contract is written in by the agent after that last signature or initial has been placed on the contract. That’s the official contract date, and the date from which all time related matters are counted. It reflects the date the transaction becomes a “done deal”.

So, here is a potential scenario, just for discussion purposes.

Let’s say on Saturday May 1, 2010, we receive an offer for one of our listings. It’s a full price offer, clean, ready for the seller to sign, and is accompanied by a pre-approval letter. And let’s say this hypothetical offer includes a note from the Buyer Agent stating, “Meant to get this to you last night. I assume the seller will sign as-is so I went ahead and filled in the Effective Date April 30th, 2010 so the buyer won’t miss out on his tax credit”.

Can we do this?

No. We would not allow our seller to back-date the contract. It would be improper. To do so would be assisting the buyer with tax fraud. The IRS tax rebate rule states that the buyer must enter into a “binding contract before May 1st”. A contract does not become binding until signed and initialed by all parties, therefore an offer submitted After April 30th cannot have an April 30th Effective Date.

What if negotiations are complete by April 30th, the parties agree on terms, we have email confirmation from both parties, but the final signatures are not gathered until May 1st? Then May 1st would be the Effective Date, and the deal would not qualify for a tax rebate for the buyer.

Hopefully we won’t presented with this scenario, but I know it’s going to happen to someone somewhere. Human behavior is predictable and people procrastinate. First-time buyers should make an effort to write your offer before April 27th, to allow plenty of time for negotiation and signatures. Sellers should be prepared to respond quickly to offers at the end of April in order to accommodate your buyer. Good communication will go a long way.

As a seller, you’d hate to lose a good offer because the buyer changes her mind after not being able to get things wrapped up with you by April 30th. So be ready and available.

And as a first-time buyer seeking the tax rebate, you’d be dumb to write anything other than a clean offer after April 27th if you hope to be wrapped up by the 30th. Make it easy for your seller to sign off. Make sure your agent knows how to write a clean, error-free offer. You’d be surprised how many agents don’t know how to write a clean offer, so read it carefully and make sure you understand the implications of every fill-in blank, every checkbox and every date. Ask why the blanks are filled in the way they are and whether the seller would object to anything on face value, such as asking seller to pay for a new survey. Don’t write in goofy provisions, the wrong Title Company, or unreasonable provisions such as a 15 day option period for $50. Have your pre-approval letter ready and include it with the offer.

Again, good communication between the agents up front should make things go quicker.

Personally, I’ll be glad to see the tax credit go away so our market can start settling into wherever it’s suppose to be. I don’t like off-season, artificial motivations. We’ll still have artificially low interest rates, so buyers who miss the tax credit will still have the near term to take advantage of 5% mortgage interest rates before they start rising again this year.