Austin Property Talk

Helping People on the Move

Don and Jillian were referred to me by my sister Gretchen who works with Jillian.  Jillian mentioned in conversation that she and her husband were looking to move.  Don was starting a job in South Austin soon and because they currently lived in Pflugerville, the commute was going to be a killer.  It just so happened the Jillian was 9 months pregnant at the time too, so logically they wanted to move closer to Don's office so that he could spend that extra special time with their newborn daughter, Madison instead of on the road.  I helped them purchase a beautiful home in Circle C first.  Then after they'd moved into their new home Kristin and I staged their vacant home in Pflugerville and fortunately got it sold in just over 20 days when the market average in the neighborhood was closer to 2.5 months.  Don and Jillian briefly share their experience in working with me:

You can never be too careful

I received a disappointing call this morning from one of my best clients.  She called to inform me of multiple unpleasant experiences that she has had with a home warranty company that I've referred a lot of business to over the past couple of years. 

If you aren't familiar with what a home warranty company does, they basically provide coverage to the home buyer for the first year of the home purchase to make sure that if anything goes wrong the buyer is insured against major repairs.  The more technical name is a residential services contract. 

As a buyer, if you never have to contact the home warranty service, you are in luck because that means that nothing substantial occurred with the house.  But, like all other warranties and insurance, the residential services contract is in place in case something happens. 

To make a long story short, this client of mine has had two negative experiences with the service that was provided during two claims she has had to make recently.  It turns out that companies (one plumber, one A/C) that were contracted to do the work through the home warranty company both turned out to be less than professional and very unhelpful to say the least.  To the point where my client recommended that I never refer future clients to this home warranty company.   That's a strong statement. 

Knowing this home warranty company well and the way that they do business, I made sure to give my account representative a call immediately to discuss the issues.   I gave him the names of the two companies that did (or did not really) do the work.  As I expected, he was very apologetic and promised to call my client directly to apologize and do what he could to make it up to her.  He said that he will make sure to take both companies off of their list so that nothing like this happens again.  While, I feel this was an isolated incident, it doesn't make me feel any less frustrated for my client. 

The main lesson to be learned through this experience is that your reputation is only as good as the people you associate with, or in this case the service providers that your company uses.   You have to be extra careful who you affiliate yourself with because not only is their reputation on the line, but yours is as well.  

Fraudulent Tax-Credit Claims Hit $134 Million

RISMEDIA -- A government audit has found that thousands of taxpayers have fraudulently claimed the first-time home buyers' credit, and the Internal Revenue Service apparently missed them all.

The fraudulent claims — some from prison inmates serving life sentences — totaled about $134 million, according to the Treasury Inspector General for Tax Administration.

Some of the "questionable claims" for refunds were made by 87 IRS employees nationwide, according to Michael R. Phillips, the deputy inspector general for audit.

There were three sets of tax credits. The first, approved in July 2008, was an interest-free loan that offered $7,500 to qualified first-time buyers that would be then repaid to the Treasury in $500 increments over 15 years.  The second, a maximum of $8,000 for first-timers, didn't need to be repaid, was approved in February 2009 and expired Nov. 30, 2009.

On Nov. 5, the tax credit was extended, and a maximum $6,500 added for qualified buyers who had not purchased a primary residence in five years or more.

All told, the "working estimate" of new and existing sales qualifying for all the credits is 4.4 million, National Association of Realtors spokesman Walt Molony said.

Fraudulent claims filed by 1,295 prison inmates added up to about $9.1 million on 2008 returns. Florida prisons generated the highest number of claims — 61 percent of prisoners serving life sentences who received the credit were incarcerated there.

Among filers loose on the streets, 256 used the same five addresses for their claims. In fact, 18,832 filers used just 7,695 addresses to claim a total of $134 million in refunds.

Of the 18,832 filings, 5,331 were filed by 1,941 paid preparers, the audit found.  About 2,500 taxpayers erroneously received a total $17.6 million in credits for houses they bought before the tax credit took effect, the audit found.

6 Biggest Mistakes Home Buyers Make

CNNMoney.com posted an article on Monday about some of the biggest mistakes that uninformed home buyers make when they go through the process of purchasing a home.  These mistakes can become all the more prevalent with the approaching expiration deadline of the Federal Tax Credits.  Home buyers must be "under contract" by April 30th in order to qualify for either the $8000 First Time Home Buyer Tax Credit or the $6500 Repeat Home Buyer Tax Credit. 

As a result, the tendency is to try to skirt the normal time lines for purchasing a house in order to force a potential purchase that will qualify for one of these incentives.  This is further evidence as to why it is so important to seek out a trusted adviser, a skilled REALTOR who will guide you through the process helping you to avoid careless mistakes and/or oversights.   

According to this article, some of the biggest mistakes that buyers make include:

1) Not knowing your credit score before you start the process.  The differences in interest rate and loan fees can be significant for just a 20-30 point difference in your credit score.  Knowing that up front can help you to take the necessary steps to address errors and clean up glitches.  

2) Making large purchases on credit prior to or during the processing of your new home loan.   Making purchases such as a new car, furniture or appliances on store credit or your Mastercard can significantly effect your ability to secure the proper financing for your home purchase.  

3) Skimping on a Home Inspection.   If you ever watch those HGTV or TLC shows with novice house flippers or investors, one of the biggest mistakes some of them make is failing to have a home inspection.  They think that because the house is a "fixer-upper" anyway, the money spent on an inspection is pointless.  Same holds true for a regular home purchase.  Money spent on a home inspection is well worth it.  

4) Overlooking contract contingencies.  When a contract in Texas is written properly, there should be at least two major contingencies written into every offer.  The first is the option period which gives you a certain period of time to complete inspections and negotiate repairs.  The second is a financing contingency period which gives you an extended deadline to finalize your loan.  Both are meant to protect the buyer and save you money.  Again, all the more reason to seek advice from someone who has skills and knowledge in the real estate field.  

5) Not budgeting for Property Taxes and Insurance.   In Central Texas we are fortunate the we usually don't have to carry expensive insurance policies against major flood and natural disasters.  However, in other parts of the country, those can be a large added expense.  In Texas we do have to budget for higher property taxes than in other parts of the country.  Depending on the value and location of your house, taxes and insurance can run an extra $400-700 a month on top your mortgage principle and interest.  

While the road to home ownership can sometimes seem wrought with pot holes, as long as you are working with a professional, such as a REALTOR, who will educate you, you should not run into as many obstacles.  On the flip side, the road is littered with unfortunate stories of people who thought they could do it on their own or who wanted to save a buck and ultimately ended up in a nightmare situation. 

Buyer's representation on a home purchase is essentially free to you so you might as well take advantage of it.  I've put together a whole library of buyer's resources to help guide you along the way on your home purchase and protect you from unforeseen incident. 

Benefits of Home Ownership

Aside from the personal and emotional reasons to buy a home, ther are also a number of financial reasons why owning a home is a great decision.  In addition to exceptional home affordability and near historic low interest rates, here are some important financial benefits to owning a home. 

Increased Net Worth:  Few things have a greater impact on net worth than owning a home.  The Federal Reserve Board of Consumer Finance Reports that homeowners have an average net worth of $184,400 compared to just $4,000 for renters. 

Big Tax Deductions:  One of the largest tax deductions available to anyone is the amount of interest paid on a mortgage.  For example, a $150,000 home paid at an interest rate of 5.5% can add up to approximately $8,000 in interest paid.  The applicable tax deduction amounts to a significant savings - effectively reducing the amount of a homeowner's monthly loan payment. 

Long-Term Appreciation:  Over the past couple of years, home prices have corrected and become more affordable in most parts of the country.  That is great news for buyers.  However, it has overshadowed the long-term appreciation of a regular home's value.  The reality is, despite market ups and downs, real estate historically appreciates around 5-6% a year.  Even taken at a conservative appreciation rate of 3%, a home purchased today for $150,000 should grow in value to $364,000 over 30 years. 

$8000 Tax Credit:  Im sure you haven't forgotten. The government is offering an $8000 tax credit for first time home buyers - or for folks that haven't owned a home during the past three years.  The program is scheduled to end soon.  Potential buyers must complete their first tme home purchases before December 1st to qualify for this special credit. 

If you are considering purchasing a home, this is the ideal time.  Call or email me today to discuss your specific situation and how you can benefit from today's market.