October Market Stats

Here are the stats for October.  Click on them to see a larger image.

The four parts of loan approval

When getting approved for a mortgage loan, there are four main items that an underwriter will use to approve or deny your loan.  They are: Income and Liabilities, Credit, Assets, and the Property.  All are important and I'll describe how they are used below.

Income and Liablities:  An underwriter will look at your monthly income and monthly debt (including the new house payment) to determine if you can afford the home.  Typically your monthly debts can't exceed 41% of your monthly income.  There are some exceptions to this, but by and large 41% is the max.

Credit: Credit needs to be above a 620 to get approved.  However for the best rates credit should be over 740.  Depending on your down payment, there are also higher score requirements too.

Assets:  You'll need to have the down payment in a liquid account such as checking or savings.  The seller can pay for your closing costs if you want/need them to.  You'll also need 2 months worth of your monthly house payment as reserves.  You won't use this money at closing, but the lender wants to see that you have some fall back money.

Property:  The property has to appraise at or above the sales price.  It also has to have a clean title and survey.  For condos there are other requirements dealing with the HOA.  These can be quite in depth so I'll leave that for another posting.

If you're thinking about buying it's good to have these things in mind so that you're fully approvable when it comes time to put a contract on a home.  I'd be happy to help you find your next home or answer any questions.
Bill
billconover@america-lending.com

Get the best interest rate

Everyone wants to get the best interest rate on their loan.  But what is the "best rate"?  Is the "best rate" the same for everyone?  And what factors affect what rate you get? 

These are great questions to ask when getting pre-approved for a loan.

There isn't a "best rate" that is the same for everyone on a particular day.  Rates depend on many factors, some which a buyer can control and others that are fixed.  One of the biggest factors is your credit score.  While you can control this before you buy a house, it is going to be set once your lender pulls your credit report.  So always check your credit far in advance of buying to make sure that it looks good.  If it doesn't you'll have time to fix some things before you're ready to buy.

For most loans, if you have a credit score of a 740 or above will get you the quoted rates.  If you have a score lower then your rate would increase.  If the score is really low the rate may increase by as much as 1%.  Those with lower credit scores are also affected more by the amount of downpayment they put down. The best way to minimize this is to put down 5%, 10% or 25%.  You'd think 20% would also give you a better rate, but lenders don't require mortgage insurance at that downpayment level (which means more risk for them) so they charge a higher rate to you.

Now for some of the items that are set no matter what your score. Loans on condos are at higher rates, again because the lenders view them as higher risk.  And duplexes and fourplexes are higher for the same reasons.  For investors buying property the rates are very high, almost 1.5% higher than a primary residence.

So the optimal rate option is to be buying a house you'll be living in, with a 740+ credit and putting down 5,10 or 25%.  And worst goes to an investor buying a duplex or condo.

Buy first, then sell? Or sell first, then buy?

For anyone that currently owns a home and is looking to purchase another one, this is always a big question. Both options have their pros and cons.

Reasons to buy and then sell

1. You don't have to move twice.
2. You don't have to get temporary housing like an apartment.
3. You are not pushed to buy something by a certain date. As you are already in a house, you don't have a lease expiration date to worry about.
4. You can sell your house while you are not living there. This is much easier than living in the house and always keeping it "show ready".
5. You don't have to buy anything. If you don't find any new house that you like enough to buy, you don't have to buy one as you're already in a home.

Reasons to sell and then buy

1. You don't have to make two mortgage payments. If you bought a new house and your previous house didn't sell for a while you would end up paying for two houses at once.
2. You may be able to get a little more for your house as you won't be as rushed to sell it.
3. You may have to go this route to qualify for the new home loan. If your income isn't enough to qualify with both house payments, you wouldn't be able to buy first and then sell.
4. You may be able to afford a higher priced home if you sell first.
5. You may feel more comfortable during the buying process knowing that the other house is already sold.

Both are good options. Some people prefer the flexibility with risk over a little more work but more secure. Please let me know if you have any questions on which route is best for you. billconover@america-lending.com

Pending Sales Up!

Check out the pending sales in yellow on the graph. There is almost no reduction in number compared to the summer. Compare that to previous years.
The FTH Credit is definately at work.

September Market Stats

Here are the market stats for September. Click on one to see a larger version.

Rainwater barrels

I've been wanting to write about this topic for some time, but it just didn't seem to be the right time during our dry summer. Now that we have rain to collect, it's the perfect time to put them in. Especially so you'll be prepared if we have another dry summer.

Rainwater collectors take runoff from your roof and collect it in a barrel for use later on your lawn. The collectors not only let you use water that would otherwise flow off your roof and wasted, but it can reduce the amount of water you use, helping your wallet too. The City of Austin also gives $30 rebates for installing them.

Collectors can come in many different sizes, shapes and colors. The simplest versions are green 55 gallon plastic or steel barrels. But you can also get square shaped ones, barrels with wheels and even ones that look like stones.

Costs range from $65 through the City (although they are currently out of stock) to $200 through some vendors online. Most are in the $70 to $130 range though. After seeing my huge water bills this summer this upfront cost should be recovered within a few years.

You can buy them from the City when they have them in stock or from a variety of vendors. One company I found, http://www.austingreenwater.com/, is based here in Austin. They sell a triple barrel (165 gallons) setup for $250. A google search turns up a lot of vendors as well and Home Depot and Lowes are good sources for them and any accessories you may need.

For those that like a small project, set up is fairly simple. Just shorten your downspouts on your gutters so that they empty into the barrel instead of on the ground. Then you can connect the barrels together and as one fills up it will start filling the others. Home Depot offers a kit to make the connections easy. For those that don't want to set it up themselves, Austin Green Water does offer setup for a $50 fee.

You'll need to place the barrels so that the area you want to water is lower than the barrels bottom. For flat lots you'll want to get a stand to raise them up. I promise I'm not promoting AGW, but they do include a stand with each barrel for the same price. The extra height helps increase the water pressure.

Once you've got them set up all you do is connect your standard garden hose to the spigot at the barrels bottom. Open the spigot and you've got water. As the pressure is fairly low the water is best used for watering beds and trees or using to soak specific areas of your lawn.

I hope you've enjoyed this green tip. Always feel free to ask any questions, billconover@america-lending.com

What is a Seller's Disclosure?

Sellers of residential property are required to disclose any defects that they are aware of that their property has. The disclosure is a protection for buyers that gives them information about the property they are considering purchasing. The disclosure lists items that are not working in the home and also cover the history of the home so can reveal items that even a home inspector may not uncover.

In most cases, depending how a contract is written, a buyer who has signed a contract has the option to cancel the contract after they've received the sellers disclosure if they object to any items on it.

The disclosure is on a standard form and and has to disclose certain items at a minimum. An outline is below:

1. Items that the home has and whether they are working. Items such as cooktop, dishwasher, pool and central A/C
   
2. The roof type and age.
   
3. Defects in the building systems such as the foundation, walls, windows, etc.
   
4. Specific conditions such as asbestos, previous flooding, termites, etc.
   
5. Other non-building items like: Has an addition been added? Is there an HOA? Any deed restriction violations? Any lawsuits? Safety hazards?

For a detailed list please see the example below. The sellers disclosure is a great tool for both buyers and sellers to make sure everyone is aware of the same issues. However as it is only what the seller is aware of always get a home inspection too to find out those issues the seller may not be aware of or that they "forgot"....

As always please email me with any questions, billconover@america-lending.com. Click on the image to see a larger version.

August Market Stats

Central Austin is up for the month and year!

Austin one of best performing markets

Check out this report on the Austin Market. It says that Austin is positioned to be one of the first to get out of recession.

http://austin.bizjournals.com/austin/stories/2009/09/14/daily18.html?ed=2009-09-15@ana=e_du_pub

Hardwood Flooring

One of the largest impacts you can create in a house is the flooring that you put in. The three main options are carpet, tile and wood, but in each category there are a tremendous number of options. This comparison will focus on the four main groups of hardwood flooring: unfinished, prefinished, engineered and laminate.

Unfinshed hardwood is a solid piece of wood that is stapled or glued to the subfloor. It has to be finished after it has been installed. Prefinished is solid wood also but has already been finished in a factory. Engineered is similar to plywood and each plank is made from multiple 'plys' of wood glued together with the top 'ply' being actual hardwood. It is prefinished in a factory as well. Laminate is a synthetic material that is created to (sometimes well, sometimes poorly) imitate wood.

To compare them I'll use the characteristics Price, Finished Look, Feel, Durability and Installation. Note that Engineered and Laminate floors were created as a lower cost option to imitate solid wood, so comparisons of Look and Feel are in Unfinished and Prefinished's favor.

• Price: Prefinished and unfinished are the most expensive. There is a lot of variation by wood species with the oaks usually the most economical and the international woods costing the most. Unfinished may cost less at a store but when you add in the extra finishing costs, in many cases the costs come out to the same or even more than prefinished. It is my preference to go with Prefinished or Engineered when budget allows to avoid the mess of the finishing process.
  
  Prices are from $6/sf to $20/sf. The average is about $8 to $12/sf. Engineereds run from $4/sf to $12/sf and laminates are $3/sf to $8/sf. Prices include labor.

• Finished Look: Unfinished (after it is finished of course), Prefinished and Engineered wood provide the most premium look and are what people usually think of when they think hardwood. You really can't tell the difference between a Prefinished and Engineered floor if they are both 3/4" thick. Unfinished wood gets sanded down so removes any of the seams between the boards, seams that show up in Prefinished floors.
  Laminate can look really close to real wood if you choose from the higher end options. However in most cases each 'plank' or piece is the width of 3 to 5 "boards" so the end seams look like three boards all end in the same place.

• Feel: With the exception of the seams between boards Unfinished and Prefinished feel very good and about the same. When walking on them the floor is solid with no movement. If using a 3/4" or similar thickness Engineered floor the feel will also be the same. Dropping to a thinner plank and/or not gluing the floor down (called "floating") will cause more movement when walking. Laminate does not feel like wood, but if installed properly can feel pretty solid. In many cases the laminates I've seen that are floating have too much movement, so I'm a strong supporter of gluing it down.

• Durability: Finally a category where Laminate can be on top! Being a synthetic material Laminate is very scratch resistant when compared to wood. I'm not saying you can't scratch it, but it holds up well to walking traffic and pets much better than real wood. The other materials will hold up about the same, although Prefinished and Engineered claim to have a harder finish than wood finished on site. I haven't seen any evidence of this in houses I've been through.
  
  I'll say too that although Laminate is more scratch resistant over time the joints and seams weaken more than solid wood, so it's not as permanent of a floor.

• Installation: Laminate again wins here as most are snap-and-click, where you just put to pieces together and then snap together. Plus each plank is the equivalent width of 3 to 5 boards so you're laying it 3 to 5 times faster based just on this.
  
  Some Engineered wood is snap-and-click, others are tongue and groove (T&G) like solid wood is. Engineered snap-and-click installs just like Laminate, but again takes more time as each plank is only one board width. Engineered T&G installs just like solid wood. Depending on whether the subfloor is concrete (most homes built after the 1950s) or wood (2nd floors and homes build 1950s or before) will dictate how you install it. If you are on wood you can staple it straight to the subfloor. If concrete you can usually glue it down.

As you can see there are a lot of differences and a lot of similarities too. If I were deciding on what type for a project of my own, I'd first think about what would look good in the house and what would be appropriate for the house given the other homes in the neighborhood. Then I'd look at HomeDepot/Lowes or a flooring store and see what fit into my budget. I'd get some samples and bring them home to see how I liked them.

I couldn't cover everything in this entry so if you have any questions please let me know. billconover@america-lending.com

Bill Conover
America Lending

What is Earnest Money

When making an offer on a house you'll have to decide on the amount of earnest money to give the seller. The purpose of earnest money is so that the seller has some protection that a buyer won't back out of the contract. For if a buyer backed out of a contract the seller would keep the earnest money. There are some protections for buyers too.

For typical residential contracts in Texas there are two buyer protections that are most often used 1) the financing addendum and 2) the option period. The financing addendum allows a buyer who has tried but cannot obtain financing to cancel the contract during a specified time period and still receive their earnest money back. The financing addendum period is typically between 12 and 21 days and is negotiable.

The option period is a more powerful buyer protection in that a buyer can back out during the option period for any reason at all. It is during this time that a home inspection is done to make sure the buyer can back out if they find something unacceptable with the house. But again, they can back out for any reason, it doesn't have to be inspection related. Option periods are usually 5 to 12 days and is negotiable too. Both the finanding addendum and option period are optional items in the contract.

There are a few other buyer protections that allow a buyer to back out, usually after getting some additional information about the property. Information such as Survey, Title Policy, Sellers Disclosure and Appraisal.

All contracts are different so it's always best to talk with your Realtor so you fully understand the contract and how these different time periods affect each other. If you have any questions, I'm happy to answer them. Please email me at billconover@america-lending.com.

July Market Stats

Save on electricity

As we're going through one of the hottest summers on record, keeping the AC cool and the electric bills under control is on everyone's mind. Here are 7 cheap and easy tips to make your house more energy efficient.

1. Weatherstrip your doors and windows. Check your exterior doors for any air leaks. Or during the day check for light coming in around the jamb. You can block up these areas with easy to use peel-and-stick rubber weatherstripping. Be sure to get an approximate measurement of the hole to be filled as it's sold in different widths.
2. Check your attic vents. If you have fixed vents that don't move, make sure they are clear of debris. If you have the rotating, or "whirlybird" kind, check them when there is a breeze to make sure that they are operating properly. If they don't move, have someone inspect or you can check them out yourself. Usually if they're not moving it's because of rust so bring some WD40 up with you.
3. Use ceiling fans. If you have them, use them. They keep the air circulated so your AC unit doesn't have to run as long.
4. Turn lights off. Your lights, especially halogen, give off a large amount of heat. If you don't need the lights on in one part of the house, turn them off. It'll save you on the energy to keep the light on and on keeping the house cool.
5. Use blinds and drapes. Blocking some of the sunlight during the day from coming right into your house can help a lot toward keeping your AC running to a minimum.

These tips are all easy to do and should really help to lower your cooling costs. Let me know if you have any questions.

Condos vs Houses

A big question that always comes up when starting a home search is whether to buy a condo or a house. There are some obvious differences between them but I will discuss here some of the not so obvious differences and why it may be best to buy one or the other.

It's important to realize that when comparing condos to houses, in a given area the condos that are available are very different from the homes that are available. So it's not so much a decision of whether you want a house with a yard or a condo with a pool, but about what area you what to live in and what your budget allows.

Typically a condo will be priced lower (or much lower) than the surrounding homes so will allow a buyer to purchase in a more desireable location. Condos are great options for those with a limited budget and who want to live in a certain neighborhood.

As condos usually come in the 1, 2 or 3 bedroom sizes, buyers that don't want or need a lot of space will find a good fit in condos. Less empty rooms means less to take care of and less to heat and cool.

And of course there is the maintenance issue. Much of a house's maintenance is on the outside exposed to the elements. The same is true for a condo building, but it is the HOA's responsibility to take care of it. This means less work for condo owners and less money too.

So to sum up the condo 'pros': better location, pay only for useable space, and low maintenance.

Houses have a lot of pros too. The biggest is that house buyers will own the land their house is on. They are mostly free (subject to zoning rules, etc) to do what they like with it. With that comes a lot of freedom. Want to re landscape the back yard? Do it. Add on to the house? No problem.

This also allows house owners to substancially increase the value of their home. Condos owners can of course increase their value through finish out details, but house owners are able to do that and much more like adding squarefootage and landscaping.

Another thing to think about is the amount of storage a house has. Most houses will have a garage and many owners keep their vehicles outside and use this just for storage. Bikes, grills, canoes, luggage, pet supplies and recreational items are all easier stored if you have a garage. I will note that some condos do have garages as well and there is a premium for them.

These are just a few of the differences, but ones that sometimes aren't realized until further into the house hunt. Hope this helped!

June Market Stats

May market stats

Market stats for May. Volume is down, but average price is up again!

New City of Austin Energy Audits

The City of Austin has a new requirement that an energy audit be done to any home before it can be sold. These audits look at the energy efficiency and energy loss of a home. Items looked at are insulation, AC systems, air penetrations and windows among others. So how does it affect a purchase?

The audits are performed by third party inspectors and the reports must be disclosed with the seller's disclosure before a closing can occur. The form looks like this. For a list of qualified inspectors click here. While the audits need to be disclosed to a buyer, there is no requirement that any of the suggested items be done. Much like a Home Inspection that reviews the whole house, the inspector points out everything and the buyer and seller then agree on what if anything will be done.

There are some properties that are exempt from an audit including those built less than 10 years ago and condominiums.

If you plan on getting some of the items on the report done, Austin Energy does offer rebates. For a complete list go to their webpage.

And for more info try http://www.austinenergy.com/About%20Us/Environmental%20Initiatives/ordinance/index.htm.

Keep your lawn green

We installed sod in our backyard in April and with some water it really came in thick. Now with this hotter weather, I'm starting to see some dry patches. I did some research on how to prevent these and wanted to share it with you.
1) The first thing is to water longer for fewer times rather than for shorter periods many times. There are two reasons for this. First, if you water it longer the water will penetrate further into the soil and keep it moist longer. Second, if you water for a short time only the surface gets wet which promotes the roots to grow in this area. As the soil dries, the roots are more exposed to dryness and the heat. Longer watering periods will promote deeper root growth, which allows the roots to stay moist longer.

A typical time to water is about 15 to 20 minutes. But this can vary depending on whether you have an automatic system or are handwatering. Try out some different times and you'll see pretty quickly if you have the right time or not.

*I was very happy with the guy that put in my sprinkler system. Let me know if you'd like his number.

2) Another important rule is to water during the early morning. Watering in the morning allows the water to penetrate the soil more and minimizes water lost to evaporation. A start time of 3 or 4 am is considered the optimum time. Don't be temped to water in the evening as letting the moisture sit overnight can cause fungus to develop that will harm your lawn.

3) Mow grass on a taller mower setting. This puts less stress on the grass and also helps to keep moisture in your lawn.

4) If you're in the city there are established watering days. For even numbered addresses you can water Thursdays and Sundays. For odd numbered addresses you can water Wednesdays and Saturdays.

I hope this helps and your lawn stays green all summer!

Bill Conover
America Realty and Lending
billconover@america-lending.com

What do condo HOA fees cover?

When owning a condominium, owners have to pay Home Owners Association dues, typically on a monthly basis. The dues are mandatory and the HOA has the ability to put a lien on your property for unpaid dues and to even foreclose.

So since owners have to pay them, how do they benefit the individual owner? HOA dues usually cover: building exterior maintenance, landscaping maintenance, amenity (such as pool) maintenenance, garbage collection, exterior utilities (like parking lot lighting, irrigation water), hazard insurance for the structures, and liability insurance. Depending on the particular condo complex dues can also be used to pay certain utilities that owners individually or collectively use. It's fairly common for dues to include the owners' water and gas bills.

Dues can change as the needs and budget of the HOA change. A common need that comes up is an improvement to the complex. These can be repaving the parking lot, a new roof, repairing the pool, etc. When these items come up the HOA will need to obtain the funds by raising dues if the money isn't already in reserves. This is always a question to ask of the HOA when thinking about buying a condo, Do they forsee any capital improvements coming up and/or are dues scheduled to go up?

As you can see dues take care of many things that an owner of a single family home would have to pay for themselves. And the hazard insurance policy that a condo owner pays for is extremely low compared to what a single family home owner pays.

More questions on condos? Just ask! billconover@america-lending.com

April Market Stats

Click on the image for a larger version. Looking pretty good in the Central, North and Southwest areas!