Tuesday, March 25, 2008

First Time Homebuyers Get a Break in Texas!

The Texas First Time Homebuyer Program provides below market interest rate mortgage loans through a network of participating lenders to eligible families and individuals who are purchasing their first home or who have not owned a home in the past three years. Two types of loans are available under this program. An “Unassisted Rate” loan typically offers the lowest interest rates available but does not provide funds for down payment and closing cost assistance. For borrowers needing assistance with their down payment, an “Assisted Rate” loan is offered to income-eligible borrowers that provides grant funds up to 5% of the mortgage amount. These loans are offered at a slightly higher interest rate.

This information is brought to you as a public service of the The HBH Group Realty Team with Keller Williams Realty. You may learn more about us at our websites located at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or contact our offices at (512) 439-3772 or toll-free at (877) 268-1877.

How Did the Sub Prime Loan Mess Get to This Point?

Sub prime mortgage loans have created a financial mess that this country has not seen since the early 1980's when mortgage rates reached 20% on conventional mortgages and subsequently put many banks and savings and loans out of business because they had too many fixed rate loans guaranteed at very low interest rates. Now sub prime loans have put 30 of the top 100 mortgage lenders in the nation out of business and have caused many large financial companies to take billions of dollars in losses, including Morgan Stanley, Citibank, Merrill Lynch and Countrywide Mortgage, the nation's largest mortgage company.

From late 2001 until 2005, mortgage lenders had a huge refinancing boom as rates declined. Then refinancing came to a halt abruptly. Many lenders, especially mortgage companies were wondering how they would stay in business. Unlike banks, mortgage companies do not have their own money to lend; they borrow money on a short term basis and resell the loan shortly after they originate the loan. Their profit is derived from origination fees, discount points and closing costs, but this income stream suddenly decreased when the refinance boom ceased, so they became more creative. They lowered the down payment requirement from 10% to 0%. They offered teaser rates to borrowers a full 3% below the market rates and they loosened the qualifying criterion to make it easier for buyers to qualify. The long standing qualifying income and debt ratios of 28% income and 36% debt ratios were relaxed. They also entered into providing sub prime loans to borrowers with poor credit histories; these people previously were denied home mortgage loans. The teaser rates offered are similar to the zero-down, zero-interest rates offered by auto dealer and furniture stores. They are designed to get buyers to purchase homes and get mortgages. The problem is the teaser rates only last one year to three years then they automatically reset to market rates. The difference in payments can be shocking to the homeowner. For example, monthly payments on a $200,000, 30-year mortgage at 3% would be $844 for principal and interest. At 5%, the payment increases to $1,074. If it goes up to a typical sub prime rate of 9%, the payments are $1,610, that's up $766 a month from the teaser rate, or $9,192 per year.

CLICK HERE to read the rest at our website. This information is brought to you as a public service of the The HBH Group Realty Team with Keller Williams Realty. You may learn more about us at our websites located at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or contact our offices at (512) 439-3772 or toll-free at (877) 268-1877.

Sunday, March 23, 2008

Builder Offering Close Out Prices in Pflugerville!

We have been working with a well-known builder in several subdivisions in the last couple of years. Please contact us if you are looking at a new home as we are privy to some fantastic discounts that we can negotiate for you on many homes in one of their developments that is about to close out. So if you are considering a trade-up to a new home, please call our office at the numbers below and we can arrange a showing of all the inventory homes that our builders have available. Almost every builder in town has inventory and most are willing to deal! PLUS if you have a home to sell we can offer you some GREAT incentives to sell your home at a discount when you purchase the new home through us.

Another reason to move now is that mortgage rates have slipped again in the past week and are now back into the 5 percent range on 30 year fixed. We are not sure how long this will last, so now is a great time to check out the options.

The HBH Group Realty Team can represent you as a buyer with no builders and at NO COST to you. We are experts at representing your interests to get you the very best deal, protect you in the building and inspection process AND we can assist you with a discount trade-up package to sell or lease your current home. Learn more about us at our websites: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free at (877) 268-1877.

405 Neill St., Thrall, TX 76578 - Country Home for sale

Lovely restored home with plenty of upgrades to make this look like a brand new place! Quiet, peaceful setting in Thrall, just minutes from SH-130. Nearly everything in the home is recently replaced or upgraded: kitchen with gorgeous cabinets and counter tops, recent appliances, ceramic tile in baths, kitchen and eating areas, recent carpet and paint, master bath has jetted tub and separate glass shower enclosure, upgraded fixtures, recent privacy fence and deck, recent concrete sidewalks and drive way, decorated beautifully, one car detached garage. This home has it all and for only $86,900! So NICE and it won't last long! CLICK HERE to see a virtual tour at our website.

This home is brought to you by The HBH Group Realty Team, experts in real estate marketing and sales. To learn more about us, check out our websites at http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free at (877) 268-1877.

15291 FM 86, Dale, TX 78616 - 30+ acre Ranch for sale

Custom built 2815 SF home with 4 bedrooms and 2 full baths located on 30.836 acres of land in Dale, TX. Includes screened-in pool, hot tub, deck, approx. 20x40 ft steel shop building, stable and large pasture for only $325,000. Plenty of tile and designer paint colors, this home is an outstanding value and is far enough off the road to be completely private. CLICK HERE to see a virtual tour at our website.

This information is brought to you as a public service of the The HBH Group Realty Team with Keller Williams Realty. You may learn more about us at our websites located at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or contact our offices at (512) 439-3772 or toll-free at (877) 268-1877.

Saturday, March 22, 2008

Personal Property vs. Real Property

When you negotiate a contract, make sure you know what furniture, fixtures and appliances, if any, are being sold with the property. Technically, anything that’s permanently affixed to or installed in the home is real property. Everything else is the sellers’ personal property. This definition leaves a gray area that can lead to disputes between a buyer and a seller. When The HBH Group lists your property for sale, we will work with you to be very specific in what is included and excluded from the sale. If we are working with you as a buyer, we will also make sure that everything is spelled out clearly and you AND the seller know what you are purchasing contractually.

We always ask our sellers what permanent fixtures they intend to remove and remind them to spell it out clearly in the required disclosure forms. We will help you define what built-in appliances are real or personal property. What about a shelving system? A chandelier? Window coverings? If the buyer wants furniture or other nonpermanent items as a part of the deal, we will work with you to spell out these details in the contract to minimize dispute and problems that can result.

Ask us to go over the standard contracts with you before you receive or make a purchase offer. That way, you’ll know what to expect and be prepared to negotiate the best deal you can get. This offer also goes for FSBO's. If you need our assistance, please call us for a no obligation visit to assist you in being as safe as possible in selling your home.

The Tale of the Foolish Real Estate Investor

We live in an information age where there are always "experts" wanting to sell you a new course on how to get rich in:

1. Real Estate
2. Your Own Business
3. The Internet
4. You Name It!

Wisdom comes as we get more mature and realize that there are really no "quick" solutions to anything and that includes creating wealth. A few years ago here in Williamson County, we saw loads of investors who swarmed into the area and purchased real estate by the bunches. The lenders were handing out 100% finance deals like the money would never end. Many of these "investors" went directly to local builders and bought 2-10 properties in specific subdivisions all at one time and all at 100% financed. I like to refer to this as "the era of irrational exuberance". Many of those of us who work this business full time knew that this was a recipe for disaster and the disaster is here now. We are seeing most of these properties now going to foreclosure right and left and although our foreclosure numbers here are dwarfed by many other areas of the country, they are still greater than we have seen in a long time.

So herein is the purpose of this article. There is a distinct difference between an investor and a "speculator". What we saw here in the past were many speculators, but not true investors. Investors recognize value and invest for the long haul. They recognize that business cycles will ALWAYS repeat themselves and trying to cheat a good investment with NO MONEY DOWN and expecting that there will never be lean times are unrealistic approaches to investing in real estate as a business. We are working with many investors from all over the country and have always attracted the SMART investors: those that recognize that money investments on the front end are required to be a wise real estate investor. There will be some great opportunities in coming months in Central Texas to invest in a growing market. And if you do so in a smart manner, over a period of years you will see a substantial return on your investment.

If you are looking for a REALTOR in this area that can provide sound real estate investment advice, counsel and services, please contact us. We groom new investors as well through our training programs and BLOGS such as this one. We'd love the opportunity to service your real estate investment and management needs!

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Searching for Homes in the Era of the Internet

Looking at homes for sale via the internet is fun and exciting, at first. After a while, it gets a little frustrating, but you’ve learned a lot. You have a general idea of what homes look like in the area, prices, differences in costs for numbers of bedrooms, baths, size and location, location, location. By the way, you can call our office and have us set up home searches for you that ONLY target your specific criteria. We have a property search system that can organize your search in a very simple manner! You can rate properties as to "Favorites", "Possibilities" or "Rejects". Then we as your agents are getting educated as to your likes and dislikes based on your choices!

Next comes the “real” home hunt. Who do you take with you? If you’re married, you take your spouse. There is always the chance you’re going to find something perfect and you cannot make a decision without your spouse. Well, you can…but you’ll pay later. If you’re a couple, then take your partner for the same reasons. If you’re single and using your own money, then take a friend whose judgment you trust. Give thought to whether you should take a parent (smile). Oh yes. There is one other person you take along with you (hint, hint) – your experienced, capable, professional, friendly neighborhood REAL ESTATE AGENT.

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Friday, March 21, 2008

A Bright Idea for Your Bathroom

Are you ready to take the plunge and remodel your bathroom? Keep lighting in mind when making plans. Recessed lighting fixtures may be a popular recent home trend, but they can often leave you in a "shadow trap" when illuminating your new room. Focused lighting such as halogen or floodlights creates unwanted shadows in your new bathroom design, making it look spooky rather than inviting.

To avoid this lighting pitfall, use a soft-focused or diffused light fixture and mount it at eye level or just above. Positioning light this way will cause it to shine at your face, not down from above. Other types of light, such as decorative or recessed lamps also can combat shadows. If you do choose recessed lighting, place the lights close to the mirror and center them above the faucet. A dimmer switch at the vanity area helps control the lighting, allowing you to adjust for day and nighttime levels. Follow these steps and you'll be brilliantly pleased with your new bathroom.

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Are You Still Paying PMI? Why?

Millions of homeowners were required to get private mortgage insurance (PMI) at the time they purchased their homes, due to having made down payments of less than 20 percent. The monthly mortgage payment includes as much as $150 that represents the PMI premium. You can get so accustomed to making that identical mortgage payment every month, some people stay on auto-pilot and continue paying for a policy they’re entitled to cancel.

Typically, if you’ve reached the 20% equity level, you’re eligible. If your mortgage is less than 5 years old, it’s 25%. You also need to have a good track record for making mortgage payments. That means having had no more than one late-payment penalty in the past year; no payments over 30 days late in that same time frame; nor, any notice of default recorded against the property.

If that sounds like you, and if you haven’t gone through the process, there are user-friendly resources to help you get the cancellation process started. First, you’ll need to confirm your eligibility. The Mortgage Insurance Companies of America (MICA), the trade association for mortgage insurers, sponsors an excellent website that offers an eligibility calculator, as well as sample letters to send to mortgage servicers that will help you jump start the cancellation process.

If you are eligible to cancel your PMI, your servicer might require an updated appraisal of your home. Don’t rush out and have an appraisal done yourself, though. Mortgage servicers use their own sources to select an appraiser for the job. If you don’t want to handle the cancellation personally, you can hire someone else to do it for you. PMI cancellation services take over all of the correspondence, escrow account analyses and any disputes with servicers. Figure on spending about $500, including the appraisal. An Internet search for “Cancel PMI” will help you locate a local company.

You’ve worked hard to have accumulated 20% equity in your home. Don’t pay for something you no longer need! Even if you know you’re not eligible yet, use the eligibility calculator to figure out when you WILL be and keep that date posted prominently somewhere in your records. Or even, for instance, on the refrigerator. It will remind you daily of something positive you’re working toward that’ll be worth celebrating when the time comes.
This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

"FIRE" Power

Fireplaces have irresistible appeal. Just picturing a fireplace conjures feelings of warmth and coziness. Even in warmer climates where people don’t rely on them for heat, fireplaces add charm, character and value — about $12,000 per fireplace, according to the National Association of REALTORs® — to homes. They lend ambiance to just about any room, and with so many varieties and options available, it’s easy to see why people want them.

If you don’t have a fireplace in your home, it’s easier than you might think to add one — without undergoing a complete remodel or major construction. Gas and electric models are more popular and affordable than ever and easy to install. And with so many options for every space and budget, the hardest part is choosing one that best suits your needs.

If you do have a fireplace in your home, whether it’s the wood-burning, gas or electric variety, the most important factor is maintenance. Like cars, fireplaces need annual tune-ups. if you have a chimney-based fireplace — traditional wood-burning or top-vent gas — you should have a certified chimney sweep inspect and clean the chimney at least once a year or after approximately 80 fires. It’s also a good idea to have a certified service technician come out once a year to inspect other types of gas fireplaces and to replace bulbs on electric units.

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Thursday, March 20, 2008

Carpet 101 - Maintenance Tips for Home Owners

The season of holiday entertaining is over. But did the increased foot traffic and occasional spill wreak havoc on your carpets? If your floor is looking a little worse for wear, it may be time for a deep cleaning. But should you try to tackle the job on your own or bring in the professionals? The Carpet and Rug Institute suggests that carpet be professionally cleaned every 12 to 18 months, before it begins to show soiling. Regular vacuuming can keep your carpet looking like new, but deep extraction cleaning is necessary to remove ground-in dirt and stubborn stains.

If your carpet needs cleaning, first check with the manufacturer to see what it advises — some cleaning methods could void your carpet’s warranty. extra care. Also be aware that carpet made of natural fibers (e.g. wool, silk, cotton/rayon or plant fibers) can be damaged by certain cleaning methods and may require extra care.

If you choose to go the do-it-yourself route, be sure to vacuum thoroughly before cleaning. Choose cleaning agents that are made specifically for stain-resistant carpet, never use a generic household detergent or cleaner. Follow directions closely and pay special attention to instructions regarding dilution and application. After cleaning, open windows or bring in a fan to speed up the drying process.

If you’d prefer to leave this job to professional carpet cleaners, look for recommendations from your local carpet retailer or the Better Business Bureau. Most cleaning fees will be based on square footage, and there is usually no extra charge for furniture removal, pre-conditioning and routine stain removal. As always, be sure to obtain a written agreement before any work has begun.

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Take a Byte Out of Cyber Crime

McGruff the Crime Dog, the National Crime Prevention Council (NCPC), the Forum to Advance the Mobile Experience (FAME), and the Chief Marketing Office Council (CMO Council) have joined together to “Take A Bite Out Of Cyber Crime.” The campaign is empowering and rallying millions of computer and digital device users in the battle against the continually growing plague of computer viruses, worms, spam, spyware, phishing, identity theft and online predators. See the latest at: http://www.bytecrime.org/

This message is provided as a public service by The HBH Group, the premiere real estate group in Round Rock and Georgetown Texas. Contact us through our websites at: http://www.TheHBHGroup.com/ and http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Wednesday, March 19, 2008

What is a CRS?

Within the world of REALTORS®, we have initials after our names that probably confuse the public in general. You can see them on our business cards, our websites, etc. They look like:

Billy Bob Houseseller, REALTOR®, ARM, LEG, TOE, EAR, etc.

However, there are two of these designations that I would like to define clearly to my readers. The first is the broker designation. The general public recognizes that the broker designation carries more weight than an salesperson license. To qualify as a licensed broker in Texas, an agent must actively practice real estate for two or more years within the state. Further, they must attend 270 classroom hours of core real estate classes approved by the Texas Real Estate Commission (TREC requires this for the salesperson license) AND have an additional 630 hours of courses related to real estate logged and on file with the commission. If you are counting, that means they have spent 20 weeks in a classroom within a 2+ year practice! That is a great amount of training. Finally, the broker-candidate must successfully pass the state and national exams for the license.

The state recognizes a broker as not only able to practice real estate, but also able to manage other agents in the sales process. They are thus allowed to open their own brokerage or property management businesses. If you will note, I have taken the time to earn the broker designation and I believe it offers me the ability to be the best I can be for my clients! This has also allowed me to open a property management company for my real estate investment clients. We currently manage property under the business name of HBH Management.

The second designation I would like to make you familiar with is the CRS (Certified Residential Specialist) designation. This is also a training and experience-intensive designation. To qualify for my CRS designation, I had to present proof that I have worked in over 75 real estate transactions, had to attend several CRS-approved courses in buyer, seller and referral strategies and techniques. Finally, I had to present another designation that I hold from the National Association of REALTORS® (Graduate REALTOR® Institute - The Master's Degree in Real Estate). The CRS designation is held by less than 5% of the REALTORS® in the United States and is a prestigious award of which I am extremely proud. Out of 1.1 million REALTORS® in the USA, less than 50,000 care enough about the quality and professionalism that they offer to clients to spend the time and money to become a CRS. I DO care and hope that this will earn me the right to be your referral partner when friends, co-workers and relatives need a REALTOR®!

If my team and I can assist you today in any of the following, give us a call:

  1. Home buying (new or resale).
  2. Home sales.
  3. Trade-up / trade-down.
  4. Real estate investing.
  5. Commercial properties or Farm & Ranch.
  6. Leasing and management.

You can learn all about what we do for our clients as well as a great wealth of information about real estate and the Austin, TX area by checking out our websites at:

Or you can call our offices at (512) 439-3772 or toll-free at (877) 268-1877. We look forward to hearing from you. As always, the highest complement we ever receive is the referral of your friends, customers, co-workers and family. They will always get "World-class service with a Home Town feel" from us at The HBH Group.

Tuesday, March 18, 2008

Tips on Saving Money in an Era of Higher Prices

This letter was sent to me by a friend, I thought this info should be shared:

"I don't know what you guys are paying for gasoline.... but here in California we are also paying higher, up to $3.50 per gallon. But my line of work is in petroleum for about 31 years now, so here are some tricks to get more of your money's worth for every gallon.
Here at the Kinder Morgan Pipeline where I work in San Jose, CA we deliver about 4 million gallons in a 24-hour period thru the pipeline. One day is diesel the next day is jet fuel, and gasoline, regular and premium grades. We have 34-storage tanks here with a total capacity of 16,800,000 gallons.

Only buy or fill up your car or truck in the early morning when the ground temperature is still cold. Remember that all service stations have their storage tanks buried below ground. The colder the ground the more dense the gasoline, when it gets warmer gasoline expands, so buying in the afternoon or in the evening....your gallon is not exactly a gallon. In the petroleum business, the specific gravity and the temperature of the gasoline, diesel and jet fuel, ethanol and other petroleum products plays an important role. A 1-degree rise in temperature is a big deal for this business. But the service stations do not have temperature compensation at the pumps.
When you're filling up do not squeeze the trigger of the nozzle to a fast mode. If you look you will see that the trigger has three (3) stages: low, middle, and high. In slow mode you should be pumping on low speed, thereby minimizing the vapors that are created while you are pumping. All hoses at the pump have a vapor return. If you are pumping on the fast rate, some other liquid that goes to your tank becomes vapor. Those vapors are being sucked up and back into the underground storage tank so you're getting less worth for your money.

One of the most important tips is to fill up when your gas tank is HALF FULL or HALF EMPTY. The reason for this is, the more gas you have in your tank the less air occupying its empty space. Gasoline evaporates faster than you can imagine. Gasoline storage tanks have an internal floating roof. This roof serves as zero clearance between the gas and the atmosphere, so it minimizes the evaporation. Unlike service stations, here where I work, every truck that we load is temperature compensated so that every gallon is actually the exact amount.

Another reminder, if there is a gasoline truck pumping into the storage tanks when you stop to buy gas, DO NOT fill up--most likely the gasoline is being stirred up as the gas is being delivered, and you might pick up some of the dirt that normally settles on the bottom. Hope this will help you get the most value for your money."
Information provided by The HBH Group, experts in Round Rock and Georgetown Real Estate. Contact us through our website at http://www.TheHBHGroup.com/ or http://www.TheHBHGroup.biz/ or call our offices at (512) 439-3772 or toll-free (877) 268-1877.

Rates Are Dropping Again!

Just received this from one of my loan officers:

"Just a quick update to my Realtor Friends. Once again, the market is moving in a favorable direction. There has been significant economic news that has driven the price of bonds up. As I have shared in many previous emails, bonds are what drive our rates. Bonds up/ Rates down..... Bonds down/ Rates up... You know the drill. So, we are headed towards the mid 5% range on the conventional 30 yr. fixed rates again. WHO KNOWS HOW LONG THEY WILL BE THERE!!

Here are the basics for a purchase loan of 150,000. These rates are subject to change without notice:

Conv. 30 yr fixed rate - 5.75 0 discount points and 1% origination
Conv. 20 yr fixed rate - 5.50 0 + 1
Conv. 15 yr fixed rate - 4.875 0 + 1

Call for any other loan program, and let me know if I can be of any assistance.

Tom Brown
Assoc. District Manager
GMAC Mortage"

Now may be the time to buy that investment or to trade-up/trade-down! Call us at (512) 438-3772 or toll-free at (877) 268-1877 and let's talk about your options!

Costs of Using a REALTOR® in Your Transaction

The National Association of REALTORS® (NAR) says its $31,800. Because some NAR stats come out every two years, I suspect there will be an update on this information soon, but at last report the NAR cites that the average seller who uses a real estate professional makes 16 percent more on the sale of their home than do sellers who go it alone.

The truth is real estate professionals do a lot more for a seller than just make a transaction go easier. I could write a book on the things we do as professionals to help both sellers and buyers. In fact many already have. There are many details and specific things that we do to help a family with a home, but normally the varied things we do fall into broader concepts such as saving time, reducing stress, making more money and reducing risk of liability and litigation.

When it comes to how much more money a real estate professional gets for selling a house, I don’t know for sure how much more that is here in the Round Rock real estate market. Sometimes it is a lot more, and I will be specific about that with examples in two of the three articles to follow.

There are times too, when we get only a little more than an owner could, and also times we suspect when we probably get about the same. What we are saying here is there is no way one can prove, or disprove on average how much more, or less, we get for a sale than what the NAR reports. In all cases though, we do save stress, time and substantially limit risk, all of which have huge value.

Here is an article from the NAR about this, and because it was presented in a public forum, there is naturally much debate, all of which is found in comments that follow the article. I thought it would be interesting and helpful to you to read the discussion in its entirety. It is a most interesting read.

When looking for Round Rock or Georgetown investment or personal real estate, check out our websites at: http://www.TheHBHGroup.biz/ and http://www.TheHBHGroup.com/ or contact us at our office phone (512) 439-3772 or toll-free (877) 268-1877.

What is a Contingency Contract and Why Should I Care?

You may have heard this term from time to time when others discuss contracts of different types. In a nutshell, a contingency is a condition that must be met for the contract to be valid and enforceable. There are many such conditions that are standard for a real estate contract, as well as many variations that can be added to the Special Provisions paragraph in Texas contracts. In this article I will focus on only one standard one, the sale of another home.

In standard Texas contracts (TREC or TAR forms), the buyer has the right to submit an offer on a piece of real property with a condition that they must sell another piece of property first before they can close on the offer. This is done with a form called "Addendum for Sale of Other Property by Buyer". It is referenced by checking a box on the basic 1-4 Unit Residential Contract form, naming the addendum form as a part of the contract. This form outlines several things:

  1. It defines the specific address and latest date of sale of the property that the buyer must sell before the next purchase contract is to be completed. If the property does not sell by the date outlined here, the contract terminates and earnest money is refunded to the buyer.

  2. The seller is still free in this case to accept other offers on their property and the form next outlines the number of days that the contingency buyer has to waive their contingency or the first contract is terminated and the seller is free to sell the property under the terms dictated in contract number 2. In this instance of course, if the buyer chooses not to waive their contingency, contract 1 terminates and all earnest money is refunded to the buyer. If the buyer does waive their right to contingency, the seller must move towards closing with buyer 1 and that buyer now must buy whether the contingent property sells or not. In order for the buyer to waive their contingency, additional earnest money is defined in the addendum that the buyer must deposit with the title company, showing good faith in both waiving their contingency and showing earnestness in their intent to close on property 1 even though the contingent property has not sold.

This option is a great power tool for people that are involved a trade-up or trade-down situation with their current home. It does not bind the seller in that they can continue to seek better deals that can be negotiated after accepting the contingency contract. Further it allows for exit of a buyer who may choose not to waive their contingency when and if the seller gets a better deal from another buyer. It is thus fair to all parties although it may not seem so if you are on one side or the other.

When in a seller's market, sellers are less likely to accept contingent contracts and buyers are more likely to present them. In a buyer's market, this tends to happen more since buyers are worried about selling their current property and sellers are generally eager to get any contract, even if it has a contingency attached to it.

If you have further questions, contact us through our websites at:

http://www.TheHBHGroup.biz/ or http://www.TheHBHGroup.com/

or call our office at (512) 439-3772 or toll-free at (877) 268-1877.

Remember that real estate transactions can be very complicated and using an experienced REALTOR is a great way to protect yourself and know ALL your options in each situation.

Monday, March 17, 2008

Managing Your "House Money"

Did you know that the average American, relocates to a new home about every 5-7 years? This is one reason why a home is such a great investment, because you carry that investment's gain from home to home over your lifetime. But what if could continue to gain the value on that investment over your entire lifetime? If you moved every 7 years and lived in homes from ages 24-64, you would have purchased 7 homes over your life time and by the end of that period at least four of them would be paid off! If you set the discipline for yourself to lease every home you lived in after you move out, what could that mean to your family financially?

I just ran some quick calculations with my spreadsheet software and found the following to be true. Assuming a 5% annual appreciation growth rate (conservative to say the least), over a 50 year period:

1. You would have acquired 7 homes in your portfolio.
2. The homes would be worth over $8MM.
3. By just paying pretty close to normal 30 year fixed mortgage payments, your equity would be running about $6.25MM.
4. You would be generating over $800K/year in cash flow (income).

So would you say that adding this financial discipline to your budget would be a good thing for you? Just imagine, passing down an inferitance of this sort of value to your children in their 40's as well as teaching them to do the same with their real estate investments.

Call us The HBH Group for more detail or plan to attend one of our Buyers or Investors Seminars soon. You can reach us at (512) 439-3772 / (877) 268-1877 / or see our websites at:

http://www.TheHBHGroup.biz/ or


Saturday, March 15, 2008

Why Should I Need an Option as a Buyer?

I am often asked this question by buyers and it amazes me that people don't naturally see the benefit of an option out of a real estate contract. After all, having a few days to "really" make up their mind on a contract is a real power tool to a buyer. Further, the option offers the buyer time to perform the needed due diligence on one of the largest purchases that an average person will ever make.

The option clause was added to our contracts in Texas many years ago simply to put the buyers more at ease. If you are not aware, real estate contracts in Texas do not qualify for the 3 day right of rescission rules that apply to bill of sale and retail purchase agreements. For this reason, the option clause was added to our real estate contracts by the Texas Real Estate Commission (TREC) and the Texas Association of REALTORS® so that buyers had a way out for any reason or for none. This right is purchased with a sum of money and MUST be in the hands of the seller within 48 hours of the execution date on the contract.

I repeat, that this is a HUGE power tool for a buyer in the state of Texas. It offers the buyer time to get the property inspected by a TREC-licensed real estate inspector. During the option period, the buyer has a great amount of leverage with the seller to negotiate needed repairs. This is a great opportunity to get repair costs negotiated and all this prior to closing.

Other buyers (particularly investors) use the option period to make offers on MANY properties at the same time in order get the best deal on one or two of them. This is a common practice (much to the chagrin of sellers), but is another method for controlling the buying process. In this case, the buyer may end up incurring a few dollars in option fees on those the contracts that they opt out of, but they can keep the best deal or deals they were able to negotiate. Many of the investors that work with The HBH Group use this method with great results.

If you have further questions about the option process or any subject that we can help you with, please call our offices at (512) 438-3772 or check out our website at http://www.TheHBHGroup.biz/ where you can get more information on buying and selling or leasing and managing real estate.

Thursday, March 13, 2008

Why Real Estate is Such a Great Investment to Reduce Taxes

At the HBH Group, we are frequently asked why we work with investors. The answer to that question is that we "create" investors from our clients. When we teach you how you can save significantly on your tax load AND gain great returns on your investment funds through appreciation, rarely do we have a client that doesn't want to get involved in real estate investing. In this installment of the BLOG, I thought it would be a good idea to teach you, my readers some of the major tax benefits to investing in real estate. Here are some of the major reasons why this is such a great way to invest your funds and save taxes too:
  1. Individuals who purchase real estate rental properties, who actively participate in the decision making process, such as determining who the tenants will be and what repairs should be made, may be able to reduce their taxable income by up to $25,000 per year under existing tax taws. The active real estate investor may deduct up to $25,000 per year on schedule E for such items as depreciation, negative cash flow, maintenance, repairs, interest, taxes, and trips to the property. This could effectively reduce the investor's taxable income by as much as $25,000. The potential savings in the 28% bracket would be $7,000. An investor in the 31% tax bracket would save $7,750. The savings would even be greater if the investor has a state income tax, as most state income taxes are based on the federal tax returns, which would be reduced also.
  2. The $25,000 annual tax deduction is the maximum allowable each year no maker how many Investment properties are owned; this amount is reduced for taxpayers who have over $100,000 in adjusted gross Income. For every $2,000 over $100,000 of adjusted gross income, the $25,000 limit is reduced by $1,000. If, for example, the investor's adjusted gross income was $1 10,000, he would only be entitled to a maximum of $20.000 per year. The entire $25,000 would be eliminated for the investor who has an adjusted gross income of $150,000. Hence, these investors would be buying the real estate investments for the potential appreciation and/or income which they can generate.
  3. Real estate investment property is a field where a substantial number of existing homeowners could be sold on the idea of purchasing rental real estate if shown by their real estate agent how to obtain good rental properties. In fact, hundreds of people each day purchase tape courses from late night infomercials, showing them how to purchase rental properties with little or no money down. The purchasers of those courses are shown that buying real estate investments can help generate large monthly incomes, build huge net worth's and shelter taxes. Some of the participants end up quitting their jobs, as they can earn substantially more from buying rental properties than what they have been doing. As mentioned above, this is a focus area of business for the HBH group. We have the expertise in acquisition and management services of rental property. Don't rely on late night TV to "buy" some, not all of the knowledge you need, instead leverage our experience to your advantage!
  4. One age old objection to owning real estate investment properties is dealing with tenants. That is, collecting the rent each month and having to locate new tenants to replace the old ones. There are several ways to deal with this. First, consider having a company such as HBH Management manage your properties for a small monthly fee. We can also lease manage the properties for you, finding you good, qualified tenants and managing all interactions with those tenants; you simply pick up your check from your mailbox! Another option is to purchase real estate as co-owner with a relative. One relative can act as the owner-occupant/tenant. The other relative can act as the owner-investor. Each party would own a percentage of the property, such as WSO. The owner-occupant relative would put up 50% of the down payment, pay 50% of the mortgages payment and pay a rent payment to the owner-investor to offset the owner-investor's 50% of the mortgage payment. This arrangement reduces the owner-occupant's cash outlay, helps him qualify and will allow him to purchase a nicer home than he could afford on his own. The owner-investor gets the same tax deductions he would if he had purchased a rental property, but he has a permanent tenant, his own relative, who will eventually buy him out. But as an active real estate investor, they may be entitled to up to $25,000 in yearly deductions.
  5. Another derivation of this idea is for parents to purchase condos or townhomes for their college age children when they go off to college. The parent can then employ the child as a property manager for their investment, pay them a salary (tax deductable) which can be used to pay their tuition and books.

Of course, The HBH Group can't give you tax advice, just ideas to discuss with your CPA, so please consult a tax professional regarding these ideas before putting your plans into action. Or feel free to call us and set up an appointment and we can connect you with reliable tax professionals to assist you in making a plan to shelter income through real estate investments.

Wednesday, March 12, 2008

For More GREAT Real Estate News...

See our websites! We have a wealth of all sorts of information plus a significant amount of search tools, etc. to assist buyers and sellers in the market place. Here are the links to our sites:

We have several more websites in the works for you now, plus we are daily posters on numerous other sites on the web. In fact, our property listings are now seen on over 40 real estate related websites! By the way, last year the National Association of REALTORS® published a report that stated that 86% of the people who purchased property in 2007, found that property on the Internet. The web is the new classified ad of this millenium.

If you or someone you know needs to sell commercial, residential, or farm & ranch properties, please refer them to us. We can get their properties noticed within the new age of real estate marketing with our expertise in the web and web-related technologies!

FHA/VA - The New Sub-Prime?

Well you would have to be a hermit not to have heard all the fallout the last 12 months from the destruction of the sub prime lending industry. Last Spring, during one week I heard there were 6 different lenders that went bankrupt within that seven day period! Unfortunately, the sub prime debacle had some bad effects on our market overall, extending a period of price aggressiveness beyond all comprehension, putting many real estate markets around the country out of the affordability reach of most buyers. This has in many ways exacerbated the slow down in the real estate industry by now severely limiting the number of qualified buyers in most markets around the country.

Hooray for the feds! They have once again come to the aid of the common man by relaxing some of the stringent requirements around FHA and VA loans in order to stimulate the real estate buyers to stay in the market and the strategy IS working. Last week, they also increased the FHA funding limits within the Round Rock area to $288,750 which will pave the way to more expensive housing now being funded by FHA, so the move up that you have been desiring may now be possible! FICO credit scores all the way down to 580 are eligible for the best FHA rates. FICO scores as low as 550 will be considered for a slightly higher rate. This also makes it possible for a lot more homeowners to refi into a great FHA rate.

There's every reason to believe 2008 will be a great year for Real Estate in Central Texas. There is a pent-up demand for housing in Central Texas that has to break loose soon. The local economy is booming, and people are moving here in ever increasing numbers. The overwhelming majority of borrowers can get financing when it's time to buy a home. And we all know what a wonderful place this is to live. So my advice is make that move NOW.

The buyer activity seems to be increasing!

I went to hear Gary Keller (aka Keller of Keller-Williams Realty) speak a week or so ago on the state of real estate in the Austin area. It is true that we have felt the impact of the national downturn in the real estate market over the past few months. Inventories of homes on the market have been increasing. Prices are falling all over town (although not NEARLY as dramatically as in other areas of the country). All of these things have been signalling a shift back towards a buyers market, although many sellers have never figured that out yet! Nevertheless, it was getting pretty hard to find a motivated buyer in our market. Most of the agents that work with me were reporting that although they were able to get buyers to look, they were not making offers and that is what really fuels the market and initiates a sale.

Well I am here to report that things may be changing already in our market. When listening to Mr. Keller speak a few weeks back, he expressed that he felt we would be in for a slow or stagnant 2008, with recovery starting in 2009. In the past couple of weeks, I have been working with some out of town investors, attempting to purchase a few investment properties (this is my specialty, since I also have a property management company under my brokers license that is not affiliated with Keller-Williams). I am here to tell you that there ARE buyers in the market! Every one of five properties that we were making offers on, had multiple buyers making offers on them, many ABOVE full price. That really doesn's sound like a buyer's market to me. In fact, this blog entry is written to note that I am seeing STRONG trending towards another shift back towards a seller's market.

The next question would be "Why?" I suspect that we are starting to see the "Wait and see" buyers jumping back into the market due to the raising of mortgage rates. In the past three weeks the rates have gone up nearly a point from almost record lows a month ago. I beleive this has fueled the interest in buying now vs. later. In fact, I have had several calls from buyers in the last two days asking my opinion about where the mortgage rates are headed and both have called one of my mortgage broker contacts immediately to get the application process started to buy now before the rates price them out of the home they really want.

So why am I making this point? If you read my blog or my websites, I hope to get your attention that the picnic may soon be over. If you are needing to upsizew, downsize, buy and investment, buy your college student a condo, etc., take my advice and move quickly. If rates move up much more, things will stagnate probably, but why take that risk? Higher rates will simply limit your buying options now and in the future. If rates slide back down, I suspect that we are heading back into a sellers market, where prices will start back up again. Call my office to get us started on your next real estate purchase today. There may never be a better time!