Know Your City's Rental Requirements

With rent prices soaring in the Dallas area, many people are considering dipping their toes into the rental business. Whether you are a seasoned investor or a first-time landlord, please be advised that most cities require rental property registration and inspections. Cities began these programs to ensure tenants and landlords of residential rental properties keep properties in safe condition. 

Even if you are not a landlord, it's important to know the requirements for rental properties in your area.  Cities with rental property registrations can take action if a rental property in your area falls into disrepair, so know that you can submit a violation complaint if a neighboring rental property becomes an issue in your neighborhood.

If you are a tenant, you should be aware that your rental must be maintained by your landlord to meet safety requirements, and that you can contact your city hall to complain if your rental property does not meet city standards.

What are the goals of rental property inspections?

• To facilitate neighborhood stabilization.

• Foster clean and safe rental properties without diminishing the availability and affordability

• Enhance partnerships and communication with property owners and tenants. 

Each city establishes its own criteria for rentals, so its important to check with the city hall for each city in which you currently or plan to rent.  Fees typically range from $15 - $75 for registration and safety inspection.

Some cities require an annual inspection and registration, while others require a safety inspection only when there is a change of ownership or occupancy.  There are stiff fines for non compliance with registration or for failure to bring a property to livable standards, and those fees can range from $200 - $2,000 per day.

Your city hall will be able to direct you to the correct department for more information.  

Here is the link for the city of Dallas.

Condo Just Sold--What You Should Know Before Buying/Selling a Condo

Please check out this article from My LinkedIn Page:

Gorgeous Condo Just Sold--What You Should Know About Buying/Selling a Condo

Educate, Then Negotiate: VA Loans

The VA Loan is a well-desered benefit for our veterans.  Through this program, veterans can purchase a home with no down payment, potentially saving tens of thousands of dollars in out-of-pocket expenses at closing.  

If you are a veteran who's shopping for a home, it’s important that you and your real estate broker be familiar the guidelines for VA loans.  Your VA lender will be the final say on what is allowable under the program, but you should know a few things before looking at properties or negotiating a contract that involves a VA loan.

Closing Costs and Earnest Money

A "zero down" loan means no down payment.  It doesn't mean there are no costs associated with the home purchase.  There will be closing costs and prepaid expenses payable at closing, plus an earnest money deposit will likely be required upon execution of a contract to buy the home.  

Typically earnest money is equal to or greater than 1% of the purchase price of the property.  In a seller’s market, expect higher earnest money deposit requirements. 

What about closing costs?  Here's what's allowed for VA loans:

• 1% origination fee charged by the lender
• Appraisal and Compliance Inspections
• Recording Fees
• Credit Report
• Prepaid Items
• Hazard Insurance
• Flood Zone Determination
• Survey
• Title Examination and Title Insurance
• Special Mailing Fees for Refinancing Loans
• VA Funding Fee
• Mortgage Electronic Registration System (MERS) Fee
• Other Fees Authorized by VA

A veteran should be prepared to have enough cash on hand to cover an earnest money deposit and a few thousand dollars in closing costs/prepaid expenses.  The earnest money will be credited toward closing cost expenses at closing. If your earnest money deposit was greater than the amount of your closing costs, the balance will be refunded to you at closing.

The buyer and seller can negotiate that the seller will pay all or some of the closing costs, but that amount is limited to a maximum of 4% of the sale price.

Loan Limits 

The VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability the VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.

The basic entitlement available to each eligible Veteran is $36,000. Lenders will generally loan up to 4 times a Veteran's available entitlement without a down payment, provided the Veteran is income and credit qualified and the property appraises for the asking price.

Your lender should discuss all this with you during your loan approval process.  

What about Condos?

The VA’s goal is to help protect the interests of veterans and the government by ensuring that all properties located in a common interest community meet VA regulatory requirements.  Meeting this goal as efficiently and cost effectively as possible serves the best interests of all program participants involved.

Because condominiums often provide affordable home ownership, they are a popular choice with veterans.  If a veteran is interested in purchasing a condo, the veteran and his/her broker should focus their search on VA approved condominium communities only.  The VA website contains a searchable database of approved condos.

While only condominiums must be approved by VA, lots or units securing VA loans in condominiums and other planned unit developments must meet both title and lien-related VA regulatory requirements.  The lender is responsible for ensuring that these requirements are met for each VA loan.  Although there is no specific VA requirement that lenders maintain evidence in the loan file that these requirements are met, they may wish to be guided by the advice of their legal counsel in this regard.

Title The title requirements for every VA loan, whether or  not the property is located in a common interest communities,  are stated in VA regulations requirements indicate: the estate must not be less than fee simple title must to be subject to unreasonable restrictions on use and occupancy certain minor title limitations will not be considered by VA VA regulations require that every  A loan be secured by a first lien on the property When a property is located in a condominium or planned  unit development, the lender must ensure that any mandatory homeowner  association assessment is subordinate to the VA-guaranteed mortgage.

These are just a few basics of the VA loan requirements and purchasing process.  To learn more, please review the VA website at:

www.benefits.va.gov

source:  U.S. Department of Veterans Affairs

Do Walmart or Target Stores Affect Home Values? Yes.

Research has shown that homes situated near a Trader Joe’s or Whole Foods see significant increases in value. Can big-box retailers have a similar effect?

According to an analysis by housing data leader RealtyTrac®, homes near a Target store see higher home value and appreciation than those near Walmart—but homeowners near Target pay higher property taxes.

Of homeowners who sold last year, those near a Target saw an average 27 percent increase in price since they purchased their home (an average price gain of $65,569); those near a Walmart saw an average 16 percent appreciation (an average price gain of $24,900). Homeowners who own near a Target pay an average of $7,001 in property taxes, which is 123 percent more than the $3,146 average paid by homeowners who own near a Walmart.

Homes near a Target also have a higher value: $307,286, on average. This is 72 percent higher than the $178,249 average value for homes near a Walmart.

Comparatively, the average price appreciation nationwide is 22 percent (an average price gain of $40,626), the average property tax nationwide is $4,283, and the average home value nationwide is $215,921.

Source:  Housecall

What's a Buyer to Do in Dallas?

We have issues in Dallas.  Housing supply issues.  Steady economic growth, low interest rates, and rising rents should have sale prices escalating to record levels.  Low housing inventory is driving up prices and making buyer competition fierce, and bringing the number of sales to record lows.  

This morning, both the Wall Street Journal and USA Today reported on "gridlock" in the housing market that's preventing first-time homebuyers and current homeowners who would like to trade up from realizing their housing goals.

Current entry and mid-level home owners are unable to move up due to soaring prices of both mid-tier and luxury homes.  Although it is a great time to sell, many current homeowners simply cannot afford to trade up now.  Families who would be trading up to a larger home in a "normal" market are, instead, digging in their heels and remodeling to extend the appeal of their current homes.  Since those homeowners aren't selling, hopeful buyers have more limited choices than ever for finding modestly priced preowned properties.

Tight inventory presents an opportunity for new home builders, but those builders are having to purchase land far from the city, even into areas where there aren't sufficient neighborhood schools to handle the influx of families.  Prices for new homes aren't all that appealing for first-time buyers, either.

The bottom line for home buyers is that there are homes available for purchase, but the selection is limited and prices aren't going down any time soon.  Buyers need to adjust their housing expectations to more modest levels and understand that list prices are a mere starting point in this market.  Fierce competition from other buyers means that multiple offers and above-list-price offers are the new normal.  

In 2014, the average home price in Dallas was $365,506. In 2015, the average price rose to $388,460.  So, waiting a year to buy a home cost the average buyer $23,000.*

With home prices expected to continue their escalation well into 2017, waiting to save for a higher down payment or in hopes that the market will cool down could cost thousands in home price a year from now.  Rental prices are soaring, too, so buying a home at a fair price now to live in for a few years is a buyer's best strategy, even if it means settling for something that is not a "perfect" dream home for now.

*Source:  NTREIS

Who's Buying What...a Generational Breakdown

Just 17% of buyers under the age of 35 closed on urban residences, down from 21% a year earlier, according to a recent National Association of Realtors® report on generational trends in home buying and selling.

The luster of urban life may be fading—for some, anyway—due to skyscraper-high prices in top markets. Suburbs exerted a strong pull on buyers of all age ranges. About 51% of millennial home buyers scooped up residences in the suburbs or a subdivision compared with 58% of Generation Xers (ages 36 to 50); 51% of baby boomers ages 51 to 60; 53% of boomers ages 61 to 69; and 42% of the Silent Generation (70 and older).

More information here:  http://www.realtor.com/news/real-estate-news/generational-home-buying-trends/?cid=soc_20160311_59182086&adbid=10154068277097871&adbpl=fb&adbpr=35368227870

When A Cash Offer Isn't A Cash Deal.

Dallas has become wild west in terms of housing.  People are moving in from all over and scrambling to find a place to live. In recent months, folks have gone so far as to camp out for an opportunity to purchase a lot to build on, and I frequently experience lines of real estate brokers and their clients waiting in front of listings (even in the rain) for their turn to get a peek inside.

Multiple offers have become the norm. Well-informed buyers, whether they are investors or owner-occupants, know they must make an offer fast, and those offers typically include an expiration date so they can move on to the next property if their offer is rejected.

When a seller sits down to quickly decide which offer to accept, he or she must consider offer deadlines, terms, and contingencies as well as the price.  This is when cash offers move up to the top of the pile.

If an offer to purchase a home includes financing, the transaction is a bit more involved. A mortgage lender will require an appraisal. If the home doesn't appraise for the contract amount, or if the appraiser identifies major repairs needed (think foundation or roof), complications and renegotiations ensue.  Additionally, the mortgage underwriting process typically takes 30 days or longer, and delays beyond that are always a possibility.

With a cash offer, an appraisal isn't necessary. There is no loan, so underwriting is not an issue. The transaction can close quickly and without complication...usually.

Some experienced buyers (often investors in my experience) know that sellers are more likely to accept a cash offer.  Some will use that advantage to submit an offer for cash, assuming that the seller is more likely to accept it because it has fewer contingencies.  But...sometimes, after the buyer and seller execute the contract for a cash sale, the buyer then informs the seller that he/she has decided to finance the purchase.  This is the old Bait and Switch.  It's perfectly legal, but it's frustrating for sellers and for buyers who disclosed up front that they would have financed the purchase.

All of a sudden, that cash offer isn't a cash deal. What's a seller to do?  It might be a week or longer in the sale process when the buyer pulls the Bait and Switch. Does the seller insist the buyer to perform under the original terms of the contract or take the chance that the buyer's lender will be able to close the loan on time?

This is where a good broker's experience, knowledge, and negotiating strength comes in when considering offers.  The purchase contract and third party financing addendum contain specific language about financing. Although we are not attorneys, brokers can suggest specific requirements for option periods/fees, earnest money, and which items to check (or not) on the contract for financing contingencies, etc. to protect our client's best interests. One thing to look for as a clue on a cash offer:  A closing date of 30+ days out.  Cash sales don't need 30+ days to close!

A good broker will also know what key questions to ask the buyer's lender to determine the legitimacy of the buyer's creditworthiness and the underwriting procedures at the lending institution. This information will help the seller make an intelligent decision on whether allowing the switch to financing makes sense.

A broker should advise their sellers to insist that all cash offers be accompanied by Proof of Funds and should verify that information to be accurate before their client executes the offer.  The seller should be prepared to deny a switch to a financed transaction, if it is not in his or her best interest. Just because the buyer asks to change the original terms of the contract doesn't mean the seller has to agree.