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TIPS FOR BUYERS

TIPS FOR SELLERS

TIPS FOR HOMEOWNERS

TIPS FOR LANDLORDS

TIPS FOR REAL ESTATE AGENTS

AMORTIZATION SCHEDULE (an EXCEL {for Windows} spreadsheet. File name: AMORTIZE.XLS)




TIPS FOR BUYERS:

  • Work with only one REALTOR®. You will find that by working exclusively with one REALTOR®, the REALTOR® will be more willing to invest time and energy to your housing search.

  • A pre-qualification letter from a mortgage officer may encourage the seller to take your offer seriously. This letter indicates that, given the preliminary financial information you have provided, you qualify for a loan of a given amount. A pre-approval letter is even better. This letter indicates that you have been officially approved for a loan, pending only an appraisal on the property you have chosen.

  • A conservative estimate for closing costs and fees is 5% of the loan amount. For example, closing costs and fees on a mortgage of $100,000 are approximately $5,000. If you have $20,000 to put down, you can afford a home of about $115,000.

  • Lenders limit the amount of your gross monthly income that may be dedicated to your monthly mortgage payment, also known as "PITI." PITI includes Principal, Interest, Taxes and Insurance. Typically, PITI cannot exceed 28% to 29% of your gross monthly income. Furthermore, PITI plus other long term debts cannot exceed 36% to 41 % of your gross monthly income.

  • You need not pay off all of your long term debts before applying for a mortgage loan. If the lender's long term debt ratio is 36%, and the lender's housing expense ratio is 28%, then long term debts, such as car payments and credit card balances, can equal up to 8% (36% minus 28%) of your gross monthly income before negatively impacting the loan amount for which you qualify.

  • The Loan to Value (LTV) ratio is the ratio of the mortgage loan to the contract price of the home. If your LTV ratio exceeds 80%, most mortgage companies require Private Mortgage Insurance (PMI). This PMI insures the lender against possible losses should you default on the loan.

  • For a loan program with down payment requirements less than those required for a Conventional loan, consider a Federal Housing Administration (FHA) loan.

  • New-home builders will often not negotiate on the base price of a home, because the base price will impact the appraisal value of subsequent homes the builder sells. But the builder often has room for negotiating the options and amenities that are included in the base price.

  • A home sold without a REALTOR® may not be lower in price. Sellers taking on the difficult task of marketing their own home are usually trying to save the cost of the commission for themselves, not for a buyer.

  • Pre-pay principal on a loan to reduce the total amount of interest due. If you wanted to pay off your loan in 15 years instead of 30, simply add one extra principal payment per month with your usual mortgage payment. This strategy can ultimately save you many thousands of dollars of interest over the life of the loan.

  • Verbal agreements may not be clearly understood by all parties in a real estate transaction. Put everything in writing.

  • Points paid for obtaining a mortgage on a principal residence are considered interest, and are therefore deductible. Even if the seller pays the points for the buyer, the buyer can deduct them as long as he/she has at least that much invested in down payment or other closing costs.

  • Three housing costs are tax deductible in the year of purchase:
    1. Discount points (even if paid by the seller)
    2. Mortgage Interest
    3. Property Taxes

  • Useful equations to help you calculate the adjusted basis and gain on the sale or purchase of a home:
    Basis = purchase price + purchasing expenses
    Adjusted Basis = basis + adjustments - deferred gain on sale of previous residence
    Amount Realized = sales price - selling expenses
    Adjusted Sales Price = amount realized - fix-up costs
    Gain = amount realized - adjusted basis


  • Rules of thumb: Percentage of purchase price needed to buy a home:
    Conventional Loans: 8-10% (includes 5% down payment)
    FHA Loans: 6-7% (includes 2.25% down payment)
    VA Loans: 3-4% (no down payment required)

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    TIPS FOR SELLERS:

  1. Reduce Clutter. A neat, organized house looks larger and more inviting than a house that has furniture, toys, and debris everywhere.

  2. Clean. Not only should a home be spotless, it must smell clean.

  3. Make minor repairs. Making repairs, even small repairs like lubricating squeaky hinges and fixing dripping faucets, can add up to a big difference in the way a potential buyer views a home.

  4. Make sure all lighting fixtures work and put in bulbs with the highest wattage allowed for each fixture. Illuminating rooms with as much light as possible will make them seem larger and more appealing.

  5. Make the front entry as pretty as possible. A coat of paint on the door; brass accents such as house numbers and a doorknob; and pruned bushes and blooming plants can help make a good first impression. It is important that prospective buyers like the home before they see the interior.

  6. Exterminate. One bug, dead or alive, can make a bad impression on a buyer. Be sure to allow time for the smell of pesticide to disappear before showing the home to potential buyers.

  7. Carpeting has a major impact on the look of a home. If the carpeting in a home is worn, outdated, or stained, you should consider replacing it. The investment will pay off by making the home more attractive to potential buyers.

  8. Make arrangements for pets. If at all possible, keep pets and pet odors away from the attention of buyers. Most people are desensitized to the odor of their own pet(s), but it is common to notice that a pet has been present in a home, even in a vacant home.

  9. Take a picture of the home at its best. A home that is surrounded by lush flowering plants in the spring may look dreary in the winter. A photo can show buyers the true beauty of the home.

  10. If the house has a deck, patio, porch or other outdoor entertainment area, make the most of it. Keep these areas clean and clutter-free. If the home has a pool or hot tub, make sure it is sparkling clean.

  11. Don't overprice your property. Some sellers want to set an original asking price that is unrealistically too high, believing that they can lower the price if they don't get any offers. But a property that is initially overpriced may "turn off" a prospective buyer. In most cases, serious buyers don't make offers on homes that are priced too high for the market. Some buyers shy away from making a low offer on a property because they don't want to offend the seller, never knowing if the seller really "believes" that their list price is fair, or if they are just "testing" the market. Also, many buyers will not return to a house once they have rejected it, even after a price reduction.

  12. The old adage of location, location, location falls short of identifying the three main factors that realistically determine a property's desirability. More accurate is location, price, and condition. Location is a factor that cannot change (unless a house is physically moved). In general, however, if a property is priced right and shows well, it will sell. If it is overpriced and does not show well due to cosmetic factors, it may sit on the market and not sell.

  13. Remove any furniture that tightens spaces or makes a passage look small.

  14. Remove family pictures. Prospective buyers want to picture themselves in a home, not the current occupants.

  15. Attention Smokers: In a Chicago Tribune article, The Woolwich, a mortgage bank, reported that 28 percent of buyers would disregard a property if the sellers smoked. The homes of smokers typically take more days to sell and require extra work to get the property ready to show. Besides having scented candles burning in the home, it is best to replace carpeting and repaint, including ceilings. Prior to repainting, wash the walls thoroughly to prevent outcasting (a re-emission of tobacco tars and nicotines).

  16. When showing the house:
  • Avoid having too many people present during a showing. The prospect might feel like they are imposing, and will hurry through.
  • Be courteous, but don't force conversation with the prospect(s). They are there to preview your home, not to be sociable.
  • Never apologize for the appearance of your home. After all, it has been lived in.
  • Don't tag along with the prospects when they are viewing the home, especially if they have their agent with them.
  • Open all blinds. If a prospect walks into the room and the blinds are closed, their view is limited to a dozen or so feet. But with the blinds open, their field of view extends into the yard.
  • Turn on all lights, even those in closets and the garage. More light makes a room not only seem larger but also easier to appreciate. Searching for a closet light switch in a dark closet is a distraction.
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    TIPS FOR HOMEOWNERS

  1. Have your air conditioning unit and furnace serviced at least twice a year (just before the summer, and just before the winter)

  2. Have an evacuation plan in order so that you will be prepared in the event of emergency (i.e., fire)

  3. For information about mold, check with reputable sources such as the Texas Department of Insurance’s Mold Resource Page (www.tdi.state.tx.us/commish/mold.html)

  4. Quick fix for carpet cleaning: Even before hiring a carpet-cleaning company, you can first try these steps to make your carpet look new and fresh. First sweep the carpet with a broom, which will make the nap stand up and loosen the embedded dirt. Secondly, vacuum the carpet. You should see a noticeable improvement just from taking these two steps. If you need to neutralize pet odors, mix one cup of Borax with two cups of cornmeal and sprinkle the carpet with this mixture. Let stand one hour, then vacuum.
  1. A pro-pets policy for rental housing nearly doubles the pool of potential tenants (TEXAS REALTOR Magazine, November 2001)

  2. If you ever have a questionable applicant for a rental unit, have them provide you with a copy of their credit report as a requirement for approval. Some will not take the initiative to get a copy.

  3. If you live near your rental property, go by on a monthly basis to change the air conditioning filter yourself.

  4. Offer a referral fee of $50 to $120 to your good tenants to help you fill your vacancies. Good tenants tend to know other responsible tenants.

  5. Do your own maintenance repairs whenever possible. Fees from maintenance companies can eat away at your profits.

  6. Use qualifiers in your advertising. Writing "no pets" or "non-smokers only" in your print advertising will save you time when screening tenants.

  7. When leasing to two or more unmarried adults, make sure to get a family contact for each one, and call those family members to confirm their phone numbers and mailing addresses. That way, if they skip out and fail to leave a forwarding address, you'll have an address to which to send any mail that you'll want them to receive. A relative will likely forward your mail to them.

  8. If possible, collect initial rent and security deposit from new tenants in the form of certified funds (e.g., cashier's check, money order, cash). Or, if accepting personal checks, cash those checks prior to move-in.

  9. Consider carefully any prospective tenant who wants to pay part of the deposit or rent upon move-in, and another part later. The issue is not whether or not they will actually pay the latter part of the deposit or rent. Rather, tenants who move in needing help show financial weakness. If they are weak at the time of move-in, they'll be more likely be weak a some future point when they have excess or unexpected expenses (e.g., car repairs, medical bills).
  1. When meeting a potential client for the first time, you have approximately seven seconds to make a first impression (Texas REALTOR Magazine, November 2001).

  2. OPTION FEES: Current sales contracts provide for an option period in paragraph 23. When submitting an offer to purchase on behalf of a buyer, the agent should submit the option fee along with the written offer to the listing agent or representative of the seller. According to Ron Walker, Chief Legal Counsel of the Texas Association of REALTORS, if an agreement is completed (i.e., an effective contract) before the option fee is paid, there is no option, but the legal contract is still binding. The seller may still accept the option fee after an executed contract, but doesn't have to. The language in paragraph 23 of the contract is that the buyer "has paid" the option fee, not "will pay." Therefore, the option fee SHOULD NOT be delivered to the title company, and the option fee SHOULD NOT be delivered to the listing agent after an effective contract. Instead, the option fee SHOULD be submitted along with the offer.

  3. A 1998 NAR study shows where real estate customers come from:
    • 31% through acquaintances
    • 20% from referrals
    • 19% from past clients
    • 12% from agent contact
    • 8% from newspapers
    • 7% from signs
    • 2% from magazines
    • 1% from radio
    It is interesting to note that 85% of marketing dollars for most companies is spent on the bottom four items (Texas REALTOR Magazine, November 2001).
  4. Conduct a careful visual inspection of each property you list or sell, and document any problems or defects you find.

  5. Recommend a prelisting home inspection for sellers

  6. ALWAYS encourage your buyers to get a property inspection

  7. Don't operate outside your area of expertise. Recognize when to ask for professional help from an attorney, accountant, contractor, etc.

  8. Remember the Four D's:
    • Decide whom you will represent in a transaction
    • Disclose to all parties
    • Document in writing
    • Do what you say you will

  9. For your listings, don’t be afraid of offending a seller if the colors or other cosmetic features in their home are outdated. They need to know how prospective buyers will view the home. If the sellers remodeling budget is limited, help them realize where they can get the most value for their buck. It may be wiser to repaint a child’s yellow bedroom rather than replace an old dishwasher.

  10. For a postal direct marketing campaign, a two percent response rate is considered good, and a one percent response rate is considered acceptable (Real Estate Business, Nov/Dec 2001).

  11. The Third Party Financing Condition Addendum provides for a maximum amount of Loan Fees that a buyer will be obligated to pay relating to the buyer's financing condition. The definition of Loan Fees is found in the Buyer's Expenses section of paragraph 12 of the TREC contract form. The possible fees to be considered to determine the total value of Loan Fees are loan origination, discount points, buy-down and commitment fees. Remember that the buyer is not obligated to pay any more than is specified in the addendum. If the total Loan Fees exceed the stated amount, the contract could be terminated.
  12. Ideas to expand your business:
    • Hire a personal assistant
    • Invest in real estate by buying rental property
    • Call all prospects at least monthly
    • Pass out your card more and introduce yourself to more people
    • Keep in contact with those that give you referrals and update them on their referral
    • Hold open houses for my or others' listings
    • Give "How to buy" seminar
    • Teach a "Home Buying" class at the local community college
    • Send flyers to apartment renters
    • Meet in person with new referrals
    • Place ads in newspaper for properties
    • Walk door-to-door in neighborhoods to meet the occupants
    • Get more familiar with local Homebuyer's Assistance Programs
    • Mail letters to local house renters
    • Contact corporate relocation departments
    • Sponsor little league sports team
    • Host cable tv show
    • Host call-in radio show
    • Offer consulting services
    • Become a loan officer too
    • Coordinate a charity event
    • Place a roadside billboard
    • Pass out company t-shirts
    • Send cards to prior buyers on anniversary of their closing
    • Use Microsoft Powerpoint to prepare slide shows for buyers & sellers
    • Get a college degree in a field that would compliment business in real estate
    • Distriute a videotape of yourself giving speeches about real estate
    • Publish a periodical newsletter for your neighborhood
    • Create a personal brochure
    • Co-op with non-real estate professionals to create a flyer

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© 2001, 2006 - Robert Milton Underwood, Jr.

Robert Underwood is the licensed Texas Real Estate Broker of real estate company Underwood Investments