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And if we can’t find the great deals, we think we can create them with a wonderful thing called the “lowball offer.” Now, technically there is no real definition of what constitutes a lowball offer, except that it’s low ofcourse. In the market that I’m used to working in (Greater Austin), anything more than 10% off a reasonable list price is considered a lowball offer. I say “reasonable list price” because there are plenty of agents who list their homes way to high, just to get the listing, and an offer of 10% off list price would actually put the home at market value!
Well, the question that you have to ask is: Is it worthwhile for a buyer to pursue this strategy for their next home or investment?
I received an email from a client regarding this very thing and I wanted to share my response with my readers:
I know this sounds bad…but given the market conditions and how many houses seem to be going up I want to buy something for what I consider a steal…I am sure there may be buyers in front of me but I figure what the heck I might as well try. We really are happy renting as we will be moving in 2 years for sure into Austin and will turn it into a rental property or sell it. I guess I would be willing to lob bids in on properties in the $125k area for sellers that are desperate. Tell me if I am wrong but, from what I have read, I think that should be doable if I am patient, and like I said I am buying for the bargain, not b/c we particularly need or want a house in Gtown. Your thoughts are appreciated! – JW
Dear JW –
Hmmm, you bring up some interesting points.
You’re not the only one wanting to snag a steal…I do too…in any market! However, there is a reason why I, as a guy involved full time in real estate, have never gotten a good as a deal as you’re wanting to get through the lowball method even though I own 5 homes:
1. I’m not savvy enough
2. I don’t have the patience
3. I haven’t been in the right place at the right time
4. I never offered anything that lowball and it got accepted.
I’d say it is a combination of maybe all 4 of those reasons to some degree. However, my goal is to own homes, not make offers, so eventually I need to be able to use the resources I have (time, money, patience, savviness – i know i didn’t spell that right), however limited they may be, and buy something. Not because I need to, but because I want to. For me, it’s better to own 5 pretty good deals, then 1 super great deal.
I don’t know how productive it would be for me to make the 50 offers for you just to get 1 accepted…..especially if I’m not willing to do it for myself! That is a full time job…and I already have one. In my early (read: desperate) years of real estate when I had time to twiddle my thumbs, I helped a lady do this and we made a good handful of offers….in the end, all I did was spend my time and money and she never bought a home. I told myself that in the future I would never do that again. If somebody insisted that I represent them on making lowball offers on a multitude of properties, I could only justify it from a business standpoint if I charged my client for every offer made.
If you’re trying to get a home for $125K and it’s worth $150k, why would the owner lose $25k to you when they can just lower the asking price to $135k (10% below market value!) and still sell it quickly and for $10k over what you’re offering? What you’re trying to do can and has been done….but I haven’t personally been able to be successful with it. Believe me, I’ve tried.
BOTTOM LINE: Value is not determined by how much of a discount you can get off a home. To many lowballers think that if they can get a huge discount off the home, they can brag to their friend’s “I’m da man!” yet really have no idea of the true value of what they bought. I would much rather determine the value of a home and purchase it at a great price rather then feel the need to have to lowball everything in sight. I guess what I’m saying is that you don’t have to lowball (offer a ridiculously low amount) a home in order to get a great deal. Real estate investing is determined by the end result…how many homes you own is more important than how many offers you’ve made. Case in point:
On the market today is a home on 1125 Boxwood Loop in the city of Georgetown, Texas. It’s listed for $157,500 and is 1953 SF. If you are an investor or homeowner, I can help you own this home for probably around $150,000. Is that a lowball offer? No. Is it a great price? Well, let’s just say that it will be the second cheapest home to sell in Georgetown Village since January of 2005 (according to the MLS). I’d say that’s a great deal! Interested? Call me before I buy it for myself.
I got an email from a past client the other day and she was wanting some advice on a small remodeling project:
Hey Edward – I’ve been thinking I might like to make two of our bedrooms into one large one. The bedrooms are very small here. Do you think that would be a mistake if we ever decided to sell? It would make our house a three bedroom instead of a four. – W.T.
I’m sure many of us have considered a renovation project at some point during home ownership. Having HGTV or being inspired by Extreme Makeover: Home Edition has certainly given renovation projects a new twist! Fortunately for W.T., knocking down a wall to combine two bedrooms is an easier project than most. The only question is, “What will it do to the value of her home?”
Well, let’s look at a comparison of ALL 3 bedroom homes with 4 bedroom homes in the city of Georgetown, Texas that sold in the past 12 months:
3 Bedrooms: 453 Sold, 37 currently Pending, 219 For Sale – 5.8 months of inventory
4 Bedrooms: 300 Sold, 20 currently Pending, 244 For Sale – 9 months of inventory
According to the numbers, more 3 bedroom homes have sold and there is less competition. But what about if we narrow the search down to the home’s price range?
3 Bedrooms: 129 Sold, 8 currently Pending, 56 For Sale – 5.2 months of inventory
4 Bedrooms: 68 Sold, 2 currently Pending, 38 For Sale – 6.8 months of inventory
Although the inventory for a 4 bedroom home shrinks from 9 months to almost 7 months, it’s still 1.6 months more inventory than a 3 bedroom home. It’s nice to know that the numbers are on your side, at least in the current market. However, if you’re going to be staying in that home for a long time then I would go ahead with the renovation even if the numbers were not on your side. Why? Well, it’s not like you’re doing something that will turn off a significant portion of the market like converting your garage to another bedroom and having no garage…you’ll also improve your quality of life and get lots of use out of a bigger room. You might even sell your home to a buyer who feels most rooms in a 4 bedroom home are too small anyway!
Quick caveat: In this particular neighborhood, most of the homes that sold in the past 12 months were 4 bedrooms homes. In fact, only 3 of the 23 homes were 3 bedrooms, and the quickest home to sell took 94 days. There’s only one 3 bedroom home (out of 5 homes) currently for sale and I’m the listing agent on it so maybe I’ll break a record:) The big downside of removing the 4th bedroom is restricting your audience to just the 3 bedroom market. The home with 4 bedrooms is able to compete in both markets.
What about you? I’d love to hear from readers about your success or nightmare renovation project! If you think going to a 3 bedroom home is a mistake, tell us why! Would it be better to split the 4th bedroom and make it a 5 bedroom home?:)
Looking for information on Georgetown Texas Homes For Sale? Visit my website or call me anytime!! Want the latest updates on Georgetown Texas Real Estate, news and latest developments? Sign up for the blog by clicking the link below:
Ok, so I’m buying a house: the “cat is officially out of the bag.” I tried to keep it low-key because i wanted to surprise my in-laws. I wanted to wait for them to visit me and find renters in my current home! I would have LOVED to see that! So, I’ll write about this homebuying experience later.
For now…what’s today’s mortgage rate?
I locked my loan for 6.375% because I was told that rates went up today on the 30 year fixed. However, later this evening I was told by another lender that rates went down! So what gives? Like any resourceful, diligent young real estate agent I decided to Google this. I Googled “daily mortgage rate history” and “mortgage rates” to get to the bottom of this.
I found three articles:
This one says that rates are unchanged - http://www.reuters.com/article/gc03/idUSN1043138120080710
This one says that rates are higher – http://money.cnn.com/2008/07/10/real_estate/mortgage_rates/?postversion=2008071013
This one says that rates are lower – http://www.foxbusiness.com/story/markets/industries/finance/bankrate-mortgage-rates-fall-weeks-row/
Can you figure this out? First one to give me an answer gets Starbucks on me…
What sells for $100/SF and higher in Georgetown Village?
Time is just FLYING by this year and I wanted to write about a series of case studies on my own neighborhood, Georgetown Village. One of the most common questions I get asked is, “How much $/SF are the homes going for in Georgetown Village?” This is simply too difficult to answer because the median $/SF would not accurately reflect the value of your own home. For example, since Jan 2007, homes in Georgetown Village have sold from as low as $78/SF to as high as $112/SF! For a home that’s 2000 SF, that is a range of $156,000 to $224,000! The best way to assess an accurate value of your home is not to use a sloppy average, but to call on your friendly neighborhood real estate man (that’s me) and to look at the top 3 or 4 recently sold homes that best match yours.
I was curious to know which homes sold for a premium ($100/SF and higher) and there were 16 that sold since Jan 07 that fit the bill:
Half of these homes are New Construction homes (surprise, surprise). New homes in Georgetown, Texas will naturally have a higher premium stuck to them.
The first and second home on the first row is built by Cobblestone Homes and they are no longer building in this neighborhood. The third home is built by Bowen Homes. Once they finish building on their existing lots, they won’t likely be building in the new sections. The second home on the second row with the turret is built by Rothenburg Homes. They are a smaller builder that has built only 1 other home in Georgetown Village. All of the rest are built by Perry Homes and they have plans to continue building in the newer sections.
Here are the resale homes:
It’s interesting that 5 out of the 8 resales are located on Village Park Drive. What makes this street so appealing?
1. They are within excellent walking distance to the Village Elementary School. You don’t have to cross a single street!
2. All of the homes are 4 sided brick with rear entry garages. Less maintenance and nice curb appeal!
3. All of the homes face a massive park that is kept by the city. All play and no work!
4. Because they have a no-maintenance park to play in, their own yards are quite small…
5. All of the homeowners hire a landscaping company so that their own yards are also maintenance-free. Are these homeowners lazy or what?:)
This street has a lot of appeal to a family that wants a low-maintenance lifestyle, but wants something bigger than an apartment or townhome. The third home on the second row is located on Chestnut Court, which is another desirable, private street located towards the back of the neighborhood. It backs to a “greenbelt.”
All of these homes are built by David Weekley (they pulled out several years ago) with the exception of the last one in the second row which is a Lennar. You won’t see many Lennar’s go for a premium in this neighborhood…it must have been those Brazilian Cherry hardwood floors!
Bottom Line: You can’t make a resale into a brand new home, but you can make it look like one! Make sure you have your home professionally staged and you spend the $1 in repairs to get the $10 in return. Simple things like cleaning your windows, fresh paint and new carpet will help you compete against new homes and command a higher premium.
What can we learn from the resales? Well, it might be a little difficult to create a park in front of your home when there is none, or grow a greenbelt behind your home overnight. I recommend turning your bland backyard into a park-like setting and work on your landscaping. This will also help your home command a higher premium and compete against those that may be adjacent to a park or greenbelt. It will certainly help you stand out against the other homes with bland backyards.
If you’re interested in knowing how much your home is worth in Georgetown Village give me a call! I employ cutting-edge marketing techniques and will put my experience to work for you to sell your home fast and for top dollar!
FREAK – Frequent Real Estate Asked Kuestions
Well, unfortunately, selling a home in Georgetown, Texas is not the same as selling a toy. I just received this letter today from a lady in my neighborhood:
I believe we may have met once or twice in the village and it seems you do quite a bit of work out here.
I own a home in Georgetown Village and have just accepted an offer for a job with my company out of state. Because I’m only planning to be gone for about 2 years I am considering whether to try to rent my home rather than sell. My husband and I built this home and really like the floorplan, etc. so I’d like to hold on to it if it makes sense financially since we anticipate being back in this area in the future.
To help me make the decision of whether to rent or possibly sell I’d like to get an idea of what rentals in the village go for and how cumbersome the rental process really is – from observing the activity it seems many homes have been up for rent and appear to have people in them now. Is this something you can help me with?
Wow, that’s a great question Sarah and you’re certainly not the first to ask it. That’s why I’m posting this in my new Frequent Real Estate Asked Kuestions Category. Ok, I know that’s not grammatically correct and there is maybe just one spelling error, big deal. How else could I make the acronym spell FREAK?
The thing with selling a home is…it’s EXPENSIVE! The costs you have to pay as a seller, although negotiable, are typically around 8% of your sales price! And if you plan on buying a home here in 2 years Sarah, you’ll also have to pay title fees and lender fees…adding up to an additional 2% (minimum) of fees. That means, if you decide to sell a $200,000 home and then buy it again in two years (assuming zero appreciation), you’ve already spent $20,000 just to make the two transactions happen! Good thing selling toys on Craigslist doesn’t cost this much!
Even if that $200,000 home sat vacant for 1 year and the mortgage was $1500/month, you would only be out $18,000! By the way Sarah, rents in the Village average $1200/mo. – $1600/mo.
If you make this decision for purely financial reasons, then it just seems as though keeping a home that you already love is the way to go. Two years goes by quickly. However, like Master Card says, “There are some things that money just can’t buy.” For $20,000, how would you like to:
Wow, I really like #6! Sarah, I hope that helps. Feel free to comment on this blog or call me anytime.