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New Construction vs. A Resale: Pros and Cons

Hello again friends, followers, readers and such—

It’s been a while since my last blog post and I thought now would be as good of a time as any to discuss the pros and cons of buying a new home in the Austin market…as I have 6 clients under contract for new homes…crazy. Some close next month, some as far out as 2018.

First off, when I say “new” I am referring to a brand new build, no one has lived in prior. And when I say “resale” I am referring to homes that have had at least one owner {example: a resale home is like a used car}.

NEW CONSTRUCTION-The Pros and Cons:

Timing Pro: If you have no lease and time is not of the essence for you, then perhaps waiting for your home to finish up works out nicely. How long can a new home take? Totally depends on the builder and complexity of the home and when you entered in on a contract.

Some builders already have pre-chosen floorplans, finishes etc, which makes the build process slower and some builders let you pick everything from start to finish. Always add on time from the builder’s original date of completion, there are always delays to account for! Always!

Timing Con: Almost always does a new home take longer than the originally projected date at contract to completion. I have had some instances where past clients have slept on different Air Bnb’s, had to pay exorbitant month to month fees on their lease due to delayed construction. It is something to be aware of, and it is honestly something that is not in the buyer’s control (which can be even more frustrating). Rainfall and labor shortage are often the biggest reasons for delays in this market….or so we are told. For example, I have clients building a DR Horton Express home. In late January we were told the completion date would be late March, then next update was mid April and now it is May 17. Be prepared to be flexible when building a new home!

Brand New Feels Pro: Having something move in ready and clean and just how YOU want it certainly has its perks. You picked the backsplash and the layout and maybe even the lot. You don’t have to put up with someone’s lack of maintenance to the outside, old windows, an HVAC that’s about to break, etc.

Brand New Feels Con: If you are one of those people who like more charm and character, a new home may not be the one for you. Or perhaps if you prefer to be “closer in” and within budget–a resale just may be the way to go to get both of those check boxes, but you will sacrifice in this instance maybe your desired finishes or taste. Some funky flooring you would have never chosen or an odd master bedroom layout. But again no home is perfect! You want to aim for a home that has 85% of the things you desire.

Warranties-New Construction: New homes usually have a pretty decent warranty. They will vary among builder, however the most common for production builders is called a 1-2-10. Which means the first year they’ll come in and do touch up’s, cosmetic issues, address things that may have broken or chipped away etc. The 2yr part of the warranty covers systems-HVAC, dishwasher etc (and most the time you can register for an extended warranty on your new home appliances). And lastly the ten year covers structural–if anything happens to the foundation/exterior the first ten years it falls back on the builder to fix.

Warranties-Resale: Resale homes also offer a home warranty. In the contract the seller pays for a one year home warranty for the buyer. You can put anywhere from $0 to $450 (about average) in the contract and the buyer chooses the home warranty they’d like coverage from. Some feel that home warranties are a “rip off.” And I will admit, sometimes they don’t have the best situations: Let’s say the HVAC goes out–well, often times the home warranty company covers all of the HVAC with the exception of a few parts. It just so happens that the parts that aren’t covered by the home warranty are traditionally the most expensive and parts that go out the most. However! There are many times when my clients have purchased a home warranty and had dishwashers fixed, leaky faucets repaired, among other items and that’s nice to have that covered right after moving into a home.

CONTRACTS for New Construction: The main point I tell my clients when they buy a new home is that builders have all the rights in a new home contract (for the most part). If you read most builder’s contracts it basically states–we can take as long as we want to build your home. If we finish early, you have to close that month, if we close late, we aren’t paying your late fees your apartment changes and you are still under contract with us. There is usually no right to rescind in a new home contract and no option period or 48hr policy to get your money back once you have put in the deposit and signed. In most cases the contract states– in the 6mo you are under contract with a builder and you lost your job and could no longer get financing–the builder has the right to keep your deposit. Some builder contracts state if the property doesn’t appraise, the buyer must make up the difference. This is important and something you should know before signing on the dotted line, it can be risky. Now, do the builders want to take forever to build your home or keep your money if something were to happen to your family? I’d like to say no, but I have seen specific situations with my clients and they can go either way.

When you purchase a resale–the buyer has many rights to cancel the contract, but the term is on average a 30 day process. The buyer has a deposit to pay (earnest money), however if they should cancel the contract post inspection or for ANY reason within the option period–which can be anywhere from 5-10 days, that money is returned to the buyer. There are several “outs” for a buyer on a resale contract that pertain to documents getting to the buyer in a timely fashion, etc.

INSTANT EQUITY?-New Construction Pros: For many people who buy in a neighborhood early enough, where there is projected growth {lots of plans for more homes i.e phases 2 & 3, projected job growth nearby or a new school coming in, commercial space coming or already existing up the road etc.} the perk often times are prices usually only rise in a new home community in Austin. There are lots of incentives that come into play when you purchase early and at the right time. Incentives vary, but being the first home on the block, staying put for a few years, you will definitely see value and equity fairly quickly, especially in the Austin market. I have seen it with several clients in a little as two years. My clients purchased, the neighborhood built up, opened a second phase and my clients didn’t have to do any particular upgrades and still ended up profiting after fees when the sold their home. This does not ALWAYS happen, but buying early has its advantages.

“Top of the Market”-New Construction Cons: This isn’t as common, but at times when you are the last person to purchase a new home in a neighborhood that has been building for a while you may be paying more than the other homes sold, naturally with market demand. That is due to new homes starting competitive and low, and as demand picks up, pricing increases sometimes weekly and incentives are given and taken away depending on how many contracts a builder has, etc. Usually one of the last homes to sell in a community is the model, and those are more expensive because they are decked out with upgrades. Appraisal issues can arise in new home subdivisions as well For example–when you are one of the first large homes with upgrades being built, if not enough homes have sold before yours, an appraiser doesn’t have much to compare yours to, therefore the value comes in lower than what you are paying–despite future floorplans selling for higher. I have seen this happen several times with new construction–they typically occur with VA loans (who have more strict appraisers) as well as those who use a credit union or lender not familiar with the community, unfortunately.

PRICING PROS and CONS: In real estate there are always some sacrifices you have to make. Price, location and size/layout are typically the big three. Some see new home’s pricing as a great deal due to the space you get, the fact everything is brand new, yet typically sacrifice location if you are moving further out where Austin is expanding. For a brand new home in a popular Central Austin neighborhood, for example 78704’s Travis Heights or East Riverside next to Lady Bird Lake, you are getting a fantastic desired location or an area with projected growth, but some sacrifices may be size or price–but again, you are getting a brand new home, so typically the cost per square foot will be much higher than something built thirty years ago. My main advise to all my clients who are looking to buy is to first get pre-approved and know what you want to spend. Secondly, start looking online, visit open houses, then perhaps visit new home models. From there, you can make a decision of what you like the most.

Now, I got this question the other day, so I thought I would clarify a few myths/misconceptions:

1. In Tx an agent doesn’t help you buy new construction homes, right? No. Clearly, like I stated above, I have helped many people purchase brand new homes. The ones who usually are not licensed are the sales agents who work for a model home. Some do have a Tx real estate license, but most are trained by the builder to sell the homes they are building. Just note, in Tx if you don’t sign a buyer’s representation agreement with a real estate agent, then technically the Seller is represented.

2. If I don’t use an agent to help me buy new construction, can I save on the sales price since now there is no commission to be paid to an agent? No. A builder has already set in their budget their cost of building, marketing fees and cost of doing business. I have quite a few friends who work for builders and sell new homes, they told me–in a town like Austin with over 5k agents, the last thing a builder wants to do is gain the reputation for cutting Realtors out of deals. BUT the most important thing to note is that if you purchase a new home with the sales agents who works for the builder, you now have NO representation. No one to go to bat for you when things are delayed or you are trying to get your money back or something was installed incorrectly in your home.

Here are some great communities where you can find my clients have a contract with a new home builder:

East Shore by David Weekley

Woodland Park (Georgetown) By Century Builders

Pioneer Crossing by DR Horton

Edgewaters (Pflugerville) by KB Homes

South Shore Pointe by InTown Homes

Colorado Crossing by Lennar Homes

 

 

 

 

 

 

 

 

Adventures of Air BnBing

As some of you know, if you follow me on Insta and the like…I bought a home this year.

I had no intentions of getting a roommate really (I have lived alone for so long, there sure are a lot of perks to living solo!) But then a friend of mine was relocating down here, so I said she could stay with me until she found a new job.

Welllll, her home hasn’t sold yet (Sorry Amber!) so in the meantime I thought–hmm. I should put my house/room on Air BnB and see what happens.

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Well, a lot has happened, actually. And here’s my experience…In a nut shell.

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A: Aren’t you afraid of getting murdered or someone stealing your stuff??

Q: No, not really.

If you know me, I am pretty trusting aka naive-whatever adjective you prefer. I approve who stays by seeing their profile photo, their reviews from other hosts, how long they have been a member and how many verifications they have. They pay a $500 deposit (this can be altered based on the reservation) if something were to happen and I make a claim within 48hrs, however most people are visiting and just need a place to crash. To be honest-I think the kitchen has been used maybe four times since I started renting it out back in October.

Q: Don’t you have to have a permit or something in Austin?

A: Yes, yes you do.

You can find the STR permits here on the City of Austin website. FYI they are still issuing permits for people who are the primary resident, but if you own an investment property and don’t have one yet-I hear there’s a wait list until 2017, but that may be hearsay. Because I live by the Domain, when I checked the map, mine was in the area AND there were 46 permits left-so I was golden.

Q: How much do you make off Air Bnb?

A: It varies, really.

December I only made around $350, but I also didn’t feel like renting out my space, I was swamped with work, holiday crafts and hosting my own friends. However, in November because I was gone for 10 days I rented out my home three different times, paid a friend to check on it in between guests and change sheets (what a peach!) and rented out the bedroom here and there-that month I made $775!

Q: So, wait-you rent out a bedroom WHILE you live there.

A: Yep.

Again, I like people, I don’t mind it. I like giving people tips on where to go and what to do. If I get the creepy vibe–(which I haven’t yet)–I have my own office, my own huge master with attached bath, so it’s not like we are on top of one another. And again, I have found most my weekday guests are contracted to do work, they’re gone all day as I work from home most the day. Then when they come back to the house in the evenings, I am usually showing properties, at the gym, grocery shopping our eating with friends, so I don’t see much of my guests when they are here.

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Q: Aren’t you worried about your dog?

A: Only her getting stolen.

Everyone loves #GoodGollyMissMollyMaltipoo. I have a disclaimer before I rent it to ANYONE–“I have a dog, she does not shed, she is super sweet, but if you leave the door open she will come in and steal a sock or lick you to death-she is a puppy still. You can feel free to play fetch with her and pet her or just ignore her.” I think after people check out they like her more than me, but Molly has never had a bad review, thankfully. Once, a guest got to my house before I did, I texted him asking if everything was ok. He texted me back a picture of him on my couch on his laptop and Molly snuggling next to him. Another guy from Louisiana came to stay a few nights. I never say him the first day, but the second evening when I got home he helped me string lights for my Halloween party in the back yard, we talked about everything and he took about 4 photos of Molly and sent it to his wife saying “we need to get a dog like this.” haha. I love it and honestly I think it is good for her! She is so social and loving. Ever since installing the doggy door-that is a nice big help too!

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(I know, I am ridiculous, but how can you not like that lil fur ball?)

Q: You are a single female and you rent your spare room to men? Are you nuts?

A: I do. And maybe?

I didn’t want to at first, but truth is, more of them are traveling for work. I usually get a “they aren’t a murderer” vibe and check reviews, then rent to them. I once got an inquiry from a guy to stay a few days and he didn’t have a photo nor reviews. I wrote him back and said, “I am sorry at this time I do not feel comfortable renting to you but best of luck.” It’s as simple as that. And honestly, I didn’t have to even write him. I could have just hit “decline.” But maybe my note will make him realize he needs to get a profile picture and more on his profile! He did write me back saying he had two daughters and he understood.

Q: Do you have to keep your home all clean?

A: It helps with reviews.

The good news is renting out the room and house to various people helps keep me in check. I do keep cleaner, but I like it! I will say renting out your home before you leave on vacation can be a bit extra stressful. Laundry, packing, making sure biz is covered AND cleaning up house, taking out trash, leaving directions, re-making beds and locking up my items–it’s a lot to do.

packing stress

 (This isn’t me, but let’s pretend it is. Thanks Google images-a girl stressed from cleaning and packing, like me…before a trip)

Q: So, you let strangers sleep in your bed?

A: Yeah, it’s not that weird to me.

Not in my sheets though. I bought some extra sheets, blankets, pillow cases and throws for my guests and so I can keep my own for me. I installed a key lock on my master closet, office and pantry (hey, can’t have the guests getting into my Tito’s), with that I keep valuables, my sheets, work stuff, and for some reason toilet paper and paper towels all locked up (hey I can’t have them stealing more than what they need). I realize some people think that is weird, but ever stay in a hotel? Remember your dorm room mattress? Wonder how many people slept in that thing before you…

Q: Do you have to pay taxes on the money you make?

A: Yep!

If you rent out your home for more than 14 days in a year you do have to pay taxes. I fortunately have a CPA, she told me to save ALL my receipts related to the rental. I am already used to paying a shit ton of taxes, so this is nothing new. I keep track of my Tuesday Morning and Marshall’s purchases (where I buy all my bath towels, sheets, blankets etc). And yes, sometimes I go there just to buy guests items because shopping for home stuff is fun.

Q: Any bad experiences yet?

A: Actually, nope!

I went to a short term rental seminar/class a few years back and a I picked up a few pieces of advice that I use(d).

  1. I keep the house really clean upon arrival, fresh sheets, vacuum, clean dishes, dusting even.
  2. I personalize it some but not fully. {For example: If you were renting my home you’d know what I look like, where I traveled and see a few family pics. You will not find the pics of me partying, with my friends on a boat or at ACL–I take those down. Reason being, people tend to respect someone’s space when they get a feel for who they are/what they are like and that someone lives in the space, which I already make known in my replies to an inquiry
  3. I leave little notes for my guests everywhere! {Notes such as “help yourself to anything in the fridge but eat at own risk!” or “feel free to use any travel toiletries in bottom drawer, extra blankets and sheets are in trunk in living area.” I also instructions on how to use the remote/ TV in living area, reminders to turn off back patio lights, etc. I also write a note to the guests when I leave wishing them a good time, etc. with my cell in case they need anything. I think it helps.

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Q: Do you use professional photos or anything?

A: They aren’t “professional” per say.

I used my camera and flash one night after having the place all cleaned up. I took a bunch of photos and used those, then if I set up an air mattress or something I take a photo and add to the folder. It’s been a slow and steady process. The more you have, the more likely people are to stay with you. I also have photos of things near my home (Domain, metro, etc) and I used the fact it was on HGTV as a selling point!

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domain2

 

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Q: Isn’t it weird having people use your stuff-has anyone taken anything?

A: Not that I am aware of.

I could eat my words in the future here, but it’s just “stuff” at the end of the day..then again my place isn’t super decked out in anything crazy expensive or nice, but things are things and they can be replaced (some of them anyway). Would I be upset if something happened? Absolutely, but I try not to focus on the bad and the “what if’s.”

Q: What about home owner’s insurance?

A: I spoke with my insurance agent, I am good.

I heard crazy stories and started thinking absurd things that could happen to my house while out of town…so I gave her a call and between that, the Air BnB policy and the fee I charge to hold for damages etc, I am good…maybe not totally covered if something crazy happens, but are we ever in life??

Q: How do they get in once in Austin?

A: We keep in touch, but I usually shoot instructions over just once.

After you accept them as a guest on Air Bnb you then have their phone number etc. I usually text or keep messaging through the app, but I have a key pad on my door. The code will get them in the door and then I have a spare key once here in case that doesn’t work. I really want to get the new August locks. You can get in with your phone, it is bluetooth and I can easily change the code when I want, I don’t have the best method right now. But I do have an alarm.  I also have a Nest so I can monitor thermostat from my phone (not that I would change it on my guests, but good to see!)

August locks

Q: How do you know what to charge?

A: Honestly, Air BnB has some suggested pricing, so I typically go by that.

After the first three guests stayed with me they had all made comments about my place being nicer than other places they stayed and how I should charge more. So I bumped up pricing a few bucks here and there and then I definitely increased it for heavy weekends like SXSW, ACL etc. Sometimes if I have an inquiry for a weekend that I wasn’t planning to go out of town (ie graduation weekend in May) you can write them back a “special offer.” It has worked for me twice now. I explain why I want more and that I am still cheaper than a hotel. Boom, Booked. Maybe those are my real estate negotiation skills coming into place

Q: Where do you stay when your home is rented out?

A: Well, I stay with friends or I am out of town/the country.

I will say I stretched myself last year (weird, I never do that–sarcasm) thinking it wouldn’t be a big deal to crash with friends for a few days. I even worked out a deal with my best guy friend, offering him a cut when my place was rented and I could crash on his couch. After the second weekend rental I decided that’s no way to live! What was I… 22? I felt like I was burdening my friends and living out of my car and it’s not like I was making a mortgage payment in two days or anything. In fact, a cold front blew in one weekend and I had to go back to my house to get the right clothing, fortunately my guests didn’t care. So, my new 2016 method: Only rent the house on weekends I plan to go out of town and keep my calendar up to date. Which is difficult. I already have it rented out two weekends where I have no plans to leave town (but all the more reason to book a weekend trip, right?!) I will say it was really nice in November when I was in Central America getting Air BnB texts that money was being transferred into my account and my friend telling me the home was spotless. Yay!

Q: Are you planning on using Air BnB as a traveler?

A: Absolutely!

I find having a bunch of reviews, as a host or traveler is beneficial. I had inquired about a condo in Tahoe, asking a question and the woman approved me off the bat, so that helps. Portland, Seattle and Vancouver I used Air Bnb and I really enjoy staying in the neighborhoods, visiting local spots in the area, it can be better than staying in a hotel downtown (and cheaper) depending where you are going.

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(the darling neighborhood we stayed in Portland, on Air BnB)

Overall Air BnB has been a positive experience for me, but I also enjoy meeting new people. Some people are so nice, text me on their way in “do you need anything, I am grabbing ice cream.” And leaving nice little notes in my little notebook I have on the entry table. I like to talk to people that travel, see where they have been (though most aren’t that far away and looking for a little getaway) and I want people to enjoy Austin (but please don’t move here, haha). I like to tell them where to go, what to do and I recommend Localuer to them as well, as I like to travel. Is it always the most convenient? Now, at times I remember I have a guest and can’t blast the music as I get ready in the morning, or I tip toe in late at night so my shoes aren’t loud on the wood floors, but in the grand scheme of things, it’s been good to me. It’s like the perks of having a roommate sometimes, without having a full time roommate-it’s pretty awesome. They pay you. They aren’t home all the time, they typically leave it pretty clean, never use the kitchen or WD and have loud music playing etc. and you only have them in your home when you want them. I’d say it’s a pretty sweet deal!

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(Localeur logo–which actually was created before Air BnB updated their logo, FYI).

I can’t really think of anything else I haven’t covered, but if you have any additional questions-feel free to ask, PM me or email me (AshleyBrinkman@gmail.com)

Austin by the Numbers

I went to a really interesting and fun meeting today with the Platinum Top 50 Finalists and Winners. It is nice to be in a room filled with successful people I look up to and can learn a lot from.

We floated around the tables and had 15minutes to discuss various Real Estate topics.

One round we were given 10 questions, “How well do you know Austin” …I was shocked, our table did not fair well, actually not many of us in the room did -how embarrassing, we are Realtors! (but I blame it on the numbers being very close to choose from, ha)

Below are some of the things I learned and wanted to share (and a few pop quiz questions for you as well)

Austin by the Numbers: General information on our parks, demographics and more…

  • In the Austin metro, 40% of adults have at least a bachelor’s degree, compared to 29% nationally, putting Austin in the top 10 among the largest Metros!! (Woohoo, go college!)

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  • Austin area households enjoy diverse options in education, including 29 public school districts, 17 charter schools and over 100 private schools

 

  • The Council for Community and Economic Research indicates that living cost in Austin are 6-7% BELOW the national average (in 2013…ha wonder if that has changed these past two years!)

 

  • The National Association of Realtors reports that the median home price in Austin was $222,900 in 2013 while the national median was $197,400

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Here is one for YOU! (don’t cheat!)

  1. According to the census metro Austin’s population grew to nearly ____ in 2013 and is expected to reach ____ by the year 2020.

A. 1.7 million/ 2.0 million

B. 1.8 million/2.2 million

C. 1.9 million/2.3 million

D. 2.0 million/2.6 million

  • In 2013 the median household income in Austin was $61,750 compared to $52,250 nationally
  • The Parks and Recreation Dept. operates 12 off leash areas for you to enjoy with your dog and 2 skate parks

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Another one for you:

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  1. City of Austin operates 50 public school facilities, which includes _____ neighborhood pools, 3 wading pools, ____ municipal pools, 11 splash plads, 1 rental facility and Barton Springs Pool

A. 20/ 14

B. 23/11

C.24/10

D. 28/6

(answers to quiz Qs at very bottom, don’t cheat)

  • Over 19% of all residents in Austin live in poverty–according to City of Austin’s annual (2014) Economic Development Report (this makes me sad, and is a hot item we talk about here in Austin)
  • 19% of Austinites are foreign born
  • The city of Austin owns 6 golf courses and one short practice course all focused on a great golf experience at an affordable price.

As always thanks for reading! wink, wink!

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Answers to the above quiz: 1.) C 2.) D *Did you get them correct?*