Pending Sales in the Austin region increased 7.2 percent since January 2010 to 1,587 agreements signed. New Listing activity decreased 16.2 percent, which means sellers placed 2,779 new homes on the market. At this rate, they should expect their properties to sell after approximately 87 days. Prices climbed upward. Median Sales Price increased 6.3 percent over last January to $186,000.

Negotiations moved toward buyers as Percent of Original List Price Received at Sale decreased to 91.6 percent. Months Supply of Inventory inched up 3.3 percent to 5.9 months.Interest rates are expected to remain around 5.0 percent and prices are expected to rise gradually in many markets. Although the labor department reported that the seasonally-adjusted unemployment rate dropped to 9.0 percent in January, expect joblessness to remain an issue.

When interest rates with start going up or if lending standards become more difficult, we often get questions about Seller Financing. In some cases, when a real estate market is down, some sellers may have to to provide some or all of the financing to sell their property.

This article will explore some of the risks of first lien seller financing and second lien seller financing.

First Lien Financing: If the seller finances a portion of the purchase price and there is no prior lien against the property, the lien securing the seller’s loan will be a first lien. There are risks in making any loan; however, the risks of first lien financing are relatively low and can be managed fairly well. With a reasonable down payment, properly prepared loan documents, and title insurance insuring the priority and validity of the lien securing the loan, the risk is reduced substantially. As long as the value of the property does not decrease below the amount of the seller’s loan, taxes are paid, and the property is insured, there is little risk of loss because, upon default, the seller can foreclose the liens securing the loan and re-take title to the property. If the value of the property is not less than the loan amount, no loss should occur.

Second Lien Financing: Second lien financing increases the risk to the seller because the lien securing the loan is secondary to the first lien. That means that the seller has an additional risk; he must ensure that the first lien is paid or risk losing the collateral for his loan. Secondary financing is secured by a lien which is second or inferior to a prior lien against the property. If there is a foreclosure of the first lien, the foreclosure will completely eliminate the collateral for the second lien holder. Consequently, a second lien holder can ill afford a foreclosure of the first lien because it leaves the second lien holder with no collateral. To prevent a first lien from being foreclosed, it is usually necessary to pay the first lien in full or bring the loan current. Assume the sale of a $200,000 home with a commercial lender providing $160,000 (80 percent loan) in financing with seller financing of $20,000 (10 percent). If there is a default in the first lien, the seller will have to either pay the first lien in full or pay the past due amount to prevent foreclosure or risk losing the security for his loan. Assume the monthly payment on the first lien is $1,750 and that the loan is three months in arrears when the seller learns of the default. To avoid losing the collateral for the $20,000 second lien, the minimum the seller would be required to pay is $5,250 (plus any attorney’s fees or collection expenses) to bring the loan current and continue to pay the monthly $1,750 while he attempts to foreclose the second lien.

As you can see, these numbers give the seller a very difficult choice to make: either make a substantial investment to protect his collateral or risk foreclosure of the first lien and the loss of collateral for the second lien.

There are two primary ways the seller can reduce the risk of secondary financing: first, require a substantial down payment by the buyer and second, monitor payments to the first lender by (a) requiring the buyer to sign authorizations required by the first lender to give the seller access to payment information on the first lien; (b) requiring the buyer to provide written evidence each month of payment of the first lien note; or (c) requiring payment of the first lien through a third party trust arrangement. There are practical difficulties with any of these methods but they will provide some level of protection.

If a buyer is interested in requesting seller financing or if a seller is offering seller financing and either party is using a Realtor, you can use a Seller Financing Addendum which will spell out the necessary information required to create the lien.

If you are interested in more information about Seller Financing or want a list of homes for sale in Austin offering seller financing please call us at 512-524-6608.

1. Leaving Blanks in the Contract: Failing to fill in the required blanks in a form is really sloppy work and, in my opinion, unforgivable. Take the time to review the final contract before it is submitted and fill in the blanks. If you do not, it can have a number of results. In some instances, it could mean that you do not have an enforceable contract. In other instances, it may be up to a court, if there is litigation over the contract, to “fill in the blank” for you. Neither of those results is particularly desirable and could result in malpractice claims against you.
2. Failure to Date the Contract: Often the times for performance in the contract are calculated from the “effective date” of the contract. If there is no effective date, it can be difficult to compute, with certainty, the time for performance. For instance, the termination option time in the TREC contract is calculated from the effective date. Failure to specify the effective date could result in a buyer missing the opportunity to terminate the contract under that provision.
3. Failure to Complete Required Check Boxes: Both the TREC and TAR forms have extensive check boxes which must be checked in order to make the provisions of a paragraph part of the contract. If the applicable check box is not checked, the provisions are not part of the contract. It is not uncommon to see blanks completed in a paragraph with no check in the box making the paragraph with filled in blanks a part of the contract. This can result in entire applicable provisions not being legally enforceable as part of the contract.
4. No Address for Notice: If the address for notice is not completed for a buyer or seller, it makes it very difficult to give proper notice to a party. For instance, if a buyer desires to terminate the contract under the Termination Option and there is no address for notice, the buyer cannot be certain of the address for sending the notice of termination. This can be especially egregious if the buyer is operating under very short time periods and needs to give notice by e-mail. Without an e-mail address specified, I would be very hesitant to attempt notice by e-mail.
5. Times for Performance Too Short: This is one of my favorite gripes. You should allow a reasonable time for performance of the various due diligence matters in the contract. Unrealistic time periods are unlikely to make the contract close sooner and may cause enforcement of the contract to be jeopardized. For instance, requiring a loan to be obtained in an unrealistic time period or negotiating an unrealistic inspection period can increase the probability that the buyer will terminate the contract. If there is inadequate time to obtain a loan or inspect, the buyer is faced with losing the right to terminate and may choose to terminate rather than lose the option to terminate.
6. Inadequate Legal Description: This is most often a problem on unsubdivided, rural property. The legal description in the contract must be sufficient to identify the subject property as distinct from all other property. A description such as “10 acres out of the Jones Survey in Hays County, Texas” is not sufficient to do that. If the legal description is inadequate, the contract is not enforceable. The best practice for unsubdivided property is to always attach the full legal description obtained from the seller’s deed as an exhibit to the contract.
7. Contracting to Provide an Existing Survey: Contracting to provide an existing survey which the seller does not have or cannot find can result in the seller being required to pay for a new survey. Simply informing the buyer that the seller cannot comply with the agreement to provide a survey does not absolve the seller of the responsibility for providing a survey. Always make sure the seller has a survey before contracting to provide a copy.
8. Improper Use of Special Provisions Section: Be careful of the provisions inserted in Special Provisions. It is easy to over-step the boundary and slip into the unauthorized practice of law. The only provisions which a TREC licensee can insert in Section 11 of the TREC contract are factual statements and business details applicable to the sale. A licensee is specifically prohibited from using this section for any provisions for which TREC has promulgated a specific form.
9. Failure to Include All Required Parties: Failing to require all sellers or buyers to sign the contract can be fatal to enforcement. A seller or buyer who is not listed as a party and who does not sign the contract cannot be required to buy or sell. The problem with not having all sellers sign is obvious. There can also be problems with omitting a buyer from the contract. If a buyer is married and is buying a primary residence and the spouse does not sign the contract, the spouse will not be required to cooperate in obtaining a loan to purchase the property. Without the signatures of both spouses, at least on the mortgaging instrument, the buyer cannot obtain a loan and may be able to terminate the contract.
10. Failure to Enforce Time Limitations: The only provision in the TREC contract for which time is of the essence is the Termination Option section. For all other sections, time is not of the essence. If a party fails to enforce the time limitations specified in the contract, they can be waived and no longer enforceable.

Termination Option in a Real Estate Transaction: Section 23 of the TREC One to Four Family Residential Contract (Resale) gives the buyer the unrestricted right to terminate a contract within what is called an Option Period.

“Section 23 TERMINATION OPTION: For nominal consideration, the receipt of which is hereby acknowledged by Seller, and Buyer’s agreement to pay Seller $____________ (Option Fee) within 2 days after the effective date of this contract, Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within_______ days after the effective date of this contract. If no dollar amount is stated as the Option Fee or if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be part of this contract and Buyer shall not have the unrestricted right to terminate this contract. If Buyer gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any earnest money will be refunded to Buyer. The Option Fee __ will __ will not be credited to the Sales Price at closing. Time is of the essence for this paragraph and strict compliance with the time for performance is required.”

The option money purchases an option period – a specific amount of time that gives you the right to terminate the contract. The option money is usually 10% of the earnest money. Example: when purchasing a $200,000 home, the earnest money is $2,000 and the option money is $200. That “buys” you 10-15 days to terminate the contract – the length of time known as the option period and it’s a negotiable time frame. If you need more time request that when negotiating the offer. It might cost you a bit more up front but will grant you additional “due diligence” time.

All inspections should be scheduled during the option period. It is also critical that you know for certain that you qualify to purchase the home during that period – even though you will have a Third Party Financing Condition Addendum if you need financing to purchase a home you should still do your very best to get approved during the option period. It is your right to terminate the contract for any reason during the option period. If you terminate the contract, you will get your earnest money back but not your option money. You will only get you option money if you purchase the home – it would then be credited back to you as long as you select that option in paragraph 23.

Critical Things to Keep in Mind!

1. “if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be part of this contract and Buyer shall not have the unrestricted right to terminate this contract” You have two days to pay the option fee and get that receipted on Page 8 of the 1-4 Family Residential Contract (Resale). If you don’t pay the option fee you do NOT have the unrestricted right to terminate the contract!
2. If you select to terminate a contract fill out the Notice of Buyer’s Termination of Contract and submit it to the seller during your option period.
3. The option period is the number of calendar days and NOT business days.



Pending Sales in the Austin region decreased by 16.9 percent from last August to arrive at 1,700. New Listings decreased by 9.2 percent since last August and the overall inventory of 13,706 increased by 25.3 percent.

Median Sales Price increased by 5.4 percent compared to last August, registering in at $195,331. Average Days on Market, at 72, decreased by 1.4 percent versus last year. Months Supply of Inventory increased by 11.1 percent to weigh in at 7.7 months.

In the coming months, keep an eye on Active Listings and Months Supply. Slowed sales may increase inventory, depending on listing activity. If listings go down, balance may be found.

August 2010 Market Statistics | Austin Real Estate

check it out Realzi SEO with Dan Price

Take a look at Austin Homes Sale a new site by Prospect Real Estate Solutions, LLC. One of the nice features of this site is that under Austin Links on the home page it has real-time Austin MLS information for the most desirable subdivisions in the area. Example:

Westlake Homes

Great Hills

Circle C

Avery Ranch

Hyde Park Austin

Foreclosures Austin

Austin River Place

Rob Roy Austin

Cat Mountain Austin

Barton Creek Homes

Pemberton Austin

Enjoy the new Austin Homes Sale site and let us know if you need anything. We look forward to helping you.

(Real Estate Center) – Smaller homes, lower prices. That’s the outlook for new home builders this year. In fact, 95 percent of those polled by the National Association of Home Builders (NAHB) say they will do one or the other, maybe both. Rose Quint, assistant vice president for NAHB’s Survey Research Economics and Housing Policy Group, told the media at the 2010 NAHB International Builders’ Show that builders were given a list of 40 features and asked which ones they were likely to include in new homes this year. Here’s what’s hot and what’s not. Items most likely to be found in new homes for 2010:

1. Walk-in closet in master bedroom
2. Separate laundry room
3. Insulated front door
4. Great room
5. Low-E windows
6. Linen closet
7. Programmable thermostat
8. Energy-efficient appliances and lighting
9. Separate shower and tub in master bedroom
10. Nine-foot ceilings on first floor

The least likely items home buyers will find in new homes this year include:

1. Outdoor kitchen
2. Outdoor fireplace
3. Sun room
4. Butler’s pantry
5. Media room
6. Desk in kitchen
7. Two-story foyer
8. Eight-foot ceiling on first floor
9. Multiple shower heads in master bath
10. Smaller kitchen area than in recent years

“Builders will focus heavily on energy-saving features,” said Quint. “Things we thought were consumer necessities — such as granite countertops in the kitchen or home offices — are not on the list.” Also on the chopping block this year are energy-guzzlers like the high-ceiling entryways. Builders hope nine-foot ceilings will give the buyer a feeling of more square footage, which has been reduced. Buyers will be looking for ways to save money. For example, water-saving toilets use an average of 39,000 fewer gallons of water annually for a family of four. That’s enough for a lifetime of drinking water for three people, said Shane Judd, senior marketing manager of water conservation for Kohler. NAHB conducted a consumer survey to compare the wants of older buyers with others.They found that those age 55 and older have a slightly different “want” list in a new home:

1. Washer-dryer in the unit
2. Storage space
3. Windows that open easily
4. Garage door opener
5. Easy-to-use thermostat
6. Master bedroom on first floor
7. Private patio
8. Porch
9. Attached garage
10. Bigger bathrooms

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I often get asked questions about Brokerage Services in the State of Texas and decided to post the “Information About Brokerage Services” document. This form is approved by the Texas Real Estate Commission for Voluntary use and Texas law requires all real estate licensees to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords.

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Before working with a real estate broker, know that the duties of a broker depend on whom the broker represents. If you are a prospective seller or landlord (owner) or a prospective buyer or tenant (buyer), you should know that the broker who lists the property for sale or lease is the owner’s agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker. A broker who acts as a buyer’s agent represents the buyer. A broker may act as an intermediary between the parties if the parties consent in writing. A broker can assist you in locating a property, preparing a contract or lease, or obtaining financing without representing you. A broker is obligated by law to treat you honestly.

IF THE BROKER REPRESENTS THE OWNER:
The broker becomes the owner’s agent by entering into an agreement with the owner, usually through a written – listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner’s agent anything the buyer would not want the owner to know because an owner’s agent must disclose to the owner any material information known to the agent.

IF THE BROKER REPRESENTS THE BUYER:
The broker becomes the buyer’s agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer’s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer’s agent anything the owner would not want the buyer to know because a buyer’s agent must disclose to the buyer any material information known to the agent.

IF THE BROKER ACTS AS AN INTERMEDIARY:
A broker may act as an intermediary between the parties if the broker complies with The Texas Real Estate License Act. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:

(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and
(4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property.

With the parties’ consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under that Act and associated with the broker to communicate with and carry out instructions of the other party.

If you choose to have a broker represent you,
you should enter into a written agreement with the broker that clearly establishes the broker’s obligations and your obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding.