FICO Scores, Part 2

With all the mortgage buzz going on and the lenders new qualifications, it is a good idea that a future borrower understands what they are up against when borrowing money. Most importantly, how good is a 'good' FICO score? We already covered much of FICO scores in a previous blog, now let's talk about the various credit scorings and what it means. This information was obtained from a mortgage lender, who speaks at our meetings regularly.

Think of your FICO score as a report card where 90-100 is Excellent and 75 is Acceptable. This is the speaker's interpretation of the various FICO scores.

Over 750 is Excellent
720-750 is Very Good
660-720 is Acceptable
620-660 is Uncertain
Less that 620 is Risky

If you are a competitive student like I was who always has to have an A, I would make sure I'd have a FICO score of 750. A score of 620 would probably mean I'd have to repeat that class or in lender lingo, they would require additional assets, lower LTV's, and often higher interest rates. Once again, before you seriously start looking at a home, call your lender and get pre-approved. There are no costs involved to get pre-approved, just a few minutes of your time.

Austin's condo market

Downtown Austin is beginning to look like mini-Manhattan to me. When I lived in Long Island, I visited New York City frequently and remembered looking at the skyline littered with construction cranes, scaffolding, newly restored buildings, etc. This is becoming a familiar sight in Austin as developers take a dip in the high-rise condominium projects.

The Austin Statesman (dated Aug. 26 2007) reports that more than 1,000 condominiums units are under construction either downtown or nearby and that more than 3,100 are planned. Soon we will find out if all of the 3,100 planned will be built. Some of the planned projects include:

Lofts on Shoal Creek: 7 stories/91 units
Gables Park Plaza: 15 stories/100 units
Seaholm Plaza Hotel: 22 stories/62 units
Block 51: 35 stories/420+ units
Block 52: 40+ stories/500+ units
W residences (Block 21): 36 stories/196 units
The Austonian: 55 stories/195 units
721 Congress: 6 units/16 stories
Fifth & Congress: 47 units/180-200 stories

And the list goes on. To view more and to keep track of downtown condominiums projects, view the Austin Statesman's site.

Bee Caves Parkway is finally open

Today is a beautiful day for the Bee Caves/Lakeway commuters. The long awaited Bee Caves Parkway which is the new road which connects FM 620 and FM 2244 (or Bee Caves Road) in Bee Caves has finally opened. The 4 lane divided road was added to divert traffic to/from Bee Caves to Lakeway without having to go thru the messy Rte 71 where the new Hill Country Galleria is still under construction. The Hill Country Galleria which is scheduled to open this fall, will be home to upscale stores will have a cinema, Barnes and Noble, Dillards, etc. To view more information or to inquire about leasing, please view this site.

Austin as hottest entrepreneurial areas

Austin has done it again. On August 24th, the Austin American Statesman has reported that according to Inc. magazine, Austin is one of the hottest entrepreneurial areas in the country! 72 Austin companies are listed in the new Inc. 5,000 list of the fastest-growing companies in America. In the list includes real estate giant, Keller Williams Realty International, with $114.3 million in revenue. The ranking of Keller Williams Realty in the list was not reported. Other Austin companies include Sports Clips, a hair salon franchiser with $88.3 million in revenue; the Mercury Mambo adertising firm and Hayes Software.

If you wish to read the complete list, it will be published in the September issue of Inc. magazine.

Seller's should not panic in a buyer's market

Now that the tables have changed and it is a buyer's market in many states, many sellers are worried that they may not be able to sell their home. What should a seller do especially if they really need to move?

First of all, let's understand the definition of a Buyer's Market. How do you know if your area falls under the economists' definition of a buyer's market? The assistance of a good realtor will help you determine if your area falls under this. Your realtor has access to statistics and reports from their market center or their Board. Bottom line is, it is a buyer's market if there are more than seven months of listing inventory. As an example, in area LS (Lake South), 92 homes have sold in July alone. There are currently 1,102 active/pending homes, hence, there are 12 months of listing inventory. Yikes! When a buyer's market occurs, there are many buyer mindsets such as: buyers expect all homes to be sold at a "steal" price; they expect to have an upper-hand in negotiations; buyers ask for concessions from the seller or; they are hesitant to make an offer because they think that the seller will lower the price or a better opportunity will arise.

Sometimes, a buyer's market is created by home seller's or those advising them what price to list their home at. 80% of the homes in a buyer's market are over priced and 20% are well-priced. Those that are well priced are most likely to get into a multiple offer situation. One must price their home within the CMA pricing researched by their real estate professional. If a home is over priced at time of listing and the average days of market increases, once the DOM hits the triple digits, the listing has been considered stale.

If you are a motivated seller, the only two things that matter the most is pricing and condition. Price your home at market value and make sure the condition of the home is pristine. A seller may have to put money on repairs, staging, fresh paint and perhaps landscaping. As mortgage lenders have tightened their belt and increase rates and fees, a seller might have to be prepared to throw in some incentives to help off-set the buyer's closing costs. Like I said above, be better off falling within the 20% of the range than having to sit and wait for the call that it's time to drop the price (again)!

Hot Areas in Austin Real Estate as of July 31, 2007

Based on the reports released by the Austin Board of Realtors, the top 5 Austin residential MLS areas, per my opinion, based on average sold price closest to the list price are as follows: The average price mentioned below is the sold price.

1) Area GTE (Georgetown), closed 102.16% above asking price averaging at $188,725;

2) Area FC, 2 homes sold averaging at $85,250 closed 100.41% above asking price averaging at $190,180.
FC includes cities of Fayette County where there are only 7 residential listings currently in active/pending status;

3) Area N, closed 99.50% under asking price, averaging at $190,180, includes areas North of Parmer Lane, West of I-35;

4) Area 10S, closed 99.42% under asking price, averaging at $177,986 includes areas North of W. Slaughter Lane but South of William Cannon Drive, between Mopac and I-35;

5) Area 1N, closed 99.02% under asking price, averaging at $279,832 includes areas North of 360, South of McNeil Rd., between Bull Creek Road and Rte 183.

I was afraid you'd ask which Austin real estate areas are selling far below the asking price. I might as well give you this information too.

Area WW at the bottom of the list, closed 80% below asking price, averaging at $140,000. If it makes you feel better, only one home sold in July. Area WW is in Williamson County. Second to the last is area CM (Comal County), closed 88.72% below asking price, averaging at $444,395.

Now that I have some Austin buyers attention, many curious birdies are wondering which areas are most expensive. Based on the average sold price, the top 5 are, drum roll please:

1) To many, this isn't a surprise but at $883,602, area 8E is topping the charts. This includes homes between 360 and Lake Austin and just South of Mopac. Average days on market (DOM)is only 26 days!

2) Area 8W which includes West of 360, between Barton Creek and Lake Austin, at $605,774. Average DOM is 40.

3) Area 1B at $564,770, which includes homes East of 360, between Lake Austin and 2222. Average DOM is 36.

4) Area LS at $538,898, which includes homes South of Lake Travis just North of the Travis County border. The average DOM is a bit high at 71.

5) Area RN at $466,471 with DOM at 59. This includes areas North of Lake Austin but South of Bull Creek Road, West of 360.

You've probably figured out that certain areas in Austin are still a sellers market. This is absolutely good news for us and many Austin sellers.

Mega Agent Camp 2007

I am a proud attendee of this exclusive seminar for Keller Williams Realty agents who sold 6 million and upwards in the past year especially if you are an agent who has a mindset to make more this year. There must have been more than 3,000 people who attended today's sessions, agents from all over the country. I took the opportunity to network with 40 or so agents, exchanging business cards from attendees from California, Seattle, New York, Arizona, Tennessee and Kentucky. The majority of cards collected were from California. I had lunch with 2 agents from Stockton who shared with me the challenges they were facing in today's market. They said that if not for short sales, they would not have any income by now. Most of their listings are "short sale" listings which means that the sellers are very motivated because time is of essence. If the home isn't sold, the sellers face foreclosures.

As explained by the Californian agent, the advantage of a short sales opposed to a foreclosure is that the seller has a debt judgement carried on their credit history for 2 years while a foreclosure remains in their record for 7 years.

I have asked if the Stockton agent have any absurd incentives that have been given to buyer's and the most she had to share with me was: a builder was giving a choice of an SUV or a truck. If you have any absurd buyer incentives, oh please do tell by clicking on the Comments icon.

Dogs in Austin

Effective October 1st, it is now prohibited to leave a dog alone on a chair or tether in Austin. An explanation of this new ordinance can be viewed. The site includes reasons why chaining is bad for the dogs. In addition, some suggestions have been posted. Other pet laws include:
1) It is unlawful to transport an animal loose in an unenclosed vehicle. Animals must be confined securely in a manner that prevents the animal from falling or jumping from the vehicle or otherwise being injured.
2) It is unlawful not to provide adequate shelter for your pet.
3) All pets residing within the City of Austin are required to be registered with the City.
4) All pets must have current rabies vaccinations.

Understanding FICO Scores

With the lending institutions tightening their underwriting. One of the basis when giving out a loan is the applicant's FICO score. The FICO score is a way to determine the credit standing of an applicant. As a consumer, do you really understand what makes a FICO score? This information was obtained from a mortgage loan officer who came to speak to a class I attended this week.

What makes up the FICO score? An obvious reason is your payment history (35%). Do you pay your loans on time? Second is capacity which comprises 30% of your score. What is your credit limit? 15% is based on the length of credit, 10% of accumulation of debt in the last 12-18 months. The number of credit inquiries and the opening dates of the loans are also taken into consideration. Then lastly, 10% is based on a mixture of credits which are installment or revolving credits, number of finance company loans (the more the lower the score). Perhaps it's time to re-think if you really need to have a credit card for each store found at the Barton Creek Mall. Once, a friend from New Jersey showed all her outstanding credit cards, which could have been enough to wall paper a small room if needed.

As a consumer, you might want to know that your income, length of residence, length of employment or debt ratio has nothing to do with your score. If you are in the market of buying a home, here are some DON'TS or it might hurt your credit score. Don't miss a payment; don't borrow money on your credit cards to the limit; don't close your credit card, it will lower your available capacity; don't shop using your credit card excessively; don't open numerous credit cards in a short time period; don't have more revolving loans in relation to installment loans; don't borrow from finance companies.

So let's say the damage has been done and tomorrow when you wake up, you're a changed person and have become a wise spender. You can improve the score by paying down on credit cards; do not close the credit cards even when the balance is zero (the credit capacity will decrease); continue to make payments on time; slow down on opening new accounts; acquire a solid credit history with years of experience; and move revolving debt to an installment debt.

Next time you put that $500 Coach purse on your charge card, perhaps it's time you take out your checkbook or debit card instead. Better yet, put the Coach purse back on the shelf, save the $500, it will be a good addition to the down payment of your new home!

Mortgage Meltdown

Every week, we have speakers from Land Mortgage come to our Keller Williams meetings to speak about the mortgage industry and the recent happenings. In the past 3 days, I have heard 3 different representatives from mortgage companies come and update us. They all have the same things to say and wanted to stress the importance of making sure that our buyers are "pre-approved" not just "pre-qualified" before taking them out.

There seems to be a bank that seems to fold every day these days. What is exactly happening? Could it be a Mortgage Meltdown? A Land Mortgage loan officer explains that the loan programs that are affected and will be changing are the interest-only, no income verified, second liens, and jumbo loans (over $417,000). I will try to reiterate the explanation of the loan officers, without using the techno lingo. The secondary market are the loans that are sold to other banks. These original loans are not selling because borrowers have forfeited their loans, hence, the banks are less hesitant to purchase more of these type of loans. The 100% loans have tightened up and only those with higher credit scores will be able to obtain them or pay a higher interest rate. We will see more people get loans at a higher rate or people will have to put in a higher down payment. Remember the mortgage insurance? These are coming back once again after the 80% first loan/ 20% second loan or 100% financing became popular. A loan officer states "mortgage insurance is the most popular girl at the dance". Not only that, the fed has "put a new dress on it" which she refers to, mortgage insurance is now tax deductible if you earn less than the maximum yearly salary. Unfortunately, I cannot find my notes to that amount.

So for those in the process of buying a home or have put off buying a home because of all the mortgage lending changes, I suggest that you speak to a loan officer before you meet with your real estate agent. Get educated and find your options. There are still alot of loan programs out there and an experienced and professional lender is the best person to speak to. If you do not have one, I have a mortgage partner that I would be more than happy to recommend.

Austin Residential Sales Statistics for July 31st

Now that I've told you about the statistics for Lakeway, what is Austin looking like? Overall, Austin Board of Realtors (ABOR) is reporting an 8% decrease in sales units in comparison to July 2006. This graph has been obtained from ABOR. The information reported herein has not been verified for accuracy. Please click on the photo to enlarge the graph.

Lake Travis ISD Residential Sales Statistics as of July 31st 2007

Statistics will be posted monthly on Lake Travis ISD Residential Sales. This data has been obtained from the Austin Board of Realtors as of 8/1/2007. The information herein has not been verified for accuracy. There has been a 29% drop in sales in comparison to residential sales last July. You may click on the graph to enlarge it.

In my experience, I have had little or no visitors during my Open Houses. 2 weeks ago, I held an Open House in Hudson Bend. I had put more signs up than usual on a busy street on FM 620. I usually get 3-4 visitors but on this particular Sunday, I had none! Many real estate agents have been reporting the same experiences and some have refused to put advertisements in the paper for their open houses and have not been holding open houses.

Negotiating Real Estate Listing Commissions

When you hire a real estate broker to sell your home, they charge a commission for listing and selling your home. The rate varies and is negotiable. The rate is a percent of the sales price. A typical commission here is 6% and is split between the listing agent and the buyer's agent. The buyers agent's commission is listed on the MLS listing sheet and can be viewed by any agent who has access to the MLS. When you start negotiating the commission to a rate lower that 6%, ie. 5%, you need to clarify with the listing agent you are planning to hire how they are willing to split the commission. A listing agent, may consider the 2% commission and give the buyers agent the 3%. But when the listing agent starts to lessen the buyer's agent, even at 2.5%, the buyer's agent tend to show the listings that pay a higher commission first than those paying less. In the same token, hiring a discount agent to list your home could mean that you will not get a service level that you expect. Most discount agents would simply put your home on the MLS and a for sale sign on your front lawn and you may not hear from them until the listing expires. Some sellers agree to this and they also agree to show their own home to the buyers.

A discounted commission is usually negotiated and given by the listing agent if you agree to use the listing agent to purchase your new home.

So before you negotiate to a lesser commission, think twice and find out what level of service you expect to receive.

78738 2nd Wealthiest Zip Code

Austinbizjournals.com (dated June 15-21, 2007) has published that 78738 is the 2nd Wealthiest Zip Code in the area. Amazing! #1 is 78730 which is the North Hills/Westlake area. This is ranked by propriety method of calculating affluence based on income, disposable income and net worth.

In my zip code, 78738, Austinbizjournals.com reports there are 3,174 households and the average size per household is 2.68 people. The average income is $176,000 and the net worth per household is $1,097,510!!! The average income in 78730 is $211,000.

So for you homeowners in the Bee Caves, The Hills, Hudson Bend area, if second is good enough for you, give me a call and I can find you a home in the North Hills/Westlake area.

Proud to call Austin, my home

Austin, Texas is the home of the Longhorns. Having moved here from Camas, Washington a few years ago, it never dawned on me that I would love this place just as much as Camas. The transition has not been easy as I fought coming here. Many moons later, I now consider Austin my home and I absolutely love the people and the topography.

Washingtonians are friendly, patient, laid back and trustworthy people. To find another place that will surpass the Camas environment would be hard. I fought that and it was hard. Then I learned to accept that Austin was going to be a place where my children would grow up.

The moment my eldest son, Ryan, started 6th grade, in Lake Travis Middle School, he became a Longhorn fan and had dreams of becoming a pro football player. The boy never played football in his life! When he entered 7th grade, his mind was made up. He played football and there we were, his parents who knew nothing about the game. But we were determined to sit in all of his games and a friend educated us as he became our personal commentator during all games. Of course, Chris, is a #1 Longhorn fan, a UT graduate. What other reason would he want to have a longhorn tatto on his arm for?

As soon as we moved to our new home in Lakeway, I confess, I became a Longhorn fan though to this day, I only understand 25% of the game. Hence, I had painted and decorated Ryan's room with burned orange and Longhorn paraphernalia. What can I say, I have the Longhorn bug. A trip to the coop was very damaging... $300 later on kids clothing and stuff I don't remember! I don't know how this could have happend. Could it have been because every other Austinite wore a Longhorn tee shirt, drive orange cars and talk nothing else about the game? Maybe, but these people just moved here! They are converts like me!

It's exciting to be a football mom and be a part of this city. The topography on the West side is something else. Never did I imagine that Austin would look like this. I can't wait for the next visitor to see and hopefully fall in love just like I did with this awesome city.