Austin Real Estate Newsletter: May Edition

Alarming Data | Uninsurable homes | Tax protest

Welcome to another edition of the newsletter! I’m Max, founder of my512realtor.com and advisor at McElroy Property Group, and I appreciate you sharing your inbox (or feed) with me ????

My goal is to keep you in the know by sharing data, news and observations from the trenches. If you have feedback or want to say hi, reply to this email!

In this edition ??

• Why everyone should protest property taxes
• Alarming market stats for April
• Tips for Austin buyers and sellers
• The Home Buyer Masterclass
• How to avoid buying a home that’s uninsurable

Everyone should protest their property taxes

By now most property owners have received notices of appraised value for 2024. Ever wonder why tax appraisals seem so random? Texas is a non-disclosure state, which means property sales prices aren't considered public information. As a result, tax appraisal districts need to come up with some way to value properties, leading to head-scratching results ??

Every property owner should protest their taxes. Even if your tax appraisal seems reasonable, even if you have the homestead exemption, you should still do it because this year’s appraisal will be the baseline for next year’s assessment - and so on. Repeating the process every year will minimize your taxes in the years to come. Especially if you live in a high tax rate area. And even more so if you plan to convert your primary residence into a rental at some point (you’ll lose the homestead exemption). Remember: $1,000 in property tax savings over 30 years has the future value of $66,438 at 5% interest rate - this could be your down payment to buy another property!

You can DIY or leverage a specialized service provider. Leveraging a tax protest service is what we recommend to our clients - they have the process, the experience, and large amounts of data to support your case. Our clients have used this service with great outcomes - they don’t charge anything upfront, and you only pay a portion of savings. If you give it a shot, please let me know how it goes!

Market update: Alarming number of sales

It’s May and mortgage rates are still well above 7%. I’ve been tracking active listings (how many homes are for sale) vs number of sales (closed transactions) of single-family homes in Austin, and the data doesn’t look great. Before I get into the details, let me repeat once again that the local market shows no signs of crashing. We are in a high season, maybe we could peak early this year, maybe we could slow down, but so far nothing points to a crash.

The chart below reflects normal seasonality - active listings and sales peak around June and bottom out around Jan. But here is the alarming part: in April we saw a 19.4% month-over-month increase in active listings, however sales increased only by 7% ?? One important driver of this increase in the number of listings is investors liquidating properties due to the softness in the long-term and the short-term rental markets in Austin.

So at the end of May we may realistically see another month of robust growth in active listings paired with moderate growth in the number of sales. If this scenario materializes, we will see more inventory, longer days on market, and incremental bargaining power for buyers.

The best inventory - move-in ready homes that are priced well and have no serious objections - has already been selling much faster than the broader market, often with multiple offers - and this gap could easily widen moving forward.

Tips for Austin buyers and sellers

If you are a seller in this market, you and your realtor should be strategic about pricing, marketing and improvements (yes, there is more to selling properties than taking pretty pictures and putting signs in the yard ??):

• pricing strategy - there are 3 main pricing strategies which I will break down in the future editions, for now you should know that choosing the wrong pricing strategy in this market could really cost you thousands (if you are selling now - reach out to learn more)
• marketing strategy - what is the profile of the ideal buyer that will pay us the price that we want, how do we get the attention of these buyers, and what is the narrative of the sale that will be compelling for these buyers.
• improvements - depending on the property condition, improvements could mean a night and day difference in terms of net seller proceeds and total time to sell. Word of caution - not all improvements will net you more money or sell the home faster. Please consult with a realtor before making any improvements!

If you are a buyer, you have a lot opportunities to capitalize on the existing market conditions. Despite what some people might think, it doesn’t mean finding random homes on Zillow and making random offers $100k below list price. There is so much more to the home buying process:

• Have a game plan - having a plan that everybody is on board with produces massively better results and awesome customer experience, and I am shocked by how many people skip steps in the home buying process to their own detriment (if you’d like to grab a template, please reach out)
• Analyze the market in the neighborhood of interest and for type of property you want to buy. Remember that real estate is hyper local, and despite the general market looking more like a buyer’s market now, each neighborhood is a micro-market of it’s own. Some neighborhoods in Austin have low inventory and high desirability even in this market meaning that buyers have less to choose from and sellers have more bargaining power.
• Make offers strategically - most people don’t realize that price is only one variable in the offer. Another huge component is certainty (does the buyer have the ability and intention to close) - and there are ways to demonstrate certainty to the listing agent and the seller. You also need to have the narrative and the data to support the offer and make it EASY for the listing agent to get the seller’s buy in (don’t assume the listing agent is great, sometimes we need to help them so we can get the best possible deal for our client????). Finally, you need to understand the seller’s expectations and needs, their pricing strategy, the fair market value of the property and the 3 best times to make an offer.

By the way, I will unpack all of this (and much more!) at my Home Buyer Masterclass - weekly webinar where I will share the 7 secrets to buying a home like a pro and avoiding costly mistakes - hit me up if you’d like to see a private preview.

Uninsurable homes: skipping this step when buying a home could cost you thousands

Here is my main guiding principle when working with clients: the #1 job a realtor is to protect the client’s equity. So in this section I will share some insights that will protect your equity and hopefully save you from a very costly mistake ????

You probably know that home insurance rates are skyrocketing in Texas, and some carriers are pulling out of Texas altogether. Here is something that nobody talks about: if you are buying a home, you need to have your realtor check it for insurability ??

Please read this carefully: the history of previous owner’s claims on the property, as well as their claims on other assets, such as their car, may dramatically impact your home insurance rate as the new owner. It could even make your property completely uninsurable - meaning that all insurance carriers would refuse to write a policy for it (and if you end up finding that one agreeable carrier who write the policy, they will be sure to charge you 2-5x the market rate).

This is why we routinely check the full history of claims as part of our multi-step process for vetting properties. My friend Lauren Constantine - an amazing insurance agent and part of our team - helps us run the reports from the central claims repository (CLUE) and make sure we don’t see any red flags before we go under contract on a property.

This is one of the many things that we do every day to protect our clients’ equity and help them not buy their dream homes, but also build wealth through real estate?? I hope your agent does too.

PS. Lauren also helps our clients get the best deals on insurance policies in Texas - hit me up if you’d like to get in touch with her.

Whenever you’re ready, there are 3 ways our team can help you:

1. Need home insurance, roofer, tax protest service or anything in between? We’ll connect you with our partners who will take great care of you ?

2. Want to learn more about the current market or understand what your property is worth? We’d love to give you value no matter where you are in the journey ????

3. Buying or selling your primary residence or investment property? Get in touch to learn more about our investor-grade process and how we can help you get the best possible results in today's market??

Cheers,

Max