Outfitting Your Short Term Rental - Tips to Enhance the Guest Experience and Maximize Profits1/18/2022 If you’re interested in purchasing a home to use as an airbnb, you may be thinking about how you will furnish the home. Should you have a king bed or a room full of bunk beds? Can I furnish it with things I already own? How important is it that I have cable TV? All of these are great questions, and the answers ultimately depend on the guests you are looking to attract. First things first, I recommend creating a vision board for your property. This board will define how you furnish and outfit the home. It will illustrate colors, style, and the general vibe for your airbnb. You’ll want to begin by getting a clear picture of who your ideal guest is. What do they value? Where do they shop? How old are they? How do you want them to feel when they arrive? Then, think about the attributes of the home. If your home is built with a rustic ranch style does modern decor really make sense? Is the main selling point of this home it’s fabulous location on the lake? Then, you’ll want to make sure your furniture isn’t so big it blocks the water views and you may want to add a dedicated area for water toys and towels. Take all of the information you know about the property and consider your ideal guest preferences in order to design your board. You can compile all of your ideas in a binder, make a pinterest board or make a collage on a large piece of paper. Whatever medium you choose, add inspirational photos, define a color palette, and find a way to visually bring a cohesive plan together.  Furnishing your airbnb is different then furnishing your home. You want to think of furnishing a home like you would stage a home. Have you ever walked through a builder’s model home? There are no family photos and the space is clean and inviting. Less is more when it comes to furnishings, and while you should have decor items, you don’t want them to be personalized. Make sure you have art on the walls that is in line with your vision, and consider adding items that will enhance the guest experience such as a well-curated guide book on the coffee table or a selection of games on the shelf. Furthermore, there will be considerable traffic through this home, and you want to keep this in mind when procuring furniture. You want items that are durable, easy to clean, and don’t show imperfections. You would think that white would be a huge no-no here, but white slipcovered furniture items are actually great because they can easily be bleached. A good rule of thumb here is that if it’s white and you can wash it, it’s a win. Leather couches and chairs are also relatively easy to maintain and clean, especially if you Scotchgard them first. A rug in a darker hue or one that’s heavily patterned will show stains less easily. When you’re furnishing your short term rental (STR), you don’t have to buy everything new. In fact, mixing in some antique or second-hand items will likely elevate the look of your airbnb. However, you don’t want your furniture to look like you found it on the side of the road. The key here is to add character, and potentially save money by utilizing the right furnishings. A used mattress, probably not the best idea. One case of bed bugs and you're out of the airbnb biz. An antique sideboard you found on the side of the road, now that could work. However, if you're utilizing second-hand furnishings make sure they are a)clean and b)functional. No one wants to eat at a table that wobbles, but with a little elbow grease you can fix that wobble. Speaking of tables, ideally, you want enough seats for the maximum number of guests your home allows in both the living and dining rooms. So if your home sleeps 10, you want a dining room table that seats 10. However, don’t cram a ton of chairs into the small dining space simply to accommodate this. Scale is equally important, and you don’t want a room to appear over-stuffed. Ditto with beds. Sure you could put four full size beds in that room, but would that result in a great experience for your guests? Probably not. Simply putting as many heads in beds as possible does not equate to max revenue. The easiest way to be able to accommodate extra guests is a pull out couch. Thus, you often see pull out couches in vacation rental homes. Alternatively, you could add a daybed or supply air mattresses if you determine that having these extra sleeping spots would be beneficial to your ideal guest. When you are outfitting your kitchen, you want to make sure you have enough plates, cups, and silverware for all of your guests. In an ideal world, I recommend you take your max occupancy and multiply that times three when determining quantities for kitchen ware. For example, let’s say your max occupancy is 10. Purchase at least 30 cups, 30 plates, 30 bowls, etc. Take one set of each item and reserve these in your owner's closet. This way, when a bowl disappears you can simply replace it from your reserves without having to buy an entirely new set. Find kitchenware that matches your vision, but it doesn’t need to be expensive. You can find great deals on kitchen items at discount stores like Homegoods. Open cabinets or cabinets with glass doors are great for STRs. It makes it easy for guests to find what they need. If you’re remodeling the home before it becomes an airbnb, you may want to consider replacing the cabinet doors with glass ones, or opting for low cost open shelves. Don’t overdo it with kitchen tools and appliances. If you have too many things in the kitchen, it will be harder for guests to find what they need. Think about what guests will really use. Just because you have a giant set of cookie cutters doesn’t mean they should go in your airbnb. At the same time, make sure they will have all the essentials. Guests will need a few different sized pots and pans, baking trays, mixing bowls, serving bowls, and a variety of knives, spatulas and serving utensils. If you have a grill, make sure there are grilling tools. Guests often are staying at an airbnb because they want to be able to cook. Make sure they have all of the essentials to do so, and make sure everything is as organized as possible so they can easily locate it when they need it. You MUST have a coffee maker in your STR, there are no exceptions. 64% of Americans drink coffee everyday so the odds are high that each booking you have will contain at least one coffee drinker. Personally, I recommend a decent drip coffee maker; however if your STR is smaller you may want to consider a Keurig. BUT if you get a Keurig, you really should provide pods too.  Bedrooms, and more specifically, beds are so important. Do yourself a favor and buy nice mattresses and ample pillows, at least two pillows per head. Quality linens are also a good purchase. Buy a minimum of two sets of linens per bed to allow for speedy turnovers. Have you ever noticed that hotels almost always have white sheets? That’s because they can be bleached. Do yourself a favor and purchase white sheets for your Airbnb. Duvet covers are great for bedding since they’re easier to wash than a full comforter. You can add color with decorative throw blankets and pillows. An airbnb bedroom doesn’t necessarily need a closet but it is helpful for guests to have someplace to store their clothes. You can do hanging racks, dressers, or even hooks on the back of the doors depending on your anticipated average rental length. Bedrooms should have at least one nightstand. A nice touch is to make it easy for guests to charge their devices. A nightstand with easy access to an outlet is wonderful. If there’s no outlet nearby, consider adding one or using an extension cord.
For the bathrooms, you will want to consider what type of products you plan to provide. Again, these should match your vision in terms of quality as well as product packaging. You need to provide hand towels, bath towels and washcloths, and you should have at least enough towels to match your maximum guest count. More is always better so you aren’t waiting for laundry to be done in order to check the next guest in, and remember white can be bleached. Don’t forget bath mats and shower curtains that match your vision. You’ll want to make sure you have at least one plunger in the home, a toilet bowl cleaner for every toilet, and a first-aid kit for the home. A blow dryer in each bath is also a nice touch. Preparing your home to be an airbnb is about much more than furnishing it, you’ll need to consider how you will market it, how you will maintain it, and how you will price it. However, a good aesthetic goes a long way when attracting guests. Make a vision and stick to it! One of the best ways to ensure that your home performs the way you want it to is by staying there personally. As soon as you think you’re done, stay for a night or two or invite a friend to relax in your airbnb. You’ll quickly realize where you may have neglected an important item or failed to provide instructions on where to find or operate something. If you’re looking to purchase a property to use as a vacation rental in the greater Austin area, I’d love to connect with you. My specialty is helping people locate and purchase homes that can be used as STRs in central Texas. Contact me today so we can find the perfect one for you
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Now that 2021 has finally come to an end, we can finally assess the state of the Austin real estate market over the past year in its entirety. It felt wild, and now the stats show it truly was one for the records. Home prices appreciated far more in 2021 than ever before. We saw median sales prices rise more than $100K in almost every city in the metro area, and homes sold at record paces too.  In the City of Austin, the median sales price for single family homes rose to $605,000. That’s up more than 30% since last year. From 2015 to 2019 it was typical to see single digit percentage increases in this median sales price jump year over year. While we saw an annual median sales price of $605K for single family homes in the city limits, the median sales price was actually higher than this many months throughout the year. In 2021, we saw a return to our normal real estate sales cycle, with the highest median sales price occurring in June and July where the median sales price for single family homes peaked at $650,000. This is typical for our market, yet a stark comparison to 2020 when we strangely saw peak median sales prices in December.  These record breaking jumps in median sales prices were not isolated to the Austin city limits. In the entire Austin-Round Rock MSA which encompasses all of Travis, Williamson, Bastrop, Caldwell and Hays counties we saw a 33.29% increase in the median sales price for single-family homes. In many cities, we saw the median sales price increase by even more. In Dripping Springs, the median sales price for single family homes in 2020 was $470k, last year it increased 47.87% to $695,000. In Cedar Park, home prices increased more than 43%. Even in areas with relatively high median sales prices, we saw significant increases in the median sales price. Homes in Westlake Hills appreciated more than 37%, bringing the median sales price for homes in this coveted neighborhood to $2,350,000.  Throughout the five county metro area we simultaneously saw the amount of time it takes for a home to sell to go down, way down. In 2020, the average days on market for a single home was 40, in 2021, that figure dropped to 16. If you were looking for a home in 2021, you may be shocked by that number since it felt like the day a home hit the market it was already gone.  So, what does all of this mean for 2022? Let me pull out my Magic 8 Ball. Will home prices decrease in 2022? Don’t count on it. Will home prices increase in 2022 as much as they did in 2021? My sources say no. Will we see home prices peak in the late spring/early summer as we usually do? Most likely.
Do you have more questions about the Austin real estate market that a standard Magic 8 Ball can’t answer? Contact me for detailed intel on what’s happening in the ATX market.  The other day, I heard a commercial on the radio that I found particularly unnerving. The spokesperson said that now is a great time to sell your home. He talked about how the record high prices we’ve been seeing in the Austin area may not be here forever, and that the uncertainty of a continued upward trajectory is reason enough to list your home for sale now. Everything that he said isn’t completely wrong, but what really bothered me was that I was listening to this recommendation in early December. One thing I know for sure is that the holiday season is historically the worst time to sell your Austin area home. Just think about it, does it really make sense to sell your home in December? You’re worried about what to buy your Aunt Jan, what to wear to the office holiday party and how the hell you’re going to be able to handle four whole days with the in-laws. Most people aren’t thinking about buying a new home in the midst of all this craziness. Like most markets, a housing market with less buyers results in lower prices. In order to fully understand this phenomenon you need to know a little about the real estate sale timeline and how it is statistically reported. First of all, we use the term days on market (DOM) to discuss the amount of time between the day a home is first listed for sale on the MLS and the day the home goes under contract. After a home goes under contract, there’s usually about 30 days before that home officially sells. That’s because lenders usually need about a month to get the funding squared away. Now, that number could be less if you are dealing with a cash sale or more if the buyer and seller agree to a farther out closing date, but 30 days is a good estimate. Now, when we are looking at the median sales price for a given month, we must look back the total amount of time ( days on market + 30 days) in order to determine the best or worst month to list your home for sale.  If you look at the median sales price per month for homes in the City of Austin over the past ten years, the January median sales price is almost always the lowest monthly median sales price for the year. In 2015, we saw the lowest median sales price in February, and the February median sales price was the 11th lowest in every other year. Now, if we look at the ADOM during January, we see it was about 30 days for January sales from 2017- 2020. Thus, homes that first hit the market in late November or December sold for the lowest amount.
If you think you absolutely have to list your home for sale in December, you may be wondering how much money you would be missing out on by not waiting to list your property. Assuming it still takes 60 days from the day you list to the day the home actually sells, you could be missing out on 20-65k. In January of this year, the median sales price for single family homes in the City of Austin was $471,000. Fast forward two months, and that figure went up to $536,000. You may want to really think about your carrying costs, and if there’s a better way for you to accomplish your goals that allows for postponing your home sale just a little. The bottom line is that December has historically been the worst time to list your home for sale. Don’t believe everything you hear on the radio, and feel free to contact me anytime with your real estate questions.  Are you looking for some fun and festive holiday activities to enjoy this year? We've got you covered! From ice skating to light shows, our list has something for everyone to enjoy. Happy Holidays!
Trail of Lights: If there’s one event that makes you think of Christmas in the ATX, it’s the Trail of Lights. This year it’s drive through only due to covid restrictions, but you can still experience the glory of over two million lights from the comfort of your car. Drive through the glowing tunnels and sing along to classic holiday hits. Don’t miss out on the 57th annual Trail of Lights, it’s an amazing family event that will leave everyone in awe. PS. the Zilker Tree is open for pedestrians, so you can still spin to your heart's content! Rooftop Rink at Whole Foods: Bundle up and hit the ice on top of the world! This is perfect for a family outing, girls night out, or even a sweethearts date night out on the town. This event takes place on the rooftop of the WholeFoods flagship store. Beverages and treats are also available to make the experience that much more great! Santa’s Ranch: Looking for a little road trip to experience some holiday cheer? Head down to New Braunfels and check out Santa’s Ranch. Here you can sip and snack on some homemade holiday treats while you drive through the gorgeous roads and experience a Christmas sight like no other. This light exhibit stretches over a mile long! Don’t forget to grab some beautiful souvenirs to take home before you leave. Ballet Austin’s: The Nutcracker: We all know the tale of The Nutcracker and the beautiful melody of “the Dance of the Sugarplum Fairies” and this year, you can experience all of the magic LIVE at Ballet Austin! You absolutely have to see these sets and costumes in person. You are sure to be in for a breathtaking performance. North Pole Flyer: Have you ever wished you could hop aboard the Polar Express? Well, this rail may not be headed to the North Pole, but you can let your imagination wander as you enjoy this 2 hour ride with snacks, holiday drinks, and visits from special guests like Santa and Mrs. Claus. There will be Christmas carols as well as story time and lots of laughs. If you’re looking for an exciting holiday event for a little one in your life, this is it. Ice Skating at Dreamland: Sip on some hot cocoa and enjoy the holiday fun with all of your loved ones while ice skating at Dreamland. There is also mini-golf and pickle ball if you aren’t the best ice skater, but who cares? Get up and make a fool of yourself and let your inner child come out to play. Armadillo Christmas Bazaar: From December 17th-19th, you can experience live music, local art, shopping from local businesses, and a bar! Honestly, What more could you ask for? This is a guaranteed great holiday experience for the entire family, or a date night out. Mozart’s Light Show: The annual light show at Mozart’s coffee roasters is an event not to be missed. Where else can watch a legendary Christmas light display reflecting off Lake Austin? Mozart’s Light Show also has a wide variety of snacks and beverages available to enjoy while you view the spectacle. This year, they’re offering a hybrid format where you can either reserve a table for a small fee or get a complimentary ticket for the standing section. Unfortunately, tables for the show dates before x-mas are sold out, but there are tables available between Christmas and New Years. Additionally, there are plenty of tickets left for the standing section.  It’s always a good idea to get a home inspection before you purchase a home. While home inspections are not all encompassing, they will illuminate areas of concern within a property. An inspector will carefully assess all major components of a home, and highlight areas in need of repair in a detailed report. Truth be told, at first glance, almost all inspection reports appear scary. An inspector points out every defect, area of potential concern, and potential pitiful with a given home. Many of these deficiencies are not something to be worried about, but a few items may haunt you forever if you decide to move forward with the purchase.
Foundation Issues Here in central Texas, it is not uncommon to see homes with foundation issues. I still remember a home I showed many years ago in East Austin that I nicknamed “The Topsy-Turvy” house. Walking through it made me feel like I was in one of those carnival attractions with disorienting mirrors everywhere. Foundation settling is normal, but when a home has significantly differential elevations in can be a major issue. Foundation repairs are expensive, oftentimes requiring a low five figure to repair. But, that’s not the only thing. When you repair the foundation, you will likely have to fix everything above it too. Tiled floors crack, drywall will need to be replaced, cabinets and molding may shift. You get the idea. A foundation issue is something that could haunt you for years. Roof Deficiencies Roofs generally last a few decades. Obviously that depends on the type of roof and how well it is maintained, but something that is supposed to last for that long comes with a high ticket price. If a roof is in substantial disrepair, it can be a major source of concern. There may be water damage in the interior of the home, and with water damage comes potential for a slew of other concerns. Pests, mold, and termites all are more likely when they have a life source. A roof replacement is something you may be able to negotiate being covered by the seller’s home owner’s insurance policy, but even if you are able to negotiate a new roof make sure the faulty room didn’t already cause other issues. Antiquated Electrical Systems Old wiring in a home can be a true horror if not properly corrected. Homes built prior to the 1940s have what’s known as knob and tube wiring. Knob and tube wiring only has a hot wire and a neutral wire. There is no neutral wire, and connections were not made in junction boxes. These are all potential fire risks. Aluminum wiring was widely used throughout the 60s and 70s and is common in many Austin homes. It poses its own fire risk with aluminum to other metal connections creating electrical resistance making the wiring hotter when in use. With hourly rates for most electricians starting in the hundreds, you can see how repairing these issues can quickly add up to a major drain on your pocketbook. Ultimately, even the scariest of items identified during an inspection may not be reason to walk-away from a home purchase. However, it’s important you understand these risks and comprehend the likely financial costs to fix the defects. A home with numerous problems can still be a good investment if you can purchase it for the right price.  For many years I have heard horror stories from clients in regards to home owner’s associations. Most frequently, it comes from individuals who are simply perplexed by the excessive fees such associations can charge for merely delivering required paperwork. When you purchase a property that is located in a community with a home owner’s association (HOA) you need an official copy of the HOA documents and a resale certificate. These documents tell you the rules for the community, what the HOA fees cover, the HOA’s financials, and if the seller is delinquent on any HOA dues. Obviously, all of these things are important documents to look over if you are planning to purchase in the community. However, the fees associations demand for such documents are sometimes downright highway robbery.
Passed earlier this year, Senate Bill 1588 helps mitigate these concerns. Effective September 1st, HOAs are barred from charging inordinate fees for subdivision information statements and resale certificates. The bill placed a cap of $375 on the cost for subdivision information statements, and limited HOAs to charging a max of $75 for a resale certificate. This is a huge win, as I have seen HOAs charging thousands for these simple documents in the past. In addition to setting caps on the amount HOAs can charge for these resale documents, the legislation also included a few other safeguards aimed at protecting Texans. The bill does the following:
While these changes are certainly appreciated among industry professionals and consumers, the new legislation has one major pitfall. This legislation is wonderful for those residing in or purchasing a home in a community with a property owner’s association, but it does not protect anyone who lives in a condo association. With the increasing costs of land in central Texas, more and more builders are creating single family homes that live and act like a house, but are technically condos. These homeowners as well as traditional condo owners are still susceptible to exorbitant charges from condo associations. Do you have questions about buying or selling in an area with a home owner’s association in the greater Austin area? Contact me today.  When is the right time to sip on some wine and beer? The correct answer is ALL THE TIME! Hey, It’s 5:00 somewhere, right?
Austin is full of amazing and unique wineries and breweries. You can spend forever exploring the many options that we have in an around Austin. I’ve gathered some of my favorite spots to visit when I need a good sip. Hopefully you’ve had the pleasure of enjoying a few of these spots as well. If not, what are you waiting for? Wimberley Valley Winery: Don't let the name fool you, this winery is located in Driftwood. Wimberley Valley Winery offers a diverse food and wine menu. For $18, you can experience their tasting which includes sampling five delicious selections. They also have a wine club that you can join which offers special perks for you to enjoy with your friends. The food menu offers everything from pizza to burgers and even tots. Yum! Get the girls together or bring your boys to this little slice of heaven. Jester King Brewery: Just west of town on over 160 acres, this local favorite has plenty of space to offer more than just a refreshing beverage. In addition to serving up cold brews, they also have an inn where you can spend the night, an event center, a farm, and restaurant. Jester King prides itself on using mostly all of their own farm grown ingredients. If you visit and end up falling in love with this place, you’re in luck! Because they host many weddings and large events here. I told you, its a beautiful place. Don’t take my word for it though, go visit for yourself. The Austin Winery: Located in an industrial section of South Austin, this urban winery offers an adorable atmosphere to sit and sip on some delicious wines. Maybe you’re a red drinker, or maybe you’re more of a white wine person. Whatever your choice, There is surely something for you here. The tasting room serves 3 half glass pours of your choice of wine, and the staff gives you a rundown of what you’ll be tasting. They also offer snack trays to feed your appetite. St. Elmos Brewery: Adjacent to the Austin Winery, St. Elmos offers unique beer options from Pineapple Pale Ale to Hop Water and so much more. They have a large outdoor space where you will also find their delicious food truck, Spicy Boys. Here you can enjoy mouth watering chicken sandwiches, nugs, curry, and more. Drop by and get your drink on while you chow down! Austin Beerworks: Located in North Austin, this brewery offers a large variety of delicious beers such as Bloodwork Orange and Megaflora. Locals know the “A” logo and the vibrant colored cans. Austin Beerworks has a very low gluten count in their beers also, which makes for a great option if you have a gluten intolerance. There is also some great food to be enjoyed while you chug down your beer. Head on over to this colorful brewery today. You won’t be sorry! Dutchman Family Winery: Known for their saying “100% Texas grapes, 100% Texas wine”, Dutchman Family Winery is also located in Driftwood. Shaded by large beautiful trees and embellished with gorgeous chandeliers, the aesthetic alone is a great reason to take a visit to Dutchman. They regularly feature live music and host events such as painting and movie nights. You can also become a member of their wine club and try all of the exquisite wines that your body can handle. The Austin Beer Garden Brewery: Known as The ABGB to locals, this South Austin brewery offers a great mix of beers, wines, and ciders. You’ll find a drink to satisfy everyone of your friends. They also offer live music of all genres, and food that will make your taste buds so happy! Their food menu has pizza, sandwiches, salads, desserts, and more. Sip on some award winning beers while you dance to the live music and chow down on some food from their large menu. Meanwhile Brewing: Located in South Austin, Meanwhile Brewing offers an experience for more than just your average beer drinker. You can also find coffees, wine, cocktails, and plenty of food trucks. This brewery often hosts live music to enjoy too. There is also a private event venue and soccer field. Sounds pretty cool, right? Well, Get your ass over there and let your fun side come out to play! Have you been to any of these fantastic places? What are some of your favorite spots?  Slowly but surely, the 2020 US Census data from 2020 is being released. Although these stats are not perfect, they were obtained during the pandemic after all, they do give us some insights as to what’s happening in the ATX. There weren’t too many surprises, spoiler alert: the greater Austin area is growing rapidly in case you hadn’t noticed. But, the official count for the City of Austin population did fall slightly shorter than expected with an estimated 961,855 people residing in the capital of the lone star state. Officially, this makes Austin the 11th most populous city in the United States.
While the population for residents within the city limits has increased slightly over 20% over the past ten years, many of you may be thinking “that’s it”. I know, that number feels low to me too, and the truth is, the population of Austin as we know it is about way more than just those living in the city limits. Residents of Sunset Valley, Westlake Hills, Pfluggerville, Leander and many other adjacent areas make up what we think of as Austinites. According to the latest census stats the Austin-Round Rock metro area is the fastest growing metro area in Texas. At the county level, we saw significant increases in population levels throughout Central Texas. Hays County which encompasses Dripping Springs, Buda, Kyle, San Marcos and Kimberly was the fastest growing county in the state. Since 2010, Hays saw more than a 50% increase in residents over the past ten years with the population now nearly a quarter of a million people. In Travis County, the census showed a population of 1,290,188 people for 2020 and Williamson County is home to over 600,000 people. Together, these stats show what everyone who’s ever sat in traffic on I-35 knows is true - there are way more than one million Austinites.  For months on end, it's seemed as if there was no end in sight for the incredibly competitive Austin real estate market. In fact, just looking at the latest numbers it still appears that way. Last month, the greater Austin area saw an all-time high median sales price of $482,364; Simultaneously 4,369 homes were sold, a record number of home sales compared to any previous June numbers.
Yet, these numbers don't show the full picture. Real estate stats are always lagging indicators. In general, it usually takes at least 30 days for a home to go from hitting the market to sold. Thus, the sales data for June is based on homes that hit the market in May. In the past month, we have started to see an increase in listings. It's not crazy, but it is impactful. In the City of Austin, we saw 2,044 new residential listings in June compared to 1,724 in May. An increase in supply is good news for prospective home buyers. This means more homes to choose from, and less competition. This subtle increase is exciting; yet we are still very far from a balanced market. You can still expect to see multiple offers. However, you may only be competing with a handful of other buyers compared to the double digit number of offers we frequently saw on homes over the past 6 months. As you might expect, the premium paid over ask price is simultaneously beginning to decrease. All of these indicators show that pricing is starting to stabilize but that doesn't mean home prices are going down. Home prices are likely to continue to stay at these elevated levels. That being said, I do foresee a return to the normal cyclical pattern for real estate sales in the Austin metro area. Over the past year, there was no normal slow down for the winter. In fact, the median sales price in the MSA stayed the same or increased month after month. In the future, I see a return of spring being the peak selling season- when buyers can expect the most inventory and sellers can expect to sell for the highest price. That being said, here are the latest Austin area market stats: City of Austin: Compared to June of 2020
Greater Austin Area (AKA Austin Round Rock MSA): Compared to June of 2020
Curious to know what's happening in your specific neighborhood? Contact me with any questions you may have. I’d love to hear from you!  There are quite a few different ways to determine a property’s value. As a real estate broker, I most often determine a fair asking price or listing price based on the relevant comparable sales. Other entities such as the county tax assessor may also use the sales comparison approach to determine a given home’s value; yet, our valuations may be vastly different. That’s because the different types of valuations are ultimately defined by the entity evaluating the property’s worth.
Appraised value is a term used to describe the lender’s valuation of a given property. When you buy a home with a loan, the lender needs to determine what the value of the home is in order to limit their risk. The lender orders an appraisal of the subject property once a buyer is under-contract on a property, but before the closing date. The appraiser then compiles a report known as an appraisal. The report is most commonly performed using the sales comparison approach in which the appraiser identifies three to six similar properties that have sold recently in the area, and then makes adjustments to these properties in order to determine the subject property’s appraised value. Occasionally, the appraiser may use a different approach such as the cost approach or the income approach to determine the appraised value. The cost approach uses current construction costs combined with depreciation to determine the appraised value while the income approach uses rental revenue to determine the appraised value. The sales comparison approach is most-commonly used in residential real estate, and if you are purchasing a new home or refinancing an existing one, the end result of this analysis is a determination of appraised value. Ultimately, the appraised value is what the lender determines your home is worth. The assessed value of a home is what a county tax assessor determines a home is worth for the purpose of levying property taxes. Oftentimes, I will have buyers looking at a home’s assessed value as an indication of a fair asking price. However, the assessed value is rarely the same as the market value. The assessed value is determined annually by the county and market value can change weekly. Additionally, the assessed value is usually determined from a computer. Looking at similar size homes on the same street only tells half the picture. Just because your neighbor’s home is worth $600K doesn’t mean yours is too. What if your neighbor’s home has solid gold toilets and italian marble while you're still rocking lime green linoleum? The county tax assessor likely has no idea that your home isn’t worth as much as your neighbor’s. Unless you say something and step up to protest your assessed value, the county will continue to value your home at the rate they think is correct. Texas is also a non-disclosure state which means that home sale values are not public information. They do rely on information gathered from real estate syndication sites like Zillow to determine the asking price for a home. They also know when a home is sold, they just don’t necessarily know the exact sales price. Thus, the assessed value is the county tax assessor’s best guess as to what your home is worth. The market value of a property is what a buyer is willing to pay for a property and a seller is willing to sell a property for in an open market. The market value of a property is oftentimes quite different from the assessed value, and may even be vastly different from the appraised value for a given property. Recently, in the Austin real estate market we have seen widespread waiving of appraisal contingencies by prospective buyers. When a buyer does this, they are saying that even if the lender determines the appraised value is lower than the contracted sales price they will proceed with the sale and bring additional cash to the table in order to close at the contracted price. Thus, the market value is higher than the appraised value. Alternatively, you could have a home that appraised for a value that is higher than what buyers are willing to pay. The market value is simply what a buyer is willing to pay for a given property. When you are trying to determine an appropriate asking price to list your home for sale for or trying to figure out how much money you should offer on a home you need to think about all of these values. However, the market value is ultimately the value that will be the most important. |