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TEXAS HOMESTEAD LAW

Homestead in the state of Texas is one of the last remaining protected rights and advantages under home ownership in our state. While it is safe to say that most people have heard of the Homestead Law most consumers do not fully understand this law by definition or what it actually does including its opportunities and limitations. The most common definition given is “they cannot take my home in the event of financial trouble”. To a certain degree that is true but the law as it is written actually is much more than that. I recently read this summation written for the Texas State Historical Association, www.TSHAonline.org that really does a great job of explaining not just the definition of the Homestead Law but its history and intent.

HOMESTEAD LAW. In popular usage a homestead is a family home. In law the term refers to the special protection given to the home of a family or a single adult from the owner's creditors, the right of occupancy given to a surviving spouse, minor children, and unmarried children of a deceased owner, and favorable tax treatment accorded to the owner. These concepts, however, developed independently. The homestead exemption, as the protection from creditors is termed, is the most important aspect of homestead law. Many Americans who settled in Texas in the early nineteenth century were pursued by their creditors, and for their protection Stephen F. Austin recommended a moratorium on the collection of the colonists' foreign debts. In response to that recommendation the legislature of Coahuila and Texas enacted Decree No. 70 of 1829 to exempt from creditors' claims lands received from the sovereign as well as certain movable property. Although that act was repealed in 1831, the principle remained in alive in Texans' minds and was a model for the Texas act of 1839, which protected the home of a family from seizure by a creditor. This was the first act of this sort, and the principle of homestead exemption is therefore deemed Texas's particular contribution to jurisprudence. The homestead principle was embodied in the Constitution of 1845 and all constitutions thereafter. Under the Constitution of 1876 the homestead was defined as the family home on up to 200 acres of rural land or urban land worth up to $5,000 (at the time of homestead designation) with its improvements and used as a family home or place of business. In 1970 the maximum value of the urban land was raised to $10,000. In 1983 the urban homestead was redefined as a maximum of one acre. The legislature has defined the homestead in terms of the maximum amount allowed by the Constitution with the exception of the rural homestead for a single adult, which is limited to 100 acres. In 1973 a homestead was made available to single adults. The Constitution also provides that the homestead cannot be encumbered by a lien except for its purchase price, cost of improvements thereon, or taxes assessed against the property. A Texas homestead is not, however, secure from seizure for a debt owed to the federal government. An encumbrance existing on land prior to its dedication as a homestead is also enforceable. Designation of a homestead is achieved by actual use and no recorded claim to the right is required. Either separate or community property may constitute a homestead. A homestead owner's spouse must join in any transfer or encumbrance of a homestead, and neither spouse can effect an abandonment of the homestead without the consent of the other. In addition to the reduction of taxes made for all homesteads, the Texas Constitution authorizes local governmental units to give further reductions for the aged and disabled. A surviving spouse is entitled to the sole occupancy of a homestead for life, though the owner may have devised ownership rights in the property to someone else.

So there, you are now a Homestead Law expert. You now know more about the Law than most Realtors. So the next time a party in your conversation mentions Homesteads don’t be afraid to chime in and show your knowledge.

Stephen McClain is a licensed broker and owner of Cornerstone New Home Solutions, a general real estate services company. Mr. McClain has been active in general real estate and the home construction industry for over 25 years in the Austin and surrounding area. He is also a certified instructor for the Texas Real Estate Commission teaching under Champions School of Real Estate.

Thank you for the opportunity to answer an age ol' question. Actually your question is two- fold. Your specific question as it relates to a specific property in a community and the general question of Ownership vs. Renting.

1st. Question: Answer- Economics (Supply & Demand) and the forces surrounding it. As the housing market has softened over the last 2 years due to most specifically tighter credit/lending practices more people have been forced to rent as opposed to buying a new home. This drives demand up for rental properties thus driving the rent values up as well. It has been good times recently for landlords. The landlord is reaping the benefit of ownership and the positive cash flow on their money (investment). Their money is making them money. Your money is well, making them money and not you money. So why are house payments less than rent? With a mortgage payment you borrow x and pay interest on x which is amortized over a certain time period thus creating a lower payment especially in government lending programs where the interest rate (cost of money) may be lower than average. You simply are re-paying a principal amount plus the cost of borrowing that money over time. The rental rate (payment) takes the previous statement into account and then adds to it a profit (cash flow) based purely on what the landlord can get on a specific property in a specific area at a specific time period.

2nd. Question: Answer- Core investment rules just do not change. Your money can work for you or for someone else. If you pay rent each month you might as well take the money and throw it in the street in terms of any return. You lose out on:

1. The growth of your money (Equity)

2. Tax Benefits

3. Interest Deductions

4. Ownership Benefits

You give all these up to someone else in a rental situation. If there is any way you can qualify for a mortgage you are always better off owning vs. renting. We all work to hard in today’s world to throw away our money.

Stephen B. McClain is a licensed Real Estate Broker and owner of Cornerstone New Home Solutions located in the Austin, TX area. He is also a certified instructor for the Texas Real Estate Commission. He has been involved in Real Estate and New Home Construction for over 25 years.

I recently answered a perspective homebuyers' question of When (How Early) do I need to hire my Real Estate Agent in a web forum. Interesting question as each individual's situation may be somewhat different. All that said, you still have these common similarities regardless of their personal situation. Each person is relocating for some reason. Each person needs a new home for some reason. So when do you hire them?

Ask yourself these questions:

1. What am I trying to accomplish?

2. How soon am I trying to accomplish it?

3. How long will this process take?

4. How knowledgeable and comfortable am I in achieving this task?

Your answers will reflect your comfort ability with the relocation endeavor and how much assistance you are going to need. I personally do not think you can begin preparing too soon. That said I do not think hiring an agent is as simple as picking up the phone, sending an email, or randomly finding someone's web site. Hiring an agent should be about establishing a relationship based on trust and comfortability. That takes time!

My recommendations are these: 10 KEY POINTS

1. Start now even if it is only preliminary.

2. Create on paper a time line for yourself based on your relocation calendar. Identify the milestones you want to accomplish by certain dates. Also identify the hurdles/obstacles that you may face in the transition. If you are considering building a new home prior to the actual move this is really critical.

3. Create a profile of the optimum agent you would/will desire to have work for you.

4. Begin with a broad approach. Research and/or talk to several (many) different companies. Include the mix- large, medium, and small companies to see where your level of comfortability may be.

5. Try to create a short list, i.e. 3-5 companies you want to focus in on.

6. Speak with several agents from each company you interview. Be candid, as specific as possible about your situation, needs, desires, requirements, etc. Note how each agent "stacks up” based on these criteria. Try to determine as best as possible their level of experience, their knowledge and skill level, their commitment to servicing their client, their availability and flexibility, their current workload, and overall professionalism. Don't hesitate to ask the hard questions and LISTEN carefully. Again, try to create a short list of 3-5 agents you want to focus on and or feel most comfortable with from each office. If an office yields just one agent that is fine- go with your feelings.

7. If you relocation schedule allows for it make a "prior to" trip to Austin specifically to meet face to face with your short list of agents. This task may be time consuming, a little expensive (depending) and maybe even a little inconvenient given your schedule BUT IT IS WORTH EVERY PENNY AND OR OUNCE OF INCONVENIENCE. Nothing substitutes for a face to face interview.

8. Based on your interview results, your feelings and your level of comfortability make a decision and hire an agent.

9. Every good worker/employee deserves a good job description/expectation. Orient your newly hired agent on exactly where you are in the relocation process and go over with them your criteria timeline you created earlier on. Bring them up to speed and then make sure they understand the schedule and milestone dates moving forward. Make sure they know, understand, and embrace your plan and schedule going forward.

10. Remember! You are not choosing an agent. You are hiring an agent. Put them to work early on in the process. First, this gives you a chance to determine if you feel you have made the right decision. Second, this frees you up to concentrate on other aspects of the relocation endeavor that you need to be concetrating on associated with your family and the transition.

Stephen B. McClain is a licensed Real Estate Broker and owner of Cornerstone New Home Solutions located in Austin, Texas.  He also is a certified instructor for the Texas Real Estate Commission.  He has been active in Real Estate and New Home Construction for over 25 years.  

THE GOAL IS TO GET IT SOLD

Let’s face it. Buying or selling a home is an emotional driven decision and transaction. It just is.  As consumers we all want the most for the least, the best deal or best value we can get for our dollar.  And that will always be an underlying factor in the decision process.  But it is not the driving force in our motivation to buy or to sell a home.  Buyers seek and purchase a home because they need shelter that satisfies their needs, wants and desires. That is an emotional based decision.   Sellers make a decision to sell because they there is a need to make a change in their current situation- a job change, relocation, financial situations (positive or negative), family situations (new additions or children leaving the nest) and desire for something different. Again these are emotional driven decisions.

As an agent who works with both buyers and sellers, I see this every day.  One of the hardest tasks or duties I face as a Broker and agent for selling clients is to get them past the emotional relationships to their home and truly understand and embrace the current market conditions and realities that exist in their present market place.  As consumers we all read the newspapers, watch the news on Television, or pick up countless amounts of information on the internet.  We know the realties but we just don’t want to accept the fact that it applies to our home. I too can appreciate this as a home owner.  After all we raise our children in these homes, have countless memories , have put our own time energy and money and most of the times backs into these homes with various home upgrading projects. We are emotionally attached to the property. 

The truth is sometimes I have to tell clients what they do not like or want to hear. The home is not presently worth what they want or think it should be.  But as a licensed broker I am bound to certain duties of Fidelity, Integrity and Competency which means looking out for my clients best interest at all times and that means telling the truth and giving facts as they exist.  So here’s one of those truths- Current Market Value (CMV)does not always mean Fair Market Value (FMV)or Intrinsic Market Value(IMV).  CMV means simply what value the home will bring in the current market place given present demand, supply, and economic conditions. Simply put, what buyers are will to pay for the home today.  FMV or IMV means the value a home SHOULD bring in a normal market with normal conditions, equilibrium and no external or undue pressures on the buyer or seller.  By definition these values may and usually are never exactly the same because marketplaces are rarely in perfect equilibrium. 

So here in closing are 5 points that I believe Sellers should fully understand and or undertake in the preparation of selling their home:

1.        Realize upfront when purchasing a home that timing is everything.  Homes will fluctuate in value over time given varying market conditions.  You cannot control the economics of the situation and none of us have a crystal ball to know the exact or perfect timing in our lives to buy or sell. Again, it is driven by emotion

2.       Know and understand the current market before you market the home for sale.  This will eliminate the shock or disappointment factor upfront so that you are past the emotional aspect and deal with the sale of the home in a business manner. After all the goal is to get the home sold and move on with the next chapter in your life.

3.       Know your competition.  Look at the current competition on your street, your block, your neighborhood and your area.  Visit the homes and “check your emotions at the door”. Preview the homes without blind eyes and be honest with yourselves as to how they compare with your home- location, sq. Footage, asking price, floor plan description, design, features, finishout and overall condition. MORE IMPORTANTLY if at all possible visit the homes that have just recently sold in the same area.  Sometimes they may not yet be occupied or they may have new homeowners who are willing to permit you to preview the property.  Just explain that you live within the neighborhood and are considering selling your home and would like to see their home as a comparison. Usually they are cooperative.  Hiring a real estate professional will help you in this endeavor as well.

4.       Realize the true value of a Real Estate Professional.  This will greatly aid you in achieving point number 2.  I emphasize the term “Professional”.  Find a Real Estate Broker or agent who truly is competent and knows their business. One who can/will give you a true perspective on current market conditions and the value of your home. Not one who is just chasing business.  Remember in selling the home timing is everything. Time is money.  A Real Estate Professional knows how to market the home and statistics clearly show will achieve the sale more quickly than trying to sell the home yourself.

5.       Put you best foot forward.  Make sure your home is “Show Ready” before you ever put it on the market. YOU only have one shot to truly make a great impression.  Get rid of clutter. Less is always better.  Use fresh paint. Make the minor repairs and give it a detailed cleaning.  Make sure the home’s exterior and yard is looking great.  A home starts selling at the curb not inside.

6.       Be honest with yourself about the current value of the home. Remember the greatest opportunity to maximize your price objective is within the first 60 days the home is on the market. After that the value decreases the longer it sits.  Establish what is the true current market value based on the current market conditions, your specific situation and your competition then market aggressively around that price. Don’t be greedy. Be smart. A quicker sale goes a long way in healing the pain of less money.

Stephen McClain is a licensed Broker and owner of Cornerstone New Home Solutions serving the greater Austin, TX metro and surrounding area.  He is also a certified instructor for the Texas Real Estate Commission under contract with Champions School of Real Estate.  For more information you may contact Stephen at smcclain@cornerstonenewhomesolutions.com.

I wanted to get this posting out there for all potential home buyers. Continuing to wait will cost more money.  The market is shifting.  Fed incentives, forclosures, desperate sales and builder driven marketing have all led to softened prices.  It took some time but demand started rising as a result.  3 Consecutive months now of increased demand. Inventory has fallen as a result.  End result- higher prices. Simple Economics folks.  There are still some great opportunities out there. But you must take advantage of them.

Here's a LINK to a market snapshot up-date from Rise Media via the National Association of Realtors. It gives a pretty clear breakdown and picture of where the market is heading.  BACK UP!

http://rismedia.com/2009-07-23/signs-of-change-existing-home-sales-rise-36-in-june/

If you would like more information on how to take advantage of the present market conditions and realize your dream of home ownership contact me at

smcclain@cornerstonenewhomesolutions.com or 512 876-3116. 

Stephen B. McCLain, Broker/Owner

Cornerstone New Home Solutions

I keep harping about now being a great time to buy that new home you have dreamed of.  And for good reason.  While it is definitely a Buyer's Market out there and there are good deals to be had.  The wind is slowly turning directions and that opportunity is going away.  I am including in this blog a press release from the Austin Board of Realtors.  It summarizes the housing activity for June 2009. In short, sales are still off about 4% compared to same time 1 year ago BUT that gap continues to narrow. If you are serious about owning a new home NOW is the time. Home Prices are going back up. Interest rates are already creeping back up.  Times are a "changin" folks.  Don't miss out! 

AUSTIN, Texas – July 20, 2009 – According to the June 2009 Multiple Listing Service report by the Austin Board of REALTORS®, the volume of single-family home sales in June 2009 was 2,135, down four percent from June 2008, and the median price was $199,900, unchanged from June 2008.
 
"We've seen the year-over-year gap in sales volume close steadily throughout 2009 and that momentum continues this month," said Jay Gohil, Chairman of the Austin Board of REALTORS®.
 
Home prices in the Austin area have also continued to gain momentum from the beginning of the year. Over the first two quarters of 2009 (January 2009 to June 2009), the average sale price for a single-family Austin home has increased $20,824, while median sales price has increased $24,400.
 
Also, from January 2009, sales volume is up 61 percent and active listings are up 14 percent. “This signifies a healthy Central Texas real estate market and good news for both local home buyers and sellers,” said Gohil.
 
The Austin Board of REALTORS® is a non-profit, voluntary organization representing more than 8,000 licensed REALTORS® in Central Texas.  For more, please contact Angela Brutsché at 512/454-7636.
 

So there you have it.  The market is changing and purchasing power is diminishing. Don't be a victim of missed opportunity!

For more information or assistance in realizing your new home dream contact me.  I welcome the opportunity to earn your trust and business.

Stephen B. McClain, Broker Owner

Cornerstone New Home Solutions

smcclain@cornerstonenewhomesolutions.com

512 876-3116

Well the stats are in for the May 2009 reporting period.  This information is supplied by the Austin Board of Realtors and tracks all transactions and activity through its Multiple Listing Service.  In short, activity for the month of May 2009 compared to a year ago (MAY 2008), is off around 30%.  Simply meaning that sales activity has slowed compared to the same time 1 year ago. However the good news is that May 2009 was up compared to the previous months activity year to date.  Not a huge surprise as we move into the peak of the traditional "buying season". 

 BUt the OTHER good news is that current market conditions spell GREAT OPPORTUNITY for those seeking to buy a home. This really applies to 1st time home buyers who have a buyer's market to take advantage of with softened prices along with stimulus incentives of $8,000 from the Fed. Government to add to the pot.  They can qualify for more home, purchase more home than normal and get tax breaks as well.  Remember 1st time home buyer is defined by the Government as those who have never owned a home or those who have not owned a home in the last 3 years.  That covers a bunch of you! With rental rates continuing to escalate and so much ownership opportunity currently available in the market it just doesn't make economic sense to continue renting. YOU ARE THROWING MONEY AWAY! 

This also applies to you move up buyers as well. Granted your home may not be worth what is was a year ago.  But if the savings you can get on the new home is equal or greater than the loos you face on your current home, it still makes great economic sense.  The net vale is equal or great to you and you get a larger or better home with more features and a newer design.  It's a win-win proposition.  By utilizing our Cornerstone Move-Up Program you can really take advantage of the market conditions and come out ahead.  

So here's a short summary of where we are in the market place:

NUMBER OF HOMES SOLD                  ACTIVE LISTINGS

MAY 2009 -1707 UNITS                   MAY 2009- 9939    UNITS

MAY 2008- 2108 UNITS                   MAY 2008- 10,577  UNITS

DIFFERENCE- <23.5%> Decline          DIFFERENCE- <6.5%> DECLINE

*** Watch this one. Notice that while sales are off, the inventory is still declining as well.  There are fewer homes on the market currently for sale than the same time last year.  This means upward pressure on home prices over time as inventory continues to decline and a clear signal that the current "Buyer's Market" condition will start to lessen. NOW is a great time to buy! Your purchasing power has never been stronger.

MEDIAN SALES PRICE                       AVERAGE SALES PRICE 

May 2009- $193,000                          MAY 2009- $253,608

MAY 2008- $195,000                          MAY 2008- $261,580

DIFFERENCE- <1.0%> DECLINE             DIFFERENCE- <3.25%> DECLINE

*** Look close at this with me.  The median price- meaning the price at which half of the homes sold were above and half of the homes sold were below, held relatively constant. Not much has changed there.  But look at the average price- down over 3% compared to the same time a year ago. That means more purchasing power. You can buy more home for the same Dollar.  I will say again- NOW is a great time to buy!  You have hit a peak in the market- home prices are down but inventory is declining which means that is about to start changing. Prices are going to stabilize and then start back upward. NOW is a peak time to purchase in the buyers marketplace.

Another important point- the cost of money or Interest Rates, are creeping upward.  The 4.75% standard is gone.  The new standard is 5.125%. Still not bad but creeping upward.  The cost to borrow is getting more expensive and economic pressure will continue in that direction as credit markets continue to be tight.  It all adds up folks. Time is money. Your money and more if it! 

If you would like a free and confidential analysis of your personal situation in regards to buying a new home or assistance in looking at what is the best direction for you at this stage with regards to your current home I will be happy to help you. We can provide you solutions to reaching your goal of home ownership. Give us a call.

Stephen B. McClain, Broker Owner

Cornerstone New Home Solutions

smcclain@cornerstonenewhomesolutions.com

512 876-3116 

I recently had the opportunity to attend a live simulcast for a "Town Hall" meeting hosted by financial guru Dave Ramsey. If you are unfamiliar with Dave he has developed a reputation over the years as one of the most knowledgeable, practical and sound financial advisors in the country.  He has helped 1000's of people restructure their financial lives through his program. He has authored several books, has a radio show, web site and makes daily appearances on TV's FOX Business news.  

The focus of the meeting was Dave's perspective on our current economic situation, how we got into this mess in the first place and how America can get back to being America. This forum was supported by incoming phone calls, emails, text messages and faxes from the general public all of which he answered with the same truth and passion that has led to his great success.  Dave gets right to the point and doesn't beat around the bush.  I respect him because he call it likes he sees it and he is usually right. 

Being a Real Estate person my ears naturally perked up when he began to speak about the housing market in general and its relationship to our current economic crisis. I thought I would share with you a couple of key and interesting points hew made while addressing this topic.

Point I:  What is creating the greatest impact on our current housing situation and economic desperity is not over building, bad loans, tightening of credit, inflated home values or unemployment.  The single most significant factor is our own FEAR.  For the first time in our nations history the American consumer, the public in general has succumbed to fear.  By no means is our current situation the first time our economy has been shaken. But unlike historical times when America buckled down, found solutions and in general refused to settle for less this generation has "rolled over" in fear.  We have actually as a consuming nation allowed ourselves to become "gripped" within our own uncertainty due primarily to the "sensationalism" reporting we experience daily through the TV, News Paper, Radio and Internet. You'd think based on the news that America was finished, done far, washed up! What happened to the "can do" attitude that made this country the most successful industrialized nation in the world.  When I really thought about this perspective I had to admit that I was as guilty as anyone.  I had allowed fear to overtake my normal very positive emotions and attitude.  In doing so I had lost sight of the REAL FACTS and blinded myself to the reality of all the opportunity that truly existed within our marketplace.

Point II:  Reality Check: If we take the time to research our economic history we will find that at several points since the early 1900's our economy and housing markets experienced worse times than what we are presently experiencing. This is not by far the worse. Look at the depression of the 20's.  This struggle is not that bad.  Sure we've all loss wealth but not everything as so many did in the crash.  The market hit its low point around mid March (approx. 6500 pts.) but by May was up over 30%.  Somebody made some money.  Of course you didn't hear about that in the news. It was still gloom and doom.   Anyone can find a problem or a negative if they look hard enough.  Look at the late 70's.  Gas was hard to come by.  Lines formed everywhere. The market took a dive like a tank.  Unemployment shot up like a Roman Candle (in appreciation of the 4th) but we weathered the storm because we did not allow fear to overtake our emotions as a society. We pushed forward. Look at the mid to late 80's- 20%+ interest rates, inflated prices, unemployment and again huge looses in the market.  Thank goodness for FHA and the 245 B as well as the ol' 5-3-1 buy-down.  That was the only way we could qualify people for home loans.  But the point is we did it. WE DIDN'T QUIT!  We got creative and found solutions and we pushed forward.

In closing I just want to say WAKE UP America!  Look around you and see the reality.  Austin, Texas and its surrounding marketplace is still a viable environment for opportunity. Certainly it has felt its pains but still remained very healthy comparatively speaking with other marketplaces throughout the country.  There are still jobs.  People are still working.  While true foreclosures are up and new home starts are down, there remains a lot of inventory available and at GREAT PRICES and incentives.  These are great opportunities for someone if they know where to look and how to negotiate the deal. So cast aside that fear.  Stop wasting energy on negative emotions and remember opportunity is what you make of it.