The Home Valuation Code of Conduct (HVCC) went into effect May 1, 2009 for all 1-4 unit and single family conventional mortgages sold to Fannie Mae. The purpose of the new HVCC appraisal process is to establish an arms-length transaction between the appraiser and loan officer/real estate agent and to avoid fraud. Through the HVCC process, all appraisals are ordered through a third party agency who assigns an appraiser. The loan officer no longer is able use a personal appraiser. Our office has had many sales transactions delayed due to this process.

The purpose of an appraisal is to protect the lender to make sure there is enough collateral in the property being purchased by the buyer. Unfortunately, many appraisers are going into depth regarding the condition of the property instead of simply providing a value of the property. Cosmetic and minor repair issues are leading to appraisal problems and closing delays.

Many investors purchased homes based on speculation of appreciation, and their rental properties produce negative monthly cash flows. Austin is one of the best real estate marketing in the country. However our market is not immune from the national housing bust. Most real estate values have dropped, and many investors can't afford to pay the monthly negative cash flow on their rental property. Some investors are selling homes if they have equity while other investors are selling homes in a short sale transaction or allowing home to go into foreclosure. Allowing a home to go into foreclosure can result in a large income tax bill.

Anytime a seller sells an investment property, he or she is subject to capital gains tax and depreciation taxes. The IRS allows an investor to depreciate the improvement of a single family residence rental property for 27.5 years. Below is a simple calculation for yearly depreciation:

The Secure and Fair Enforcement for Mortgage Licensing Act 2008 (SAFE Act) was passed last year and is now in force effective April 2, 2010. The purpose of the law was to enhance consumer protection, minimize fraud, and establish a national licensing system and registry for licensed loan officers. An individual in the State of Texas may not act as a Residential Mortgage Loan Originator (RMLO) unless licensed by the state and the national registry system.

The SAFE definition of a loan originator includes an individual who takes a residential mortgage loan application; offers or negotiates terms of a residential mortgage loan(s) for compensation or gain; and who performs purely administrative or clerical tasks on behalf of a person who is described as such. Texas is the only state in the US that also requires applicants to pass both the national RMLO exam and the Texas state exam.

Investors frequently call our office inquiring about our property management service. Most investors ask standard questions such as what are our monthly management fees and lease listing fees. Vacancy and turnover costs are typically the most costly expenses for landlords, yet few investors inquire about how we market rental properties and minimize vacancy periods.

Many prospective investors never ask some of the most important questions: How we market our properties? How do we minimize vacancy periods? Do we specialize in a specific area? Do we have dedicated leasing agents? Do we show property on weekends? What is our average vacancy percentage? Instead, many uninformed owners hire a property manager because his or her monthly management fee is 1% less than another property manager. Is it a good business practice to make a decision based on $10 per month savings? You would be surprised how many landlords do.

As you may have read, the US Government stopped purchasing mortgage backed securities the end of March 31^st. As a result, interest rates have increased about .5% the past 7-10 days. What does this mean for future buyers, tenants, and investors?

As long as our unemployment rate remains high, we expect house values to remain stagnant if not drop slightly this year. There will be more pressure on higher priced properties than homes priced below $200,000. Lower priced homes will be more resilient and better hold their values.

Chris Warren Realty, our in house property management company, specializes in leasing and managing property in Cedar Park, Leander, Round Rock, Pflugerville and Central/NW Austin areas. Surprisingly, we have a 100% occupancy rate despite the attractive $8,000 tax credits available to first time buyers who enter into a contract to purchase a home by April 30^th. Today, I did a lease search and found surprising results. Leasing Inventory is near record lows.

I queried active single family resident properties in Cedar Park/Leander and Round Rock areas. The majority of the properties we manage are in these areas. We manage over 100 properties just in Cedar Park/Leander. This makes sense since our office is located in Cedar Park, and we have multiple leasing agents living in area. As of today (2/25/10), there were only 57 active homes available for lease in Cedar Park and Leander. Round Rock also only had 57 active homes for lease. This is very unusual. We have seen inventory

For the first time, I sued a tenant in small claims court for not paying last month's rent and was awarded triple damages. Tenant failed to give proper written notice, breached lease by vacating early, and did not pay last month's rent. We had previously filed an eviction lawsuit and received an eviction judgment for rents in arrears. We filed a second small claims lawsuit for damages, reletting fee, lost rents, and triple damages for not paying last month's rent.

When filing an eviction lawsuit, a judge will only award a judgment for past due rents. Late fees, reletting fees, future rents, and damages will not be considered in eviction court. A landlord must file a small claims lawsuit to pursue rents from breach of contract, damages, and late fees.

Texas is a very friendly landlord state and has property codes to protect landlord. Under no circumstances are tenants allowed to pay the last month's rent using security deposit. Texas property code § 92.108 states:

Getting a property ready for lease does not require as much work as getting a home ready for sale. Prospective tenants are not as concerned about curb appeal, condition of yard, or extensive upgrades. However, tenants are looking for homes in good subdivisions that are priced competitively and show nicely.

Tenants are looking for a home with clean walls and carpet. These are probably the most important features. Like home buyers, tenants have choices in looking for homes. However, most will submit an application once they see a home that meets their needs and is priced competitively. Tenants usually don't preview additional properties once they find one in good condition, because there are fewer homes for lease than for sale. Homes with clean walls and carpet will lease quickly and sometimes receive multiple applications.

Adding a swimming pool can increase the value of your home and make home for saleable. However, like most upgrades, sellers most likely won't capture  the entire cost of adding a swimming pool.

In my experience, there are usually three profiles of buyers looking at homes with swimming pools. Some buyers specifically want a home with a swimming pool and make this an important factor in their home search. Other buyers will not consider a home with a pool due to cost of maintenance and or fear of liability if they have small children. The most common buyer may not be looking for a home with a pool in a home search but end up choosing a home because it has a swimming pool. So, the swimming pool can be a feature that sells the home. In this scenario, a buyer chooses the home with a pool because it stood out from other properties.

Higher priced homes have a better chance in recovering the cost of adding a swimming pool. In fact, if many homes in a subdivision have a swimming pool, it can be a real advantage for the seller. Homes in these neighborhoods without a pool may actually be at a disadvantage when competing with other listings that have swimming pools.

It can be challenging working with tenants and collecting rent. Many times an unexpected car repair or medical bill will come up. Or, a tenant may lose his or her job and lose income for a month. This can make is extra difficult for tenants to get caught up in paying rent. Most tenants will have a hard time paying the next month's rent plus a month in arrears. In these situations, we have considered a lease modification for qualified tenants.