We got a new realtor, and she's a lot better than the old one (not that it would take much).
Our new realtor seems to actually know what is going on, and she has gotten us into two foreclosed houses the day before they list. So far, we've put in two offers, and lost both. One was a cash buyer for about the same amount. The other offered 290 to our 280. At least in foreclosures it's all over in a couple days, you move on, you don't have time to get attached.
We've got our heart set on a neighborhood or two, we're just trying to make it work.
The thing about Texas real estate is that you have to remember the crippling tax load. You pay about 1.5-2% taxes on the APPRAISED value of your house. It is really a lot of money. So, even if you could get a 1M$ house somehow, you have to be able to carry 20K in the taxes.
So, we're still working on it.
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20 comments:
Ah, yes, the high real estate tax rate in Texas. What did you expect? It's not like they're collecting a state income tax from you. They've got to get their money from somewhere. It's a all a tradeoff, and now that you want to become a homeowner, all those years of tax-free living will come to an end. =)
I'm living vicariously through you, so keep us posted.
wow, that doesn't seem like a lot for property taxes. given the option, i'd choose a 1.5 - 2% property tax over state income taxes any day.
based on my rough calculation, i'm paying about 1% of my appraised value in property taxes. add that to the state income taxes (which tops @ at 6%, but that's not hard to get to) and i'm definitely paying more in taxes than texas residents.
That's not terrible. My levy was 2.2% in Nebraska last year and they're going up. Can't wait to receive my assessment in December. They delivered the week before Christmas last year.
To make things even better, Nebraska levies a 5% income tax and 7% sales tax. Likely 7.5% after the mayor gets his next tax hike through.
I saw an episode of My First Place once where their bid was 1,000 over the highest bidder (with a max bid of something like 280). It was a clever strategy that worked (ex. another buyer proposed 255 but the seller chose this couple for 256) - worth a try?
@ Christina -- The problem with the foreclosures is that we have no idea what else anyone is bidding. All the bids come in on one day, there's no listing price, so we just do the best we can.
Good luck to you buying your house. I just started following you today after reading your blog about the self-employed mortgage crisis! I assume now that you've been "legit" 2 years you are good to go?
My husband is self-employed and we just bought our first house in June through owner financing for $215,000 and only 5% down. We will have a balloon payment in 2 years and will need a mortgage from a traditional standpoint then. I worry about it at least once a month. It's definitely making me take a closer look at my finances and how we can best portray them on paper without getting taxed out the wah-zoo by the gov't!
In Houston, it's more like 2.85% each year - I thought it was the same everywhere in Texas. It's really painful when you can't get rentals capped like you can your primary residence.
I am responding to Christina's comment and your follow up. This is an excellent strategy, but it doesn't seem to work for me. The clause in the contract goes something like this:
"Buyer offers $1,000 more than the highest offer, up to a maximum amount of $X"
The "X" amount is the absolute maximum amount that you are willing to pay, but the clause might work to get you a lower amount.
In reality, when I use this clause, the real estate agent on the other end is inevitably awful and stupid - they don't know what the clause means, and in two instances, has refused to present the offer to the seller. But, other folks have told me that it works!
I think was Christina was saying is your bid it "$1,000 over the highest bid" and then you put an upper cap on it. I'm not sure how this would go over. Kinda like Ebay. You put your max but you only pay a bit over what the next highest bid is.
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1-2% property tax would be awesome. I'm paying 4% (on the appraised value) plus we have income tax and a 13% sales tax.
My effective tax rate in Austin is 2.1787 - adding in the following sub-sections: Travis County, City of Austin, Austin Community College, Health District (pays for EMT/Ambulance/local hospital), and Austin Independent School District. The thing that bugs me is funding services almost wholly on the backs of home-owners. If I rented, I wouldn't support paying for the schools my future kids might go to? That's whack.
On a semi-related note, a coworker has a lakehouse that he built with his two hands, having owned the property for more than 35 years - he's essentially still working past his anticipated retirement age to pay the taxes because of the appraisal value - and he's worried that he'll not get to enjoy retirement in his retirement house due to the tax level and the coinciding of the market's steep fall with his (potential) retirement...That's sad.
oh, and good luck with the foreclosure search - are the ones you're seeing all 'bank-owned' at this point? Beware the as-is's among them!
We brought our home through foreclosure. In SC (at least our county), they are sold at the county courthouse in a public auction. Everyone sits in a room and the clerk of court opens bids. The only 'person' who has to give a bid before the bidding begins is the leinholder. The leinholder gives paperwork with the top bid to be made as far as they are concerned.
That number is not announced to potential bidders. I have seen lienholders get the property for as low as $500 if no one is interested. In general, the bank's bid is between 30-40% of the outstanding mortgage. The previous owners owed $103,000 on the house we purchased. We won the bid over the bank by one cent. The bank bid 34,788.07 and we bid 34,788.08.
If you can see the deed/mortgages (which are public record here), you can probably get a decent idea of how much might be owed on the property and bid 30-40%. At least it might give you a shot to beat the bank. I definitely think I like the public auction the best! Good luck!
oh yes, do be prepared for an outlay of cash if you purchased a distressed house. The 'guts' of the air conditioner had been stolen, the roof and ceiling below had to be replaced in three spots, every appliance, lightbulb, etc. had been removed. The gas logs had been taken. It took two people with bush hogs 7 hours to reclaim the yard (acre lot). With those repairs and improvements we added, we paid out an additional $20,000 before we moved in --that includes paint, carpet cleaning, etc. Additional expenses including fencing the back yard and a lot of landscaping and other improvements to the house itself.
Good luck!
Interesting comments on the "$1000 over the highest bid up to x" stuff. The market is different here so I can't see if flying, but here we have public auctions of properties in that situation.
If it works for you then brilliant, but in that case why not just bid x? I'm assuming x is not some ridiculous high number.
Tax burden in TX and many Southern states are quite low. I am thinking you have never lived outside of TX to realize this. 3% of your house value to the state is quite low considering most other states are around 4% of salary at the lowest. It encourages you to have a house that is closer to your yearly income.
Most mortgage payments roll in taxes, insurance as well as P&I, so you should be basing your monthly payment on that total number rather than just P&I. It isn't a bad thing to set your sights on staying far below what banks and real estate agents say you can afford.
I did a similar strategy to what Christina proposed one time to get a townhouse in a very hot market. But I think what really made them pick my offer was that the house was empty and I was willing and able to close in two weeks. Sure there were some problems with the house, but nothing I couldn't handle.
My parents live in Plano (Collin County), where the tax rate is apparently 2.3% of the value of the home.
I live in Taxachusetts now, so I don't feel too bad for them.
@Zuzu Yup, that's what I meant. But I do agree with @Taylor - it does sound a little nouveau, however, the couple I saw do it had placed 5 losing bids on the house and kept getting outbid everytime (I think at least one of them was a foreclosure too).
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