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Top 5 Mistakes Homebuyers Make in Austin, TX

Ryan Rodenbeck

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Oct 2 16 minutes read

Video Transcript

-RYAN: We are live, and today we are covering the top 5 mistakes that homebuyers make in Austin. Join us in just a second.

INTRO: Welcome to Behind the Scenes with Spyglass Realty, with Ryan Rodenbeck and Matt Edwards.

RYAN: Let’s get right into today’s topic, and it is the top 5 mistakes that homebuyers make when they buy a home in Austin. This is something that as a listing agent, we come across a lot. You really don’t know that these are mistakes until you live in the house and you’re trying to resell the house.

We’re going to go through these, but first, Kelly has a link to the eBook that outlines all of this. She’s going to drop it into the comments section. Once again, if you’re watching and just joining us, hit “like” if you like what we’re saying, and type the word “AGENT” to subscribe. If you’re watching this on YouTube, hit the subscribe button.

Mistake #1. This is pertaining to new homes, and it’s going to sound a little weird, but don’t buy a new home unless it’s in an established area. What I mean by that is we’ve had this problem with several sellers that have bought on the outskirts of town. They bought a brand new home, and they need to sell it two years later.

What happens here, guys, is that – the general rule of thumb is that if you can get into the backyard and you’ve got a ladder that goes up two stories, or one of these firetruck crates or whatever, and you get up two stories high and you can see land all around, what that means is that they’re going to be building around there.

A typical homebuilder trick is that they’ll tell you that “we’re on the last phase of it.” They say that to people all the time. Yeah, they might be in the last phase of that neighborhood, but then all the builders in that neighborhood are just going to pick up and move right down the road.

MATT: Yeah, because they already own the land, most likely. If you really wanted to get technical, you could find out who owns that land.

RYAN: You could find out who owns it now, but the issue is – this comes from the book The Millionaire Next Door. They always say buy a home in an established neighborhood. Now, they’re talking about older neighborhoods. Sometimes people want new homes, and that’s fine.

But either you need to plan on being there for a good long time, or find a place that’s really almost finished, like South Park Meadows. There’s a couple developments right over there that you could go four stories high and you’re not going to find any land.

What happens in a couple years after you have lived in a home, and let’s say you get a job and you’ve got to move, then what you’ll find is the builder is actually selling the homes that are just like yours. They may be selling them for $20,000 or $30,000 more than yours. Homeowners are going to want the new home. They’re willing to pay more.

MATT: Yeah, you’re basically competing with the homebuilder that you bought the home from.

RYAN: Yes. And the builders are making concessions at the higher price so that they don’t have to lower the price of their comp – meaning they can always raise the value a little bit, even though really they’re giving concessions to make the house cheaper than what it looks like they’re buying it for.

That’s a big one. Sunny and I have listed several homes in the last few years that were really hard to sell because of that issue. We see it all the time.

Mistake #2: Don’t buy a home that’s either facing a busy road or right next to a busy road.

I can tell you, I’ve dealt with a few of these houses in Barton Hills. It’s really tough because what you’re going to see happen is most of the time when people buy these homes, they’re moving from out of town. They’re trying to buy – Barton Hills is a great example; so is Northwest Hills – where they want to get into a home. They’ve been bid out and maybe stuck at a price range where they have to get something in that area, in that price range, and the only thing available is right next to a busy road.

I’ve also seen situations where people have moved into a home like that and they don’t have kids, and once they have kids –

MATT: It becomes a challenge because when they have kids, they put out the little green guy with the flag that no one pays attention to.

RYAN: Yeah. I’ll say this – and I’ve sold homes like this to buyers, working as a buyer’s agent – but if you’re wanting to get into a neighborhood and this is all you qualify for or all you can find, that’s completely fine. Just know that when you sell that home, you’re going to need to look at the comps and discount your home a really big amount compared to homes that are even one or two houses over.

MATT: And then hopefully, if they were using a great agent to begin with and that’s the home they chose with, they would know whether that discount was priced in a buy side. Hey, it’s on a busy street, it’s been set for a month, and get it for a discount. Help ease that pain on the sell side.

RYAN: Yeah. I sold a home to some clients – I actually sold them like three homes. I remember going to the home, and it backed to Manchaca. I said, “Gosh, I wouldn’t buy this home.” They were like, “We really like it.” I said, “Okay, but look, guys” – this was like six or seven years ago; I think it was like $210,000 – “you really need to get something like $190,000.”

They actually sold it two years later, and they came back to me like, “We understand. We’re going to have to sell it. We’re pulling comps at $245,000 and we need to go in at $225,000,” or whatever it is. So they were happy with it.

MATT: I mean, you did your job. You prepared them before they bought the home. You set the expectations upfront on the buy side and then on the sell side.

RYAN: Yeah. I didn’t have to look bad. I didn’t have to feel bad, either. And they brought it up to me, like, “You’re right. We don’t like living here anymore, we’re having a baby, let’s get out of here.”

Mistake #3. This is a big one in Austin. Austin is really hilly. We have properties that have very steep driveways down, very steep driveways up. The backyard goes straight up or the front yard goes straight up, or it doesn’t have any yard at all.

What you’ll see happen is – for instance, I went to a listing appointment in I think Jester Estates a couple years ago, and the lady that called me out there said, “Hey, I’ve got an acre and a half in Jester Estates.” It’s like, wow. Go out there, it backs to Greenbelt. It’s basically a quarter acre. It goes straight down.

Now, in that case, that doesn’t hurt that property, but you’re not getting any value for the acre and a half. It’s not usable.

What we’re talking about are – my wife and I almost bought one in Barton Hills. There’s a home on Kassarine where you go into the backyard and it’s all rocks. All rocks. The usable backyard was just like a patio.

Once again, it’s the same situation that if you’re buying a home like that, just know what you’re getting into.

MATT: Right. Prime example – now, this is super rare, but a few weeks ago when we were having al that rain and those storms, a friend of mine owns a home at the bottom of a very steep hill, but it’s all trees. I guess the wind or something broke a big old tree limb off, and it came tumbling down the hill and into the side of the house. Now, he’s lived there forever, and that’s super rare, but…

RYAN: Yeah. By the same token, if you’re in a hilly section, you also – I didn’t even put this in the eBook, but we need to – when you’re looking at homes that are on hills, or even homes that aren’t on hills but you’re behind a home and it’s on a hill, you really need to look at the grading.

MATT: Drainage.

RYAN: Drainage, yeah. When that water hits, it can flood your house. We see it happen in my neighborhood all the time. In fact, my home, we got lucky because the people that owned it before put in this massive drainage system. All of the gutters and the downspouts go underground and into the street

MATT: Oh, nice.

RYAN: Yeah. That would probably cost $30,000 or $40,000. So that’s just a couple things when it comes to lot characteristics that you really need to be cognizant of. Not to say that you should not ever do that, because look, I would buy a home in the right neighborhood. I’ll make sacrifices to be in the right neighborhood. You just need to know that when it comes time to resell, those things have to be taken into consideration.

Mistake #4. This is why we’re talking about this – #4 is pick the right time to buy.

MATT: It’s fall. This is it. Hey, we’ve even got some fall weather outside today. It feels great out there.

RYAN: Yeah. What we see here is it’s the opposite time of selling. The best time to sell is mid-January through May. Things start to slow down in June. We’re about to hit October. September, October, November are really good. This is the sweet spot. September, October, and part of November. The rest of November and December are actually good, but inventory is low.

What you’re going to see happen here is there’s less competition and there’s a decent amount of inventory for the inventory prices that we have compared to the rest of the year.

What that means, Matt, is that when you’re – if you have to buy a home at a certain time, you’re just going to have to do what you have to do, right?

MATT: Yeah.

RYAN: But this is probably the least mistake that people can make. The other ones are bigger. But if you can help it, when you’re trying to pick the best time, June to December.

MATT: There’s a lot less competition from buyers, so there’s less multiple offers in the fall.

RYAN: Absolutely.

MATT: You’re not getting that spring fever. And then on the investment side, it’s kind of the same thing as well. I think November and December are probably the two best months for investors to buy.

RYAN: No doubt about it.

MATT: Because when you’re an investor buying a distressed property, guess what? That owner needs to sell. It doesn’t matter what day or time of the year it is, if they either inherited a home they don’t want or in a financial situation or tax link or something, it’s got to go.

RYAN: Yeah. You make a really good point about that, because I would say the duplex market is only slightly cooler now than it was any time earlier in the year. But what happens when it comes to investment properties, in November-December, investors have kids, investors have Thanksgiving, investors have Christmas. The best deals I’ve ever bought have been on holidays, really, for myself and for clients.

MATT: Because no one’s paying attention.

RYAN: That’s right.

MATT: But that homeowner still has to sell. You better believe I’m going to be buying.

RYAN: Yeah. What you need to do is find a good agent who’s single and no kids, and I have one right here.

MATT: Hey, there we go. [laughs]

RYAN: This guy is here every single day. I come up here to pick up something on Sundays and he’s here. So he works.

And finally, Mistake #5: Work with a reputable lender. This is probably the most important thing, and I don’t think people really understand why.

We have these maps back here from the Leaman Team. They’re the #1 volume producer of loans in Austin. They are reputable. Everyone in town knows that they get deals done.

MATT: And there’s a couple of reasons. That’s what they do, mortgages. They do it day in and day out, and they’ve done it for quite some time. Even if it’s a newer member on the team helping, they’ve probably been there a while, or they’ve got the training and they have the guidance.

RYAN: Or the systems.

MATT: Or the systems. You go to some of these bigger companies, it’s a turn bar. They put somebody in there, they last for 6 months, they’re gone. They’ve got a new person in there, and then they’ve got to go through all the corporate drama, send it to somewhere else.

RYAN: First of all, let me just say this. Leaman Team is not the only team in town. There are plenty of reputable lenders. But in Austin – Austin is a boutique town. We support local businesses.

But even more than that, the real reason why is that when you’re dealing with a national bank like Bank of America or Compass or Wells Fargo, the person that you walk to and you talk to, to fill out your loan app, you’re not going to be dealing with them anymore. You’re going to be dealing with someone at a call center in Florida. That’s really what it is in Wells Fargo.

You don’t have access to them at night or on the weekends – which you really don’t need them on the weekends, but sometimes you do.

MATT: Yeah. You find a property and need a preapproval letter adjusted or whatnot. It happens more than you think. That’s not end-all, be-all, but it’s just one of the things that working with the Leaman Team or working with some of the other mortgage companies that we recommend, those guys answer their cellphones.

RYAN: They answer their cellphones.

MATT: Yeah. You text them, call them on the weekend, “Hey, I need this,” they’re on it. It’s done, and we’re in good shape.

RYAN: Yeah. The other thing is, most of the lenders that we work with and we recommend have direct access to their own writing department. If there’s something funny that needs to be talked about for underwriting, they can talk to them.

Here’s why it’s so important. I don’t think that we got to this part yet. If I have a listing that I’m going to get a multiple offer situation on, and I get two offers that are exactly the same – call for highest and best, all the terms are exactly the same, and I get one that says Bank of America and one that says Leaman Team, Bank of America is cooked.

MATT: Done.

RYAN: It’s done. I can tell you, you could go survey every top producing agent in this town, and you would get a 100% agreement with that situation.

MATT: Yeah. As a listing agent, it’s going to give you headaches that you don’t need to deal with when you have an identical offer that you know is backed by a mortgage company that’s going to get the job done.

RYAN: Yeah, absolutely. We’re going to wrap this one up short. Before we do, Kelly, when you get a chance here – we want to invite you guys to join us on social media. We’re going to put our Instagram in the comments, we’re going to put YouTube, let’s do Twitter.

MATT: We have a Twitter?

RYAN: Don’t do Twitter. Let’s do LinkedIn. Check us out. We’re putting out more videos on YouTube than you’re seeing on Facebook. We’re putting some good content on Instagram. We would love to see you guys on there. Follow us, we’ll follow you back.

MATT: And leave comments on videos and topics that you would like us to cover.

RYAN: That’s a great point. We want to know what you want to cover. You know what we have going on for next week?

MATT: What’s that?

RYAN: I have no idea. But we’re looking for suggestions.

MATT: Actually, I’ve got it.

RYAN: What is it?

MATT: Five tips from a professional inspector for homebuyers on what to look for.

RYAN: I like it.

MATT: How’s that?

RYAN: Sounds good.

MATT: All right.

RYAN: All right, guys. That is a wrap for today. I hope to see you next week. Actually, let’s put that in the books. We’re going to do the five red flags on an inspection, okay? See you next time.

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