What is the status of that property?

There are 6 terms we use to describe the status of a property here in Texas: active, active-option, active-contingent, active-kick out, pending and sold. Most homes will pass through 4 of the 6 status updates from going on the market to being sold.

Active means the property has no contract on it and the buyer is free to enter a contract and buy the home.

Active-option is most often the second stage in
a typical real estate transaction. Once everyone has agreed on
all of the terms of the sale, the property goes under contract and into
active-option. This is what is known as the option period. During this time, the
buyer can opt out of the contract for any reason. The buyer pays for this right
to terminate. It is a negotiable item but the period is typically 7-10 days at
a cost of approximately $10 a day. During this period the buyer will get inspections,
make sure the home is insurable and negotiate for repairs. While the buyer may
terminate for any reason, the seller is obligated to sell to the buyer, even if
he subsequently receives a better offer. In some situations, such as
foreclosures and corporate relocations on the seller end, the option period is
eliminated. Instead the buyer has an inspection period but not an unrestricted
right to terminate. In those cases the property typically goes pending
immediately without first going active option. In those cases, the only reason
the buyer can terminate is due to excessive repairs needed.

When the property being purchased is a short sale (see prior post), most often the contract will go to active-contigent. The sale is contingent on the seller’s bank approving it. Additionally, some agents will use the active-contigent status on a regular transaction if the buyer will be obtaining a loan, indicating the sale is contingent on financing. The third most common use of the active-contingent status is when the buyer’s home is also under contract and they must complete that transaction in order to purchase the new home.

Active-option and active-contingent signal to the buyer that the home is already under contract and the sale would have to fall through for the second buyer to have a chance. I typically counsel my clients not to look at homes already under contract as the percentage of homes that fall out is minimal. However because I sell primarily unique, one of a kind properties, I have had clients  look at the home under contract anyway and consequently have written several back up offers for those clients. Homes do fall out of contract and back up offers do sometimes slide into first place, so sometimes it makes sense to stall the search in hopes that the first deal will come undone, however more often the buyers are left waiting on a property that never becomes available and have to get over the disappointment of losing the house they loved before they are free to move on and look again. If you know you are the type who will have a hard time getting over the loss of your dream home, it is best not to look at homes already under contract.

Active-kick out means there is a contract already on the property, but it can be ”kicked out” under certain situations. Typically the buyer has a home they have to sell first and the sale is contingent on them selling their home first. Usually their home does not have a contract on it yet but they are hoping it will sell in time. If a second buyer comes along and is ready to buy, they can submit a contract and potentially kick the first contract out. When the second contract comes in, the first buyer typically will have to plunck down additional earnest money and waive their right to terminate due to their house not selling to stay in contract. This puts them at risk, because if their house does not sell and they can’t purchase, they lose their earnest money. If they elect not to take the risk, they opt out and their original earnest money payment is returned. Contract #2 then slides into primary position. In these situations I always call the listing agent first to get the scoop as they will often know what the buyer’s situation is and what they will probably do if a second contract were to come in. Kickouts can make sense to look at under the right circumstances.

Pending means all options have been completed and the home is now waiting to close. If the contract were to fall out at this stage, and sometimes they do, it means nobody was expecting it and something went wrong. Most homes that go pending then move to sold. And nobody needs an explanation of what that means!

Q. What is a short sale?

A short sale means the seller cannot sell the home for what they owe,
thus they are “short” and are asking the bank to forgive a portion of their
debt. This is a distress sale and should be regarded as such. The transaction
is never pleasant for anyone involved.
The homeowners are typically in pre-foreclosure and cannot sell the home
for what they owe. Sometimes this is due to the property losing value, but
often in our market it is because they purchased the home with 100% financing
and rolled their closing costs into the home. Closing costs for buyers are
typically somewhere around 5% of the sales price and is mostly made of loan
fees, recording fees, HOA fees, survey &  inspection fees. Because
the homeowners are usually delinquent on their mortgage, they also have late
penalties accrued as well. Finally, there is the cost to sell the home which is
typically 8% of the sale price. This usually includes realtor fees, title
policy, recording fees, lender fees, HOA resale fees, and can include a survey
fee, inspection fees, taxes, etc. So if a homeowner has only been in the home a
short time and the house has not appreciated yet, they can be 13% short without
the home having lost a dime in value.

In order to qualify for a short sale, the sellers must meet certain criteria. There has to be a
hardship that has occurred: loss of job, divorce, health issues, etc. Because
these circumstances are stressful, often times the home does not show well. We
are currently in a buyer’s market and the competition to sell is tough.
Therefore the sellers involved in most short sales do need to sell under market
value to be competitive. This means those buyers who have a hardy resolve and
can afford to wait can get a good deal when buying a short sale, but they need
to be fully informed on the trials they will endure.

Currently the banks are inundated with demands for short sales across the country as homes in many
markets have decreased in value and sellers are struggling to sell. Typical
response times have been 12-16 weeks on most short sales I’ve dealt with. This
means you won’t hear anything from the bank as to whether or not your offer
will be accepted for that time period. Now you can always exercise your option
period (see above) to get out of the contract, while awaiting the bank
response, but it’s better not to go in and waste your time and money if you
don’t think you can wait it out.

In  a typical real estate transaction between individuals, after inspections have been completed by the buyer, a second round
of negotiations will happen in which the seller will usually agree to make repairs. In short sales, the sellers usually cannot afford to make repairs. In many cases, by the time the approval comes in they are fatigued and
demoralized, they have been scrutinized by the bank in every regard and they
don’t care anymore if the home sells or is foreclosed. The buyers still need to
do an inspection to make sure there are no serious faults or deal breakers,
however they should treat the short sale as an as-is sale and not expect any
repairs to be completed.

In summary, the short sale is not
for the faint of heart on either end. However if you are an investor, or have
the time to wait for your primary residence, and you want a great deal, then a
short sale can be worth the trouble.

Q: Can I build a dock on Lake Lewisville?

A: I am often asked this question. The answer is no. Lake Lewisville is an Army Corps of Engineers lake. The Army Corps actually owns the lakefront land and they do not permit any structures to be built on their land. There are a handful of boat docks on the lake that were permitted in the 1960′s and 1970′s. These properties occasionally come available but as you can imagine, are usually pretty expensive. Most people on Lake Lewisville keep their boats in their garage, in storage or at one of the marinas. There are numerous public boat ramps on the lake so getting in the water isn’t difficult. Still, if a boatdock or boathouse is a must for you, then Lake Lewisville isn’t your lake.

Still, there are a number of benefits to living on Lake Lewisville. In addition to the great location and easy access to both Dallas and DFW airport, owning adjacent to the Army Corps land means you can enjoy the lakefront land behind your home knowing it will never be built on. This land is public use land and so you are free to enjoy the land leading into the lake without paying taxes on that additional land. It also means that when looking at the size of a lakefront lot, it will always feel larger than it is because of the additional Army Corps land. The look of that land is different in different parts of the lake. Sometimes there is some sort of fencing, sometimes not. Sometimes there is a retaining wall and again, sometimes not. You also don’t have to worry about flood insurance like you do on some lakes, because the Army Corps will not permit you to build an inhabitable structure within the 537 ‘ line, which is the level of the 100 year flood plain. Sometimes the 537′ will be on the Army Corps property, sometimes it is on your property, so it is important to look at the survey when purchasing lakefront property… especially if it is vacant land!

How are the schools?

When looking at school districts, I always urge my clients to go to the Texas Education Agency website. You will find a wealth of information there. Among other things, you will find the School and district ratings for all of Texas as well as demographic information, average class sizes and dollars spent per pupil. If a school district makes the cut from a data perspective, then go look them up on the web. Most schools will have a public website where activities and pictures are posted. This will help you get a feel for the school and clue you in to what types of activities and programs you can expect to find there.

Lake Lewisville Facts

Lake Lewisville is approximately 29,592 acres impounded in 1954 with a maximum depth of 64 feet. It is owned and operated by the Army Corps of Engineers which owns and maintains the land around the entire perimeter of the lake. New, permanent boat docks are currently not permitted, however homes that have pre-existing docks have been grandfathered in, and therefore there are a handful of homes, generally in the $800,000 range and up that have a permitted dock. These homes are rare and do not come on the market very often. I typically see one or two a year come up for sale. The lake does have several access points, all around the lake. These include boat ramps, marinas, parks and swimming beaches. You can also install a removable boat dock, if that’s what floats your boat

Most lakefront homes range in price from $400,000-$1.3 million. However I know of a lakefront home for sale right now at $149 ,000 and another at $179,000. There are several in the $200,000-$350,000 price point as well, so it is possible to live on the lake in almost all price ranges. You can find everything on this lake from an old fishing cabin, a cozy family home,  a Mediterranian villa or a Castle. Whatever your flavor, Lake Lewisville has it. The same holds true of the lakefront terrain. There are homes built up over the lake with expansive views downward and a hike down to the water’s edge to gently sloping access right out your door. Some lots have trees, trees and more trees, some have none and there is everything in between.