Albuquerque Real Estate Talk - Nov 16 2013
Tego and Tracy cover Albuquerque Market Statistics, Real Estate Contracts, and Real Estate Trades and Exchanges.
Tego: Good morning. Welcome to 95.9 FM and AM 1600 KIVA The Rock of Talk. It is Small Business Saturday here. This is the Albuquerque Real Estate Talk Show. This is Tego Venturi with Keller Williams Realty. I’m joined as usual by Tracy Venturi.
Tracy: Good morning everybody.
Tego: We’re part of, I should say, the Venturi team of residential realtors here in Albuquerque, we have a ton of us on our team all together. We have listings specialists and buyer specialists and administration people and marketing people. We work as a team and it’s a great way to get homes sold. It works well for us. We do this every Saturday. We talk about residential real estate. Tracy, what are we going to chat about today?
Tracy: I thought we should get our market update from you, maybe talk about the property tax bills that went out. I’m sure everybody got them, but if you didn’t, we’ll talk about that, and also talk a little bit about homeowner’s insurance and part of the buying process. If we have time—we have time—we’re going to talk about homes for sale using owner financing or creative exchange opportunities in real estate, maybe being able to exchange properties and 1031 opportunities. That’s a lot of topics for one morning.
Tego: It is.
Tracy: I got a lot of caffeine already so I’m ready to go.
Tego: I’m ready to go, too. With the market stats, we’re into November now. Thru October, just some quick numbers, we have had in the metro area here, the average price is up 1.63%, which when you look at that, it’s not pretty substantial but that’s what we’ve been seeing all year.
Tracy: So, that’s a year-to-date number.
Tego: That’s a year-to-date number. That’s year-to-date 13 versus 12. But actually the number of homes sold, actual number of properties sold has gone up. It’s closer to about 16% of increase in the number of homes sold. Actually, it’s closer to 17 when I look at these numbers. It’s what we’ve been trending all year which is more homes are selling. Prices have not been really moving up much but they are not going backwards which is great.
Tracy: So, if you’re thinking of selling your house, give us a call. We’d love to talk to you. House sales is up 16%. We know that there’s need for homes to be on the market. I know it’s November. However, it doesn’t mean you shouldn’t wait until spring. Give us a call at 933-6881. We can talk with you about getting your home sold if that’s what you need to do. It’s interesting to me, yesterday afternoon I was in my car listening to satellite radio CNBC and Maria Bartiromo and some guy were bantering. She was really badgering him saying, “You should be buying a house. You need to buy that house. The market is perfect. Interest rates are low. Prices are still affordable. Get out and buy that house.” It seems everywhere you listen to people are talking real estate.
Tego: Yeah. It’s definitely changed from you just think about 2 or 3 years ago how the media was like ‘Buying a house is the worst thing you can ever do.’ Of course, media changes their opinions. Obviously, we feel like it makes sense if you’re going to be in the same place for a while, say 2-3 or 4 years minimum. It just makes more sense to purchase over renting.
Tracy: Right. One of the things that’s interesting is there’s a lot of rental homes on the market in the Albuquerque metro area, Rio Rancho metro area on the market right now for rentals that are sitting vacant waiting for you if you need to rent a house. The rents on those tend to be, I’d say the average is $1,200 to $1,400. It’s pretty tough to find a house to rent for $900. I know apartments are expensive these days as well. We talked on previous shows that you can buy 175,000 house and your monthly mortgage would be equal to or less than the rent. That’s kind of an unusual place in the real estate market because very often it’s a lot cheaper to rent a house than to pay a mortgage. We’re still in unique times where it’s generally going to be equal or similar to pay for a mortgage and own a house versus rent.
Tego: Yeah. Let’s segue way into something that’s really exciting taxes and insurance. This came in the mail this week, we own multiple properties both here and Bernalilio County and also Sandoval County. So, we get that little joy in the mail this time of year called a property tax bill. Tracy, explain how the assessor’s bill, this bill that we’re getting right now, it’s due in December, what is this bill for?
Tracy: This bill that’s due December 10th is for the first half of 2013. Similar to your mortgage payment that you pay after you’ve lived in the house for a month and they’re due at the end of the month, property taxes in New Mexico are also due in arrears. You’ve been in the house all year. Your property tax for the first half of the year isn’t due until this December 10th. That’s the bill you got. It’ll have a coupon on there for the 2nd half of 2013 which is due and payable next spring. I believe it’s April 10th.
Tego: Many people that have a mortgage, part of the escrow that they pay every month, that portion that the mortgage company holds aside is to pay for the taxes. You may get a bill, although that may be getting paid by a mortgage company, so you may want to just confirm that Escrow money is there and they are paying it. If not, you need to make sure you’re getting it paid. There’s a bunch of different ways to pay. In the past couple of years, I’ve always just logged onto Bernalilio or Sandoval county’s website and just paid those directly there.
Tracy: Yeah. I appreciate you doing that. If you don’t have a mortgage and you’re owning your house outright, then you are obviously paying your taxes yourself. Sometimes credit unions, some of them don’t do escrows for you. Sometimes if you have enough equity in your house, you can opt out of those escrows. A lot of people believe they want to hold their money and continue to have it grow for them so they don’t want to pay into an escrow where there’s no interest bearing account.
Tego: Sure. Let’s talk about disputing your property taxes. There is a method for folks that feel like they’ve been assessed improperly on property value to go to the county. This is the bill. This is not the notice of value.
Tracy: Right. This is, unfortunately, not the time to protest. Every spring, the assessor’s office sends out a notice of value. It says, ‘This will result in a bill.’ That’s when they’re giving you the opportunity to say, “Hey, this doesn’t look like the right value for my house.”
Tego: That’s what you can protest. The value that they’ve determined of the property, not necessarily the dollar amount that they’re giving you the levy. You can just protest the value they’ve put on the property.
Tracy: Right. In the spring, when you get that notice of value, open it up right away because you only have about 30 days as I recall to file a protest. Part of that protest is something we can help you with. Oftentimes, you have you have comparable sales or comparable values of properties to show that you believe your house is being overvalued. We can supply some of that sold data because New Mexico is a non-disclosure state, sales prices are just not online in the county database or anything. We can help you get the underlying data you need to do your protest. Let’s move on
Tego: Not now.
Tracy: Next spring. For now, you just get to pay.
Tego: You get to pay. The other thing, I saw an article this week just talking about property insurance, I know taxes and insurance. I can’t believe we’re doing this. These are important things if you’re a homeowner. One of the contingencies on our purchase agreements is a contingency regarding property insurance that when you make an offer and you have a contract on a property, you have a certain amount of time that you can go in and figure out what your insurance is going to cost in that property. You just need to make sure that you don’t just want to ignore the insurance par when you are home shopping.
Tracy: Normally when we’re going out and we’re doing the joyful thing of looking at houses for sale, which I love. It’s my favorite part of my job. We sometimes overlook the homeowners’ insurance cost. We think that all the houses are going to be the same. If I’m looking at a $200,000 house, the homeowners’ insurance will be the same whether I’m buying here or there. In actuality, there are a lot of factors that can play into what the homeowners’ insurance cost will be. One house right next to the other, one could be completely different. Typically, we see houses that are in developed areas close to fire hydrants or close to fire stations, they seem to get better rates. If you’re in a rural area where there’s not a fire hydrant or the fire station is a long ways away, your insurance rate will be higher. But if we’re just looking in Albuquerque Northeast Heights at homes for sale, the chances are most houses will be about the same. It’s going to depend on age of roof, age of the home, the things that your insurance company will need to know about to give you a quote. What most people don’t know is houses can be like lemons kind of like how cars can be lemons. If a house has had a lot of claims, their homeowners’ insurance is going to be higher. So, at the beginning of the period where we have a house under contract for you, we’ve got a period where you can check with insurance companies to make sure that the house wasn’t a lemon and you’re not going to pay twice as much for homeowners’ insurance than you might have if you picked house #2.
Tego: We found in our clients that shopping around, just like anything, rates are going to vary in between the different companies. Shop around and find the best coverage for the best dollar. We’re going to take a break here. We’ll be back shortly. We’re going to talk about creative financing, exchanging, real estate contracts, also known as seller financing and some of the options there for both buyers and sellers. This is Albuquerque Real Estate Talk. You’re on 95.9 FM and AM 1600 KIVA, the Rock of Talk. This is Tego Venturi with Keller Williams Realty. Talk to you soon.
Welcome back to Small Business Saturday on 95.9 FM and AM 1600 KIVA K-I-V-A the Rock of Talk here in Albuquerque. This is the Albuquerque Real Estate Talk show with Tego Venturi and Tracy Venturi. We’re with Keller Williams Realty. We’re residential realtors specializing in residential real estate, obviously, in the Albuquerque/Rio Rancho/Corrales, East Mountain
Tracy: Rocitas, everywhere
Tego: The whole metro area. We were talking about those fun things like taxes and insurance. Let’s get away from that. Go ahead.
Tracy: Let me just take over. Tego, you’re past president of the New Mexico Council of Exchangers. It’s a group of realtors.
Tego: That name, it sounds so official, doesn’t it?
Tracy: Yes, it’s very important. It’s a group of realtors open to anybody, any realtors. They meet once a week, spend a couple of hours presenting opportunities in creative real estate realms sort of.
Tracy: It’s always interesting because every Thursday mornings or most Thursday mornings you attend these meetings and you come home energized or you’re back to the office and you call me and say, “Hey, we got to go run a buy and look at this property or that property.” Tell me about that network.
Tego: This is obviously networking. It’s just a wonderful thing no matter what business you’re in. I feel like that’s probably one of the most important things to be successful in any business and anything you do is networking with other smart people. I got involved with this group years ago. It’s the New Mexico Council of Exchangers. It’s realtors that specialize in property trades or exchanges, swaps let’s say. Of course, mixed in with that is other creative real estate marketing pieces which could include real estate contracts, also known as seller financing, also known as land contracts
Tracy: Or owner financing.
Tego: Also known as owner financing. But basically, we generally call them real estate contracts. That’s part of it.
Tracy: That’s where we get the REC part. Real estate contract.
Tego: Right. REC. also known as real estate commission. But let’s not confuse it. The exchanges, basically it’s just like it sounds. It’s trade. I have one property over here, and you have this property over here. I want yours, you want mine. Let’s work out some sort of deal that we can put this together.
Tracy: When I hear you say that, sometimes it’s more than 2 parties. It might be 3 because what somebody has might not be what you want, but somebody else might be willing to take it. Sometimes, it’s even more involved. It could be several parties trading things around.
Tego: I think the thing that people forget is equity, whatever that equity is in a property, that’s as good as cash.
Tracy: That’s what they’re trading. It’s trading equity.
Tego: Yes, exactly. Sometimes you’ll hear that term. We’re going to do an equity exchange as opposed to a property exchange because what you’re swapping is equity in one property for equity in another property. They don’t have to be of equal values. You can balance it out with some sort of loan, real estate contract or multiple properties going in to one property or something like that. There’s a lot of potential. I think the opportunity for somebody that has a property that they want to sell or let’s say that they just don’t want any more but would like to move it when some other real estate opens up, that’s where the potential is for this type of deal.
Tracy: One of the ways that we can help you with your real estate is if you have something that you think might work as a real estate exchange, you think you would sell it with owner financing, get with us and we can list the property for sale, and Tego can present this at these weekly meetings.
Tracy: You can’t just say, “Hey, throw my property up there.” This is a real formal.
Tego: Oh yeah, absolutely. For sure. Even then, we would still market it thru the multi-listing service MLS and advertise it as open for exchange. An example would be somebody that has a home, maybe it’s a rental home that they have that they’ve been renting for a whole and they just don’t have the passion for being a landlord anymore, but yet, they don’t really need the money. They don’t need to liquidate and take cash out of that property. They would maybe like to move that equity into another piece of real estate – a house, land, maybe some commercial real estate as well. This is where this opportunity opens up.
Tracy: One more thing as the Venturi team of realtors. One more opportunity that we can market and work with you with your real estate needs. I was thinking about some of the things I’ve heard you talk about. I’ve heard somebody saying, “Hey, if you’ll buy this house, I’ll throw in the RV or this old classic car.” Sometimes, it’s not even just real estate. It might be–
Tego: Personal property.
Tracy: Personal property. Sometimes we come across things where somebody has a house on Abiquiu Lake or they’ve got something in Angel Fire. You came home this week.
Tego: There’s one in Angel Fire I saw Thursday. Great property. It’s free and clear. Term that we use that they don’t want her meaning they just don’t use it anymore, but they’d like to keep it in real estate just not in Angel Fire. So, they’d like to move that equity to something else probably.
Tracy: Something more local. It’s an opportunity if you want something in Angel Fire and you want something here, give us a call. Yeah, give us a call.
Tego: Give me a call.
Tego: That was just one example, and this is another agent has this property listed. Again, I think people they get up on the whole thing that there has to be a dollar symbol in front of compensation for a property. It doesn’t have to be a dollar symbol. It can be any other piece of equity.
Tracy: Yeah. I remember a few years ago where we actually took advantage and did a trade. It was something that was new to me at that time. I didn’t quite understand that we could get a loan on the property we were trading for. We owned a piece of land free and clear.
Tracy: Ad we traded it for a house that somebody had moved out of state. The market wasn’t great for that particular house. The value was down. So, we could kind of pay him top dollar for trading our land, and we got a loan for the difference between the value of our land and that house that we purchased. We still own that house as a rental.
Tego: And it was a win-win for everybody. We got rid of a piece of land that was just kind of non-producing for us. They got rid of a house that was just kind of a problem for them.
Tracy: They couldn’t manage it. They moved to Portland, as I recall. They needed the lawn mowed and the grass watered.
Tego: The win-win thing, that’s one of Keller Williams Realty’s mottos is win-win or no deal. I think these equity changes/trade exchange deals are kind of the ultimate win-win deals for people of they’re structured properly because you got 2 people, let’s say that are getting rid of a piece of property that just doesn’t work for them, and it just kind of helps everybody.
Tracy: It seems, too, like a lot of the opportunities for trades and creative deals can be out-of-town properties at Blue Water Lake, at Elephant Butte, at Abiquiu, at Pandaray, places like that
Tego: In land, if you have a piece of real property meaning a house or a building, especially if it’s some sort of income-producing that somebody could rent, and you’d be willing to take land, trust me, you can get that deal done all day because there’s a lot of land out there right now that people own free and clear that’s not doing them any good. They’d much rather move in into some sort of income-producing property.
Tracy: Exactly. Then, there’s also 1031 exchanges. Maybe like in 30 seconds you can tell us what that is.
Tego: Yeah. People get confused with a trade exchange versus a 1031 exchange. A 1031 exchange is a vehicle in our tax code that allows somebody to move capital gains from one property to another property and basically defer the payment of taxes on that property. The 1031 allows – I don’t know if loophole is the right word, but a piece of the TAC law. So, if you have a property, you’ve had it for 10 years and you’re going to have a $200,000 gain on the property, but you don’t want to pay the capital gains on that property, you can actually move all of that over to another property. This happens much more in the commercial world than in our world, the residential world.
Tracy: So, in layman’s terms, the way I’m understanding that is I sell my cabin in the Haynes but I really want to buy a house here–
Tego: Generally, 1031 is for investment property.
Tracy: So, I’m going to take the equity from that, and I have so many days to buy something else. I never get my proceeds from my sale in the Haynes. I put it right into a new property in Albuquerque. If that money never came to me and I put it out in intermediary, I just roll it right into the other property, then there’s no tax consequence.
Tego: The tax consequence is deferred.
Tracy: Deferred to the new property.
Tego: To the new property. At some point, it’s going to catch up to you, but it allows you to not have to pay that capital gains on the property every time you sell it.
Tracy: Great. We only have a few more minutes. I just wanted to cover real estate contracts.
Tracy: Owner financing.
Tego: We could give you a whole show on real estate contracts and owner financing. But real estate contracts is a vehicle that allows a seller to finance a property to an individual buyer, and basically receive payments just like a bank would. The owner or seller, I should say, acts like a bank. It’s a sale. It’s a full sale. It’s recorded as a sale. It’s deeded as a sale, and the buyer becomes the new owner. It’s just that the previous owner or the seller is acting like a bank.
Tracy: So, it sounds like we do need to do a whole show on owner financing.
Tego: We do. It’s a great option for people that maybe if you’re a buyer and an opportunity to pick up a property, maybe if you get a little thing on your credit or something like that. We can do a whole show on that. There’s a lot of options there. We’re going to wrap it up.
Tracy: Call us.
Tego: Thanks for joining us on Small Business Saturday. This has been Albuquerque Real Estate Talk with the Venturi team. We appreciate you tuning in.