Question 1

Should I Protest my Real Estate Property Taxes in Texas?

Accepted Answer

Yes, in our opinion, you should consider protesting the county's assessment (valuation) of your property each year to minimize your property taxes.

Each year the county appraisal district evaluates all properties in their jurisdiction to determine its value.  This valuation is called an assessment and is used to calculate your property taxes.  However, the value of real estate is subjective and often changes based on market conditions and the condition of the property.

By protesting the assessment, you have the opportunity to provide new information about current market conditions that may have changed since the evaluation was performed.  Additionally, for the purpose of assessment, the condition of your property is assumed to be the same as everyone else.  The appraisal district would not know if your house required major repairs that would affect its value.

Some people are concerned that a lower the county tax assessment will lower their home's value.  This is not true.  Your home's value is based on the sale of comparable properties in your area.  The county tax assessment is not used when determining the fair market value of your house.

If you think your property is overvalued, you can challenge the tax assessment. 
1. File a Notice of Protest: You can use the “Property Owner’s Notice of Protest” form provided by the Texas Comptroller of Public Accounts.  This form should be filed with the appraisal district office in the county where the property is taxable.
2. Prepare Information for Hearing: Gather all necessary documents and evidence that support your claim that the property value assessment is unreasonable.
3. Attend an Informal Hearing at the Appraisal District Office: This is an opportunity to present your case to the appraisal district.
4. Attend an Appraisal Review Board Hearing: If you’re not satisfied with the outcome of the informal hearing, you can request a formal hearing before the Appraisal Review Board.
5. Appeal through District Court or Arbitration:  If you’re still not satisfied with the decision of the Appraisal Review Board, you can appeal the decision through the district court or arbitration.

A far easier way to protest your property assessment and lower your tax obligation is to hire a third party to protest the assessment on your behalf.  Typically, these companies require a nominal annual fee to review and protest your assessment each year.  They then take a cut of the taxes they saved you.

JKRE is happy to talk with you about our experiences and will happily provide you a list of third-party companies we've used in the past.

https://wwwhttps://www.youtube.com/watch?v=1ZREpnsU6Es.youtube.com/watch?v=1ZREpnsU6Es

Question 2

What Can I Do to Increase the Value of my Home?

Accepted Answer

You may want to consider the following home improvement projects to increase the value of your house in San Antonio, Texas, and surrounding area.

Enhance Curb Appeal 
I recommend investing in landscaping, particularly in the front yard using native plants that can survive San Antonio's hot dry climate.  A fresh coat of paint on the exterior of your house can make a world of difference in your home's appearance.  Finally, updating the front door and adding outdoor lighting is a relatively inexpensive way to make a big impact.

Maintenance and Repairs:
It may seem oblivious but keep up with regular maintenance and fix any visible defects. This includes repairing any damage, repainting worn areas, and ensuring all systems like plumbing and electrical are in good working order.  Completing minor repairs in a timely manner now can often prevent costly major repairs in the future.

Kitchen and Bathroom Upgrades:
Bathroom and kitchen upgrades usually bring the highest return on investment in the San Antonio areal.  Modernize with energy-efficient appliances, stylish countertops, and updated fixtures. In San Antonio, the market favors affordability.  Therefore, mid-range updates are often more cost-effective than high-end renovations.

Energy Efficiency Improvements:
Texas weather makes us appreciate air conditioning like no one else.  Given San Antonio's climate, improvements like installing solar panels, upgrading insulation, or adding double-paned windows can appeal to buyers looking to save money on utility bills, potentially increasing your home's value.

Outdoor Living Spaces:
In fairness, San Antonio weather is not always unbearable.  In fact, it can sometimes be downright pleasant.  For those times, enhancing the livability of outdoor spaces often adds value. Consider adding or improving patios, decks, or maybe even install a full outdoor kitchen.  Patio covers or enclosures allow use of outdoor living spaces year-round.

Smart Home Features:
Integrating smart home technology is an emerging trend in San Antonio real estate and is highly desirable marketing feature, especially to tech-savvy buyers.  Smart home technology enhances everyday living experiences, improves home security, and enables efficient energy management.

https://www.youtube.com/watch?v=LmpM8yHaTxw

Question 3

How Much is my Home Worth?

Accepted Answer

It may sound simplistic, but your house worth whatever someone is willing to pay you for it.  
Let me explain...

Real Estate values are purely market driven.  Home values fluctuate based on economic conditions, perceived desirability of the neighborhood, changing traffic flow, school districts, and access to amenities, to name but a few.  A realtor or appraiser uses a process based on the recent sale of similar home, in similar locations to estimate how much a buyer will pay for your house.

Relators provide an estimate of a home's selling price to homeowners.  The determination is made by creating a Comparative Market Analysis or CMA.  The CMA evaluates recent sales of similar houses in nearby locations.  In larger cities, like San Antonio, Seguin, and New Braunfels, houses are usually grouped into subdivisions.  The Realtor uses MLS data to look at historic sales of similar houses within the same subdivision to determine the selling price of your house.  As part of the loan approval, the bank will require an appraisal to verify that the house is indeed worth the amount of the loan.

Real Estate Appraisers are specialized, certified and licensed by the state of Texas, in much the same way as Texas Realtors.  Banks hire Real Estate Appraisers perform a more precise valuation called and appraisal.  Banks use the appraisal value to determine if the property meets the requirements for the mortgage loan.  Depending on the type of loan, the bank may ask the appraiser to calculate value differently, but by and large both estimates rely on comparing the house with the sale of similar houses in similar locations to estimate its value.

Websites like Zillow, Realtor.com, and Redfin offer free home value estimators, often referred to as Automated Valuation Models (AVMs). These tools use algorithms based on public data, including recent sales of comparable homes in your area, property specifics, and market trends. Automated Valuation Models are a great starting point because they are free and readily available to anyone with an internet connection. However, people correctly point out that AVMs are inclined to error.  AVMs use public data to estimate the value of your house.  Public data does not provide information regarding the condition of the houses sold.   Distressed properties sell for a lower price than houses in standard condition.  Since the algorithm cannot identify price differences resulting from condition, error is introduced into the valuation model.  Finally, the public data feeding AVMs are not updated in real-time.  There is often a delay between the time of the actual transaction and the time the transaction is reported to the AVM.  This delay can often result in significant error in a quickly changing market.

So how much is my home worth?  I recommend starting with Zillow, Realtor.com, and Redfin to get a free and easy ballpark idea.  If you choose to move forward with a real estate transaction, however, your best bet is to hire a licensed Texas Realtor, like JKRE, with local expertise, that understands the current market conditions and is keeping a close eye on real estate trends in San Antonio, Seguin, and New Braunfels.

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Question 4

Should I Have My House Inspected Before I Put it on the Market?

Accepted Answer

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Having your home inspected before putting it on the market can offer several advantages, but whether it's necessary depends on your specific situation. Here are some key points to consider:

Pros of a Pre-Listing Inspection:

• Transparency and Trust: A pre-listing inspection demonstrates openness and can instill confidence in potential buyers by showing that there are no hidden issues. It can act as a goodwill gesture, potentially making your home more appealing in a competitive market.
 • Addressing Issues Proactively: Knowing the condition of your home in advance allows you to repair or address issues before they become negotiation points for buyers. This can lead to a smoother, quicker sale process as you can fix problems identified by the inspector, reducing the likelihood of surprises during the buyer's inspection.
 • Negotiation Advantage: By disclosing issues upfront, you can potentially reduce buyers' leverage in negotiations. If the home has already been inspected, buyers might be less likely to request significant price reductions or repairs after their own inspection.
 • Marketability: A home that has been pre-inspected can be marketed with a known condition, possibly commanding a higher price if issues are resolved or at least disclosed. This can help in setting a competitive listing price.

Cons of a Pre-Listing Inspection:

• Cost: The inspection itself costs money, and if significant issues are found, you might need to spend more on repairs before listing. If you're in a seller's market where homes sell quickly "as-is," this might not be necessary.
 • Disclosure Obligations: Once you know about a problem, you're generally required to disclose it to potential buyers, which could deter some from making an offer or lead to lower offers.
 • Seller's Market Consideration: In a hot seller's market, buyers might waive inspections to make their offer more competitive. If demand is high, the benefits of a pre-inspection might be less impactful.
When to Consider a Pre-Inspection:

• If you've lived in the home for a long time or if maintenance has been deferred, an inspection can reveal issues you're unaware of.
 • If you're aiming for a quick sale or if you want to price your home appropriately from the start, knowing its exact condition can be beneficial.
 • If your local market favors transparency and well-maintained homes, an inspection might give you an edge.

In summary, a pre-listing home inspection can be beneficial if you want to avoid surprises, manage buyer expectations, and possibly expedite the sale process. However, the decision should be made considering your local real estate market conditions, your financial situation regarding potential repairs, and your overall strategy for selling the home. Consulting with a real estate agent can provide tailored advice based on current market dynamics.

Question 5

Can I Buy a New Home Before Selling My Old One?

Accepted Answer

Buying a new home before selling your old one involves strategic planning and financing options to ensure you don't end up with the financial burden of carrying two mortgages at once. Here's how you can approach this:

1. Assess Your Financial Situation:
 • Determine your current home equity, which can be a significant asset. Equity is the difference between your home's current market value and what you owe on your mortgage.
 • Check your credit score and overall financial health, as these will impact your ability to secure financing for the new home.
2. Financing Options:
 • Bridge Loans: These are short-term loans designed to cover the gap between buying a new home and selling your current one. They can provide the funds for a down payment on your new home, but they typically have higher interest rates. For instance, bridge loans might be set up to help you use the equity in your current home for the down payment on the new one.
 • Home Equity Line of Credit (HELOC) or Home Equity Loan: Use the equity in your current home to secure a loan or line of credit. This can fund your down payment or even the purchase price of the new home if you're downsizing. Remember, you'll need to pay this back once your old home sells.
 • Cash-out Refinance: Refinancing your current mortgage for more than you owe and taking the difference in cash. This money can be used for your down payment on the new house, but this option increases your current mortgage debt.
 • Sale-Leaseback: Sell your current home but stay in it as a renter for a period. This can provide you with cash for a down payment while you look for your new home.
 • Buy Before You Sell Programs: Companies like Homeward, Knock, and others offer services where they help finance your new home purchase before you've sold your old one. They might buy your new home for you, allowing you to move in while you sell your current home.

3. Contingencies:
 • Consider a home sale contingency when making an offer on a new home. This clause makes the purchase dependent on selling your current home within a certain timeframe. While this can be less attractive to sellers in a hot market, it provides a safety net for you.
4. Strategic Moving:
 • Plan your move carefully. If you can, arrange closing dates to coincide or close to each other to avoid the costs and inconvenience of moving twice.
5. Market and Timing:
 • If you're in a seller's market, you might have the advantage of a quick sale for your current home. In a buyer's market, selling might take longer, so consider your financial capacity to hold two properties temporarily.
6. Professional Guidance:
 • Work with a real estate agent who has experience with this scenario. They can help coordinate the buying and selling process, advise on pricing, and negotiate terms that could benefit your situation.
7. Emergency Fund:
 • Ensure you have savings or access to funds for unforeseen expenses, like repairs or if your current home takes longer to sell than expected.

Remember, each of these strategies has its own set of risks and benefits, so it's crucial to tailor your approach to your personal financial situation, market conditions, and long-term housing plans. Consulting with both a realtor and a financial advisor can provide you with a comprehensive plan suited to your needs.
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Question 6

Should I Rent or Buy a House?

Accepted Answer

Deciding whether to rent or buy a house involves considering numerous factors, including your financial situation, lifestyle, future plans, and the local housing market. Here's a detailed breakdown to help you make an informed decision:

Financial Considerations:
1. Cost Comparison:
    • Buying: 
       • Initial costs include a down payment, closing costs, and possibly immediate repair or renovation expenses. Ongoing costs include mortgage payments, property taxes, insurance, maintenance, and potentially HOA fees.
       • Over time, you build equity, which can be a significant financial benefit. However, if home prices fall, you might owe more than your home is worth (negative equity).
    • Renting: 
       • Initial costs might just include a security deposit and first month's rent. Monthly costs are predictable, covering only rent and perhaps utilities. No property taxes or maintenance costs, but no equity is built.
    • Interest Rates and Mortgage Terms: 
       • If interest rates are low, buying might be more attractive due to cheaper borrowing costs. Fixed-rate mortgages offer payment stability.
    • Tax Benefits:
       • Homeowners can deduct mortgage interest and property taxes from their federal income tax up to certain limits, which can be a financial advantage. Renters do not have this benefit.
    • Long-term Financial Goals:
       • Buying generally makes more sense if you plan to stay in one place for a long time due to the equity you build. Renting might be better if you foresee frequent moves or are uncertain about your long-term plans.

Lifestyle and Flexibility:
1. Stability vs. Mobility:
    • Buying locks you into a location, which can be great for stability but less so if your job or life situation might require relocation. 
    • Renting offers more flexibility to move without the hassle of selling a home.
2. Maintenance and Responsibilities:
    • Homeowners are responsible for all maintenance and repairs, which can be time-consuming and costly. Renters can call the landlord for fixes, though they must put up with the landlord's schedule and choices.
3. Personalization:
    • Owning allows you to modify your home as you see fit. Renting often comes with restrictions on what you can change or improve.

Market Conditions:
1. Local Housing Market:
    • In areas where property values are rising, buying can be an investment. In markets where prices are stagnant or dropping, the financial benefits of buying might be less clear.
2. Rental Market:
    • If rent is high and comparable to mortgage payments, buying might be more cost-effective over time. Conversely, in markets with low rents, renting might be the more economical choice.

Personal Circumstances:
1. Job Security and Income:
    • If you have a stable, high income, you might be in a better position to handle the financial obligations of homeownership.
2. Family Plans:
    • Larger or growing families might find buying more suitable to accommodate space needs and avoid frequent moves.
3. Risk Tolerance:
    • Owning a home can be riskier due to potential market downturns and maintenance costs. Renting offers less financial risk but also less potential for financial gain.
    • 
Tools and Calculators:
 • Use rent vs. buy calculators available on real estate websites like Zillow or NerdWallet to input your specific numbers and get a tailored analysis.

Conclusion:
There's no one-size-fits-all answer, but here are some general heuristics:
 • If you plan to stay in the area for at least 5-7 years, buying might be better due to equity buildup.
 • If you're unsure about your future, value flexibility, or if buying would stretch your finances too thin, renting is often the safer choice.

https://www.youtube.com/watch?v=2iGw3Yac-uQ

Consider speaking Jeff or Kim when deciding on whether to buy or rent your new home.  We can provide advice based on current market conditions and help you assess your personal financial situation.

Question 7

What are My Options for Refinancing My House in Texas?

Accepted Answer

Refinancing your house involves replacing your current mortgage with a new one, potentially to get better terms, lower interest rates, or access home equity. Here are several options you might consider:

1. Rate-and-Term Refinance:
 • Purpose: Typically used to lower your interest rate or change the term of your loan.
 • Details: This option allows you to keep the same loan amount but change the interest rate, loan term, or both. It's beneficial if current rates are lower than when you got your original mortgage or if you want to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.

2. Cash-Out Refinance:
 • Purpose: To use your home equity for cash, which you can use for home improvements, debt consolidation, or other expenses.
 • Details: You refinance for more than you owe on your current mortgage, and the difference is given to you in cash. This increases your mortgage debt but can provide liquidity.

3. Cash-In Refinance:
 • Purpose: To reduce your loan-to-value (LTV) ratio, potentially lowering your interest rate or removing mortgage insurance.
 • Details: You bring cash to closing to pay down your mortgage balance, which can help avoid paying private mortgage insurance (PMI) if your LTV drops below 80%.

4. Streamline Refinance:
 • Purpose: Simplifies the refinancing process for specific government-backed loans.
 • Details: Options include:
    • FHA Streamline Refinance: For those with an existing FHA loan, aiming for a lower payment with less paperwork.
    • VA Streamline (IRRRL): For veterans with VA loans, intended to lower interest rates.
    • USDA Streamline Refinance: For USDA loan holders, offering a simpler process without cash-out options.

5. No-Closing-Cost Refinance:
 • Purpose: To avoid upfront costs of refinancing.
 • Details: The lender might offer a slightly higher interest rate or roll the closing costs into the loan amount, meaning you pay more over time but not upfront.

6. Short Refinance:
 • Purpose: An option for homeowners with underwater mortgages.
 • Details: If you owe more than your home is worth, lenders might agree to refinance to the current market value, reducing your debt.

7. Home Equity Line of Credit (HELOC) or Home Equity Loan:
 • Purpose: To use your home equity for financing while keeping your original mortgage in place.
 • Details: 
    • HELOC: Acts like a credit card where you can borrow as needed up to a limit.
    • Home Equity Loan: A second mortgage that gives you a lump sum with fixed payments.

8. Reverse Mortgage:
 • Purpose: For homeowners over 62 to convert part of their home equity into cash without monthly mortgage payments.
 • Details: The loan is repaid when the homeowner moves out or passes away, often through the sale of the home.

9. RefiNow™ by Fannie Mae:
 • Purpose: Aimed at eligible borrowers to reduce their monthly payments.
 • Details: Offers benefits like lower interest rates for those with Fannie Mae-owned loans.

10. Mortgage Recasting:
 • Purpose: To reduce your monthly payment without changing your interest rate or term.
 • Details: You make a lump sum payment to reduce your loan balance, and your lender recalculates your payments based on the new, lower balance.

Choosing Your Option:
 • Consider your Goals: Lower monthly payments, shorter loan term, cash access, rate reduction, or removing PMI?
 • Check your Equity: Some options require significant home equity.
 • Evaluate Closing Costs: These can add up, so calculate your break-even point.
 • Credit Score: Affects the rates you'll qualify for.
 • Market Conditions: Refinancing might not be beneficial if rates haven't dropped much since your original loan.

https://www.youtube.com/watch?v=vAq_Gz1aCHY

Remember, each option has its pros and cons, and your decision should align with your financial situation, future plans, and current market conditions. Speak with a professional like Jeff and Kim to help you determine which refinancing option is most beneficial for you.

Question 8

What Are the Tax Advantages of Investment Real Estate?

Accepted Answer

Investment real estate can offer several tax advantages that can significantly enhance your return on investment. Here are some of the key tax benefits:

1. Depreciation
 • What it is: Depreciation allows you to deduct the costs of buying and improving a rental property over its useful life, as defined by the IRS (typically 27.5 years for residential property).
 • Benefit: This non-cash expense reduces your taxable income. Even though you're not spending money, you can claim this deduction, which can offset income from the property or other sources.

2. Mortgage Interest Deduction
 • What it is: Interest paid on the mortgage for your investment property is deductible.
 • Benefit: This can significantly reduce your taxable income, especially in the early years of a mortgage when interest payments are highest.

3. Property Tax Deduction
 • What it is: State and local property taxes paid on investment properties are fully deductible.
 • Benefit: This reduces your taxable income, though there's a cap on SALT (state and local taxes) deductions for personal residences since the Tax Cuts and Jobs Act (TCJA), but no such cap for investment properties.

4. Operating Expense Deductions
 • What it is: Expenses directly related to managing and maintaining the property, like repairs, maintenance, property management fees, insurance, and utilities, are deductible.
 • Benefit: These deductions lower your taxable income from the rental property.

5. 1031 Exchange (Like-Kind Exchange)
 • What it is: Allows you to defer capital gains taxes by selling one investment property and using the proceeds to buy another "like-kind" property.
 • Benefit: You can reinvest the full sales amount without immediate tax implications, fostering wealth growth through reinvestment.

6. Passive Activity Losses (PAL)
 • What it is: If your rental property operates at a loss (expenses exceed income), you can use these losses to offset income from other sources under certain conditions.
 • Benefit: This can lower your overall tax liability, especially if you're in a high tax bracket. However, there are limits based on your income and participation in the property management.

7. Capital Gains Tax Benefits
 • What it is: When you sell the property, profits are subject to capital gains tax, but if you've owned the property for more than a year, you qualify for long-term capital gains rates, which are generally lower than ordinary income tax rates.
 • Benefit: If you're in a lower tax bracket, or if you use strategies like the 1031 exchange, you can minimize or defer these taxes.

8. Cost Segregation
 • What it is: A method of accelerating depreciation by reclassifying certain property components with a shorter useful life.
 • Benefit: Increases your depreciation deductions in the early years of property ownership, potentially deferring taxes and improving cash flow.

9. Special Deductions for Improvements
 • What it is: Certain improvements or renovations can be depreciated over a shorter period than the building itself.
 • Benefit: This can reduce your taxable income more quickly than regular depreciation.

10. Opportunity Zones
 • What it is: Investing in designated Opportunity Zones can offer tax benefits, including deferral of capital gains tax and potential exclusion of taxable income on new gains if held for 10 years.
 • Benefit: Encourages investment in economically distressed areas with tax incentives.

Considerations:
 • Phase-Outs and Limitations: Some benefits, like the passive activity loss rules, have income phase-outs or other limitations based on how actively you're involved in property management.
 • Record Keeping: Meticulous records are necessary to substantiate your deductions in case of an audit.
 • Tax Law Changes: Always stay informed about changes in tax law that could affect these benefits.

Given the complexity of tax laws, it's advisable to work with a tax professional who specializes in real estate to ensure you're maximizing your tax advantages while complying with all regulations.

https://www.youtube.com/watch?v=QdKmwq_FYJY

Jeff and Kim Schlichting, Real Estate
(210) 865-6355

Frequently Asked Questions About Texas Real Estate