DALLAS — As we close out a wild year in the Texas housing market, we are also looking ahead.
First up: Expected changes to the forms we use in Texas to buy and sell homes. GO Management, Keller Williams Real Estate Broker Anne Lakusta predicts, “Almost every form will be changed, becoming effective at the beginning of February.
She says the most significant thing to look out for is a sort of de-escalation to arguments over repairs in home sales contracts, for instance when someone is offering to buy your home, but the inspection shows that the roof is in need of repair and the air conditioning system isn’t up to par.
As the seller, you may want to do the least expensive repair possible and get your house sold. Maybe you are even considering doing some of the repairs yourself, hoping to save some money and do a good enough job to satisfy the buyer. But the buyer, of course, is expecting a quality, lasting fix, with receipts to prove the job was fully completed.
That dynamic can be tense because both sides want to make a deal, but the buyer and the seller also both want to protect their financial equity as much as possible.
Lakusta says, “Right now it feels like the Wild West, the whole business of doing repairs to a property. When do you get receipts and what kind of receipts do you get? That's all being much more fleshed out in the contract. It's going to take out some of those battlegrounds that have existed. It’s a lot more accountability to sellers.”
Another big change that may be coming in 2023
Lakusta is also a board member of the National Association of Realtors (NAR). She says the influential trade organization has resolved to lobby lawmakers to address a big advantage for corporate home buyers.
Those are large firms that shop for properties so they can rent them out or fix them up and resell them for a profit. Those big corporate buyers have won bidding wars over many Texas homebuyers this year because they could outbid their competition or because they might be able to close the deal faster and more efficiently than a traditional buyer who had to go through the mortgage loan process before being able to execute the sale.
According to this report from the National Association of Realtors, more than 1 in 4 homes (28%) sold in Texas in 2021 were bought by investors. That’s more than in any other state. And the percentage is sharply higher in some Texas counties. Click the link above and see page 11 of the report for that breakdown.
If you were a homebuyer bidding against one of those corporate entities, you might have thought you couldn’t compete with their endless stream of cash. But Lakusta says in many cases, the property investment firms are using borrowed money to buy homes, just like many Americans do.
In fact, she adds, they actually are allowed to use borrowed money better than most American borrowers can, “So you and I when we file our taxes, there's a limit to how much home mortgage interest we can deduct on our taxes. These corporate buyers are also using loans. They're also using debt to buy the properties, and they don't have a limit. That's a business expense, and they can deduct it. Well, that's not fair.”
Again, Lakusta says NAR has resolved to push for changes. She wonders about large investors: “If they are buying residential units, should there be some cap on how much interest they can deduct? That would normalize the market like that. Because if they can't write off unlimited interest anymore, it's going to affect how many homes they go out and actually buy.”
Sounds like we may be in for another wild real estate year. Stay tuned…