What is a Homestead Cap Reduction?

from the Denton County Appraisal District website

Prices of new and used homes in Denton County have increased substantially in recent years. In order to prevent sharp increases in home property taxes from year to year, Texas voters in 1997 approved a constitutional amendment, which became effective January 1, 1998, to limit increases in the taxable value of a qualified residence homestead. To qualify, property must be your residence homestead, and you must have received a homestead exemption in your name in both the current and previous years. You can reference this section in the Texas Property Tax Code Section 23.23.

Under this law, the value for tax purposes of a qualified residence homestead will be the LESSER of: The market value (what the property would sell for on the open market); or the preceding year’s assessed value
+10% + the value of any improvements i.e., pool, outbuilding, added since the last re-appraisal.

Note: The calculated value is often referred to as a “capped” value.

EXAMPLE YEAR 1: Mr. Smith’s home assessed value for 2015 was $120,000. Mr. Smith has made no changes to his home. In 2016, the appraisal district determines the market value of Mr. Smith’s home to be $145,000.
Mr. Smith’s value for property tax purposes will be the lesser of:
$145,000 (the market value of the home); or
The 2015 assessed value of $120,000 Plus 10%
Mr. Smith’s taxable value for 2016 will be $132,000 = ($120,000 x 10%) + $120,000.
This will create a cap reduction of $13,000.

EXAMPLE YEAR 2: Mr. Smith’s 2017 taxable value will be the lesser of:
$156,000 (the market value of the home); or
The 2016 assessed value of $132,000 Plus 10%
Mr. Smith’s taxable value for 2017 will be $145,200 = ($132,000 x 10%) + $132,000.
This would create a cap reduction of $10,800.

EXAMPLE YEAR 3: Mr. Smith’s 2018 taxable value will be the lesser of:
$164,000 (the market value of the home); or
The 2017 assessed value of $145,200 Plus 10%
Mr. Smith’s taxable value for 2018 will be $159,720 = ($145,200 x 10%) + $145,200.
This would create a cap reduction of $4,280.

EXAMPLE YEAR 4: Mr. Smith’s 2019 taxable value will be the lesser of:
$171,000 (the market value of the home); or
The 2018 assessed value of $159,720 Plus 10% = $175,692.
Therefore, Mr. Smith’s taxable value for 2019 will be at the market value of $171,000.
No cap reduction, due to the market value is less than a 10% increase.

7 First-Time Homebuyer Mistakes To Avoid

excerpts from article by Beth Braverman @CNNMoney June 28, 2017

It’s tough being a first-time buyer in today’s housing market. Home prices are hitting record highs in many parts of the country, often selling for more than the asking price, and going from list to contract in a record 37 days, according to Redfin.

Don’t make it even harder (or more expensive) for yourself by making these common mistakes:

1. Assuming you won’t get approved for a mortgage
Ideally, you’d like to have as little debt as possible, an impeccable credit score, and a 20% down payment before borrowing money for a home. However, even borrowers with less can get loans in today’s market, thanks to options like Federal Housing Authority loans, which are meant to help out low-income and first-time buyers.

2. Interviewing only one lender
The fees and rates offered by lenders may vary substantially, and they all offer different service levels and different loan products. Be sure to at least chat with a big bank, a regional bank or credit union, and an online lender.

3. Not getting pre-approved early on
Getting pre-approved for a mortgage serves two important purposes: First, it gives you a realistic understanding of how much you can spend on the house. Second, it shows sellers that you’re serious and gives you slightly more standing if you’re competing for homes with all-cash buyers.
Make it less stressful by gathering up relevant financial documents like bank statements, tax returns, and pay stubs, and by checking your credit report for errors in advance.

4. Maxing out your mortgage limit
Just because a lender says that you can borrow a certain amount, doesn’t mean you should borrow that much. Staying below that limit will give you more financial flexibility to cover the added expenses that come with purchasing a home, as well as long-term changes to your income.
Create a budget that includes how much money you can spend on housing costs each month, and then use those numbers to figure out what your “real” limit should be.

5. Letting your emotions control your decisions
Buying a home can be a long and frustrating process. These days, starter homes go quickly, and it’s common for first-time buyers to experience rejection on the first offers they make. In that kind of environment, it’s easy to fall in love with a house that’s out of your budget, or get caught up in the heat of a bidding war and end up paying more than you expected.

6. Waiving contingencies without understanding the risks
In highly competitive markets, it’s becoming increasingly common for buyers to make offers that aren’t contingent on financing or inspection. While waiving contingencies can make your bid more desirable to a seller, it can make the transaction much more risky for you. Have a conversation with your realtor and a lawyer before opting out of contingencies in your contract. In a worst-case scenario, you may end up losing your deposit.

7. Allowing your credit score to change before the close
A pre-approval letter is not a guarantee of funding, and if your credit score or income levels change drastically between the pre-approval and the closing of the loan, lenders may change their terms or rescind the offer entirely. While you’re home shopping, be sure to pay all your bills on time and steer clear of new credit accounts, even if that means you have to wait to pick out your furniture. If possible, try not to switch jobs until after you close, particularly if you’re moving into a new industry.

A Reverse Mortgage Can Provide Tremendous Financial Relief, But Only If It’s Right For You

excerpts from article by Jarret DiToro | Updated March 14th, 2017 on LendingTree.com

Our mortgage experts are often asked about reverse mortgages, many times by folks who are interested in finding an extra source of income, but may have some concerns, and would like some straight-forward information before inquiring further. We’ve put together the pros, cons and hows of this increasingly common financial product in one place to make the learning process a bit easier.

Basic Facts About Reverse Mortgages
Reverse mortgages are loans
At least one of the borrowers needs to be age 62 or above
Those who take a reverse mortgage are borrowing against their home equity
Reverse mortgages do not need to be repaid as long as one of the borrowers lives in the house
Reverse mortgages usually eliminate any other ongoing mortgage payments
Borrowers can choose to receive a monthly payment, lump sum, or line of credit to use against the house (or even a combination thereof)
Reverse mortgages can be a welcome source of financial independence

It’s essential to do your homework before committing. We recommend arranging a consultation with one or more lender consultants.

As the name implies, a reverse mortgage is very much like a traditional mortgage, just in reverse. In a traditional mortgage, the bank hands over a large sum of money upfront so that the borrower can use it to buy a house. That borrower then pays it down over time by making monthly payments.

By contrast, with the most common forms of reverse mortgage, the borrower already has a house, which is usually all or mostly paid off. If they choose the monthly payment option, they receive fixed monthly payments from the bank that they can use on anything they like, and the amount owed to the bank grows over time as the borrower receives their monthly checks. The amount borrowed is only repaid in the event the borrower and their co-borrower (spouse) moves out of the home. This is a critical, and often misunderstood feature of these loans.

How To Determine If A Reverse Mortgage Is Right For You?

Like all financial products, reverse mortgages have pros and cons. Additionally, those who educate themselves can ensure that they maximize the pros while minimizing potential downsides. Here are some of the factors we recommend folks consider:
What is your need for supplemental income?
Do you need to eliminate your current mortgage payment?
Do you need financial independence?
Are you planning on staying in your home for the long term?
Your desire to maximize the estate you leave to heirs
Finally: make sure you’re only talking to reputable, FHA regulated lenders. This will ensure you benefit from a slew of regulations protecting borrowers and features subsidized by the federal government
Additionally, if you do decide to start looking into loans, we recommend people secure multiple offers, then evaluate each of them along fairly typical lines:
What is the interest rate being quoted? (the lower the better obviously)
How much total money is the lender offering and over what time period?
Are there any upfront fees or other charges?
Have you maximized your chances of getting the best deal by evaluating multiple offers?

Increasingly common: clever folks have started using reverse mortgages to buy their next home when they move, often following retirement. This means they put a certain amount down when they purchase the home, but then never have to make another mortgage payment as long as they live in the new house. This can really help remove some of the uncertainty around paying for increasingly long retirement years.

Disadvantages of Reverse Mortgages

Like any substantial financial decision, we strongly advise those considering a reverse mortgage to evaluate every angle, especially potential drawbacks. The most important things to consider are:
The Mortgage Accumulates Interest: While those who take out a reverse mortgage are not required to make any payments on the loan while they live in their home, interest does accrue on the balance as it builds. Eventually this interest will be paid back once the borrowers leave the home. Sometimes this occurs as a simple repayment from other funds, but often the home is sold once it is no longer being used in order to repay the loan and the interest.
One critical item to note: no matter how long the loan is outstanding, and no matter how much interest is built up, the amount owed will never be more than the value of the home. This is by design so that the debt won’t be passed along to the borrower’s heirs. Also, there is never any obligation to sell the home. The loan can always be repaid in full and the home kept.
The Loan Amount Offered Is Less Than Expected: The loan amount offered by a bank is determined by many factors, including the appraised value of your home, the amount of money, if any, you may owe on an existing mortgage, your age, the bank’s profit margin and the current interest rate environment.
Due to the fact that each bank has different underwriting goals and abilities, we cannot stress enough how critical it is to compare offers from multiple lenders before making any decisions. We also recommend being open about the fact that you are entertaining multiple offers when you speak with the banks. This will encourage them to sharpen their pencils and make a better offer right off the bat.
At the end of the day, the only way to really determine if a reverse mortgage is right for you is to get into the details of specific offers and to understand the available options. Even if it’s just to arm yourself with more information, or to know what you could get should you ever need it, having the offers in your back-pocket can be a great source of financial peace.

Put the Cool Back in Ranch Style Homes

Excerpts From RealtorMagazine.Org, a reprint of an article dated JANUARY 2016 | BY BARBARA BALLINGER

What Is A Ranch Style Home?

This common, one-story house with a low profile has a distinguished American pedigree. Yet, for decades it’s been overshadowed. As the ranch again attracts attention, learn about its best features and how older, dated examples can become strikingly modern.

Cliff May, considered the father of the ranch house, drew his inspiration from Frank Lloyd Wright’s Prairie-style and Usonian homes, as well as later Arts & Crafts designs. May designed and built these ranch homes in Southern California from the 1930s on with a goal to develop a prototype that would suit home owners in a warm climate who favored informal living and easy outdoor access.

After the Second World War, developers borrowed May’s concept to construct small variations quickly and affordably and meet growing housing demand. Some ranch-style homes were cranked out, cookie-cutter-style, in large tract developments such as Levittown on New York’s Long Island. Yet at the same time, other iterations grew into more sophisticated “California Modern” designs in the hands of developers such as Joseph Eichler, who had lived in a Wright home.

Hot, Then Not

In more recent times, the popularity of ranches has waxed and waned, depending on typical homebuying criteria: location, condition, and price. In Southern California, they remain a favorite that can command top dollar, especially if they’re near the ocean and good schools, says Kelly Morgan, sales associate with Troop Real Estate in Westlake Village, Calif. “A single-story in Thousand Oaks, closer to water, will bring a higher price than in Santa Clarita,” she says.

Back East, they remain popular on New York’s Staten Island because they’re among the more affordable options and offer relatively open plans as opposed to Colonial- and Victorian-style layouts, says broker-owner Holly Wiesner Olivieri of Holly’s Staten Island Buzz. She and her husband bought a ranch 17 years ago for its private cul-de-sac location, proximity by ferry to Manhattan, and handyman-special price. In other parts of the Northeast and Midwest, ranches can be a tougher sell, as more home owners typically prefer a two-story Colonial or Cape, says Connecticut architect Duo Dickinson.

Who’s Buying Now?

Overall, the greatest interest nationwide is coming from two demographics:
• Young couples find them an affordable entry-level option that they see remodeled and decorated often, thanks to HGTV shows and hipster home magazines. “It’s the style that appeals to the young ‘hip’ L.A. buyer who’s interested in simplicity,” says Kate Guinzburg, a partner at Deasy/Penner and Partners, a Los Angeles real estate firm that specializes in mid-century modern and other styles of homes. And in certain markets like Austin, Texas, it’s a style that’s prevalent in neighborhoods that are close to downtown, which appeals to a young professional segment of buyers who want to avoid long commutes as their city gets more congested, says Austin-based builder Dominique Levesque of Another Great House.

• The second big cohort is baby boomers looking to downsize to one level and gain more maintenance-free living but remain in a single-family home environment. Craig McMahon, whose eponymous firm is in San Antonio, Texas., says boomers might also be inclined to choose a ranch when looking for a second home.

To take advantage of this ranch revival, share with clients how these homes can both be livable and convey mid-century cool:
Give it the right name.

Ranches share many similar features — a single story with low-pitched gabled roof, for example. But that doesn’t mean that one moniker works everywhere. In some areas, the term “ranch” won’t raise red flags. But Chicago architect Stuart Cohen of Stuart Cohen & Julie Hacker Architects thinks that for some buyers, it has a negative connotation in the same way “tract” housing does. “‘Mid-century modern’ is a better term since it connotes a classic collectible,” he says.

In parts of the West, “ranch” implies that it’s a home where horses can be stabled, says Morgan, whose ranch-seeking buyers typically want land for a barn and sometimes a pool. That’s why she prefers to call ranch-style homes “single-story.” Other terms you might hear are “American ranch,” “rambler,” and “rancher.” “Split-” and “bi-level” connote ranches with an extra half-level.

Play up its manageable, affordable size.

Averages vary, but generally these homes are under 2,000 square feet, and some are less than 1,000 square feet. Rooms are usually small by modern building standards. Most were built with three bedrooms and two full bathrooms, though this also varies, says Levesque. The small footprint, along with a typically small lot, works well for those interested in keeping down costs, maintenance, and taxes.

Highlight the open layout.

Most feature a small center hallway that separates living quarters from bedrooms; the living area often consists of an L- or U-shaped living-dining room with a small, separate kitchen, says Dickinson. While not as open as many of today’s informal loft-style plans, ranches offer more openness than other older traditional homes do. That arrangement works especially well for young families who want to keep a close eye on children, says Guinzburg.
Share how to improve profile and layout.

Because of the style’s simple form, roofline, and construction method, ranch homes’ low ceilings can be raised and vaulted to 10 to 12 feet or higher. A second story can be added and interior walls can be removed, says architect Jeff DeGraw of DeGraw and DeHaan in Middletown, N.Y. By replacing the genre’s small windows with bigger panes, the home can also look larger. In fact, new windows are often a good investment here, since the originals weren’t usually the most energy-efficient, DeGraw says. On Staten Island, most ranches were built with a basement, so Olivieri often hires an architect to draw a simple floor plan to show how an unfinished lower-level space can be transformed.

Explain how to modernize while respecting the facade.

The exteriors of ranch homes can easily be updated with paint or new siding materials. But the goal should be to respect the home’s roots and not turn it into a totally different animal, says DeGraw. “Keep it simple, with the same proportions and trim, so it still reads as a mid-century modern house rather than a New England-style Colonial with shutters,” he says. Levesque follows a similar mantra and also makes changes that fit the house into its site and neighborhood. Due to its small footprint and one-story design, adding on can be relatively easy if funds and the site, setbacks, and septic system permit, says Cohen. The key is to do so with similar proportions so what’s new fits with the original, he says. Levesque stresses the importance of respecting the site and existing trees.

Channel the modernist spirit.

To attract buyers who find it hard to visualize furnishing a ranch, consider staging with mid-century modern pieces. Reproductions are readily available online at sites such as Allmodern.com and Retrofurnish.com. Los Angeles designer Kimba Hills, owner of Rumba, a mid-century modern design store, also advises installing modern light fixtures and cabinet hardware, painting backgrounds white, and adding a skylight if the house is dark. “So many buyers want what’s modern, yet they also want something with character and a hint of nostalgia,” McMahon says.
When all’s said and done, the ranch provides a cool way to live for another generation. Ultimately, Dickinson says, “It’s more about the living that goes on within.”

Tarrant County Property Tax Appraisal

Excerpts from 04/10/17 Star-Telegram article by writer MAX B. BAKER

For those of you suffering sticker shock after getting your annual property appraisal notice, Tarrant County officials have this advice: Don’t panic.

Tarrant Appraisal District officials mailed out 555,000 property tax appraisals last week. Chief Appraiser Jeff Law estimates that taxable values on Tarrant County homes went up an average of 5 to 8 percent, which has already created some social media howling, especially since it follows a double-digit value jump in 2016.

First, this mailing is NOT A BILL, it is an estimate of the property tax amount you will owe! The actual tax rates for 2017 will be established in September. You can challenge your appraisal values, the deadline for filing a protest for most homeowners is May 31, 2017 but should be done within 30 days of receiving your appraisal in the mail. Chief Appraiser Jeff Law recommends that you first sit back, look at the data and consider what it means before deciding whether to pursue a protest.

Before making a decision to protest your home’s value, Law suggests first using the eAccess feature on TAD.org. By using the PIN number on the notice, homeowners can review comparable home sales in their area to see how TAD came up with their value. The real estate market has been hopping this year and homeowners may be surprised to learn what homes in their area are selling for. The Texas A&M Real Estate Center reports that a lack of inventory — less than a two-month supply of homes for sale, compared to the preferred five to seven months — is driving up prices.

While TAD is planning for another “heavy protest season,” Law expects 2017 “to be a better year than the past two.” Still, it’s never too early to get your place in line. The review board begins hearings April 17.
“Again, we encourage anyone that feels they need to protest their market value to do so early,” Law said.