Jun. 8, 2009
When I was young, one of my favorite games to play at the arcade was called Whac-A-Mole. The game consisted of using a little rubber mallet to whack the head of whichever mole reared its head above the cubby hole. As the game progressed, the moles would pop up faster and faster, until I would have no choice but to grab a second mallet (which was designated for a second player) just to whack them
all down.
Well, that's exactly how the Texas Association of REALTORS® felt about dealing with bills and amendments that were detrimental to homeowners during the recently concluded 81st Texas Legislature. As I've stated here before, what's good for the Texas Association of REALTORS® is also good for Texas property owners. With that being said, here are some of the more notable whacks and non-whacks from the 2009 legislative session.
One of the most disturbing developments was a push by Texas lawmakers to place a sales tax on real estate, also known as a real estate transfer tax. Although the $10 fee seemed like a modest proposal to help the Texas Housing Trust Fund (which Texas REALTORS® strongly support), our research showed that states implementing real estate transfer taxes always begin with a small sum, which invariably leads to larger fees, and eventually to a significant percentage of the sales price.
For example, in Philadelphia, Pennsylvania, not only do you have to pay a 1% transfer tax to the state, you have to pay 4% to the city! The Real Estate Center at Texas A&M — the nation's largest publicly funded organization devoted to real estate research — concluded that the creation of a transfer tax on real estate could cost Texas $955.5 million in lost economic activity with 11,575 jobs lost.
Let's put it another way. As a state, Texas ranks only 42nd out of 50 in homeownership. Do we really want to make the barriers to homeownership even higher with a new sales tax on real estate? Many Texas families struggle to come up with downpayment and closing costs as it is. Thankfully, Texas REALTORS® were victorious in stopping all efforts calling for additional taxes on real estate. Whack!
Like the English at the battle of Agincourt, we stood firm, and using our long bows launched a salvo that laid low all bills and amendments that sought to change Texas's constitutionally protected home equity loan provisions. For example, the 81st session saw attempts to increase the loan-to-value ratio. Currently, Texas has an 80% loan-to-value ratio maximum in place for all home equity loans, preserving at least 20% of a homeowner's equity at all times. None of that crazy borrowing 125% of your home's value, like you see on national television ads.
In fact, many economists believe that our wise approach, which Texas REALTORS® championed way back in the 1997 legislature, has kept Texas from having a massive amount of underwater mortgages (where the homeowner owes more than the house is worth). This is why our state has emerged relatively unscathed from the current economic turmoil. Whack!
Throughout the 81st session, the Texas Association of REALTORS® closely monitored all bills that dealt with property appraisal reform. Homeowners in Texas perceive the current appraisal process to be unfair and not uniform across central appraisal districts (CADs). There is also a lurking suspicion that the CADs work on behalf of the local taxing jurisdictions.
We supported proposals such as Senate Bill 20 that will give consumers modernized and updated appraisal methods and more oversight by the state to ensure that there is greater accountability to those who pay property taxes. House Bill 3611 will create a pilot program that allows consumers to avoid the costly civil litigation process when appealing a ruling by an Appraisal Review Board. Finally, HB 3613 allows a residence homestead to be appraised as a residence, not on the basis of the "highest and best use" appraisal standard.
All these measures will put Texas property owners on firmer footing, and give homeowners more tools to fight back against unfair and onerous appraisals. Non-whack!
So I leave you with a promise from the Texas Association of REALTORS®. Whenever a bad bill for Texas homeowners raises its head from the pink granite dome in Austin, rest assured we'll have our little rubber mallets ready! Whack!
