Nov 282010

My doctor occasionally accuses me of being a “statistical nihilist.” This usually happens when I challenge his advice and point out there’s a difference between correlation and cause. (He tried not to show it but I think he found my statement that “mash potatoes cause cancer” mildly amusing. I defended my statement by noting that 100% of the people I knew who’d experienced cancer has eaten mashed potatoes at various times in their lives.)

Numbers are interesting as long as they don’t result in kangaroo reasoning (jumping to conclusions). With that as background, the Maine Real Estate Commission recently released some interesting numbers.

In October of 2010 there were 461 active sales agent licenses in Maine. (A sales agent license is the first license and is non-renewable. A sales agent generally has been “in the business” less than two years–three is the maximum, but that requires approval of an extension.) If we compare that to October of 2007 we find the number of sales agents is down a whooping 63% from 1249. Are we tempted to jump to any conclusions?

Before doing so, let’s add another statistic. Continue reading »


Goodbye, Facebook “Like”

 Posted by at 7:04 am
Nov 262010

For a brief period of time after redesigning this site, you may have noticed a “Like” button on posts and pages. You may now notice that it’s gone. I haven’t had any complaints over it’s absence, but would still like to offer an explanation.

We can certainly debate the value of social media to the real estate business… and discuss at length the entire phenomena. My decision not to provide the “like” link was not terribly grandiose; it was practical and based on these factors.

  1. My sense is that most people do not realize how much information they have given Facebook and what happens to it. The value of Facebook is also the negative–sharing information can become intrusive. In order to “like” a page on this site you are required to allow Facebook to access and use your personal information. Personally, I don’t think you should have to do that just to “like” a website page or blog post.
  2. While I’m willing to be “friends” with clients and colleagues on Facebook I’m not a big user. For one thing it’s time consuming. For another thing, there are some lines I draw. I’ve seen other agents “discuss” clients and other business activity on Facebook and, while they’ve probably not violated the letter of the law, it’s just not the way I choose to do business.
  3. I also make some choices regarding how I choose to live. One of those choices is to admit that most people aren’t THAT interested in what I’m doing every day. I confess to finding some entertainment at reading some of the things folks announce to the world… they’ve overslept… broke a nail (I’m serious)… You don’t have to know me very long to know that’s not my style.
  4. While I like being liked, I’ll be just as happy if you try the share botton–the best form of liking this site or an individual post is telling others about it. My original intent hasn’t changed: this site is meant to be a resource. I’m not entering popularity contests.

Just for the record, I’m not “anti-Facebook.” I am in favor of making decisions deliberately. The fact that you can do something doesn’t mean you should.


That Offer Is Nuts!

 Posted by at 6:32 am
Nov 262010

Most real estate brokers are preparing their listing clients for “lowball” offers, but occasionally we still get surprised by a truly low offer. There are any number of reasons why a buyer might make what seems to be a ridiculous offer. Since we can only guess why, our energy might be better spent considering how to respond.

In the “old days,” the common response was to ignore the low offer. This lack of response was meant to communicate “I’m insulted and don’t even want to deal with you.”

Given the current market situation we will function more effectively by taking the emotion out of the process and becoming good negotiators. That’s of course easier said than done. But remember, you can’t negotiate with someone if you aren’t talking to him or her.

Let’s say your property is listed at $169,000 and a buyer offers you $125,000. You’re allowed to scream–just do it alone or with your agent. Then consider your next move. You might, for example, want to counter the buyer’s offer at $165,000.  Afterall, the buyer submitted a low offer to see what you would say. Doing the same makes sense because what the buyer does next will reveal a lot.

A big jump (say to $140,000) may indicated the buyer is seriously interested in the property. A smaller increase may indicate the buyer is near his or her financial limit. (Your small reduction when making the counteroffer communicated two things: one, your price is relatively firm and two, you are nevertheless willing to discuss terms that will enable the buyer to purchase your property.)

When I was actively consulting with organizations we were fond of telling them “We can’t help you if we’re not here working for you.” You can’t negotiate without communicating. The challenge often becomes being aware of what you are communicating–and being willing to listen.


How’s your Credit Karma?

 Posted by at 12:42 pm
Nov 172010

Even if you aren’t considering a home purchase or refinancing you ought to be concerned about your credit. (Your credit score/rating can actually impact what you pay for insurance. One site you might consider spending a little time visiting is Credit Karma. For one thing, they really do offer a FREE (no strings, no trial memberships, etc.) report of your credit score. You’ll also find an opportunity to explore “cost savings” on your credit cards, mortgage, etc. Just remember this is all automated so you’ll want to do some analysis of the recommendations.

All in all, the site is fairly educational and a good tool. Use it wisely!

By the way, “Karma” is defined as “the total effect of a person’s actions and conduct during the successive phases of the person’s existence, regarded as determining the person’s destiny.”  Don’t be the victim of your credit history; determine your destiny!


Seller Financing Caveat

 Posted by at 12:26 pm
Nov 102010

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was passed in 2008 as part of the federal Housing and Economic Recovery Act. The act required states to establish a registration/licensing process for loan originators. Maine enacted its versionwhich will take effect January 1, 2011.

 There are exemptions for seller financing of the seller’s principal residence and for financing provided to family members. Thus owner financing of the sale of the owner’s home is exempt and parents financing a child’s purchase are exempt. But a buyer who is fixing up and reselling homes would need to be licensed to take back financing. Previous exemptions based on a maximum number of transactions are gone. The purpose of the law is clearly to disallow or at least discourage private, unregulated financing.

Those considering seller financing beyond the previously noted exemptions should check with the Office of Licensing and Registration.


Should I buy now?

 Posted by at 6:21 am
Nov 062010

According to a recent article in Real Estate Economy Watch, “Despite 19.1 percent fewer home sales in September than a year ago, private mortgage insurance applications received by leading mortgage insurers are up 32 percent in the past 12 months.”

For those who might not know, private mortgage insurance (PMI) protects the lender in the event the borrower defaults and it comes into play when the borrower is unable to make a conventional (20% of purchase price) down payment. Using PMI the borrower can borrow with as little as 5 % down. The smaller down payment makes the loan higher risk.

So a somewhat simplified analysis suggests that while the number of home sales is down 19%, more and more of those purchasers need private mortgage insurance (32% more) because they simply do not have the traditional down payment. The good news is PMI makes home purchasing possible for buyers who’ve been unable to accumulate the sizeable amounts of cash typically necessary to purchase a home. The bad news is PMI significantly increases the monthly cost of the home. (A homeowner with a $100,000 mortgage could see an additional $40 tacked on to his or her mortgage payment.)

So what makes sense? Does a buyer who does not have an abundance of cash buy now and pay the PMI? Or does it make sense to wait? The only correct answer is, “It depends.”

Now more than ever we all need to manage our money wisely. You don’t have to see too many real estate ads to hear “it’s a good time to buy.” I’d suggest inserting some disclaimers. It might be a good time to buy. Prices are down and interest rates are at historic lows.

But if it’s a great time to buy, why isn’t everyone buying? Why were sales down 19% in September? Here’s one correct answer that’s certain: Now more than ever it makes sense to sit down and look hard at your personal situation before making a major financial decision. It might also make sense to do that with someone who has a long term outlook and no immediate self-interest in your decision. I have several clients who’ve told me that I’m not allowed to retire for at least three years.

That’s called “taking a long term outlook.”