Feb 282017
 

Dagnabbit! I can’t make things work!

Imagine your buyer client calling you in panic or frustration because the lights in their new home keep going on and off… the garage door is opening by itself… and the thermostat refuses to affect the temperature of the house. Would your first instinct be to suspect the house is haunted? (Bonus point available–that’s called a stigmatized property. Is that a required disclosure in Maine?)

Well, there might just be another explanation and an item for you to add to your closing checklist. (You do have one, right?)  Here’s a link to a recent article in USA Today reporting how “As the Internet of Things finds itself into houses via connected devices, more and more homes contain hot new tech gadgets that can all too easily become unlocked digital backdoors.”

In non-technical language, if the seller forgets to reprogram his smartphone, he could end up opening the garage door of the home he sold.

Speaking of closing checklists,  the article includes a link to a one-page “smarthome checklist” created by the Online Trust Alliance. It’s not exactly free of technical terms but is definitely worth a look. Sorry if it makes your head hurt! Those with kids have access to technical support with this language and these devices.

Seriously, there are some potential issues here to think about–including what electronics “go with the house” and what programming changes need to happen when a property changes hands.

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Aug 052016
 
Let's think about this.

Let’s think about this.

Since I’m not actively engaged in brokerage on a daily basis, I take some extra steps to make certain I’m keeping current with “what’s going on in the business.” I know all too well the hazards created when class content and delivery aren’t in tune with the current environment.

One of those steps is to scan the media regularly and consistently. Recently there have been some headlines regarding action taken by the CFPB (Consumer Financial Protection Bureau) that are at best misleading. One I saw this morning claimed “CFPB makes clear lenders’ ability to share closing disclosure.” Actually, the CFPB has proposed some changes to TRID (TILA-RESPA Integrated Disclosure Rule). Until those changes are adopted, nothing has changed. The original rules remain in place.

In layman’s terms, the current rules adopted last fall created a reluctance on the part of lenders to share Closing Disclosures (a detailed statement of the buyer/borrower’s costs) with third parties–including real estate licensees. I suspect this stemmed in part from a desire to protect borrowers’ privacy. That would seem to be noble goal. But it was a change that did not sit well with some licensees who had become accustomed to the lender sending the previous disclosure (called ” the HUD”) to the licensees involved in the transaction.

Under the new rule, lenders were given strong confidentiality guidelines that actually go far beyond the issue of who gets the closing disclosure. Those guidelines increased the borrowers’ confidence that information about them and their transaction would remain confidential. Nothing, however, took away the borrower’s right to share that information with others.

Personally, I never understood why this created a problem for licensees. Under the new rule, the lender would send the closing disclosure to the borrower. The borrower would, if he or she wished, contact his real estate licensee and provide a copy for review and discussion. I informally polled some of my students and, while many admitted it felt like an extra step, no one reported a serious problem with the process. In exchange for what might be seen as an extra step, the buyer/borrower received additional protections and maintained responsibility for the the process. So the campaign to change this rule feels a bit like a solution in search of a problem.

Perhaps someone can help me understand why this change is necessary. The lines of communication between a real estate licensee and his or her client should be open and frequent. We say it often, “The agent (licensee) advises, the client decides.” Why would that not apply here? The information contained in a closing disclosure belongs to the client, not the licensee. This change might actually be seen as a power grab, taking away a borrower’s right.

We sometimes hear licensees “complain” that buyers and sellers do not accept enough responsibility for what happens in a transaction and are quick to blame the licensee when things go wrong. If that’s true, does it really make sense to take this step?

I haven’t looked at the specific language of the proposed rule changes, but a summary indicates the change will include (among other things) “guidance on sharing the disclosures with various parties involved in the mortgage origination process.” It seems to me that we already have that and we might think about what we’re doing and saying if we change that guidance.

 

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Mar 262016
 

It has come to my attention that the article referenced in “Over the River and Through the Woods” is now only available to subscribers. A little “googling” has turned up another article that actually looks at the issue from a slightly different perspective:

Private Road Plowing Debated

This is not a simple, one-dimensional issue. For real estate licensees, the question may be more important than the answer because the answer will be different in different municipalities and situations. I’ve raised the issue because I suspect there are some concerns a licensee representing a buyer considering property located on a private road might need to discuss with his or her client.

For an excellent summary of some facts regarding the forming of road associations, read this article on Maine.gov.

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Feb 102016
 
Photo courtesy of Pixabay

Photo courtesy of Pixabay

A recent accident in Harrison, Maine involving a fire truck raises more questions regarding private roads, a complex topic that has always affected those dealing in real estate. In spite of recent efforts to clear up issues surrounding abandoned and discontinued roads, the legal and practical aspects of going over the river and through the woods can be daunting.

As reported in The Sun Journal, a Harrison Fire Department truck slid down a hill while responding to a carbon monoxide alarm, suffering major front end damage. Fortunately, the driver escaped with only a few scratches.

As a former volunteer firefighter, I can recall some heartbreaking calls when we found ourselves unable to reach a home on a private road that was poorly maintained–or not maintained at all. Those were simpler times and a call to the road superintendent would bring a plow, sander, or in some cases the town grader, even if the road wasn’t officially maintained by the town. But precious minutes were lost. Difficult judgments had to be made quickly–is this road passable? Am I going to risk people and equipment if I proceed?

Those decisions are no less simple today. If anything, they have become more difficult as entities and individuals must consider liability and legality. Some towns are adopting ordinances and policies to deal with these issues.

Property purchasers need to be aware of the potential issues and problems if access to the property is anything other than a public road. Since this is truly a local issue, research and diligence are required. Happily, buyers do not need to make split second decisions, but they do need to be aware that purchasing property on private roads always means assuming risks.

Reading the entire article will heighten awareness, certainly. And if you read all the way to the end, you’ll discover an interesting story of how some homeowners “solved” a problem with access to their properties.

 

 

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Dec 152015
 

Jack is a longtime friend and colleague… one of the things I love about him is the way he shakes cages and challenges traditional thinking. The following piece is his Daily Investor Brief published by St Anselm College on December 14, 2015, challenging some of the traditional thinking often touted by the real estate industry.


Jack F HeadshotJust because everybody is doing it is no reason to do it! You’re allowed to be who you are and to plan your financial life as you please. “I’ll never have to cut the grass again!” is a poor reason for uprooting your life. Roots are worth a lot.

When the grass is cut by a condo association, you pay to have it done. You can pay to have your grass cut in the house in which you live. Think a little bit about the devil you know versus the one you don’t. Things change, and you may want big changes in your life at any time, but don’t let convention dictate your life.

In doing financial planning, your plan dictates your finances. If you want to fund a downsize move, so be it. Think through your goals and objectives, plusses and minuses, and then see what you can realistically finance. Your finances, of course, limit your plan, but get first things first. What do you want to do and why do you want to do it?

Many people live in the same place for many years and suffer no adverse consequences. Others have wanderlust and enjoy gypsy genes. Following children and/or grandchildren is not a bad strategy.  Think through your reasoning and then test the waters. What looks good in your imagination may not be ideal in practice. Then again, it might be far better than you ever imagined. Your reasons, whatever they may be, are the right reasons. Make sure they are your reasons.

Going home to the home you’ve lived in for forty or fifty years is not a bad place to go. Your investment in a home can also be an investment in a community. First it might be for schools. Next it could be for a religious congregation. Neighbors might become lifelong friends. All of this factors in. Next time you are cutting the grass, think about all this.


Jack Falvey is a widely published freelance business writer, contributing to Barron’s, The Wall Street Journal, and The New Hampshire Union Leader and Sunday News in the areas of sales, sales management, and marketing. He teaches professional sales and sales management at both University of Massachusetts Boston and at his alma mater, Boston College.

Falvey is currently a fellow at the New Hampshire Institute of Politics & Political Library at Saint Anselm College in Manchester, New Hampshire where he offers daily Investor Education Briefs.


 

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Oct 022015
 

panic_button_400_clr_2667Many will recognize the title of this post as a line delivered often by Henny Penny in a folk tale that by some estimates has been around for more than twenty-five centuries. As with most stories that old, there are various endings–some happy, some not so happy for Henny as she and her friends get eaten by a fox. The moral therefore has several twists, but the commonalities are usually around the theme of having some courage and not believing everything you hear. We might also conclude, rightfully, that hysteria is often contagious.

TRID (TILA-RESPA Integrated Disclosure rule) is coming this weekend. Actually, it’s been coming for a long time. Now it’s finally arriving.

There has been a certain amount of “The Sky is Falling” hysteria surrounding the implementation TRID. This is evidenced by some of the dire warnings that licensees should expect problems, add extra time to their closing windows, etc.

Personally, I think it may rain for a while, but the sky will not likely fall. Why? For one thing, the changes aren’t really that massive. However, any change that impacts an entire industry (real estate, lending, legal/closing) will surely create some temporary disruption. Learning curves are real, but their steepness often depends on the learner. The changes didn’t come as a surprise. I suspect some lenders are well prepared and will find the change relatively smooth. One thing that will help those lenders is for the other parties to become informed and stay calm.

The CFPB (Consumer Financial Protection Bureau) has actually created a “Real Estate Professional’s Guide” on their website that might be very reassuring, particularly if you accept the idea that we most greatly fear the unknown. Did you know, for example, there are only three changes that will trigger a new three-day review period? (And one of those three has existed for quite some time–it’s not new.)

I’m not suggesting it wouldn’t be a good idea to prepare customers and clients for the change. In fact, educating your buyers about the “new” process will streamline the steps between pending and purchase–as it always has. I’m less certain that we need to start adding days and weeks to closing. We still need to focus on our clients’ needs. Another thing that hasn’t changed is the reality that the length of time required to close is still dependent on the capability of each and all of the involved parties: borrowers, licensees, lenders, title companies, attorneys, etc.

In at least one version of the tale, the panic starts when an acorn falls on Henny Penny’s head and she mistakenly concludes it’s the sky that is falling. The implementation of TRID will be an acorn for those licensees who do not panic, become informed, and facilitate keeping their client’s transactions on track. If it helps, you can give yourself the nickname “Ducky Lucky” and be like a duck: be calm on the outside while you’re paddling fast beneath the water.

 

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Sep 122014
 

elephant_on_hose_400_clr_11550Hopefully, most are at least aware of the elephant standing in the room even though he’s easy to ignore. We don’t like looking at him because he represents an area that can seem confusing and make him look even bigger than he actually is.

The Federal Emergency Management Agency continues to roll out revised flood risk maps that are dramatically impacting homeowners (existing and potential) and businesses. Another reason the elephant is easy to ignore is so far only seven county’s maps have been released: Cumberland, Hancock, Knox, York, Lincoln, Waldo and Sagadahoc.

The bad news is that flood risks are changing and flood insurance premiums are dramatically affected. The good news is that there are often options and alternatives, including  subsidized and grandfathered rates which can be transferred to new owners. However, rates will still increase gradually over a period of years.

If you’ve been ignoring the flood risk elephant, it’s time to stop. A good place to start getting some basic understanding is a recent article published by the Bangor Daily News. Licensees can and should understand the issue as it relates to businesses, primary and secondary homeowners–both sellers and buyers. This is not an issue that should be reserved until closing.

Ultimately and at a basic level it’s not much different from other risks homeowners must face. There are parallels to homeowners insurance and title insurance–for licensees with clients, it’s about helping those clients manage risk. Just like other risks, another good place to start is by becoming familiar with those companies who provide the insurance necessary.

Aristotle said, “Education is an ornament in prosperity and a refuge in adversity.” You can’t lose by getting smarter!

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Real Estate Investment Trusts

 Posted by at 5:24 am
Jun 272014
 

What follows is the work of friend and colleague Jack Falvey–who many will recognize as the author of the “blurb” on the back cover of my book, Small People–Big Brains. Jack’s authoring this online investor program for Saint Anselm College… a free daily investor brief. See the bottom for additional information… try ’em! The price is right and I think you’ll enjoy Jack’s style. As a bonus you’ll learn a lot! Subscribe here.


Real Estate Investment Trusts are mostly about big buildings.

Jack F HeadshotCommercial real estate investment is best done as a group activity in order to spread risk. By owning multiple properties, each legally separated for liability purposes, a relatively safe element can be added to an overall investment plan. There are publicly traded REITs (Real Estate Investment Trusts), and there are REITs where investors of size can buy into a fund used to buy properties. The company managing this process operates as a Real Estate Investment Trust. They buy and sell properties that produce rental income for their fund shareholders. They charge the fund a management fee for this service.

Their expertise involves buying properties at desirable market prices that will produce steady rental income for their owners and that will appreciate over time. Acquiring mortgage funding for their purchases is part of the process. Private REITs cater to investment portfolios that seek a real estate component. These are often retirement funds or, in some cases, even sovereign funds.

Publicly traded REITs are stock exchange listed and report earnings, as do all public companies. Their product is real estate investment services. They perform according to their skill levels and the ups and downs of the capital and property markets.

They are, in effect, mutual fund companies that operate exclusively in real estate investments. They are highly specialized in what they do. The value of a property and its ability to produce income is a relative determination. There is considerable judgment involved in each transaction.

REITs prosper on their performance. They are captive to both capital and property markets. Because they are asset backed, they are considered to be more secure by some than investments in pure equity or pure debt opportunities.

Most real estate investors are merely buying their own home. Some buy multi-family homes. Some buy a number of multi-family homes. Some invest in a commercial property. All this is done for appreciation and potential rental income. On a small-scale, it makes sense to manage your own holdings. Scale all this up and REITs are what you have.


Investor Education Briefs is an online investor education program provided by the Institute for Politics at Saint Anselm College. It goes out each business day of the year at no charge. The editorial opinions of Jack Falvey, a Fellow of the Institute and a frequent contributor to The Wall Street Journal and Barron’s, are provided for investor education only and are not offered as financial advice. Anyone may enter or exit the program at any time. There are no tests or academic credits involved. It is designed as a free program which will recycle and be updated every twelve months. Subscribe here.


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Where can I get…?

 Posted by at 7:27 am
Jun 032014
 
"You are going to pay me, darn it!"

“You are going to pay me, darn it!”

Fortunately, I’m able to see the humor in this question–I get it at least once a year from a do-it-yourself buyer or seller. “Where can I get a blank purchase and sale form that will protect my interests if I don’t want a broker involved?”

I usually manage NOT to answer, “Gee, I can’t answer that since you don’t want a broker involved and I am one.”

It’s a really tempting answer.

Why do we get requests like this, anyway? We’re quick to explain that some people simply “don’t want to pay a commission.” We’re quick to judge but slow to answer the questions that are hidden in that objection.

Coincidentally, I happened on an article that raised the question “Why do real estate agents still exist?” Using the over-worked (but applicable) analogy to travel agents, the article offered several reasons. Ironically, most of the answers were about agents, not customers or clients. One answer was that agents still exist because the Internet is making it possible for them to be more productive. A true statement, certainly, but also a bit self-serving and not particularly helpful to a buyer or seller.

I liked the question more than the answers. So let me ask my readers, “Why do real estate agents (licensees) still exist?” Don’t tell me it’s because we have the blank forms or the MLS, please. In fact, I’d like you to pretend you’re being asked the question by someone who doesn’t know much about the business of real estate. What are you going to do for me that I can’t do for myself given all the information at my disposal on the Internet?

If you think it’s an easy question to answer, you’re probably not trying hard enough. So let’s upgrade the question and pretend it’s being asked by someone who’s bought and sold property a dozen times over the past few years. What is your value to someone in that category? What can you do for that person that he or she can’t do?

Your assignment is to come up with a list of at least five to seven contributions (benefits) you can provide to that person that he or she can’t get anywhere else. Some generalities are okay, but specifics are a lot more powerful. A hint might be that it’s likely to be less about what you have to offer and more about what the buyer or seller needs in today’s economy and environment. The reason you need at least five to seven is simple–if your prospective client is (for example) a marketing and sales expert, your marketing program diminishes in value and importance.

If you want extra credit for the assignment, find somebody who will challenge your reasons and assumptions and maybe even argue with you. While this (arguing) is not a great technique to use with prospective clients, it can certainly sharpen your thinking.

And if you want bonus points and a sticker, answer this question: Why will real estate agents exist ten years from now?

 

 

 

 

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Railroads and Real Estate

 Posted by at 8:58 am
Apr 192014
 

walking_on_tracksOne more thing to think about… are you involved in a transaction where access to the property involves a railroad crossing? According to the Maine Department of Transportation, unless there is deeded access, the property owner must have permission and an agreement with the railroad owner to cross. In the absence of this agreement the landowner could actually be considered guilty of trespass.

As with all rights of way and easements, this is not a particularly simple topic. Much of the information you’ll need can be found by downloading a pdf file from the Maine.gov website. Note these requirements apply not only to active crossings… you’ll want to consult an attorney who is familiar with the topic.

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