No Whining!

 Posted by Walter at 5:25 am
Dec 052011
 

As if to reinforce my previous post, I read a news item this morning pointing out that pending sales are up but along with that REALTORS are reporting a signficant number of “settlement failures.” (A settlement failure happens when a buyer and seller agree to a “deal,” but something happens and the sale doesn’t actually take place.) The talking heads are of course blaming this on the lenders. (By the way, the statistics on the failures are not hard numbers-they are based on a survey of REALTORS who are reporting they are experiencing the problem.)

One comment posted to the story by a REALTOR included the observation that the “entire industry is being held hostage to ridiculous underwriting standards.” I confess to chuckling a bit.

I have an idea for her. I think she should start making $100,000 plus loans, asking herself just how much assurance she wants that her borrowers are going to pay her back. My guess is she’ll want some underwriting standards, documentation, and won’t be making loans to just everybody. If she can come up with enough money, she can turn an entire industry around.

 (Just to put the lending risk into perspective, a separate article notes that in cases where the lender or federal government modified mortgages to assist the borrower nearly half are in foreclosure again anyway.)

There’s no doubt that mortgages are a lot harder to get now than a couple of years ago. Personally, I’m not sure that’s a bad thing. But to those who are whining, I would suggest that unless we are going to start opening our own banks, “it is what it is” and we (REALTORS) need to start dealing with it. Whining about it isn’t going to help one bit.

We can’t continue to shout, “It’s a great time to buy!” because it’s only a great time to buy for those who can and not everyone can.

My personal experience is that it’s not THAT difficult–there are lenders with money to loan who have reasonable expectations. Buyers (and agents) who are looking for the slam dunk are going to be disappointed. You do have to work for the mortgage and the sale. Sorry.

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Salesmanship is NOT a dirty word!

 Posted by Walter at 6:43 am
Nov 282011
 

For a long time now I’ve been “preaching” to those who will listen–”It’s high time for those of us in the real estate industry to realize we are not in the business of selling houses; we are in the business of helping people make intelligent decisions regarding real estate.” I would call your attention to the fact that I said “selling houses.” I didn’t say “We are not in the business of selling.”

Some years ago I wrote a short booklet called Salesmanship Is Not a Dirty Word. I can assure you that I’m not “anti-sales.” I happen to think that selling is an important skill–even if we have to call it something else to make it palatable. 

So this morning I read an article on RIS called Warning: Your Sales Techniques May be Under Fire. It’s actually a pretty good piece. The author notes that while brokers have traditionally been “selling information” (because of the historical emphasis on the multiple listing system) things have changed. Buyers now have all that information available to them thanks to the Internet. (I wonder how that information gets there… hmmm.)

Therefore, he somewhat rightly concludes, buyers of real estate are looking for someone to “assist and consult.” But, like all good ideas, when you push this to the extreme it doesn’t work. “No dialog, technique, or pitch needed,” he goes on to say.  That’s where the author lost me.

 This is the age-old debate–it’s not a new one based on some new paradigm. Every industry has always had salespeople who put their personal gain before their customer’s. Real estate is no different. Well, except for one thing, maybe.

If you hire me (or somebody else) to “assist and consult” with you… wait. How are you going to decide to hire me? Will you draw my name out of a hat? Should we develop software that is a random broker generator to pick your broker for you? (Banks are doing that with appraisers these days–interesting back story there.)  No, I think we’re probably going to have some dialog and while we may not like calling it that, I’m going to “sell” you on the value of hiring me.

Let’s assume, however, that somehow you do manage to hire me without any influence on my part. So if we assume I’m not supposed to use sales techniques, let’s consider what that means. If you’re a buyer and you decide to make an offer on a home I’ll just submit the offer and we’ll see where the chips fall? Or maybe you are about to make a truly “bad” decision… you don’t want me to try to talk you out of it, right?

See, when we write articles like this we can afford to be conceptual and puristic. When we’re out in the trenches we have to deal with reality.

If you’re entering the real estate market as either a buyer or a seller I think you absolutely need a broker who knows how to sell and is pretty darn good at it. Remember, it’s about perspective. He or she is supposed to be using that skill on your behalf–not on you for his or her own gain.

Unfortunately, the information aspect of this business makes it very easy to end up working with a broker without much thought. You call a number on a sign because the house looks interesting. You don’t think about selecting your broker. You’re leaving that to chance. Wouldn’t it make sense to find out what that broker’s perspective is?

I often tell students that they’ll make their biggest mistakes in the business when they are broke. Why? Because it’s about perspective. It becomes very easy to put the transaction (sale) ahead of the client when you can’t make your mortgage payment.  Just like in dating; desperation isn’t pretty. Don’t hire a desperate broker.

Customers and clients really do need a sensitivity to this–is your broker truly working in your best interest? Extreme cases are relatively easy to spot because you feel “pressured.” 

There are two questions you should be asking yourself constantly:

  1. Do I feel like I am making my own decisions with all the information and options available to me?
  2. Do I feel like my broker is my partner-working with me?

If the answer to either question is not a resounding “yes,” it’s time to reassess your relationship.

 

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Home Inspections…

 Posted by Walter at 6:40 am
Oct 112011
 

Home inspections are always a good idea for buyers… and they actually can benefit sellers! But a home inspection is not a pancea–there are things that can go wrong with the process. The “House Detective” is nationally syndicated columnist Barry Stone–he writes a great blog and answers some tough questions. There’s some interesting reading even if you’re not considering buying a home!

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 Permalink  Posted by Walter at 7:00 am
Aug 062011
 

The PinchME Promotion is underway… the fundamental idea behind it to make it easy for folks who are interested in a second home. You can try out the search routine here.  Contrary to the slogan, not every one can afford a second home. But if you can afford one,  it is a great time to buy. You might want to check with your bank or mortgage lender before you get too deep into shopping… if you are seriously interested, let me know–I’ll be glad to “hook you up” with a lender and we’ll see if we can make your dream come true.

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Bugs in the Well?

 Posted by Walter at 9:38 am
Jul 072011
 

Buyers who are purchasing a home or camp with well water are wise to make their purchase contingent on a satisfactory water test. There are, of course, various types of tests for different substances. The most common problem we see with these tests is the presence of bacteria–particularly in systems that have been idle (such as camps) for sometime.

Even if you aren’t considering selling your property, an occasional water test is a good idea. You’ll find some easy to understand information at the University Maine Cooperative Extension website–you can download two brochures for free. One will explain the testing process–this can be a “do it yourself” project. The other will explain the process used for disinfecting your well if bacteria is found. The direct links to the well information are:

How to test your well.

How to treat your well.

“Disclaimer” — One of my volunteer positions is president of the executive committee for the Piscataquis County Extension. Even so, I can say with some objectivity that your local extension office is a great resource… as is extension in general. In fact, that’s one reason I agreed to accept the positon. If you’re thinking about moving to a new area, visit the chamber of commerce and the extension office. There’s lots to learn!

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Cheap Maine Land!

 Posted by Walter at 7:16 am
Apr 252011
 

An “inside joke” among Maine REALTORS has always been out-of-state buyers who call or email asking about “cheap Maine land.” A few years ago I developed a trade show exhibit that involved a bucket of dirt, a scoop, some plastic bags and a sign that read, “Cheap Maine Land-five cents per scoop!”

Whether property is on the market due to foreclosure, short sale, or just a desperate seller, price is now an important aspect of nearly every transaction.  While buyers can find some real bargains, all too often there’s just too much emphasis put on the bargain at the expense of common sense and basic diligence. Sometimes it seems like it’s not about buying a home or property, it’s about getting the lowest possible price.

Some things haven’t changed.  Common real estate logic used to be “location, location, location.” That logic really hasn’t changed. Property values are still dramatically impacted by location both at the macro and micro level.  Unless your goal in life is to live in a cheap home, you ought also to be looking at neighborhoods, school districts, infrastructure, local economy, amenities, etc.

But you aren’t going to live there you say? I recall getting an excited call from a Boston-based buyer back when one of our local towns lost a major employer. He explained that he’d heard you could buy homes there for “pennies on the dollar” and he wanted five of them. When I inquired of his long range plans, he explained his intention was to turn them into rental properties and garner a great return on his investment.  He hadn’t, of course, considered who he was going to get for tenants.  I occasionally have to explain that my “job” sometimes is to talk people OUT of doing things.

There is something to be said for “at this price I can’t afford not to buy it,” but there still needs to be some caution—especially when dealing with vacant homes that can deteriorate quickly.  Again, logic suggests that you should determine the true cost of owning the home you are considering. A professional home inspection will do that by reporting issues that should be addressed immediately and some that will require attention over time.

It’s strangely ironic that in an earlier market one could sometimes stifle interest by pricing a property too low. Buyers would suspect there was something wrong and avoid considering it! This was also a time when buyers would often require prodding and pushing to do the research and make decisions. Buyers were afraid of making a bad decision. Now it seems like many buyers are afraid to purchase because the price might go lower. A bad decision at a rock-bottom price is still a bad decision!

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Should I buy now?

 Posted by Walter 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.”

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I Saw It On TV!

 Posted by Walter at 10:37 am
May 172010
 

I’ve been reading a book based on a TV series about real estate. It’s actually fairly well written and in many cases downright funny.  But there are also a number of places where it is just plain wrong. That’s one of the joys of receiving advice (whether it’s from a book, TV show, or the agent you are working with). Sometimes it’s just plain wrong.

I chuckled a bit when a potential buyer called me recently to announce that she was ready to buy a house because she’d been watching all the real estate programs on TV and knew “how it worked.” I envied her because I’ve been at this for a while and I still don’t know how it works. Not every time anyway.

Students in my real estate classes learn to remember that we have two hands and that should remind us to consider both sides of a question when giving clients advice. When a buyer asks, “Should I make a really low offer?” we do well when we consider both possible answers. “Yes, because the seller might accept it. But on the other hand… there are some risks associated with really low offers…”

In other words, you should be getting all the information necessary to make a decision that is ultimately yours. If I could give a buyer only one “tip” it would be just that. Get all the information—the pros and cons—before making an informed decision. In simplest form the tip is “be a smart buyer” and that includes surrounding yourself with professionals willing to educate you.

In addition to being a smart buyer, here are some other recommendations—many of which will apply to sellers as well.

  • Read every piece of paper and take everything seriously. This is especially important regarding the offer you sign. Don’t be intimidated into just signing and don’t be too proud to ask questions about any points you don’t understand.
  • Keep legible copies of all paperwork in an organized file. Remember that a real estate transaction is complex. Be prepared to consult professionals: lenders, home inspectors, attorneys, accountants.
  • Don’t just look for a house; look for a community or neighborhood. Unless you are a hermit, what’s around you will have importance. You can add a family room. Changing a community isn’t quite so easy.
  • Be prepared to act quickly and be available to do what needs to be done. Taking a few days off to go to the islands might sound good, but remember your priorities. It’s actually a good idea to set a timetable. I once worked with a buyer who had been looking for seven years. (Not with me!)
  • It will sound self-serving, but have some loyalty to the agent you choose.
  • In Maine, you should be given a one page “Real Estate Relationships Form” that describes various types of relationships the law permits and requirements for them. Selecting the agent and type of relationship is an important decision that should be made early in the process.
  • Understand that there is an emotional and financial component to selecting a home to purchase. In the ideal world, these will be in balance. In the real world they’ll require some juggling. The home you fall in love with may not make the best economic sense. That doesn’t mean you should reject it. (Think, “On the one hand—on the other hand.”)

Ultimately this really is about making an informed decision—your informed decision. Don’t let somebody else tell you the right answer. Oh… and don’t believe everything you see on TV!

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Title What?

 Posted by Walter at 10:11 am
Nov 112009
 

A recent question from a buyer client suggests it might be a good time to review some very basic concepts regarding title. Let’s start by understanding the word “title” is describing the evidence one has of right of ownership. A “clear title” basically means the ownership of the land is clear and without question.

When a buyer purchases a property, some assurance that the current seller has “clear title” is in order. I could sell you the Brooklyn Bridge, couldn’t I? How do you know whether or not I own it and have the right to sell it? (I could create a fake deed and register it–the existence of a deed is not a guarantee I truly own the property.)

There are three important terms we use when we talk about title.

A title search is performed to establish the links in the chain of title and discover any potential clouds or problems (such as liens) with the title. This is the service buyers and lenders commonly get. (If you are mortgaging your property it will be required by the lender.)

A title opinion may be issued by an attorney. This becomes the attorney’s legal opinion that the title is “good” or clear. Because the attorney is assuming risk; these tend to be expensive. Do not confuse a title search with a title opinion.

Title insurance is a policy issued by a Title Insurance Company. Typically the policy is issued based on the title search. It ultimately is about risk management. Nobody really says “you have a great (clear) title”—the insurance company says “based on the title search we are willing to insure your title.”

If something or someone comes along after you’ve purchased that brings your title/ownership of the property into question, the Title Insurance Company will either defend your title or pay you for the loss of your property – up to the face amount of the policy. The premium for this coverage is a one-time charge and there are numerous options available to the buyer including an “escalating” policy in which the face amount increases automatically.

Don’t let your eyes glaze over when the topic of “title” comes up. These are not difficult concepts, really and you should insist on explanations that you understand well enough to make good decisions.

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Orange Isn’t Just For Pumpkins

 Posted by Walter at 9:50 am
Oct 262009
 

The Irish have the wearing of the green; Maine has the wearing of the orange. When venturing into the woods some orange clothing is always a good idea, but it becomes a requirement during hunting season. In fact, for a few dollars you can pick up a vest, clip a compass to it and maybe carry a small survival kit in one of the pockets. You carry a spare tire in your car, right? Do you think more of your car than you do yourself?

Fall means shorter days, colder weather and a number of hunting seasons. Deer season is open the entire month of November and there will be a lot of hunters in the woods. Think orange! Be safe and be smart.

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