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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Here’s a lead!

 Posted by at 7:03 am
Dec 062013
 

But don’t get too excited…

My name is Begenc Gundogdyyew from Turkmenistan, I want to buy a family living home in your country, please let me know if you can assist me. What i need is a single family home, a big kitchen, a car garage that can content up to 3 cars, a flower garden and also a pool. I will be happy if u can put the pictures together and sent it to me for me to make selection with my wife and children. I am ready to purchase a house that will not be more than $2,000.000 (Two Million US Dollars).

The life of my family is no longer safe here in Turkmenistan, the government and my political opponent want to assassinate me and my family, they have several time tried to assassinate us, but the Almighty God has always been with us. You know when you are against the wrong doing and evil acts  of the government you are bound to have a lot of enemies.

Please I want you to assure me that you will assist me and my families relocate to a very safe and gated area in  your city,  i want you to keep this plan of mine very confidential let it just be between you and me please, this is due to my present situation in Turkmenistan.

Waiting for your quick reply.

Thanks.

Begenc Gundogdyyew

money bagsI’ll provide the email address to licensed agents who have completed a course I’ve taught and will agree to pay my agency a 25% referral fee. No, wait… for a limited time I’ll give the referral for a mere 15%.

I’d suggest you sign Begenc up as a client fairly quickly as that would invoke the fiduciary duty of confidentiality he seeks. Unfortunately, the world already knows his motivation and his price range–a mistake he might not have made if he’d seen the Real Estate Brokerage Relationships Form prior to having a substantive communication with us. He hasn’t, however, disclosed his time frame for completion and students from my courses will probably recognize the need to “qualify” him on that point. “If we find a property today that meets your family’s needs, are you…?”

You also probably noticed he hasn’t mentioned whether or not he’s been to a lender and pre-qualified for the requisite mortgage to purchase the property. However, given the nature of this potential transaction it would probably make sense to get a client agreement before suggesting that or asking for proof of funds.

I might also suggest that you clarify his cap of two million. He may not realize there are closing costs, transfer tax, etc. (You do know how to estimate those, right?) If he’s working close at two million, it might make sense to reduce that top end–or at least be prepared to negotiate a closing cost concession with the seller.

In the interest of fairness to those considering a client relationship with Begenc, I should probably also point out Begenc wishes to be in a “gated community” in a city, thereby eliminating much of the Maine Market. Of course we also don’t know how he defines “city” and that should probably be a point of clarification in preparing a buyer representation agreement.

Since it sounds like this will be more than an “arm’s length” transaction done without a showing, it probably wouldn’t be necessary to have a disclaimer that your company is not including personal protection services.

There. Now tell the truth… how often do you get offered a referral like this (only 15%!) AND some advice for getting started? What a change from the “Have you got any good foreclosures under $20,000 that I can buy and flip…? I must have the Christmas Spirit to be this generous!

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Erosion Control Requirements

 Posted by at 10:39 am
Feb 012013
 

shoveling_hole_pc_400_clr_3788Way back in 2008 a bill was passed that required, beginning on January 1, 2013, any activity that adds or displaces more than one cubic yard of soil in the shoreland zone, must either 1) be done by a certified contractor, or 2) a person trained and certified in erosion control by the Department of Environmental Protection (DEP) must be on-site while the activity is being done.  The law does not apply to homeowners doing the work themselves.  The long lead time between passage of the statute and final implementation of the law allowed excavation contractors and other interested parties ample time to become certified.  Certification is achieved by attending an eight hour course given by DEP.  There are currently 1,524 individuals on the list of certified contractors.  For a list of contractors: www.maine.gov/dep/land/training/ccec.html 

This information was excerpted from information provided by the Maine Association of Realtors… one thing I haven’t researched is what the penalty (if any) might be if a buyer purchased property where this requirement was not met by the previous owner (seller). I’d recommend buyers ask questions about any work done in a Shorelands Zone prior to purchase as part of their due diligence!

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Foreclosure Buyers Beware

 Posted by at 7:41 am
Jan 222013
 

There are still a number of buyers who seem determined to buy a foreclosure. My personal rule is “you need a strong stomach, a lot of patience and courage, a good wad of cash, and an attorney on retainer.” I have yet another example of why that’s my rule.

The Bangor Daily News recently reported an interesting tale of a foreclosure purchase made in 2009. The original owners are claiming the foreclosure process was flawed–therefore they still own the property and have refused to leave the home. The “new” owners are paying the property taxes but haven’t had access to the property they “purchased” for over three years. You can read the details for yourself, including the fact that the case is now before the Maine Supreme Court. We can debate the validity of the original owners’ claim, but not the reality they made it and the court is apparently taking it seriously.

This particular case happens to be a tax foreclosure, but bank foreclosures are no less risky. Buyers love to point out that foreclosures can be a heck of a deal and think they “can’t lose.” I suspect these buyers would not agree. Even if the court eventually declares them the rightful owner, they are left with a huge legal bill and the need to evict the original owners.

 

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There Might Be A Reason…

 Posted by at 7:16 am
Jan 022013
 

Let me start with a disclaimer: I am not in any way, shape, or form a reverse mortgage expert. For that matter, I’m not sure I know anyone who is… but with that, let me share a news story with you. The Bangor Daily News recently ran an article Seldom-used financial tool helps seniors purchase new homes without mortgage payments. I will tell you that the tool involved is a “reverse mortgage for purchase” and the story involves a woman in Westbrook who successfully used one.

The article notes that while these loans have been available since 2009, there haven’t been very many issued. There might be a reason for that. Understanding the concept will make most people’s head hurt and I don’t know too many lenders who are familiar with the program. If you are over 62 years old and would like to downsize–it will be worth reading the article and doing some research. Just use some caution and consider all of the financial implications.

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Gram’s Moving In!

 Posted by at 8:24 am
Dec 052012
 

A recent article in Real Estate Economy Watch offers a wealth of statistical data supporting the observation that “Today’s housing depression has again forced generations to move in together, but as the housing recovery takes hold, many plan to stay together and revive the multi-generational lifestyle of the past.” The article also, quite naturally, focuses on how this changes the real estate market. At least one commenter notes that the “biggest upside” of the trend is “more housing for the money.”

I’m not sure I agree. I might agree if the analysis was that this trend means different housing for money. Too often, we view the world as one dimensional and in America, it’s all about the money most of the time.

When I am teaching people who are studying for a real estate license, I tell them the biggest mistake one can make after getting licensed is to start out “poor.” It’s a horrible basis on which to make decisions and one can discover him or herself chasing commissions instead of objectively counselling clients.

I think that advice applies across the board. A real estate buyer who posted about a “Catch-22” he’s caught in is clearly caught there in a large part because he doesn’t have the money required to complete a painless transaction. Even he sees an option of passing on the current purchase until he can save up some more money.

We shouldn’t–can’t really–ignore economic reality. But when we are thinking about living arrangements, we need to look beyond the economics. The personal and social impact of multi-generational living arrangements can be both positive and negative. Those impacts are something we can have some control over.

The Amish understand this with homes and farms where multi-generational living is the norm. (I would suggest you research “Gros Daddy Haus” except when I did, most of the references are to porn sites! That might say something about our society…) Actually, it’s more than a norm–it’s an expectation that is based on their larger definition of community and their tendency to carefully consider how changes will impact that and their way of life.

Given our economic environment, the likelihood of families facing these sorts of choices in clearly going to increase and in many cases “there won’t be a choice.” Even if you believe that, don’t just add up the dollars in the process–consider how that “forced” choice is going to impact you and your way of life. You aren’t just letting somebody move in with you, you are changing your way of life and with some forethought you can control the impact.

If, as the article suggests, you want to “stay together and revive the multi-generational lifestyle of the past,” understand that lifestyle isn’t something that just happens to you–it’s something you can consciously define and adopt.

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Escalation Clause in Offer?

 Posted by at 7:49 am
Oct 232012
 

Every so often an idea will surface that sounds good at first, but deserves some critical thinking. A recent question from a student regarding an “escalation clause” in an offer to purchase serves as an example.

The student’s client had been advised to insert an escalation clause into her offer. For those unfamiliar with the concept, the escalation clause states that the buyer will offer $1000 (for example)  above any other offer the seller receives. The buyer (hopefully) “caps” this with a specific amount. The buyer was tempted to do this because she is in a “bidding war” with multiple offers being made on the property she wants to purchase. This approach might at first glance seem to guarantee she will “win” the war.

As the student correctly analyzed, a fundmental problem with this is it could require the seller’s agent to reveal terms of competing offers. Under Maine License Law and Rule, this would not be permitted without the permission of those other buyers.

Another interesting twist on this: what would happen if two buyers used the same escalation clause?

But beyond that and more importantly, it’s simply bad strategy.

If the buyer uses an escalation clause to effectively tell the seller “I will pay $1000 more than any offer you receive up to $100,000,” an astute seller would either negotiate accordingly or simply respond, “I’ll accept your offer of $100,000.” The seller is under no obligation to justify his or her offer based on receiving other offers.

One of the discussions I often have with buyers is that while negotiation is part of the process, we need to remember this is about purchasing a property–not about proving who is the best negotiator. In the example we are using, the buyer has established what the property is worth to him or her and announced it to the seller. Why not just offer what the property is worth right at the start?

Reverse the situation and it becomes obvious this is an ill-advised tactic. I do not know too many sellers who would inform a buyer, “The lowest offer I will accept is $100,000, but if you’d like to make a higher offer I’ll take that one.” An escalation clause with a cap equates to “The highest I will go, but if you’d like to accept less, I’ll do that.”

Even when there are multiple offers on the same property, this is not truly a “bidding war” because we are not conducting an auction. We simply have several buyers competing to purchase the same property. Also, the seller is under no obligation to accept the offer with the highest price–he or she might well consider accepting an offer with a lower price but better terms. For that matter, the seller is under no legal obligation to accept any of the offers.

If you are buying or selling property, ask the agent representing you to review all of the options both parties have in the negotiating process and remember what you are trying to accomplish.

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No Worse Than…

 Posted by at 8:43 am
Oct 062012
 

“Remember, people will judge you by your actions, not your intentions. You may have a heart of gold – but so does a hard-boiled egg.”

 – Author Unknown

Having recently experienced a rather painful transaction and participated in the development of a course on buyer representation, I am not at all suprised by a study earlier this year that revealed that “Buyer Satisfaction with Real Estate Brokerage Companies Hits All-time Low.” You can read some highlights on the Real Estate Economy Watch website.

One of the things I found interesting about the analysis of the latest data (based on national data involving large companies) is the rationalization that this is somehow due to the difficult market. Although I must say, to J. D. Powers credit they note that the companies with the highest ratings are inclined to be more skilled at managing the customer’s expectations.

While the article obviously doesn’t report all the data, the analysis yields some interesting conclusions. “Notably, although the agent/salesperson has the largest impact on overall customer satisfaction among both home buyers and sellers, customer loyalty is stronger toward the real estate company than toward the agent. Less than 20 percent of customers say they ‘definitely will’ switch real estate companies if their agent moves to another company.”

If I owned a company, I’m not sure that I would sleep well at night as a result of that. This could be as much about inertia as loyalty. Let’s not miss the import of viewing these numbers from a slightly different angle. The data is suggesting that only one in five (20%) of customers see enough value in their agent to stick with him or her if that agent moves to a different company. Something doesn’t add up.

Note that the same analysis suggests “the agent/salesperson has the largest impact on overall customer satisfaction among both home buyers and sellers.” That’s a statement that’s hard to disagree with. So help me understand how an agent who couldn’t create value and loyalty on an individual level creates a high level of customer satisfaction for (and loyalty to) the company, please.

I’m the first to admit that the current market situation is causing a crisis for many agents and companies. In plain language, it’s darn tough to make a living in real estate–especially in rural Maine. But agents and companies should not be making that the customer’s problem. Managing expectations ought to be about the market, not about the level of service we are willing and able to provide.

Unfortunately, when satisfaction decreases, so do expectations. Some years ago Tom Peters had a lot of fun with a ficticious company who’s slogan was “We’re no worse than anybody else.” Unfortunately, that might well be what the survey is identifying as loyalty. Buyer satisfaction is at an all-time low. Seller satisfaction is decreasing. So the tempting conclusion for customers is “might as well stick with company x, they’re no worse than anybody else.”

Blaming the market doesn’t work, really. What about customers? Do they contribute? If customers do have a role in the state of affairs it is in the acceptance of mediocrity. (The survey notes that 60% of the respondents were repeat buyers and sellers–not limited to one experience.)

Customers: Raise the bar, increase your expectations. You are probably entitled to a lot more than you think. You can change these numbers.

If you are dissatisfied or having issues with your agent or company, check out this article What’s the Number for the Real Estate Police? As one who loves platitudes, I would close with “if you are not part of the solution you are part of the problem.”

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Sep 272012
 

I’m tired of being surveyed. I suspect a lot of people are already tired of hearing about the election–that’s unfortunate because we do, in fact, have some important choices to make.

One choice that’s been impacted by the pending election is whether or not to buy a home! According to Real Estate Economy Watch, some 25% of Americans would like to know who the next president will be before they put their money down to buy a house.

I do not think that means the real estate market will dramatically improve immediately following the election. In working with buyers, I’ve learned that there are always “good” reasons to delay buying a home. The question is whether or not those “good” reasons to delay outweigh the good reasons to do something now. After the election, many of those buyers will find a different reason to delay a decision.

Should you buy or wait? There is not one answer to that question. While there are certainly some factors (like low mortgage interest rates) implying a home purchase now is a good decision, the answer needs to be specific to your circumstances. You won’t hear me shouting “It’s a great time to buy!” You also won’t hear me shouting “It’s a great time to delay!” If anything, it’s a great time to give thoughtful consideration to your individual situation.

Partly because of the technology explosion, we are prone to remain uncertain in the hope (or fear) that new information is on the way. While that has validity, we ought to balance that hesitation with the knowledge that many times it’s less about making the right decision and more about making a decision, then making the decision right by adapting and adjusting.

In election terms, it’s the “undecideds” that give the candidates fits… and I find it somewhat amazing there are still a number of people who haven’t decided who they will vote for… I’m told some do not until they enter the voting booth. Given the stark differences in the presidential race, a decision shouldn’t be that difficult. It’s a matter of looking at fundamental differences between the candidates and the “big picture.” There’s not much to gain by waiting to discover one more thing you do or do not like about the candidates.

The same logic applies to the home buying decision.

 

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