I Thought I Owned It!?

 Posted by at 7:22 am
May 022011
 

One thing that no longer comes as a surprise to me is the occasional prospective listing client who, it turns out, doesn’t actually (legally) own the property he or she wants to list for sale. Sometimes it’s a mere technicality; sometimes a misunderstanding. These issues are often referred to as “title defects” or “title problems.”

These situations also can affect buyers. During one recent transaction where I represented the buyer we discovered the “seller” ( a corporation) no longer existed–it seems the owner(s) of the corporation dissolved it and took title personally. The good news was they had done it properly. The bad news was they hadn’t told anybody–including their listing agent.  I didn’t point out to him that technically he was no longer the listing agent since his contract was with a non-existent corporation.

Some of the more common are created by confusion over similar names, missing heirs or surviving children left out of a will, wills not probated, signatures of minors or people of questionable competence. Undischarged mortgages and tax liens are also fairly common.  In short, there are a lot of things that can “go wrong” when title is transferred from one owner to another. Sometimes these escape notice for several transactions.

So what happens if somebody comes knocking on your door and announces they believe they have a claim against the title to your property?

You did buy title insurance, right? When you did the Title Insurance Company ordered a title search of public records to determine whether or not someone other than you might have an interest in the property.  Any discovered risks were either mitigated (or excepted) prior to your purchase. That policy is your protection against legal fees and any losses you might suffer based on a claim.

The “even better” news is that most of these policies cover you after you’ve sold the property! But wait, there’s more! You only paid one premium, at closing. (If you financed the property, there were two policies involved–a lender’s policy and an owner’s policy. The lender’s policy covers the lending institution’s interest for the life of the loan.) If you are in the market for a real estate purchase, make sure you understand the concept and buy some peace of mind!

 Buying Real Estate, Financing, Selling Real Estate  No Responses »

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!

 Buying Real Estate, Financing  2 Responses »

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.

 Camp, Financing, Home, Selling Real Estate, Uncategorized  No Responses »

Not Your Parent’s Mortgage Company

 Posted by at 7:37 am
Aug 112010
 

At least one recent media wave has included a fair amount of whining over the fact that buyers are often finding it difficult to secure a mortgage as lenders have tightened standards and are much more cautious than in the past. Qualified buyers are still ok, There seems to be an entitlement mentality at work–and that’s in a large part what got us into trouble in the first place. One good aspect of that some non-traditional forms of financing are coming to the surface.

One article on the topic included some of the reasons banks are denying loans and offered a reminder that there maybe be an alternative for some folks in the form of private lending. We’re not talking about owner financing (although that is private lending). We’re talking about individuals and private companies making mortgages. Very often this is done through some sort of “matching” service. One mentioned in the article is Noteflo. A potential borrower can actually post the sort of loan he or she is looking for and see if any investors will consider making it.

One thing to remember–these are considered higher risk loans and the investors are looking for a decent return on the loans they make. Expect to pay a premium interest rate if you go this route.

(Understand, this is not an endorsement of Noteflo–I”ve not had any experience with them nor have I researched them.)

 Buying Real Estate, Financing  No Responses »

Can We Bribe A Buyer?

 Posted by at 5:56 am
Aug 012010
 

While I’ve never been asked exactly that question, it’s sometimes implied–especially given the slow moving market we’re experiencing. There’s an obvious temptation to “get creative” when property goes on the market. After all, what was the tax credit? (And for the linguists: what is the difference between an incentive and a bribe?)

Definitions aside, recent changes in the mortgage industry have an impact. For all practical purposes, there are severe limits on what sorts of  (and how much) incentive sellers can offer a buyer. Savvy buyers are often leery because they recognize gimmicks and the risks associated with “rebates” in any form.

Some of the things that do work :

  • Realistic pricing… there’s very little reason for a buyer to pay more than fair market value and it’s easy for them to have some sense of what that is.
  • Curb appeal matters and the old “one chance to make a first impression” logic applies. Keep the lawn mowed and trimmed, plant a few flowers.
  • Keep the inside neat and fresh. You don’t need to create a sterile look, certainly… but neatness counts.
  • Part of neatness is “decluttering.” Pack up and store 1/3 to 1/2 of your “stuff.” It’ll make the house look bigger and you might discover you don’t miss it!
  • Think “exposure.” Don’t be bashful about letting people know your house is for sale… and make sure the information about it is complete and accurate. Facts are important, but presentation makes a difference.
  • Be patient. At least one study showed that it takes as much as 21 showings to sell a house.

These are “safe” and relatively inexpensive buyer incentives. Remember that an incentive is only an incentive if the buyer wants it! At the same time, understand that once a buyer falls in love they may drive a hard bargain.  Be prepared for low offers even if you’re priced right. A lot of buyers are using the “nothing ventured, nothing gained” approach.

 Camp, Financing, Home, Selling Real Estate  No Responses »

Better Than A Tax Credit?

 Posted by at 8:36 am
Jun 292010
 

Here’s an article you’ll find interesting if you are buying or selling property… I’ll give you a short version. The article suggests buyers who did not take advantage of the recent tax credit may actually come out ahead.

Why? There are at least two reasons.

First, sellers are taking increasing numbers (and amounts) of price reductions on their listed property simply because buyers are harder to find since the tax credit expired.

Second, interest rates are continuing to drop–nearly half a point since the end of April. Frankly, this one suprised me, you won’t have to go back too far to find posts where I predicted a rise. But my inability to predict this one accurately is the buyer’s gain! A half point difference on a $175,000 loan amounts to a $15,000 savings on a thirty year mortgage.

Of course we must add the disclaimer that “all markets are local” and all generalities are false, but this still can be a very good time to buy. Don’t fret over missing the tax credit, chalk up some even bigger and better savings!

 Buying Real Estate, Financing  No Responses »

The Silent Victims

 Posted by at 4:33 am
Jun 212010
 

Most clients discover fairly quickly that I spend a fair amount of my available volunteer hours working with children… second and third graders. So it goes without saying that a recent headline caught my eye. “Housing Crisis Wreaks Havoc On Children” It’s not an article for the faint of heart.

It’s a fairly long article filled with statistics… some that are frightening. One of the lead paragraphs points out that a large number of Americans are spending nearly half of their income for housing, leaving very little for other basic necessities. “Middle and lower income households with children are dedicating more than half their outlays to housing, leaving less than $600 per month left for all other necessities… Similarly burdened elderly and single person households had even less (under $500) left over after housing expenses…”

A gross over-simplification is that housing costs (remember to include taxes and utilities) are out pacing income growth. We hear it in town meetings. “I haven’t had a raise for three years but my taxes keep going up!” I hear it from first time homebuyers who are rightfully often buying “less” home than the numbers say they can afford. The real estate industry used to encourage people to stretch their limits. I’m not sure that’s a wise move in today’s economy.

If you are thinking about a home purchase or relocation, an objective analysis of housing costs goes along with applying for a mortgage. But remember, your “mortgagability” is a snapshot in time. The current foreclosure crisis is built in part on people who are now living in homes they simply can no longer afford.

Beyond that, if you have some stability in your life, how about considering a helping hand to those who do not? There are lots of programs that do not require a major commitment of time and money. One of those here in Piscataquis County is called Smart Starts for Students.

The campaign represents a school supply assistance program for the greater Piscataquis area by providing starter packs of new school supplies for families in need throughout MSAD #4, #41, #46, #68 and Union #60. Last year nearly 250 kids benefitted from the program and there’s every reason to believe the need will be even bigger this coming school year. Penquis is looking for donors to help empower our kids.

Donations can be money or specific items. There are lots of options! You can “back to school” shop for a specific starter kit or just some items… you can pick which district your donation will go to and even decide whether you want to help at the elementary, middle or high school level. Penquis is working really hard to make it easy for us to help. Look for drop boxes around the area where you can leave items. You can find details regarding the program at the Penquis web site or call the office at 207 564-8196 564-7116 (see comment).  Parents may use the same resources to register their children for the program.

Maybe if we help some of these kids get through school they’ll be able to figure out how to get us out of the mess we got ourselves in!

 Buying Real Estate, Community Info, Financing  1 Response »

Make Your Own “Stimulus” Package?

 Posted by at 5:46 am
May 082010
 

The opportunity may be gone to collect a tax credit for buying a home, but that doesn’t mean there aren’t other opportunities for buyers. Just consider this: there were some reports of sellers “hardballing” buyers in the last few weeks of tax credit eligibility. Sellers knew that buyers were working against a deadline and they took advantage of it. They knew getting under contract meant up to $8,000 in tax credit for the buyer and they decided to “force” the seller to share the wealth by increasing the offered price. “If I accept your offer you stand to receive an $8,000 benefit. My counter offer involves you sharing that… I want $4,000 more than you offered.” We might say that a buyer’s opportunity became a seller’s opportunity as the deadline approached.

This reminds me of the oft-stated truth, “There’s nothing like a fast approaching deadline to keep you focused.” In a perhaps not intended way, the tax credit deadline created some “undue influence” on buyers who waited until the last minute to find their home and get the deal done. We can argue whether or not the sellers in these instances were being fair, but the buyers ultimately put themselves in this position.

A lot of buyers are repeating the mistake and again putting themselves in a less than ideal position. Without getting all “economic” we can say with some confidence that interest rates are already off their lows. I’m not confident about how quickly they will climb, but I’m sure they will. The only question that’s worth talking about is how long it takes for sellers to realize climbing interest rates are creating another deadline for buyers.

It’s basic math. As interest rates climb, payments and costs go up. Each “click” up potentially reduces the amount of house a buyer can afford. (The money that would have gone into purchasing the house goes into paying to borrow the money.) So, let’s say for example, as a buyer you postpone your buying decision hoping prices will come down. If you’re looking at homes requiring a $100,000 mortgage and interest rates climb just one half percent that delay cost you $5500 in increased interest cost over the life of the mortgage. Your monthly payment will also increase 3%.

If interest rates begin to climb quickly, sellers may gain the edge in negotiating. The house the buyer could afford today will become unaffordable at some point in the near future.

So, while I don’t subscribe to the “it’s a great time to buy!” theory as a general guideline, I do think it’s a great time to sit down and do some thinking and analysis and make some decisions. If you are in the market to buy, how long are you going to wait before you “get serious” and make a decision? Does waiting cost you money or make you money?

Let’s not forget the principle of “target fixation.” The term stems from a phenomena discovered in World War II where pilots became so fixated on targets they would tend to collide with them during strafing runs. The brain gets so focused on the target that awareness of obstacles and hazards decreases. (If I represent you in a transaction, one of my tasks is to help keep you focused without allowing you to become fixated.)

Your stimulus package is no longer about a tax credit. In reality, that was only one piece of the buying decision. I’ve used interest rates as an example, but that’s just another component. Yes, prices of homes (in general) are down. That’s just another component. Your personal stimulus package needs to include all the positives and negatives at your disposal–you might be surprised at how many there are!

 Buying Real Estate, Financing, Home  No Responses »

Loan me…?

 Posted by at 5:28 am
Apr 192010
 

One of the calls I seem to be getting more of involves the buyer or the buyer’s agent asking, “Will the owner provide financing?” Since these calls are typically regarding property I have listed, I usually try to do a little research regarding the need for owner financing. Fortunately, most of the answers are honest.

Not too long ago, a statistic was released suggesting that over 20% of the people asked thought it was “okay” to walk away from a mortgage in which the holder was in over his or her head. In layman’s terms, I think that means one in five people find it acceptable not to pay back the money they’ve borrowed.

That must have included one call I had requesting owner financing. In reply to my question regarding why owner financing was being sought I got the explanation that the potential buyer for my client’s property was “walking away” from the house and mortgage he currently owned. He is desparate for a place to live and has a “small” downpayment.

And I’m supposed to suggest my seller client offer financing to this person?

I am not unsympathetic to those who have fallen on hard times, but I also do not think sellers should make bad decisions. It’s also no secret that lenders have “tightened up” lending standards–there are very few circumstances that suggest a seller should become a lender with low standards. For that matter, it’s not a particularly good time for a seller to become a lender with high standards.

Currently one of out ten mortgages is delinquent according to Real Estate Economy Watch. This is over 20% higher than a year ago. Foreclosure rates are over 50% higher than a year ago and there doesn’t seem to be any indication things are going to improve much in the immediate future.

If you are selling remember that “owner financing” in almost any form means you are loaning money to the buyer. Typically, owner financing is being requested because the buyer can’t get financing through a bank. There’s historically been a false sense of security with owner financing because the seller can always “take the property back.” Before you owner finance you might want to explore how difficult and expensive that is… and be sure you are making an informed decision.

 Buying Real Estate, Financing, Home, Home, Selling Real Estate  1 Response »

Smaller Homes Are Better?

 Posted by at 3:23 pm
Mar 022010
 

Some data released by the National Association of Home Builders will be of interest to home buyers and sellers. New-homes are, of course, new homes and as such it’s tempting to think “different” than the market for an existing home. Can we say “Maybe, maybe not?” Are new home buyers really THAT different than folks buying existing homes?

Perhaps the most interesting bit of data is that the average size of a house built is down for the first time in twenty-seven years! Maine readers may be particularly surprised to learn that the average home built in 2009 was 2,480 square feet—significantly larger than what we are used to in Maine. That’s down from the 2008 average of 2,520 square feet by about 1.6%. The pundits are saying things like “small is the new big.” (How much sense does that make really?) Of course the fact that we’re talking about something less than 2% makes me wonder about the margin for error… but there is also logic at work here.  One commentator suggests that “cents and sensibility” are coming into play.

Cents and sensibility may mean talking about the cost per square foot. But we also need to remember we pay for our homes more than once. There’s the cost to build or buy it, the cost to heat, maintain, insure and clean it. Certainly as times get harder (a.k.a. the recession) the need to think about size and objective needs becomes important. 

Let’s not be too quick to attribute the smaller home trend solely to the economy. Remember that the number of households with members 55 and older is increasing. Typically this is a “smaller home” market. This also tends to be a single story market. Does that suggest our general housing market is a bit more focused on single story homes? But wait! There’s also a focus on energy efficiency these days and two story homes are definitely more cost efficient to build…

Personally, I wouldn’t suggest one consider these market trends in planning purchases—they are too spongy and general. But the “cents and sensibility” factor is important. How much home you should buy is really a factor of your needs and your needs should include a reasonable determination of what you can afford—not only to buy but to heat, maintain, insure and clean. One thing we ought to have learned from the foreclosure crisis is that it’s not just about how much of a mortgage a buyer can get. The critical question is “how much house can a buyer afford?”

 Buying Real Estate, Financing, Home  No Responses »
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