Selling Real Estate

The 3.8% Tax Scare

Posted by Walter at 4:41 pm

Feb 272012

There’s a scary email that’s been making the rounds for some time warning folks that the “National Association of Realtors” is “all over” a 3.8% sales tax that was part of the Obama Health Care Bill… the retiring generation is getting screwed, etc. etc. It doesn’t mention that the sky might be falling too. This tax has been called a transfer tax and a sales tax, but it’s actually neither. Unfortunately some REALTORS have jumped on the scare bandwagon because they are afraid this have a big negative impact on the real estate business.

Without getting all political, I will say that I’m not a fan of the Health Care Bill, but this sort of criticism of it is unfounded. I’ve been referring folks to the Snopes Urban Myth site for years on general principles… and would suggest the same for this except there’s an even better source: the National Association of Realtors has addressed this with some facts. There’s short blog post and video that explains the tax in simple language. Again, I’m not saying that I’m supporting the tax, but it is no where near what this email claims and since this email just isn’t going away, I decided to post about it here.

For starters, if (and there’s a big if) it were to apply, it would only apply to individuals earning more than $200,000 per year and couples with a joint income of greater than $250,000. Additionally, it is not going to apply to the sales price of a home–it MIGHT apply to a portion of investment income. In other words, it MIGHT apply to a portion of the capital gain acheived. It is NOT a real estate transfer tax and it is NOT a sales tax on real estate.

Again, I’m not saying it’s a good law or a good tax–but criticizing it with scare tactics, exaggeration, and just plain wrong information accomplishes nothing. NAR (National Association of Realtors) has actually produced a free brochure outlining several different scenarios.

If you receive the scary email, don’t forward it. Objecting to bills, laws, and taxes needs to be done with diligence and solid facts–not scare tactics. The tax is scheduled to take effect in 2013 so it would be wise to get educated.

By the way, the information I’m referring to was actually written and posted in November 2010–which just goes to show you the power and durability of fear. People are quick to forward the scare… most won’t forward a link to the facts!

Ignorance is bliss!

Posted by Walter at 7:29 am

Feb 242012

But it’s not a defense. You might blissfully speed down the highway. But don’t try telling the police officer who stopped you for going 60 MPH that you didn’t know the speed limit was 30 MPH. I doubt he’ll say, “Oh, ok! Have a nice day!”

When it comes to real estate the problem becomes the number of laws that potentially impact a real estate transaction and trying to stay “on top” of them all. The National Association of Realtors recently developed a list of some 23 Federal Laws that may apply to a real estate transaction. I’ve decided to offer a link to it here primarily for the benefit of students–many of these laws affect what we do as we facilitate transactions. Consumers may, however, find the list at least interesting — if not intimidating! Remember, these are just federal laws. There are also state, county, and local laws and ordinances.

http://realtormag.realtor.org/law-and-ethics/feature/article/2012/02/23-federal-laws-apply-real-estate-sales

Tree Growth Tax–April 1 Deadline!

Posted by Walter at 4:21 pm

Jan 242012

Reprinted with permission from WoodsWiseWire, an occasional electronic newsletter provided by the Maine Forest Service, on topics of general interest to woodland owners, foresters, loggers, and others interested in Maine’s forests. For more information on MFS programs, services, and publications, call the Maine Forest Service at 207-287-2791, or 1-800-367-0223, or send an email to forestinfo@maine.gov Visit our website at www.maineforestservice.gov.

Tree Growth – also known as the Maine Tree Growth Tax Program – is Maine’s current use tax program for productive forestland. The program is administered in organized municipalities by town assessors and in the unorganized territories by Maine Revenue Service’s Property Tax Division. “Current use” means that enrolled land is valued according to its ability to grow trees for commercial use, rather than according to its fair market value. This often results in a significantly reduced property tax bill for enrolled landowners.

Tree Growth can be a beneficial program for landowners who manage their land sustainably for commercial forest products. In exchange for generally lower property valuations, landowners commit to following a written Forest Management Plan prepared by a Maine licensed forester. A licensed forester must also certify that landowners are following their plan.

Landowners are required to submit a signed Tree Growth Application and a supporting map to the assessing agent. The details of the forest management plan belong to the landowner and are not public information, although the Assessor may request a copy of the plan and hold it for a reasonable period of time for review.

The Maine Forest Service (MFS) provides assistance and education about the Tree Growth Tax Program, and forest management and planning in general, but does NOT administer the Tree Growth Tax program.

Landowners should be aware of some very important requirements:

1) Land enrolled in Tree Growth must be recertified every ten years. Written management plans must be updated at least once in a ten year period. Could this be your year to update your plan and recertify?

2) In addition, when Tree Growth land is purchased, inherited, or otherwise acquired, new landowners must re-enroll within one year of the date of transfer. New landowners may not harvest timber until they have had a new forest management plan prepared or adopted a previous but still valid plan, and re-enrolled. Have you acquired or inherited forest land recently?

Why is this important?

Because Tree Growth forest land that no longer complies with the program – including failure to recertify or to re-enroll on time– must be withdrawn from the program, with potentially significant monetary penalties to the landowner. Withdrawal can occur even if you were not the owner at the time the land was first enrolled, because Tree Growth status “runs with the land” – the parcel remains enrolled, even if it changes hands. Continue reading »

The short road from “no thanks,” to “leave me alone!”

Posted by Walter at 8:08 am

Jan 172012

: “Leave me alone!”

Nearly every day I have to delete emails or “zip flyers” from other agents who feel compelled to “market” their listings to me. In some cases these flyers come as huge files that take forever to download… in other cases they represent properties outside the area I tend to work in. Some clearly violate real estate/fair housing rules and a majority violate the “CanSpam” act.

I used to respond directly to the sender with suggestions and observations, but I found the odds were about equal. Half would thank me; the other half would basically tell me to “mind my own business” because they are busy doing their fiduciary duty to their client.

Since I’m pretty obsessive about fiduciary duty (there are actually seven listed in Maine Real Estate Law) I decided to do a little more research on the outside chance I was missing an opportunity to serve my clients. On occasion, I’ll ask my real estate students about “marketing” and what they think it means — especially in terms of fiduciary duty to the clients they represent. Many take the position that “all exposure is good.” I challenge that thinking with this suggestion: “Then I hope you are taping your business card to the wall of every public restroom you use.” How’s that for a technique that is low cost with lots of exposure!? (Pun intended.)

Maybe it’s because I’m an instructor that I tend to wonder what we are teaching our clients with some of the stuff we do and don’t do. I also tend to wonder how much our clients know and don’t know. I do know that when there’s an online real estate discussion, it is clear many do not know basic real estate law and practice. Heck, I see it in my own practice.

Now admittedly, a seller is unlikely to get into legal trouble if the agent representing them violates one of those laws previously mentioned. But a seller does need to monitor their agent’s performance to be sure their “marketing” program is efficient, professional, and not so intrusive that people are responding “leave me alone.”

Keep Going!

Posted by Walter at 8:01 am

Jan 072012

I recently announced that I was not making any new year’s resolutions, but I was adopting a slogan: Keep Going! After a week or so of operating with that simple slogan I’m convinced I made the right choice.

The beginning of a new year is always a good time to reassess and it’s no great surprise that the calls and emails currently reflect that. People do seem to be considering what they want to accomplish this year: buying a home, selling property, taking a course. It’s all good stuff, but the problem with resolutions is also the problem with goals. Enthusiasm can fade quickly–especially when external factors (like the market and the economy) seem to be constantly working against us.

That’s when we have to “Keep Going.”

All of those decisions (goals and resolutions) have an obvious financial aspect. One of the things that still amazes and distresses me a bit is the amount of “financial illiteracy” I encounter with students and real estate clients. However, I can’t be too critical of it–because I’ve found myself feeling pretty ignorant when I talk with my financial advisor. Things have gotten pretty complicated in the financial arena. Consider, for example, how many different program choices a buyer has when it comes to mortgaging. I’m convinced that one thing keeping prospective first time home buyers from acting is they just don’t want to deal with the complexity.

Conversely, I’ve worked with clients so determined to achieve their dream they didn’t want to deal with reality. “The bank won’t give me a mortgage I can’t afford; that’s what got them in trouble.” At the other end of the spectrum, this is easy–all that matters is what I want. Part of my job is to make sure buyers understand that the price of the house and the mortgage payment are only one small part of the cost of home ownership.

Those who might be feeling a bit overwhelmed by all this financial “stuff” will find it easy to “keep going” but may not be thinking about where they are going to end up. (I’m reminded of the wisdom “If you find yourself in a hole, the first thing to do is stop digging.”)

One of the new courses I’m developing for this spring is “Cash as a Crop.” It’s part of a You Can Series we’re developing as a collaboration between the Piscataquis Valley Adult Education Cooperative and Piscataquis County UMaine Extension. There are a number of courses geared to giving people information and skills emphasizing what you can do–some are very basic, but all are about facilitating a sense of independence and control. (That, by the way, is one of the driving motivations for owning your own home!)

In that spirit, let me share with you several resources for getting your financial affairs in order. Here’s a great site with some very practical financial advice… http://www.thesimpledollar.com/. I liked his explanation of mortgage rates a lot… and found his advice to someone who is considering walking way from their mortgage interesting, because ethical considerations aside, there are some serious financial aspects that most people don’t consider.

Another resource is http://www.totalcandor.com. Frankly, it’s a bit self-promoting, but with some justification. I met Michael Rubin at a financial literacy conference and found his approach refreshing because it’s down to earth and he’s got a great sense of humor. You might check out his blog and consider his book “Beyond Paycheck To Paycheck.” It’s a good read.

I don’t think it’s too late to make a resolution, set a goal, or adopt a slogan. Given the financially troubled times we are living in can be discouraging, but let’s keep going!

There’s Nothing “Fair” About Fair Market Value

Posted by Walter at 6:58 am

Dec 132011

Wikipedia defines fair as “in accordance with the rules or standards; legitimate.” One of the more memorable definitions I’ve encountered was offered by a student a few years ago. He said that whenever his kids whined “Dad, that’s not fair,” he would remind them that a fair was actually a place where pigs go to compete for ribbons.

In real estate classes, I “force” students to memorize the definition of fair market value, but we also want to be sure we understand that definition because it’s a pretty important term to sellers and buyers. It’s a lengthy definition, but the core of it is “that price… which a ready, willing, and able buyer will pay…”

Arriving at the fair market value for a property involves both science and art. I’ve brought the topic up because according to a recent survey nearly three-quarters of home sellers think their homes are worth more than the price the agent determines. Where it gets really interesting is that the same survey indicates that 68% of all home buyers believe homes are overpriced. And, yes, it’s possible for both of those things to be true at the same time.

In the article I read, one professional suggests that the problem is “fixing the credit system.” There’s a leap I really do not understand. (The suggestion is that would bring more qualified buyers to the market and increase demand.)

The law of supply and demand is still at work. In general, we are currently working with high inventory (supply) and low demand. That low demand is not totally the fault of the credit system. There are many qualified buyers who are sitting on the sideline for lots of reasons. Most of those reasons fall into the category of “fear” and they are all about the future and mostly about the economy.

This all gets simpler when we recognize that homes are bought and sold one at a time. Things would get really simple if we could remove the emotion from that process. We might then be able to get those sellers who think they aren’t getting enough and those buyers who think they are paying too much together. This means we have to get price into perspective–hard to do for sellers who are faced with a mortgage payoff that exceeds the current market value. But let’s not forget that it’s also hard for buyers who want to buy more home than they can afford.

(One concern I have that I hesitate to raise–the cost of home ownership is about a lot more than the sales price. I’m afraid that the current situation is making it very possible for buyers to buy homes they cannot ultimately afford. That’s probably a different topic. For today, buyer alert: don’t let low pricing lure you into making a bad purchase.)

The talking heads will probably continue to over-simplify things. In truth, there’s always been a tendency for sellers to over value and buyers to under value. What makes the current situation unique is the disparity. We might do well to worry a bit less about blame and “fair” and more about buying and selling. Simple, really. Not easy.

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:

Do I feel like I am making my own decisions with all the information and options available to me?
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.

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!

State Cleanup Day–Landowners Note!

Posted by Walter at 6:01 am

Sep 032011

According to the September issue of SWOAM News, the second annual Landowner Appreciation Cleanup Day has been scheduled for October 15th. Volunteers from snowmobile clubs, ATV clubs and other groups help out all over the state as a way of improving landowner relations. To participate or to report illegal dumping sites, call the Maine Forest Service at 1-800-750-9777. Of course you don’t have participate formally… it’s a great time of year to spruce things up!

Maine Forest Service

Small Woodlot Owners Association of Maine

Real Estate vs Home Ownership vs…

Posted by Walter at 10:05 am

Aug 242011

Ultimately, it's about decisions!

In an article titled “The Emergence of a New Real Estate Industry” Greg Rand offers some interesting statistics from a number of sources. One that I found particularly interesting was the observation that according to the U.S. Census 34% of households are renters–and that number is growing at a significant rate. He also quotes a survey conducted by Move, Inc. suggesting that investors (as differentiated from home owners) are three times more likely to buy a house in the next three years.

He uses this statistics to support his conclusion that a new industry is emerging. While it’s not clear to me what he thinks that industry is, he seems to be suggesting it’s about a lot more than home ownership.

I’m not sure if I take issue with him, but I would opine that one of the problems with this business has been the narrow view the industry has taken. We’ve tended to think that “real estate” is all about owning a home and that’s something everybody should strive to do. (We’ve acknowledged that there are investors, but have tended to put them into the commercial segment.) In short, we’ve never even pretended to offer “full service” because we still think the real estate business is about selling properties.

This is a short term outlook in an industry that thrives on the long term. If all we do is decide we should be serving investors as well as homebuyers (I would think we’d benefit from clearly identifying the difference between them), we’re still going to miss the boat.

Our ads need to stop reading, “If you want to buy or sell, call me!” What they need to say instead is “If you want to make an intelligent decision about real estate, call me.”

Older Entries

boomsmaonline.com

The 3.8% Tax Scare

Ignorance is bliss!

Tree Growth Tax–April 1 Deadline!

The short road from “no thanks,” to “leave me alone!”

Keep Going!

There’s Nothing “Fair” About Fair Market Value

Salesmanship is NOT a dirty word!

Home Inspections…

State Cleanup Day–Landowners Note!

Real Estate vs Home Ownership vs…

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