Welcome to the Maine Moves Real Estate Blog

There is no doubt that the satisfaction of being an “owner” is one of the most wonderful aspects of buying a home. Knowing that the home you live in is completely under your control is very empowering to most people. If you want red walls, you can have red walls. If you like hardwood floors or you want to turn two small bedrooms into a large master bedroom, the decisions are yours to make.

Equally as important is the knowledge that any money you do spend on your home can be seen as an investment. New appliances or granite countertops generally add money to the resale value of your home. A home is one of the few investments in life that serves a purpose larger than the investment itself. It’s not just money in the bank, it’s a roof over your head.

Another important benefit of owning your home is being able to deduct the interest on your mortgage payments. This may be a larger financial gain than you think. Let’s say for instance that you have a $200,000 mortgage on your home. If you take out a 30-year fixed rate loan, for the first five or more years of that loan you will almost exclusively be paying the interest on the loan. This is because banks want to ensure that they get paid, even if you don’t keep the home for a long period of time. So banks charge the majority of the interest on your loan up front. If your monthly payment is $1,100, there is a good chance that about $1,000 of that payment is interest. Therefore, at the end of the year you could have a $12,000 deduction. That’s no small change.

Although there is no guarantee that your home will go up in value, if you are in a home for a long period of time, there is a good chance that you will also realize a decent appreciation in the property’s value. This means that there are two ways for you to build equity in your home. You can build equity by paying down your mortgage, or you can gain equity by the increase in the value of your home. You can then refinance (get a new loan at a higher amount, or get a credit line based on your equity) to buy other properties, fix up your home, or even send your kids to college.

However, there are potential drawbacks to home ownership as well. When you rent, if the light doesn’t turn on, or the toilet is no longer flushing, the first thing you do is call your landlord. If your landlord is any good (and complying with the law), they will quickly send someone to your home to repair the problem. If all goes well, this situation can create a pretty carefree way of life. The landlord may make the profit from your rent, but they also handle most of the hassles involved in maintaining the home. The same is not true when you are a homeowner. The house is yours to improve, but it is also yours to deal with when something goes wrong. If you have some basic skills, this may not worry you, but if you aren’t very skilled at fixing things or simply don’t have the time, you may be in for some big surprises. You will also need to be prepared for maintenance such as lawn mowing, snow shoveling, and roof leaks.

But don’t let us scare you away completely. If you would like to buy your own home, but are concerned about its condition and on-going maintenance, there are some things you can do. First is the fact that you have the right to have a thorough home inspection before you buy any property. A home inspection provides you with the opportunity to find out exactly what condition a home is in before you buy it (see Chapter 8 of our book, Buying or Selling a Home in Maine). If you are not the fixer-upper type of person, maybe a new or well-maintained home might be right for you. You can also purchase a home warranty, which protects you from plumbing, electrical, and appliance issues immediately after buying a home. Lastly, you can avoid a lot of maintenance issues by buying a condo or townhouse. Even though you would be responsible for any repairs to the interior of your home; yards, fences, roofs, and often plumbing are the responsibility of the homeowners’ association.

Another reality of being a homeowner is that when you want to move, you have to sell. Depending on the market, as well as other factors, selling a home can be easy, or it can be a very involved process. Unlike renters who can just give notice when a lease is up and no longer be responsible for payments, mortgage payments don’t end until you sell your home. If you need to move for work or personal reasons and for some reason your home does not sell, then you must still make the payments on your mortgage. You can possibly find a renter, but the reality is that your payments must be made on time for the duration of your mortgage, or you will lose your house and all of the equity you may have in it. So for a person who is not sure that they will stay in one place for more than a few months, home ownership is probably not the best option.

In addition to the costs of purchasing a home, there are costs involved with selling. Consequently, if you have only owned the home for a few months and you have not built up any equity in the home nor realized any appreciation, then it may actually cost you money to sell your home. The bottom line is that short-term home ownership is risky and may not be the best decision for some people.

So now that we have discussed the ways in which you can be represented, let’s discuss what specific qualities you should be looking for in a representative. Regardless of the type of agent you work with, there are certain qualities and attributes to look for that will make all the difference in your relationship with your Realtor®.

You may have seen ads for a Realtor® in a magazine or a flyer at the supermarket, but how do you know if that is the person you want representing you in a major financial transaction? They may have a nice smile, but how much do they really know? Knowledge is the key. Just as you wouldn’t hire an attorney because they were attractive or because they said they were the best, you should likewise not hire a Realtor® based solely on an ad you’ve seen.

Three important attributes of a good Realtor® that you should keep in mind are knowledge, organization, and availability. You want to know that your Realtor® can handle the oftentimes hectic pace of a real estate transaction. They need to know what listings are out there, what forms are needed for each step of the transaction, and they should be easily accessible to you if you have questions along the way. So how do you find this Realtor®? Well, a good Realtor® can be found in a variety of ways.

The first place to start (as with any professional you are looking for) is to get recommendations from a family member, friend, or colleague. Keep in mind, however, that it is important to find out what they liked about the person they are recommending. It is possible that you are looking for a different type of Realtor®. They may have loved their agent because they had an aggressive style and fought for every penny on their clients’ behalf, while you may be looking for someone who is easy to talk to and who will hold your hand throughout the process. Just make sure that your referral source is someone you trust and whose advice you value.

Another way of finding a Realtor® is to look for someone in your area who is known for being extremely knowledgeable on real estate. These people are often quoted in the real estate section of the paper, or on radio talk shows or television. Although thismay not tell you much about their character, it does give you a good idea of their level of knowledge. You can then meet with them and find out if they fit your other important criteria.

You can also talk to the “designated broker”, owner, or manager of a local real estate firm for a referral. Describe to them the kind of agent you are looking for and what your specific needs are. A good designated broker will know their agents well, the areas they specialize in, who is perhaps too busy at a particular time, and so forth. They want you to be happy and to refer other people to their brokerage.

The bottom line is that regardless of how you initially find your Realtor®, this is just the first step in the process. Before you hire any representative, you should meet with them, ask them questions, and then decide if they are the right representative for you. Taking the time and making the right decision up front can save you the hassle of looking for new representation in the middle of the buying or selling process.

Disclosed dual agency occurs when an agent represents both the buyer and the seller in a transaction. This may seem like an awkward arrangement, but there can be instances when you hire a buyer’s agent and it turns out that they get a listing that just happens to be your dream home. Because of the conflicts of interest that can occur in such a situation, Maine has very strict laws governing disclosed dual agency. One requirement is that both parties must be given a full disclosure about the nature of this type of relationship, and they must both agree to a disclosed dual agency relationship in writing.

In a dual agency situation, the agent is still held to all of the duties required as a single agent, except that they must not disclose to the parties:

• the willingness or ability of the seller to accept less than the asking price;
• the willingness or ability of the buyer to pay more than has been offered;
• confidential negotiating strategy not disclosed in the sales offer as terms of the sale; and
• the motivation of the seller for selling and the motivation of the buyer for buying.

In addition, the agent must not take any action that is adverse or detrimental to either party’s interests in the transaction, and they must obey the lawful instructions
of both parties.

In Maine, disclosed dual agency exists when an agent within a “single firm” represents both parties to a transaction. As a general rule, a “single firm” may operate one office or many offices, but it is usually determined by company ownership. If more than one office has the same owner, it is generally considered a “single firm.” It is “appointed agency” when the parties agree to designate one agent for the buyer and one for the seller within the same “single company.” A buyer can be “unrepresented” (an agent must be honest but cannot give advice), or find another agent outside the “single company.” Although this may sound confusing, all of these relationships are described in detail in Maine’s agency disclosure form that you are required to be given at the very first substantive conversation about real estate.

When you enter into a relationship with a Realtor®, it is important that you understand their role in the transaction and their responsibility to you. In the business, their obligations are typically defined by an “agency relationship.”

We should start by defining the term agency as used in this section. An agent is someone who represents your interests in a particular transaction. In Maine, when someone acts as an agent for a client, they assume certain legal obligations on behalf of that client. There are various reasons why you might choose to hire an agent rather than representing yourself. The primary reason is that an agent is generally more knowledgeable on a particular subject matter than you are. No one can be an expert in every area. For example, if you were in need of legal help, you would most likely hire a lawyer. Or if you needed advice on buying a business, you might hire a business consultant. These professionals are usually better educated and better equipped to deal with particular transactions; therefore, you would hire them to represent you and look out for your best interests.

Another reason you might hire an agent is because you are physically unable to represent yourself in a particular transaction. This might be true if you are in another state and cannot personally oversee your affairs, or if you do not have the time to devote to overseeing a particular project. For example, you would probably hire a property manager to oversee an out-of-state investment property.

An agent is given the authority to act on your behalf in reference to a particular transaction. Hiring an agent to represent you in a real estate transaction follows the same lines of logic. An agent is generally more educated and better equipped to handle a real estate transaction than you are. It may benefit you to hire a Realtor® to act on your behalf in order to protect your interests in what is likely the largest investment of your life thus far.

Prior to the enactment of buyer agency laws in real estate, agents generally only represented sellers. You may not have known this going into a transaction, but agents
were paid by the seller so their only job was to sell the home. Buyers had no one looking out for their interests and ensuring that they got a fair deal. State legislatures eventually caught on to this discrepancy and created agency laws to make sure that each party to the transaction had a chance at representation. These new laws ensure that all parties are informed up front about who represents whomand what each representative’s responsibilities are.

If you are in the position of having to sell your old home while trying to buy a new home, the timing can be hard to gauge. Should you wait until you are under contract with a buyer before you start looking for your new home? And if you wait too long, could you miss out on that perfect property? Don’t panic. Like all other aspects of buying and selling real estate, planning is everything. Have a backup plan in place for what you will do if your old house is sold before a new one is found. Or conversely, make a plan for how you will deal with potentially owning two homes for some period of time. Your choices will be largely dependent on the market and your flexibility.

In a buyer’s market you may want to wait to look for your new home until you are under contract with a buyer. There are several reasons for this. First of all, if you find a new home before you sell your current home and it then takes 90 days or longer to sell your home, you could be faced with two mortgages. This financial hardship could not only hurt your savings, it could also affect the financing of your new home (unless you use the equity in one home to finance the other). If it is also a buyer’s market where you are moving, you may be able to make your new purchase contingent upon the sale of your old home.

Secondly, if the idea of two mortgages is unrealistic for your financial situation, you could panic and unnecessarily sell below market. In the end, this could cost you much more than the price of temporary housing.

Another choice available to you in a buyer’s market is to find a new home and then rent out your old house until it sells. Keep in mind, however, that houses with renters are often harder to sell. The reality is that renters don’t usually take care of a home like owners and, therefore, it never “shows” as well to potential buyers. Buyers are also reluctant to deal with the potential of evicting someone from their home if the tenant refuses to leave after the sale.

In a seller’s market, it is usually best to sell first and then have a game plan if you don’t find something right away. This way, you can make the most of the market situation. Double moves can be expensive and inconvenient, so you can try leasing back your old house for a short period of time. You can also try putting your items in storage and staying with friends or relatives for a short period of time. Your Realtor® will know your needs best, and they can often be a very good source for finding affordable short-term housing, especially if you have children or pets. Although these choices may seem daunting or expensive, if you plan ahead they may save you the anxiety of owning two homes.

Gateway Title 

    Last month, as you may recall, we discussed why title insurance is such an integral part of the real estate industry. In fact, one might argue that title insurance is the catalyst that allows the real estate industry to function. Given the fact that title insurance is a necessary part of most real estate transactions it may be helpful to understand how title insurance premiums are established, and why title insurance relative to other types of insurance is such a great value.

     Title insurance premiums are established much the same way as other types of insurance by calculating the anticipated cost of claims then dividing that cost among all policy holders in a particular region or State. In addition to the estimated cost of claims enough is added to the premium to insure the solvency of the industry as a whole. This is all done with the oversight of the State as title insurance companies in most states are required to file and substantiate their rates with the applicable state regulatory agency. With that in mind the title insurance premium for the purchase of a single family residence in the State of Maine for a price of $200,000.00 involving mortgage money from a bank or mortgage lender will be approximately $800.00. At first glance that may seem like a lot but consider what you get. For a one-time premium there are actually two policies issued, an owners policy and a lenders policy (more about this in a future blog). The lenders policy remains in force until the mortgage loan is paid off; the owners policy remains in force for the life of the owner(s). Compare this one-time premium of $800.00 with the amount a person pays for auto insurance every year. I would guess over the last 20 years I have paid about 12,000.00 for auto insurance with a total claims benefit of approximately $300.00. That makes the one-time premium for a policy of title insurance seem pretty reasonable. It is important to note that title insurance is transactional and property sensitive. It cannot be transferred from one property to another or from one lender to another. Therefore, each time you refinance your home you will need to purchase a lenders policy to insure the new interest of the lending institution and each time you purchase a home you will need to consider an owners policy and lenders policy for that transaction. When refinancing, a lenders policy is the only policy that will be required. The cost for the insurance, therefore, is significantly reduced from our earlier example involving the purchase of a home. The title insurance premium to insure a refinance mortgage in the amount of $200,000.00 will be approximately $500.00.

     Considering the value of real estate and all that is at stake with home ownership, why are title insurance premiums so low? Where other insurance is based on the probability that some insurable event might happen at some future date, such as a financial loss due to a storm or an accident, title insurance is based on the principle of “risk elimination”. The purpose of the title search and the work that occurs on the part of the title insurance agency prior to the closing of a real estate transaction is to discover and eliminate any potential problems before the title is transferred to the new owner. The reason you don’t hear of many title claims is because the industry does an excellent job of finding and fixing potential title issues before the title transfer occurs. Reasonable title insurance premiums are a direct result of quality title work which in turn results in a relatively low frequency of claims. Even with the careful scrutiny of title examiners and title attorneys there are still many hidden title risks that can cause financial losses to property owners and lenders. When title claims do happen the title insurance underwriter and their staff of attorneys will work to fix the problem for the property owner including defend their title in court if necessary. In other words, that one-time title insurance premium will cover the cost to fix the problem up to the policy amount plus court costs and attorney’s fees.

     Title insurance is a great value. For a reasonable cost it helps the real estate industry to function by providing safety and security to property owners and lending institutions against financial losses due to title problems. In the event of a claim it provides assistance, even a staff of attorneys if necessary to defend the title in court. Where else can you hire a staff of attorneys and receive a life time of coverage for such a small fee. Title insurance; don’t buy a home without it.

 There has been plenty of gloom and doom in the newspapers lately….high prices on gasoline, heating fuels and many other commodities have affected nearly everyone.  What has been largely overlooked, though, is that amidst the many rough patches in today’s economy lies an enormous opportunity for a particular segment of our population…home buyers.  Hidden away under the section titled “Our Views” of the May 29th, 2008 editorials in the Portland Press Herald is an article expressing the views of the editors of newspaper titled “Note to home buyers:  It’s your market now ” with a sub-heading that points out the overall “moral of the story”:  “Obsessing about picking the bottom of the market can lead to missing an opportunity”. 

The bottom line, which is not news to anyone, is that this market can present a particularly difficult time to be selling a home.  The good advice of a good Realtor is something upon which all sellers should rely in this market.  Moreover, though, the very factors that make this a tough market in which to sell a home have made it an incredible time to be purchasing a home…in many circumstances buyers who had no chance of finding a home a year or two ago within a price range that would fit their budgets now have multiple options to choose from.  And even sellers who must go through the financial pain of selling a home at less of a price than they thought their house would sell for have a big opportunity ahead of them….because the same market factors that drove down the price of their home which they sold has also driven down the prices of most other homes, too, and good deals are out there waiting to be found.  

The editorial, in its entirety, follows:

“The market for single-family homes in Maine finally did what markets do when demand slackens – it fell.  The median sale price for a single family home in Maine dropped to $178,200 in April, down from $201,000 a year earlier.  It’s notable  that the price changes were not uniform throughout the state, with some markets holding firmer than others.”But the change is enough to get people talking and asking what this means.  The short answer to that question is that the laws of supply and demand have not been repealed, and as long as people believe that prices will be coming down, demand is likely to lag.Given that home values decline rarely and make up such a large portion of most people’s assets, there is something disquieting about the drop.  And it is true that if you owned that mythical “median-priced Maine home” a year ago, you are $22,800 poorer today than in 2007.But Mainers have known this has been coming for some time.  The sub-prime mortgage mess reduced the number of buyers.  The market was widely believed to be overheated.  Markets in other parts of the country have been going through corrections.If you own a home and have a fixed-rate mortgage, it’s not a false hope to hold on to the notion that with time the market will stabilize and, with a little more time, whatever paper losses were suffered during this period will be erased by the market’s gradual recovery.  What’s genuinely anxiety-provoking is when somebody is forced by circumstances or financial need to sell in such a down market.  If one has to sell now, then one has to accept where the market sits at the moment.One group of people who might be stressed but ought to relax are potential buyers.  Ask Warren Buffet, Carl Ichan or any of the other legends of Wall Street, and they will tell you that they didn’t get rich because they could pick the exact bottom of a market.  Instead, smart buyers know when to get in and when to get out, and they don’t obsess about it – never regretting a gain, even if it could have been better with a better guess.This is likely a good time to buy a home, even if the market hasn’t bottomed out.  Sure, maybe in six months you might say you wished you held out a little longer.  But then again, maybe not.”

Good luck with the house hunting!

Fannie Mae announced a new, national policy on down payment requirements for conventional, conforming mortgages that the company will purchase or guarantee.  Starting on June 1, 2008, Fannie Mae will accept up to 97 percent loan –to-value for conventional, conforming mortgages processed through the automated underwriting system.  This new national down payment policy will supersede the policy the company adopted in December of 2007 that required higher down payments in markets where home prices are declining.  In order to do this, they have created a new version of their automated underwriting risk assessment model which will limit risk layering and assess each loan more precisely.

 Since the housing correction began, Fannie Mae has expanded its mortgage guaranty business to serve the market’s urgent need for stability, liquidity and affordability. The company also undertook steps to help protect borrowers, manage the increased credit risk in the market, and fortify the company’s capital position. Among these steps, the company has continued to assess and establish new pricing, eligibility and underwriting criteria for its business that more accurately reflect the current risks in the housing market and guard against the potential for foreclosure. These changes have been incorporated into the automated underwriting system and have included adjustments to credit risk assessment, loan-to-value ratios and down payment requirements, among other factors.  

So, although the down payment criteria guidelines are tightening up, this is still good news!

Maine Tourism officials recently announced a new promotion and encouraged Mainers to take a “Staycation“.  Well, the name of the promotion probably speaks aptly for itself but with higher prices for gas and just about everything else on the planet, staying close to home and enjoy some of what Maine has to offer sounds like a good idea.    I hate to try to any credit for the State of Maine’s bright idea, well actually, I can’t because I had nothing to do with it, but our family did discover the joy of taking a “Staycation” a couple of years ago.  We were very fortunate to have our closest family friends encourage us to buy a Maine camp.  My family didn’t have a camp growing up, but I always remember with deep fondness the one week every few summers when we might rent a cottage on a nearby lake or camp out at a nearby campground with relatives.  I often spoken with friends whose families had camps their entire lives and we liked the thought of our children growing up knowing what it was like to have a family camp.   So, we bought a camp on the same lake as our friends and have been enjoying a “Staycation” the last few summers in Maine.   We go to bed earlier, stay up later, watch less tv, have no internet, and work a lot harder than you might think at camp.  The joy of spending all that time with our kids and seeing them have so much fun and enjoying camp life makes our summer weekend getaways to camp the best “Staycation” anyone could ever have.

A fresh coat of paint is the most inexpensive way to “remodel” a room whether you are trying to gain a competitive edge while selling a home or moving into a home where the existing color scheme doesn’t quite fall in line with your preferences.  Even if you are not going anywhere, walls become dinged and damaged over time by children or pets and brightening up a space can bring a little sunshine back into an older home.   Painting is a great value to freshen a room and change the “feel” of a room.  Most painting contractors will give free estimates, but if you are a do-it-yourself type of person, here are some great tips to give your room a professional finish.

Preparing the room before beginning your project not only makes it easier for you to paint, it also protects your home from inadvertent splatters or spills.

     Remove draperies, pictures, mirrors, area rugs, hardware (if possible), and switch and receptacle cover plates.

     Move all furniture to the center of the room or the room, if possible. Cover all furniture with drop cloths.

     Tape off woodwork and tape down plastic drop cloths.

     Wrap plastic around light fixtures, and use masking tape to cover any hardware you can’t remove.

     Open a window or door to ensure good ventilation.

     Clean the surface as needed.

     Gaps between walls, ceilings, crown moldings and other interior trim can be filled with the appropriate caulk after priming the surface. 

To get this great looking finish that will last a long time, ensure the surface to be painted is clean, dry and smooth.  Your walls will only look as good as the surface underneath the color you select.

Preparing the surface

     Patch holes and cracks with spackling or joint compound. Allow to dry, then sand smooth.

     For glossy or nonporous surfaces, lightly sand to a dull finish or use an abrasive cleanser.

     Remove sanding dust or cleanser residue.

NOW…..you can start painting! Next month’s blog entry will give you some great detail and a few hints and tricks to getting a great paint finish.