New housing wrinkle rankles sellers

Scrutiny over values forces price drops
By Elna Seabrooks
Staff Writer
    HOULTON — A cold dose of reality on the state of the housing market has forced some sellers to drop their asking price.
    “Appraisers are being scrutinized heavily. And, you can’t borrow money if the house doesn’t appraise. That’s the big thing right now. And, that’s why we have to get some of the sellers to reality and let them know they have to come down,” explained Diane Hires, a RE/MAX Central broker in Houlton.
Houlton Pioneer Times Photo/Elna Seabrooks
FOR SALE — Property can languish on the market if comparable homes sell for less than a buyer’s asking price. Diane Hires, a RE/MAX broker, said underwriters are scrutinizing appraisals and banks will not lend more than the amount of the appraised value.
    The historically low mortgage interest rates and the variety of housing choices are tempting buyers into the market even after expiration of stimulus housing tax credits. But, Hires said banks won’t risk lending money on a house that’s overpriced, even to qualified buyers.
Appraisal must match value
    “Some people still think they should put their house on the market at what it was worth in 2006 and 2007. So, we have to do more comparative market analyses. And, we have to educate the sellers. The buyers are OK. But, they think the sellers are way too high,” added Hires.
    If a buyer doesn’t drop down the asking price, the house can end up staying on the market longer than it might have with a price correction. “I think the buyers are being realistic. We have several buyers pre-approved and ready to go. But, the houses don’t appraise. The prices of some of the houses are appraising $20,000 or more less than the listing price. So, the bank isn’t going to loan money if the house doesn’t appraise for what the seller is asking for it.”
    Another problem for sellers is a property that is “under water” where the mortgage exceeds the value of what a seller can recoup on a sale. Hires said there are quite a few bank foreclosures in the area and cases where people are “upside down and owe more than what they can get for them.”
    Hires said one option really working well for her clients is having the owners pay for their own appraisal. “If we think your house is too high, we suggest you pay about $350 for an appraisal. Then, if you pay for an appraisal, adjust your price and we sell the house, we refund the cost of the appraisal.”
The good news
    “The good thing is that rates are lower than they have been in many, many years. I just closed on one at 4.2 percent. The rates are down, there are lots of choices, it’s a buyer’s market,” said Hires.
    Adding to affordability, the median sales price in Aroostook County has dropped by just under 3 percent and sits now around $85,000 according to the most recent figures from the Maine Real Estate Information System (MREIS). However, overall sales in the state, also according to the MREIS, are down about 30 percent while prices are up statewide by more than 4 percent.
    “What we have seen is a large increase in refinance business because rates have been historically low. But, in the last three weeks we have really seen a pickup in the purchase business,” said M. Jane Irving, Bangor Savings Bank senior vice president. She manages the bank’s mortgage development group and added that with the end of summer, many are “seeing wonderful opportunities with the rates being so low. And, there are some very realistically priced homes on the market.”
Steps into the housing market
    With the numerous forms that need to be completed to purchase a home, Irving advises buyers to speak with a loan officer and get the process going. “Basically, we need people to come in with their W-2 forms, their pay stubs showing a full month’s worth of earnings and their Social Security number. And, we ask people right up front if there are any credit issues.”
    And, Irving added, a potential homebuyer should have money on deposit to cover the down payment, which varies depending on the type of loan, in addition to knowing their credit score. Something as simple as a common name or transposition of Social Security numbers could cause errors on a credit score. A very, very good score, according to Irving, is 740 or higher. Some lenders will ask for a one-time “fee adjuster” on a higher risk loan.
Affording home ownership
    “We would not want (a buyer’s) total indebtedness – home, car payment, credit card payments and mortgage to exceed 41 percent of their gross earnings,” said Irving since any unexpected expense can wreak havoc on a tight budget.
    “When we do underwriting we also include the monthly portion for taxes and homeowner’s insurance. We also have to take into consideration heating which can fluctuate. So, we suggest they put away a small amount for unexpected costs not covered by insurance like a refrigerator that dies and puts a kink in the monthly flow of cash.”
    Past credit history and how it was handled is factored into the bank’s decision on whether or not to make a loan. “We look at whether or not they have had a mortgage and whether or not that has been paid on time or if they have had revolving credit with a car or an equity line and if that has been paid on time. If they had a rental, we look at whether that was paid according to the contract. And, we verify income and look at the overall credit pattern to see if there was a high usage of credit cards.”
Interest picking up
    “We are hearing from our realtor contacts that phones are ringing and morale has been very positive. Aroostook is not as busy as we would like it to be. But, there is more activity there than in some other pockets of the state,” stated Irving. Repeat buyers with larger families or those who are downsizing are in the market in addition to a sprinkling of second-home buyers, according to Irving.
    She and Hires agree there are multiple options for prospective buyers even some with small down payments like the USDA rural development loans as well as the FHA, VA and Maine Housing programs.
Words of caution
    “Always be prepared to negotiate. There always has to be wiggle room,” said Hires. And, Irving advises buyers to be wary of lenders who offer rates lower than everyone else without any fees. “If the deal sounds too good to be true, it probably is.”