Maine Insider Newsletter
August - September 2024
There has been a lot happening in the news lately - so much so that it feels like a year’s worth of news has happened in only about 30 days. The largest changes in a hundred years just hit real estate.
Do you know what it means for you?
Do you know what to be careful about?
This month we will cover these two big news items in the real estate world from the past month - commission changes and flood zone insurance. These are historical moves that will impact many people. I will walk you through the history and impact of the changes, and share some honest advice.
Even if you aren’t in the market for a new house, you may be faced with changes in insurance rates due to expansion of flood zones.
If you have any questions or concerns about the changes, you are always welcome to reach out to me and chat.
Much Love,
Michael Hamilton
📸 The Maine Shot
A balmy evening in Windham, Maine
Things to do:
May & june
- August 24 - 2024 Portland Fine Arts Craft Fair
- August 25 - Pet Rock in the Park - Portland
- September 7 - Sketch & Improv Showcase - Portland
- September 14 - Maine Poutine Fest - Portland
Market insider
with Michael Hamilton
Ch-ch-change is happening
Major changes in the real estate world
Most likely you have all heard about the sweeping changes regarding real estate commissions and representation coming this September. As of the 17th of September, these changes go into full effect and will affect buyers and sellers throughout the United States.
I want to take some time today to explain the background of these changes, the actual changes coming, and finish with my thoughts on things buyers and sellers should be cautious of in the post-September 17, 2024, real estate market.
THE BACKGROUND:
Going back four decades, buyer agency became more popular. To ease the out-of-pocket cost for buyers affording representation, this compensation was shared by the listing agent with the buyer’s agent for bringing and representing the buyer. This “shared commission” became an industry standard for both buyers and sellers. It was more or less understood that the listing commission a seller agreed to would be shared (typically half) with the agent who brought the buyer. This practice simplified lending for the borrower and allowed the agent to know their compensation ahead of showing the property, which they could inform their client about.
The mechanism used over the years to advertise this commission “offered” to the buyer’s agent was the Multiple Listing Service (MLS). As time went on and this practice became more of an industry standard, sellers began to feel like it was less and less of a choice to offer this assistance to the buyers, leading to lawsuits for antitrust violations.
You might wonder why this happened. Most agents are members of a trade organization called the National Association of Realtors (NAR), and most MLSs are owned by NAR boards. NAR is a single board with a huge “monopoly” over the industry, but the reason they are allowed to operate as such is that each agent and broker in the NAR practices real estate with their own unique methods. However, when the MLSs required a field for commissions to access the system, it became cooperation among all agents and agencies, which was viewed as collusion and an antitrust violation.
The various lawsuits regarding this issue were consolidated into a single class action, and eventually, after years of negotiating, the NAR reached a settlement with the DOJ, who brought the class action suit on behalf of sellers.
THE SETTLEMENT:
The settlement came with three major results:
- Big money payout to sellers involved from NAR.
- The decoupling of commissions – listing agents are no longer required to share with buyer agents and cannot advertise in the MLS.
- Buyer agents must have a written agreement with buyers to show property listed on the MLS, clearly outlining the terms and cost of service PRIOR to showing a property.
What it Means:
If you are a seller listing a property after September 17th, you cannot advertise a set commission amount in any NAR or MLS platforms. This doesn’t mean you cannot offer or should not offer assistance to buyers, it just means you cannot do it in an NAR or MLS-related platform.
If you are a buyer after September 17th, 2024, you cannot view an MLS-listed home with a buyer agent without having a written agreement with that agent (though you could view with the listing agent as a customer).
My Thoughts and Advice:
For Sellers
Just because you don’t have to offer commission to buyer agents anymore doesn’t mean you shouldn’t. Some sellers might think, "I’m gonna save myself 2 to 3% on this sale," and in some cases, they may be right. However, sellers should consider how it affects the buyer pool interested in their home. If there are buyers who want representation but are restricted by the amount of cash they have, not offering to help with representation costs may limit their ability to offer on your home. This could shrink the buyer interest in your home, reducing overall competition and potentially lowering the price you may receive.
It’s important to come to a listing appointment with an open mind and listen to what the listing agent suggests as the best scenario to get the best net amount for your home from the largest pool of buyers. Keep in mind that this is new territory for all of us, and if an agent is honest with you, they do not know exactly how buyers or the market will react to these new rules. They can only look at history and current buyer needs.
Commission and seller compensation is just another term of the entire contract with a net impact on you. When deciding how to proceed, consider all the terms in a purchase and sale agreement and the net financial impact to you. The highest net offer might have a large amount set aside in seller concessions or buyer agent commission. At the end of the day, if that offer nets you the most money, are your feelings about the commission more important than your proceeds?
Be careful with appraisal issues. Even if you and the buyer agree on seller concessions or agent commissions, the property still has to appraise for the purchase price if financing is involved. We do not know how appraisers will handle this change, but they will likely be careful about allowing purchase prices to inflate suddenly. Make sure you and your listing agent consider the likelihood that the purchase price will pass appraisal.
For Buyers
You will have to sign an agreement to be represented, and that’s okay. If you are searching for a home and hear that sellers are no longer paying agents, your first thought might be to go it alone. However, don’t let these changes force you into that decision. There are lots of versions of buyer agency agreements, and many ways to negotiate that the cost of the buyer agent does not come out of your pocket.
If you are nervous about signing a long-term agreement with a buyer agent, know that the terms are fully negotiable. You could sign a compensation agreement for one day for one house, though building a trust relationship with an agent is usually more beneficial. When you make an offer, discuss with your agent how their fee and your other closing costs will be handled.
Don’t assume you won’t have to pay out of pocket. If you agree to pay the buyer agent, you are responsible for that payment. Make sure you and your agent are clear on the terms and that you are prepared to meet them.
Don’t assume the property will appraise. If the property does not appraise for the full offer amount, including any seller concessions or buyer agency fees, the seller may look to mitigate their risk by reducing these concessions. Discuss with your buyer agent how you will handle any shortfall in appraisal.
Conclusion:
I hope the above information helps you make informed decisions in the new US real estate market.
One last piece of advice: Over the years, people have often oversimplified an agent’s job and undervalued their service. Regardless of your opinion, remember that real estate agents have put time and effort into a career that is now changing outside of their control. Change is scary and unwelcome for many of us, and realtors are no different. Be considerate and understanding as we navigate these new waters together.
Is a Flood Coming Your Way?
Contributed by
Katie Herklotz
Senior Agent with Farmers Insurance
207.810.2190
If you’ve lived in Maine long enough, you know that winter can bring more than just cold weather and snow. This past winter, many of us experienced a harsh reality check when several severe storms led to unexpected flooding. What was particularly shocking? A staggering 40% of the homes affected by this flooding weren’t even in high-risk flood zones.
Let’s face it, FEMA’s flood zones, which determine our risk levels, hadn’t been updated in Maine since the 1980s - until just this July. Given the amount of unexpected flooding, it’s clear those maps were due for a refresh. But now that they’ve been updated, what does this mean for you, whether you’re a homeowner or in the market to buy?
First off, if you haven’t already, it’s time to reach out to a local insurance agent. With the updated flood zones, your property’s risk level may have changed, and it’s essential to know where you stand. Your insurance agent can look into your current zone and help you understand any new risks that might be associated with your property.
In response to the recent floods and these updated zones, the Maine Association of Realtors has also stepped up with some changes. Starting this month, when you’re selling a property, listing agents are now required to ask specific questions about the home’s flood history. In some cases, they’ll even need to provide documentation related to the flooding zone.
If you’re in the market to buy a home, this is crucial information. Your Home Sweet Maine agents are well-informed about these changes and are partnered with a local insurance agent who knows the ins and outs of flood insurance. Together, we can guide you through your options.
Thankfully, here in Maine, a relatively low percentage of properties are at constant risk of flooding. But even if your property isn’t in a high-risk zone, there are still indicators to watch for. It’s all about evaluating the risk and making smart, informed decisions.
If you find that your property, or one you’re eyeing to purchase, might have some risk factors, don’t just brush it off. It’s important to discuss this with the team at Home Sweet Maine and factor in the potential costs associated with that risk. Flood damage can be costly, and being prepared with the right insurance can save you a lot of headaches down the road.
Remember, making one of the biggest purchases of your life comes with its fair share of responsibilities. So, take the time to find the right team of real estate and insurance agents who are familiar with flood insurance. They can provide the peace of mind you need to protect your investment.
REFLECTIONS ON MIDCOAST
By Ian Dixon, Home Sweet Maine Associate Broker
207.560.0205
I’ve had the pleasure of living my whole life in Maine. Growing up in the Sebago Lakes Region in Raymond on a dirt camp road, I definitely took it for granted.
Bailey’s Island, Maine
Growing up, I was completely unfamiliar with the mid coast region. We used to have our annual family gatherings on Bailey Island in Harpswell, but I don’t remember ever exploring and experiencing everything that the region had to offer. It wasn’t until after college, when I started working as a delivery driver for a craft beer distributor, that I was able to experience many parts of Maine for the first time.
As a beer truck driver, Wednesday was my favorite day and my favorite route - the mid coast. Not only was it the route with the lightest load, it was by far the prettiest scenery. The route started in Brunswick and Topsham, then followed Route One all the way up to Damariscotta, hitting every peninsula in between. I’m sure I was the envy of my colleagues having this route!
For most of the day, I was cruising along the scenic rocky coast down to what felt like the end of the earth of each peninsula. In some places, I could see my next stop at the end of the next peninsula over. We would joke that I could knock this route out in a fraction of the time if I loaded a dinghy onto the back of the truck.
Rocky coast at Pemaquid Point Lighthouse
But, lucky for me, it was a relaxing 30 minute drive all the way back up the peninsula to Route One and all the way back down to the end of the earth of the next peninsula. At each stop, I was able to enjoy the incredible panoramic views, the sound of waves crashing on the rocky shore, and the refreshing salty mist carried by the breeze off the water.
The mid coast region is the perfect blend of natural beauty and rich history. I’m very grateful that I am a real estate professional in a state with so much history that we all take pride in preserving and sharing. I don’t know if I would love my job as much as I do if I were only showing cookie-cutter homes and strip malls outside of Phoenix. No offense Arizona...
It was on this delivery route that I had the pleasure of meeting many wonderful people that were born and raised in the mid coast region. Coming from a bedroom community of Portland, I felt that everyone’s lives revolved around commuting to and from work.
However, when driving along the midcoast, you can feel the change of pace that is different from inland areas of Maine. Nobody cares what their commute was to and from Portland because they have everything they need in their area. In place of fast food or grocery chains, you’ll find locally owned shops and restaurants dotting the streets of these communities. Anything beyond that, you will find in the larger towns of Brunswick and Topsham.
Nickles-Sortwell House in Wiscasset
The mid coast region has a rich maritime history. Anywhere you go you’ll be transported back in time. From what were once bustling port towns, to quaint fishing villages dotting the rocky shores, you’ll find meticulously maintained and preserved time capsules of homes that may have belonged to wealthy ship captains or humble homes passed down to generations of fishermen.
I’ve always had a huge respect for the character of these homes with their attention to detail and craftsmanship and architecture that blends the kind of art and engineering that we just don’t see anymore.
It was this stunning scenery, rich history, and laid back lifestyle that made me fall in love with this area and convinced me to pack up and move to Topsham shortly after. I lived in Topsham for five years and in my free time I enjoyed just going for drives exploring every peninsula and island and village and soaking up all of the wonderful things this region has to offer.
Homes for Sale & local trends
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