A Quick Guide to Buying Land in Anne Arundel County Maryland

Perhaps you are thinking about building your next home instead of purchasing on that has already been constructed.  Or maybe you once lived in a home that you’d like to live in again.  Either way, when thinking about building versus buying there are a few things to consider as you get started.

1.  Selecting Your Site

Land comes in all sizes and shapes.  Here in Anne Arundel County, land is still at a premium in that there isn’t that many locations left to build on.  This is especially true if you’re considering waterfront lots.  Whether on the water or off the water, any property located within the Chesapeake Bay Critical Area will be subject to additional building restrictions.  In most cases you can build almost anything you want as long as it meets local building code.  But, some sites may have covenants that state the minimum requirements were you to build (such as the minimum square foot or even a maximum square foot – I’ve seen both!).

2.  Writing a Land Contract

When it comes to writting the contract to purchase property, the standard Maryland contract used by many members of the Maryland Association of Realtors is different that your residential contract.  The key difference is that a land contract will stipulate any feasibility studies you want to perform before your obligated to purchase the lot.  Some possible feasibility studies you might consider include:

• Sewage Disposal – Specify if the sale is contingent upon a percolation test (usually referred to as the “perk test”) to determine suitability for the installtion of a private on-site sewage disposal system.
• Public/Private Water – Specify if the sale is contingent upon any provision regarding well water quantity or quality or the ability to connect to a public or private source of potable (“drinkable”) water.
• Survey – Specify if the sale is contingent upon a survey of the property.  This may or may not be needed to meet the underwriting requirement of the title insurers and/or mortgage lender.

3.  Agriculturally Assessed Property

You will want to determine if the land is subject to any agricultural taxes that will be assessed at the time of the sale.  You will want to specify whether you (the Buyer) or the Seller will be paying those taxes, if any, in the Contract. 

4.  Forest Conservation and Management Programs

Forest Conservation and Management Program taxes - like agricultural taxes – may also come due when the property is sold.  You will want to specify whether you (the Buyer) or the Seller will be paying those taxes, if any, in the Contract.

3.  Borrowing Money to Buy and Build

Unless you’ve got “cash to burn” you will probably need to borrow money to purchase the land and build you new home.  This usually takes the form of a construction-to-permanent loan.  The idea behind construction-to-perm loans is that you have one closing where you purchase the land, establish the escrow for the construction, and upon satisfaction of occupancy requirements by the county and your bank, your construction loan will convert to a conventional mortgage.

4.  Selecting a Design, an Architect and a Builder

While the design part of building a new home may seem the hardest, selecting an architect, if the home needs to be designed from scratch, and a builder who can execute the design, is actually harder.  You will be looking for a custom builder that has built homes in the area before.  You may even want to talk to some of the builder’s past clients, go visit their homes, see exactly what it is that the builder has constructed before.  The very best builders may be booked far in advance, but, with the recent economic downturn, they might have openings in the schedules and crews that they could assign. 

5.  Working the City, County and State Authorities

Depending on where you are building, you’ll need permits and approvals from city, county and state authorities for a variety of construction matters.  You will need to work with the Anne Arundel County Department of Health on matters concerning the well and septic systems.  And, you’ll need to work with the Maryland Department of the Environment for any permits that may be needed to comply with Maryland’s environmental requirements (for example permits where the waterfront may be impacted including piers).

For a list of possible residential building sites in Anne Arundel County Maryland, follow the link below:

Residential Building Sites in Anne Arundel County Maryland

For detailed information on an example building site in Lothian Maryland, follow the link below:

AA7424040 – 5271 Rustic Way, Lothian, Maryland 20711

So, whether this is the first home you will build or it’s your final home site, the process starts by finding a the location and finishes when you’re ready to move it.  It’s both exciting and challenging to build a home and watch your dream come to life as you oversee it’s design and construction along the way.

Trusted Partner or Common Thief?

The front page article that caught my attention this morning in our local newspaper read “Three indicted in escrow fraud scheme“.  The article by Scott Daugherty of The Capital Newspaper announced that the owner and two employees of Troese Title Services (which had an office here in Annapolis, Maryland) had been indicted on charges stemming from their misuse of escrow funds.

Title companies – sometimes called settlement agents – should be trusted partners in every real estate transaction.  They represent the buyers’ interests in the purchase of real property.  And, the title company should be there to ensure a worry free transfer of ownership between sellers and buyers of homes and land.

Title companies in Maryland (and elsewhere) are responsible for accounting for all the funds in the real estate transaction on the HUD-1, from the net proceeds payable to the seller to the real estate commission paid to the agents, from holding earnest money deposits to receiving money from the bank to fund the transaction.  A great deal of money passes through title company escrow accounts during any given day.  Millions of dollars go in, millions of dollars go out.  In the end, the only retained money should be the title company’s own fees.  Maryland Real Property Code Section 7-109 defines our state as a “wet settlement” state – meaning that all the funds and the loan conditions must be satisfied on the date and time of transfer.  A “dry settlement” means there are no funds available at the time of settlement for disbursement.  For wet-dry regulations in other states check out this Wet-Dry Settlement Matrix.

Misuse of escrow funds is a common abuse of clients’ trust by service providers – right up there with providing real estate services without a license.  Title companies, real estate brokers, attorneys all handle extremely large sums of money entrusted to them by their clients as part of the real estate transaction.  Nearly all these companies do the right thing and properly manager their escrow accounts and the funds entrusted to them.  But, it takes just one bad apple to spoil the bunch and cast a shadow over an entire industry.

It’s amazing that these abuses went on for as long as it did - but – consider how long Bernie Madoff pulled off his ponzi scheme.  Privately held companies have little or no external oversight on matters such as accounting for escrow funds.  When selecting a title company or settlement agent, their reputation is as important as that of the real estate agent/broker and lender you work with.

Has the Waterfront Real Estate Market Stablized in Annapolis, Maryland?

Waterfront homes in Annapolis, Arnold, Edgewater, Riva and Crownsville is about six percent (6%) of the overall residential real estate market in Anne Arundel County, Maryland.  On January 20, 2011 there were 194 active waterfront listings while there were 3,161 active listings overall.  The overall real estate market has just a little more than 9 months of inventory (the amount of time it would take to sell all the actively listed homes if no more were listed) but the waterfront market segment has more than 20 months of inventory.  Waterfront houses on average are priced about 280% more than the regular inventory and sell for about 295% more than homes sell on average in the county.  But, they’re selling at a big discount, about 85% of asking price – which translates into a substantial savings for buyers – or on average about $175,000 less than asking price!!!

The table below details the statistics for the greater Annapolis, Maryland waterfront marketplace and the overall statistics for Anne Arundel County.

Waterfront homes are desirable even in today’s uncertain real estate market.  At the peak of the real estate market in 2005-2006, buyers looking for waterfront homes had few choices, in less and less desirable locations (shallow water, creek views, small lots), at seemly every rising prices.  Today, buyers can find highly desirable waterfront homes, in more desirable locations (deeper water, expansive view, larger lots), at more reasonable prices.

For a list of waterfront homes in Annapolis, Maryland area, along the Chesapeake Bay and the nearby rivers and creeks, follow the link below:

Waterfront Homes for Sale in Annapolis Maryland

The market for waterfront homes continues to soft.  If you or someone you know is interested in obtaining the most up-to-date list of waterfront homes currently on the market in Annapolis, Arnold, Edgewater, Riva, Crownsville, Anne Arundel County, or any area in Maryland, send me an e-mail at showell@cbmove.com or call me at 443-994-8043.

Why Hasn’t My House Sold Yet?

I heard it again today from a seller “why hasn’t my home sold?”.  I was polite.  I was even patient.  What I said was “homes in your neighborhood are selling for less than yours by $35,000, have you thought about dropping the price?”.  And after some discussion between the husband and the wife, “we will lower the price by $15,000 and we will not back off this price, no further negotiation”.  Even after implementing the price reduction, they would still be $20,000 over the sales price of comparable homes that have sold in the last 90 days in the neighborhood.

So, just why Hasn’t their home sold yet?  It’s not because of the new carpet (although I’m not crazy about the color – it’s darker than I would have preferred if I had picked it out).  It’s not even because of the fresh paint (neutral white, a little on the cold side).  And, it isn’t because of the new appliances in the kitchen (despited being newer they are mismatched, different vendors and not color coordinated).

It couldn’t be that they have only one full bath (while it is updated with new fixtures, the only other bath is the half bath downstairs).  And it isn’t the fact that there’s no deck or patio off the dining room and there’s nothing but dirt outback where there should be grass or landscaping.

Sellers have control over only two things: 1) Price and 2) Condition.  That’s it, nothing more, nothing less.  Buyers, lenders, agents and everyone else has control over almost everything else.

A number of years ago I had a repositioning consultation (code for “asking for a price reduction”) with clients in the office.  An agent who was also working in the office that same evening, after overhearing my consultation with the the sellers, breezed by and said simply “price overcome all objections“.  So, if you picked the wrong color carpet, choose a sterile paint scheme, didn’t buy all the appliances all at once, there’s no room (let alone money) to add a second bath, and just can stand doing yard work, what are you supposed to do?

Holding out and hoping for a price you know the market isn’t the answer.  You must get out ahead of the competition when supply exceeds demand.  Price is the only motivator.  And, if you’re serious about selling your home, proper price positioning for current market condition is the only way of getting your home sold for the most money in the shortest time for current market conditions.  There’s simply no valid reason for a home to sit on the market for 90 days, 120 days, for that matter 180 days or more!!!  Reluctance on the part of the sellers to face current market conditions and let go of the past (“it would have sold for $xxx, in 20xx”) can result in “missing the market” and ultimately costing them many thousands of dollars when and if they finally do get a contract.

In conclusion, sellers have control over price and condition.  While some homes will fail to sell because of condition, it almost always is about the price when you get right down to it.

A Simple Guide To Obtaining and Monitoring Your Credit Report

Before you’re ready to buy a home, what’s the first thing you should do?  Call your REALTOR!!!  No, actually obtain a copy of your credit report.  Why?  When you’re ready to buy a home, that is the first thing your lender is going to do – pull your credit.  And, your real estate professional will be asking you the dreaded question: “Are you pre-approved with a lender yet?“.

Even if you’ve already bought a home, you know what’s on your credit report.  Its simple to take the few simple steps needed to obtain your credit report from the three companies that keep track of you and your debt: Experian, Equifax, and TransUnion.  Identify theft is a growing concern, but, that’s not the only reason to check on your credit report from time-to-time.  Companies make mistakes and report inaccurate data, but, its you that suffer the consequences with less favorable loan terms.

While you don’t have any control over how the three credit reporting companies score you (i.e., your credit score), you do have control over the events that will affect your credit scores.  In a Yahoo Finance post Daniel Gross wrote about comments made by Mark Green, the CEO of Fair, Issaac & Co., who is the creator and proprietor of the FICO score.  Mr. Green revealed three ways to improve your credit score:

1. First, pay your bills on time.
   
2. Second, don’t don’t use more credit than you really need.
   
3. Third, don’t apply for new credit unless you absolutely have to.

The bottom line, pay your mortgage, car payment, and other obligations on-time and you’ll be just fine.  The article provides insightful information about the things that affect your credit score.  And, it’s your score that your lender will be looking at when they’re making a decision to lend or not to lend you the money you need to buy your next home.

Increased scrutiny by your lender before they make their decision means you should be vigilant too.  In order to check on your credit report, you can request it free at www.AnnualCreditReport.com.  You’ll have to enter a lot of personal information to verify who you are, but, you’ll get a full report – just like your lender will.  If you haven’t requested the free copies of your credit reports from these three vendors you might want to consider the following monitoring strategy:

1. Each trimester (that’s every four months) request your credit report from one of the three companies: Experian, Equifax, or TransUnion.
2. Four months after that, request a copy of your credit report from one of the two companies that you haven’t requested one from in the last 12 months.
3. Four months after that, request your report for the last of the three.
4. Repeat the cycle, starting each year with the first company again.
5. Put a reminder in your calendar four months from now to request your report.

If you’re requesting one free report every four months on an ongoing basis, you should be able to spot any developing issues quickly.  Of course there are companies that want to sell you credit monitoring, and, if you’ve been a victim of identity theft in the past or are very worried about the possibility in the future, then it’s probably a good idea to keep more frequent watch over your credit reports.

Have We Saved The Big Ships While Letting The Passengers Go Down in Their Lifeboats?

In response to an MSNBC.COM article – Banks repossessed 1 million homes last year – and 2011 will be worse - I posted the following response:

We’ve been very lucky in Anne Arundel County, Maryland. While other parts of the country have experienced high foreclosure rates, our local real estate market – despite nearly a 30% decline in value from the market peak in 2006-2007 – has not seen significant foreclosure actions. Less than 10% of our current active inventory are foreclosures. About 1 in 12 homes are flagged as a foreclosure in our real estate market and are often great deals and sometimes really are steals!!!

The real challenge as I see it, is finding a way to incentivze banks to work with homeowners before they become distressed, i.e., past due on their mortgage payments. Banks don’t appear to be willing to work with homeowners who may need to sell short until they are in default, once in default then they’re on the foreclosure track. It’s a “chicken and egg” problem. If more banks were willing to cooperate with borrowers before defaulting on their mortgage, we just might be able to avoid more foreclosures.

To really get things back on track, we need a true spirit of cooperation between banks and borrowers. Ben Bernanke said in an interview on television the other day that one of the root causes of the last depression was the Feds allowed the banks to fail. Fifty years from now when we look back, will the real cause of the Great Recession be that we let so many homeowners fall into foreclosure? Will we have saved the the big ships while letting the passengers go down in their lifeboats?

In case you missed Mr. Bernanke’s interview on 60 Minutes, watch below:

DISA and BRAC Jobs Now Arriving at Fort Meade, Odenton, Maryland, 21113

Ben Weathers at The Capital Newspaper reported this morning (January 5, 2010) that with Fort Meade jobs on the way and thousands of jobs transferring, local area road projects are still many months away from completion.

Traffic congestion around the Ft. Meade area may be a negative by-product of the Defense Information Systems Agency (better known as DISA) move to the base in Odenton, Maryland, but, a surge in the demand for local housing should prove beneficial to the area.  So, demand for housing this spring should be strong, especially since home prices are low and interest rates are also very modest.

Along with the 5,000-plus DISA employees expected to work on base at Ft. Meadewill come their families.  And with them increased demand for goods and services creating opportunities for local area businesses and store owners.  While this is not likely to create an economic boom, the overall benefits will should be noticeable in our area.

Relocating active duty military and certain other Federal government employees may qualify or up to $8,000 in IRS tax credits for first-time home buyers and up to $6,500 in tax credits for trade-up buyers.  Those buyers who may qualify have until April 30th, 2011 to get their new home under contract.  More information on qualifying for the credit can be found at IRS.gov.

The Metropolitan Regional Information Systems, Inc. (MRIS) data for December is not yet available (typically published by the 10th of the month), but the current active inventory in Anne Arundel County is only 3,130 units (as of this writing).  In December 2010 the county had about 9.5 months of inventory, down from 11.9 months in December 2009.  A lower inventory level is good for sellers, while higher inventory is better for buyers.  Industry experts suggest a balanced market has about 6 months of inventory.  So, buyers are still favored in today’s real estate market.

If a significant number of DISA employees relocate to the area to be closer to work, to reduce their commuting time and distance, this should have a positive impact on stabilizing local home prices as a result of the increased demand for affordable housing.  Sellers should see increased traffic (showings).  Buyers will have few homes to choose from.  All-in-all, this is good news all around.