Heise & Heise, LLP

For Sale by Owner: Roadmap to Sell it Yourself!

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At present, we are seeing a pretty active real estate market in the Greater Baltimore area coupled with low interest rates that should continue for the foreseeable future. If you need or want to sell your home in Maryland, and live in an area where there is low inventory and properties tend to sell quickly, consider trying to sell without the high expense of a real estate broker. 

Steps for FSBO in Maryland 

Here’s how it’s quite possible to create marketing plan without a real estate agent being involved at all. There is no harm in hanging a for sale sign on your house for thirty days to see what happens. Oftentimes your neighbors will reach out to their friends and family who may be shopping to let them know that your house is available. Couple that possibility with the rise of do-it-yourself online marketplaces like Zillow, Craigslist and Facebook.

And if all else fails, the decision to market your house as a for sale by owner in Maryland is not irrevocable, you can change course at any point and involve an agent. 

 Maryland FSBO Tips  

Price to attract buyers. Take a step back and put your emotional attachments aside, you need to figure out what your house is realistically worth. For a few weeks leading up to your offering pretend you are a buyer shopping for a house in your neighborhood. Go to open houses, search public sale records, research on Zillow and see what kind of value nearby houses have. You may also consider asking an agent for a comparative market analysis to see what their opinion is. Most agents will willingly do this with the thought that you will go back to them if you eventually decide to list the house for sale. 

Protect agents. Make it clear that if a potential purchaser is working with a buyer’s agent that you will pay out one-half of a typical commission. This will be in the 2% to 3% range and will keep those agents showing your house and interest high.

Make your Maryland house a grabber. As you travel through open houses in your research phase take note of what those sellers have done to make their house attractive. Is the landscaping tidy and fresh? How is the curb appeal? Does the appearance of the house make it appear well kept and loved? Has the house been decluttered inside? Now take a critical look at your house and decide what you need to do to compete. 

Marketing your Maryland property. Spend a few extra dollars and get an attractive sign made by a local sign shop. That will show that you are serious about the sale and projects a professional and prepared image. Prepare some quality color flyers with a few photos and detailing the highlights of the home. There are so many resources available online now such as Vistaprint or Fiverr that there is no reason not to bring your best efforts.

Stay relaxed. When you have a potential buyer and are negotiating the terms of the sale be calm. Try not to be too pushy, or impose unrealistic requirements, or you run the risk of running your potential buyer right into the arms of a buyer’s agent eroding your savings. 

Give a little. A Buyer coming into a for sale by owner transaction without an agent is going to have to do a fair amount of work on their own. They will have to identify their own lender, home inspector, title company and other third party service providers. They will also likely have to engage an attorney to review or prepare the contract. What is the trade off? Discount your asking price a bit below market or offer a buyer credit so that your buyer can also enjoy some of your savings on real estate commissions. This will entice them to have patience with the process and see the purchase through. 

Know when to call in the Maryland real estate professionals. While you can handle most home sale activities on your own you want to draw the line when it comes to preparing or reviewing a contract. This is where you want to engage an attorney to paper the transaction and ensure you are protected and entering into a binding agreement. 

Click here for additional FSBO resources for Maryland homeowners. 

Still have more questions? Contact our Baltimore real estate law firm today. 

 

 

 

 

 

 

Why a Baltimore Real Estate Investor Should Consider an Umbrella Insurance Policy

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If you are an owner of investment real estate in Baltimore, MD you are at an above average chance of being sued. Why? You are likely not living on site, and as a result, certain condition issues may not be brought to your attention promptly. Additionally, you have only so much control over your tenants, who they invite into their home and the activities they engage in.

Sure, you have insurance and that will cover your liability but only to the extent of the coverage limit of your policy. For example, let’s say that a tenant sues you for an injury he sustains and you only have coverage in the amount of $500,000.00. If the tenant gets a judgment for $750,000.00 your policy will pay out $500,000.00 but the remainder of the judgment, $250,000.00, is yours to deal with alone. If you cannot pay the remainder of the judgment your property, and possibly your personal assets, are at risk.  

How do you protect against suffering this loss? You may want to consider an umbrella insurance policy. An umbrella policy sits on top of your insurance policy and typically covers the same things as your existing policy. However, the umbrella policy kicks in where the limits of the existing policy are reached. An umbrella policy usually runs $150.00 – $300.00 per year for $1,000,000.00 of coverage oftentimes making it less expensive than increasing your underlying policy limits. 

Most insurers that issue umbrella policies in Baltimore will only sell you a policy if you place your property and general liability policy with them and maintain certain amounts of liability coverage. This is a good practice because with just one insurer, if the requirements of the umbrella policy change you will be given notice. Also, if the underlying policy limits are exceeded you will be able to keep the same insurance agency attorney on the job throughout your case.  

Have questions about investing in Baltimore real estate? Give us a call.

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Three Reasons Why You Should Title a Baltimore Rental Property Into an LLC

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Three Benefits of Titling a Baltimore Rental Property Into an LLC

Three Benefits of Titling a Baltimore Rental Property Into an LLC

Are you a rental property owner here in the Baltimore area? Perhaps you’ve wondered what the best approach is for titling your rental property? Let’s take a look at the three main benefits of titling your Baltimore rental property into an LLC.

  • Protect Assets – titling a Baltimore property to a limited liability company (LLC)  and treating it as a business (creating separate bank accounts, maintaining insurance in the name of the LLC, etc.) insulates the business operation from your personal assets and provides you with limited liability personally.
  • Pass Through Taxation – normally businesses are taxed on profits and owners are taxed again when they make income from the business operation. With an LLC, the profits pass through to your personal tax return, which minimizes the amount of money taken out of your income for taxes.
  • Track and Deduct Business Expenses – having the income and expenses flow through your LLC makes it easier to track legitimate business expenses and keep them separate from personal expenses.

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When to Title a Baltimore Investment Property Into an LLC 

It is best to title your Baltimore rental or investment property into your LLC when you purchase it. Why? If you take title in your own personal name, your loan, your title insurance policy and your hazard insurance policy will also be in your personal name. A subsequent transfer to an LLC may have certain negative consequences if you are not careful. Three potential negative consequences are detailed covered below.

First, when you transfer your Baltimore rental property to your LLC after taking out a loan in your own name it may trigger the due on sale clause set out in your loan documents. What does this mean? It means that your lender may accelerate the loan and demand immediate payment in full. If you are unable or unwilling to pay the loan off your lender may file a foreclosure to force you to do so and this may result in you losing the property.

Second, in regard to your title insurance policy, it may be necessary to have an additional insured endorsement issued so that the protections afforded by the policy are not terminated. In certain circumstances it may be necessary to place a new title insurance policy.

Finally, the concerns that are raised with title insurance also extend to hazard insurance but are easier to correct. If you fail to change the hazard insurance policy post transfer and someone is injured on your property it is possible that the insurance company will deny coverage and you could be held responsible for a judgment.

These are just a few details to consider when purchasing and titling a Baltimore rental or investment property. Each situation should be evaluated based on the details of that particular transaction so if you have any questions please contact our Baltimore real estate attorneys at Heise & Heise, LLP for a full review.

 

 

 

Legal Considerations of Owning a Rental Property in Baltimore

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Legal Considerations of Owning a Rental Property in Baltimore

It has been a year since you and your spouse bought your first rental property in Baltimore, MD, and things are going great! You sat in on real estate seminars specific to the Baltimore market, read all the investment books, joined in on online discussion boards, and now all the hard work is starting to pay off. Each month that rent check comes in like clockwork and you are realizing a profit, a small one, but still, it is a profit. You think “this is easy, why aren’t more people doing this?”

And then you come home from work one day, grab the mail, and head to the house and there it is . . . a letter from a law firm. Turns out that one of the children living in your rental property has elevated lead levels and you are about to be sued.

No worries, this is why you have insurance, right? You give your insurance agent a call and find out you have a lead paint exclusion in your policy. The worst-case scenario has surfaced – no coverage. You are on your own. 

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Legal Risks of Owning a Baltimore Rental Property

What does this mean? What happens if the lawyer sues and gets a judgment? Since you and your spouse are both on the title of the Baltimore rental property and also on the title to your primary residence, your home is at risk. It is possible that the lawyer can force a sale of your home to squeeze the equity out to satisfy the judgment. 

If the sale of your home does not return enough funds to satisfy the judgment, the lawyer can also seek to collect by garnishing your wages or seizing your personal assets. This goes for your spouse, too. 

A friend suggests that bankruptcy may stop this terrible slide but then it will be years before you fully recover from your filing and you can see that dream of being a real estate mogul slowly slipping away. 

Take Title of Baltimore Rental Property in LLC

Interested in how to prevent the likelihood of this scenario becoming a reality? Go back in time and take title to the rental property in a limited liability company (“LLC”). Get in touch with Baltimore’s best real estate attorney at Heise & Heise and we will be happy to explain the structure and how to begin the process to protect your future. 

 

 

Top Three Questions to Ask if You Are a FSBO Seller in MD

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Three Questions to Ask if You Are a FSBO Seller in MD

Is the Maryland FSBO buyer qualified?

So, you listed your Maryland home for sale by owner on one of the many platforms available and received an offer, now what? You want to make sure that the potential buyer is qualified before entering into a contract. How do you do that? Request that a buyer submits a pre-qualification letter or pre-approval letter (stay posted for a future blog on the differences between the two coming soon) along with the offer. This document will help you determine that the buyer has met with a lender and has a good chance of being approved for a mortgage for the amount that is being offered for the home. There is not much sense in investing energy and resources into a contract from a buyer who will not be able to secure a loan for the purchase.  

Who is paying the realtor?

In a traditional sale involving real estate agents, the seller’s agent negotiates a fee with the seller, usually anywhere from 4%-7% of the sales price, that is shared with the buyer’s agent. In a for sale by owner transaction that fee may be avoided if there are no agents involved in the transaction. However, it may be the case that a potential purchaser is represented by an agent, what then? A seller in this scenario should determine in advance whether they will agree to pay the buyer’s agent a commission or will require the buyer to pay the buyer’s agent themselves. A seller may be able to refuse to pay any type of commission to a buyer’s agent if their house is a particularly desirable property or is in an area where there are high demand and low supply. In Maryland, there is no requirement that a seller pays an agent a commission unless agreed to in a contract.  

Is the Maryland FSBO real estate contract valid?

Even the major service providers in the for sale by owner space advise engaging a real estate attorney when a seller does not have an agent. Why is this? Many states require property disclosures for property condition, radon, lead paint, asbestos, etc. and if the requirements are not fulfilled the buyer may be able to terminate the contract. There is a huge temptation to use a form contract found on the Internet or purchased at a store to save a few dollars but this is a risky proposition. You will already be reducing your expenses by eliminating one or both agents so best to make sure you have taken the steps necessary to ensure that the buyer is obligated to see the purchase through.

HAVE QUESTIONS ABOUT THE FOR SALE BY OWNER PROCESS IN MARYLAND? CONTACT US TODAY FOR A FREE CONSULT.

 

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