maine dwelling by laurie lamountain
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ife sometimes has a way of taking you down an entirely different road than the one you intended . . . with surprisingly good consequences. In was on just such a journey, seemingly navigated by the ghost of Yogi Berra telling him “when you come to a fork in the road, take it!” that Stephen Schmitt ended up in Maine. He had been living in Connecticut and working in New York City for a hedge fund/private equity firm when fate and circumstance led him north. Ironically, the road to Maine turned out to be more of a detour than an altogether different route. The company Schmitt worked for in New York purchased pools of bankedowned properties that they would put back into the housing market by selling them to other brokers and banks. He points out that by the time one of those properties hit the MLS, it had probably been bought and sold several times. During his off-time, Schmitt helped a friend in Connecticut flip a family home that, when listed, sold within four hours for $100,000 more than the realtor had previously said it was worth. When he made the move to Maine and was unable to find a similar position working in finance for a hedge fund company, he reasoned that he had successfully flipped a property in Connecticut and could do it in Maine. He bought his first property, a ranch in Biddeford, for cash and spent the next four months preparing it for resale. It sold to the first person who looked at it on the first day it was listed. His second house sold an hour and twenty minutes after he listed it.
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Schmitt checks the MLS every day for REO (real estate owned), bank-owned foreclosure properties and is finding there are fewer than there used to be. The reason for this is that banks are realizing they have an opportunity to renovate the houses they own and then put them back on the market as financeable properties for which they can then provide mortgages. So these days, in addition to renovating and staging properties that he has acquired doing business as Maine Dwelling, Schmitt is relying on his experience in finance to work with banks who hire him to renovate houses they have acquired through foreclosure. They specify what they want done to the house to make it financeable and request a bid from Schmitt to complete the work. “It’s still sold as a foreclosure, but it’s a turnkey, renovated foreclosure. The banks see that they can earn the profit that a house flipper would earn, so they want to do it themselves. They would rather pay somebody like me to go in and flip the house for them so they can recoup as much as they can.” While he’s conscious of the fact that the owners of the houses he renovates lost them through foreclosure, he points out that derelict properties can sit on the market for years. And who wants to look out their windows at a property that’s slowly rotting away? Renovating foreclosed houses rejuvenates the neighborhood and increases the value of surrounding properties. The difference between working on his own and with banks is that they will not take their properties to the extent that
Schmitt does his. He has never staged a bank-owned house that he’s been hired to renovate. The twelve bank-owned houses that Maine Dwelling has bought through cash sales with the bank over the last four years are a very different story. They represent what Schmitt calls his soup-to-nuts process. Every one of those houses has sold for full price or more within the first week. Northwest Cottage, a house on Sebago he recently finished and put on the market over Fourth of July weekend, sold above list price in four days. The one before that sold to the first person on the first day for full price. The one before that was listed in the middle of winter and sold within a week. His longest listing was seven days. When I ask him why he thinks they move so quickly, he replies, “You have to know your audience. That’s the secret sauce. I never buy an ugly house. A lot of people who flip houses want to put lipstick on a pig. They want to get in and out quickly, where I spend a lot more time.” Part of his soup-to-nuts process includes showing the houses he flips. He feels certain that no one will sell them better than him because he knows them inside out. He had sixteen showings for Northwest Cottage in four days, the last of which was with the buyer at 8:30 in the morning on July Fourth. He also gives his staging credit for quick turnaround. He points out that a lot of people, especially younger ones, don’t have the time or inclination to “fixerupper” the way baby boomers did. They don’t even want to paint, let alone redo a kitchen or bathroom. He also feels most buyers don’t have the vision to see a house the way they would ultimately like it to be. A third and significant factor is that while they may have the credit to purchase a house, they don’t have the capital to buy a lower-priced house that requires a substantial outlay of cash for repairs and renovations. They would rather buy a turnkey house that will qualify for a mortgage. “Most people don’t want to buy the ‘broke down palace,’ which is what I call them. I want to buy a broke down palace and make it pretty. Every house I go to look at I ask, ‘is this something that I myself would buy?’ Because if I wouldn’t buy it, then I won’t have the vision to renovate it and sell it.” He does caution that house flipping is not the glorified process they depict on HGTV and in house flipping seminars, especially when you’re dealing with “all things New England.”