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Tag: Anna Maria Island real estate

Negotiating is coming back

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Once upon a time, there was a great tradition in real estate where sellers listed their homes, buyers made an offer and eventually, both parties met in the middle and, like magic, you had a sound transaction. We haven’t seen much of that tradition recently, but don’t give up, you may start to see more of it.

Sellers, if you can find one, are more receptive to certain requests than they had been previously. Despite hearing that homeowners don’t want to give up their ultra-low mortgages, there is always someone who needs to sell their home. Since the pool of buyers has dwindled recently because of higher interest rates and lack of inventory, motivated buyers need to find sellers out there who are also motivated and more flexible than they were two to three years ago.

The obvious buyer strategy is to ask for money or something that costs money. With mortgage interest rates getting close to 8%, every penny in the hands of a buyer is a valuable one. Offering or asking for help with closing costs isn’t a new concept. Buyers who may be short on cash but qualify for financing may ask sellers to provide a credit at closing to be used for closing costs unrelated to their mortgage rate. This amount can usually be rolled into the financing for qualified buyers and the seller could easily be netting the same.

Sellers know or certainly should know what the flaws in their homes are. They may not want to take on a renovation project but are faced with buyers who may again be short on cash for repairs or adverse to doing renovations. Sellers can agree to make specific improvements to the home before closing. This agreement can be negotiated between buyer and seller so that both feel they come out pretty much with what they want and can close the property.

The next concept is a little more complicated but again includes money passing from the seller to the buyer. Sellers can agree to lower a buyer’s mortgage interest rate, known as a rate buy-down, by offering to pay closing costs in the form of points. If a buyer can reduce points, their mortgage rate can be lowered, resulting in a lower monthly payment. Points are typically 1% of the loan amount, so if a seller gives two points to the buyer on a $300,000 loan, that’s $6,000 the buyer doesn’t have to come up with.

Finally, sellers need to consider capital gains in a conversation with their tax attorney or preparer. A seller who is in a position where they may have large capital gains on the sale of their property needs to know exactly what those gains could be in real money. Entering a negotiation with this knowledge is important since the seller and the buyer may not be that far apart on their offers and counter offers if you calculate what it may cost the seller in additional capital gains. Knowing ahead of time how much flexibility you have between the sale price and capital gains could save the transaction and still net the seller almost what he wants. Holding out for an exact number embedded in your brain could kill the deal and keep you from moving on.

Go out there and make magic. Beat the bushes to bring those sellers out from the scrub. An old high school friend of mine’s mother would say, “There’s a lid for every pot.” And even though she was talking about boyfriends, the principle is the same. Go find your pot.

What is a condominium?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Condos are all over Florida, representing every imaginable price range. People live in them full-time, part-time or invest in them. They’re a very flexible real estate resource, but are they meant for you?

A condominium is a privately-owned individual unit within a community of other units. In general, the owner usually owns the interior of their condo and the structural components of the exterior walls. Condo owners jointly own shared common areas within the community, such as pools, garages, elevators, gyms and boat slips. Some condos are in high-rise buildings, mid-rise buildings, detached villas or semi-attached villas. In waterfront communities in Florida, you will even find condo associations of boat slips. You name it and it probably can become a condo as long as it abides by Florida condominium laws.

Condo communities are popular because they provide an easy, turn-key way of life. There is low homeowner maintenance – no lawns to mow, pools to clean or peeling paint to address. Many condo associations have secured gated entrances and some have on-site security personnel. It’s easy to make new friends and socialize if you’re new to the area. There are many affordable condo associations in Manatee County. They come in all shapes and sizes, but there are also some very high-end associations, mostly with water or beach access. Finally, condo living usually offers many amenities ranging from pools, clubhouses, barbecue areas, gyms and dog parks.

So that’s the good stuff, but what about the bad stuff? The biggest complaint about living in a condo community is the rules of the homeowner’s association. If you’re not a good, follow-the-rules kind of person, you may be in for a shock. Just about everything from trash to noise to pets to paint color to patio furniture could very well have a rule attached to it.

Also, condo associations are essentially small businesses and, in some cases, not so small. HOAs are required to maintain reserves for maintenance of the property, funded by the collection of monthly or quarterly dues. This is always the biggest cause for concern with condo owners who sometimes feel they have no real input on how much money is spent to maintain the property.

Associations are organized with an elected board of directors, and, with some limitations, they make the decisions on behalf of the community. If you don’t like what they have decided, the only thing you can do is run for the board yourself or not vote for some or all the directors at the next election. Since participating in a condo board can be tedious and time-consuming, it’s not that easy to get volunteers, so be careful what you wish for in a dispute with a board member.

Condo owners are sometimes worried about their investment since they don’t have complete control of their assets and maintenance decisions. The only thing I can say here is before you buy, go over the financials of the association as well as condo documents with a fine-tooth comb and see if this is the place for you.

I’ve written columns like this before, and I always point out that communal living is not always easy and, unless you have a “condo personality,” it may not be the right choice for you. If your neighbor isn’t quite making their trash into the trash bin and it ends up on the ground, you may not like it, but it’s one of those adjustments condo living requires. The good part is you’ll always find a friend to help you pick it up.

Speaking of spooky, look at those population numbers

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Halloween is next week, so as you’re decorating your home with spooky and creepy stuff from the Dollar Store, think about the spine-chilling increase in population right here in Manatee County.

There’s a good reason why the traffic on the roads never seems to take a break and why your favorite doctors are all of a sudden working weeks out for an appointment. So far this year, the population of Manatee County is reported as 429,125. We grew by 29,420 in three years, per the U.S. Census. In April of 2010, the population was 322,833 per the U.S. Census, an increase of over 100,000 residents in not quite 13 years. Manatee County is the 15th most populated county in Florida out of 67 counties.

The above numbers, of course, do not include the scary number of visitors and part-time residents flowing into Manatee County every year. They also do not include the many thousands of residents that will be added to the county when the large construction projects are completed.

Lake Flores, Aqua by the Bay and Peninsula Bay, all on the southwest side of the county near or on the bay are already being developed or getting ready to start. The east and southeast sides of the county are exploding with plans for new subdivisions with good access to the interstate. In addition, all this construction is coming on the heels of the construction of both a new Cortez Bridge and Anna Maria Island Bridge. Are you scared yet?

Selling a property always involves disclosing anything that can be a material change to the value of the property. This usually involves structural issues not obviously observed and even appliances and air conditioning and heating systems. And, since we’re in scary season, you will be happy to know that you don’t need to disclose if your house is haunted, or if there was a murder or death in the home.

Also, there is no obligation I could find that a homeowner must disclose construction projects near the property, even if that construction could be a nuisance. Nevertheless, everything you know should be disclosed. This is not only the right thing to do, but it will also protect you as a seller from potential future lawsuits.

At least one thing that’s not haunted this Halloween is the September sales reported by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 46.9% more properties than in September of last year. The median sale price was $503,495, down 2.6%, and the average sale price was $661,608, up 6.0%. The median time to contract was 29 days versus 19 days last year, and the month’s supply of available properties was 2.9 versus 2.7 last year.

Condos closed 48.6% more properties. The median sale price was $350,000, up 3.9%, and the average sale price was $402,480, up 0.3%. The median time to contract was 46 days versus 15 days and the month’s supply of properties was 3.3 months versus 1.9 days last year.

One interesting statistic in the September report is that cash sales are up for both single-family homes, 38.3%, and for condos, 58.3%. I suspect this has a lot to do with the high interest rates on new mortgages.

The Association of Realtors sums up the market this way, “While closed sales registered an unusually high year-over-year growth, median prices stayed relatively stable.”

Spooky or not, those are the numbers that reflect sales transactions booked during the slow summer months. We’ll see how that changes when we get into the selling season. Happy Halloween.

Get insurance if you can

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Even though our area has so far been spared a major hurricane hit this year, the threat is always there, as is the threat of losing your insurance. What happens if you can’t get homeowners insurance is one of those “I don’t even want to think about it” questions, but, if it happens to you, you’re in good company.

Florida and Louisiana are the two states in the country that have the most challenging homeowners insurance markets. Florida has the highest average home insurance premium in the country. They also both have state-run insurance of last resort companies that are called Citizens, and they are both trying to reform their state’s insurance obligations.

In addition, Florida is attempting to bring insurers into the state to help create more competition, driving costs down. The state’s Legislature has worked to reduce the number of lawsuits by limiting what attorneys can charge. High attorney fees were mostly blamed for driving up costs and driving out insurance companies, leaving homeowners no choice except to go to Citizens. It’s too early to know for sure what the Legislature is accomplishing, however, there is some evidence that progress is being made.

Nevertheless, the stress for homeowners is enormous, prompting some residents to consider leaving waterfront properties and properties prone to flooding. If you do find yourself in the unimaginable position of not being able to get homeowners insurance on your home or condo while carrying a mortgage, you could be in for some serious problems. Not having the ability to find insurance on your property violates your mortgage agreement. Your lender may force you into a more expensive policy, which is called lender-placed or force-placed insurance. Worse, your loan can be declared in default, risking a foreclosure if you’re not able to satisfy the mortgage.

I know this sounds dramatic and it is, however, one way is to have an advocate on your side like an insurance broker who has access to any new insurance companies coming into the state as well as an understanding of the system and may be able to offer advice. Also, Fair Access to Insurance Requirements (FAIR) plans were created in the 1960s to make insurance available in areas that had abnormally high exposure to risk. The Florida contact numbers are 850-513-3700 and 904-296-6105.

Citizens Insurance in Florida asked the state Office of Insurance Regulation to raise its rates for property insurance by an average of 13.1%. This request was denied and replaced with a cap of not more than a 12% increase. Citizens’ higher-ups feel the approved rate increase is artificially low, resulting in potential exposure beyond its assets. This affects the private market by not being able to compete with what was designed to be the company of last resort for insurance.

As a comparison, Louisiana’s Citizens’ Property Insurance is uncapped. This means their rates are based on what’s happening in the marketplace, allowing private insurers to compete and taking some of the financial exposure of the state. In addition, Louisiana has an incentive program that provides grants to encourage insurers to write property policies in areas of the state that are most at risk.

The solution to Florida’s unraveling insurance market is obviously to attract more private companies into the state, a feat that is easier said than done. We can only hope a plan is in place before the next “big one” comes knocking on our coastline.

Making lemonade out of a lemon real estate market

Written by Monica Simpson on . Posted in Business, Castles in the Sand.

Sometimes it looks like the national real estate market and the high-interest mortgage rates are nothing but lemons. But one startup company has found a way to turn the lemons into lemonade.

Assumable mortgages are something that was not uncommon back in the more civilized real estate era. Many conventional mortgages had an assumable clause built into the mortgage, giving lenders another source of potential borrowers. Those days are long gone except for government mortgages, including VA and FHA loans, which usually still contain an assumable clause.

What is an assumable mortgage? An assumable mortgage allows sellers to transfer their mortgage loan to the buyer purchasing their home. An assumable transaction doesn’t replace an old mortgage with a new one, but instead transfers the old mortgage to the new owner. The seller is relieved of the remaining mortgage liability and the balance of the outstanding loan is subtracted from the purchase price. The buyer, of course, must come up with cash to cover the balance of the purchase price.

Roam is the name of a new real estate startup launched several weeks ago in a handful of states, including Florida, who – for a fee – will search out properties with assumable mortgages. They will handle the paperwork and work through the system and the seller’s mortgage company on behalf of both buyer and seller to facilitate the mortgage transfer and property sale. Roam’s goal is to attract lenders and investors who can place new loans for the balance of the selling price, possibly at higher rates to compensate them for holding the assumable mortgage at lower rates. It’s not for a novice but, if successful, could open more available properties for buyers.

There are always good and bad points to anything new to the marketplace. If something looks too good to be true, it may be. Some of the pros for purchasing an assumable mortgage are lower interest rates, an obvious benefit for the buyer. Having an assumable mortgage gives significantly more exposure to a seller’s property. Closing costs will be lower and no appraisal is necessary, saving more money, and the buyer is assuming less debt.

The negative side of an assumable mortgage is a larger down payment, which is fine if a buyer has a lot of home equity or cash. Buyers still need to meet the lender’s credit and income requirements, and the buyer does not have a choice of lender.

Buyers who are assuming a VA-backed mortgage won’t be entitled to another VA loan until the assumed loan is paid off. Therefore, if you are getting VA benefits you may need to wait a while to qualify for another loan.

You may also be required to carry mortgage insurance depending on the amount of loan assumed and the loan-to-value ratio.

As I pointed out, this is a balancing act and not for everyone. Assumable mortgages could work great if you’re buying from a family member. If you don’t want a federal loan and are more comfortable with a conventional mortgage, it won’t work. Sellers with an assumable mortgage who may be having a problem selling their property could benefit by using it to make their home more desirable and advantageous to buyers.

Lemons or lemonade, the yin and yang of the real estate market. Just one more thing to add to the confusion.

Homes are shrinking, but not on AMI

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Well, here we go with another everything old is new again story. This time it’s about the size of the average American home.

The homes most of us, certainly my generation, grew up in were small relative to the average family home today. We shared bedrooms and bathrooms, and the whole family sat together in the only family living room to watch the only family TV. According to the census data, some of that is coming back.

Census data shows that the median square footage of floor area for new construction single-family homes in the U.S. peaked at 2,519 during the first quarter of 2015. This has since dropped 13% to 2,191 as of the second quarter of 2023. But don’t think that because the amount of square footage has been declining the cost is also declining. According to John Burns Research and Consulting, the cost per square foot has accelerated to 13% in 2021 and 10% in 2022.

So, what are the builders eliminating from their newly-built properties to produce tighter, more efficient living spaces? First, they are axing dining areas, bathtubs and separate living rooms. Secondary bedrooms and loft spaces are shrinking and frequently disappearing. Much of this downsizing is the result of the COVID-19 pandemic and everyone’s focus is on saving energy and conserving our natural resources.

To compensate for the lack of formal dining and living rooms, they are increasing the size of multi-use rooms like kitchens and great rooms. Some families are opting to use the kitchen island as the primary dining area and expand their outdoor space for entertaining. Shared bathrooms are back in style and bathtubs with all the water jets and seating areas are gone along with the extra expense of building them.

Since formal dining is gone, so is the formal dinnerware, glassware, starched linens and the glass-faced cabinets formerly used to store them and show them off. Your grandmother would not be happy. Instead, builders are giving their customers more practical storage for wine racks, appliance drawers and roll-out shelving.

Unfortunately, most of this type of downsizing is not helping the prices. The overall price may be less, but the price per square foot is not, so you’re paying more for less. Nevertheless, first-time homebuyers are likely happy with the compromise just to be able to get into a home.

Home size may be shrinking but you would never know it riding around Anna Maria Island.

The new construction homes look bigger than ever, and they are. However, these multi-bedroom fun palaces are not designed for families to live in, they’re designed for investment owners to rent. Homes on the Island are being repurposed and converted into rental properties at the expense of owners who are either full-time or seasonal.

Rest assured, Anna Maria Island is not alone in the world with this problem. A recent article I read talks about Venice, Italy being out of control with tourists chasing out residents from the island city. Venice’s resident population is in steady decline, dropping below 50,000 last year for the first time in more than three centuries. This is down from 66,000 two decades ago and 175,000 in the early 1950s.

Smaller homes with fewer bedrooms and baths may not be happening on Anna Maria Island, but families who live in less of a tourist area are reconsidering their priorities. You may not like the demographic change for the Island but at least we’re in good company.

Market in the eye of the beholder

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

To some people, our national real estate market is downright awful, but to others, it may be the best of real estate times. It’s all in the eye of the beholder.

Don’t believe everything you read and, believe me, I read it all. Yes, it’s true that buyers, especially first-time buyers, are having a terrible time finding an affordable house. Yes, indeed, sellers aren’t moving out of their 1,200-square-foot starter house because they have a 3% mortgage. But it’s also true that sellers who want to sell are in a pretty darn good financial position and they’re as happy as can be.

Home prices were declining for five consecutive months but all of that has reversed itself quicker than the housing economists expected. The surprisingly quick recovery suggests that the residential real estate downturn is turning out to be shorter than many housing economists expected. Even if the number of sales keeps going down, sale prices are unlikely to fall significantly. In popular regions, including Florida, bidding wars are breaking out again, reliving the insanity of the 2021 market.

A byproduct of higher selling prices and fewer sales is, of course, the fear of low appraisals. If the buyer is planning on obtaining a mortgage based on the contract price the lender will be looking for a satisfactory appraisal for at least the purchase price. If the appraisal comes in too low, that will affect the loan-to-value ratio and could easily sink the transaction.

Sellers in today’s competitive market may remove the appraisal contingency from the contract. This means that no matter the amount of the appraisal, the buyer is legally bound to complete the transaction and better have the additional cash available.

Facing a low appraisal in an escalating market is not uncommon and can be a shock to buyers. Again, they will need to come up with more cash to close the gap to proceed with the transaction. Parties to the transaction like the broker and/or attorney can ask for consideration on the appraisal if they determine that one or more of the comparable properties were not valid, however, getting appraisers to change appraisals is nearly impossible.

Time to look at Manatee County’s August sales as reported by the Realtor Association of Sarasota and Manatee for the month of August:

Single-family homes closed 6.9% more than last August. The median sale price was $525,000, the same as last August. The average sale price was $715,711, up 9.2% from last year. The median time to contract was 33 days, compared to 13 days last year. The month’s supply of properties was 2.8 months, compared to 2.5 last year.

Condos closed 0.8% less than last August. The median sale price was $358,990, up 1.8% from last year. The average sale price was $393,727, down 2.6% from last year. The median time to contract was 50 days, compared to 13 last year. The month’s supply of properties was 3.3 months, compared to 1.8 months.

The Realtor Association feels that our prices are steady, and Florida is enduring in its desirability among out-of-staters. The fact that new listings and pending inventory are up for both single-family and condos is encouraging. Single-family had 8.6% new listings and 8.4% pending inventory. Condos had 18% new listings and pending inventory at 16.1%.

My eye beholds further adjustments, not a downturn, and once buyers get comfortable with 7.5% interest rates, they will forget all about the 3% their friends have. This is the way the economy rolls; it can’t be timed, it can only be faced head-on.

Castles in the Sand

Property owners with equity may tend to overpay

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Feeling pretty flush, are you? Most of us who have owned property for several years are pretty happy with the equity we have accumulated. But if you are selling and purchasing another property, be careful. That equity can slip through your fingers at lightning speed.

A recent study by UCLA Anderson School of Management discovered that for every dollar of equity gain that a seller receives, he or she overpays by 7.9 cents on the next home purchase.

There are a few theories about why this is happening, one of which is that with higher equity comes lower capital constraints, allowing buyers to consider larger homes they are willing to pay more for. Also, a buyer with a nice equity cushion can offer more and sometimes will pay more to avoid a time-consuming search for a new home or to place themselves at an advantage above other buyers. Either way, these actions are driving offers higher than they should be.

Naturally, overpaying contributes to escalating housing costs, compounding the effect of fewer homes on the market and pushing up selling prices. This is more bad news for buyers who are competing with high equity buyers who are cornering the market with a lot of equity and cash bidding up prices.

Buyers who overpay for a property are risking that the property values will stay high when the time comes to resell. If a buyer is in the property for the long haul, it might be a smart risk to take for a property you want. However, if a buyer is looking at a short-term purchase they could get caught in an unexpected downturn of the market.

With residential mortgage interest rates approaching 7.5%, not only are buyers caught in the vice, but banks are also starting to see their profit margin caught in the same vice. Applications for home purchase mortgages dropped to their lowest levels since 1995 a few weeks ago, according to the Mortgage Bankers Association. Buyers aren’t buying because of low inventory and high rates and potential sellers aren’t selling and giving up their ultra-low mortgages – a perfect storm in a not-so-perfect real estate market.

But there are still high-end buyers who are jumping into the real estate market. The only difference is the jumbo loans these buyers typically are looking for are not as available as they once were. A jumbo loan is a non-conforming loan that exceeds the conventional loan limit set by the government housing authorities. The limit is currently set at $726,200 or higher in some high-cost areas in the country. For instance, Hawaii would be considered a high-cost area. These loans typically were considered low-risk loans the banks kept on their books that attracted wealthy customers, many of whom used the same bank for additional business transactions.

These loans usually carried lower rates than regular mortgages. However, the lower preferential rates for jumbo loans have reversed in recent months and now the jumbos are also approaching 7.5%, forcing home buyers to reconsider their financial options or even whether it’s a good time to buy. Since we’re living in an area with many high-end properties for sale, these higher rates could influence our market.

Whether you’re buying a car or a pair of shoes, it’s the same. If you have more, you pay more and if you pay more, you borrow more. Americans love the best of the best. Be careful that the money doesn’t slip through your fingers.

Castles in the Sand

Some homeowners ‘going bare’

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Florida homeowner’s insurance is one of our favorite cocktail party conversations here on the coast. People who don’t live on the coast think we’re nuts to risk all just for great views and beach access. But we’re not the only homeowners who are being charged more for getting less coverage; it’s the new norm.

If you notice a drone over your roof, don’t be surprised, insurance companies are checking roofs for condition before renewing homeowner’s policies. In an effort to recoup some of their losses in recent years, insurance companies are raising deductibles, requiring new roofs and denying coverage on older homes without strong wind mitigation. With the Gulf waters overheated, we can expect more storms and higher premiums.

The national average for home insurance has gone up 20% from 2022, according to Bankrate.com. As unbelievable as it may seem, 12% of homeowners in the country don’t purchase homeowner’s insurance. About half of them have annual household incomes of less than $40,000, according to a survey by the Insurance Information Institute.

Florida is not alone in experiencing double-digit insurance increases. Companies are raising rates or completely leaving Louisiana and California in addition to Florida. There is, however, a solution for some homeowners who have the funds and nerve.

The insurance industry has a phrase for homeowners who choose not to buy homeowners insurance – it’s called “going bare.” If you own a home with a mortgage, you can stop reading right now, you don’t have the option of going bare since your mortgage lender will require you to carry sufficient coverage to repair or replace your property in the event of a major disaster.

Your lender may also require you to escrow for insurance as part of your monthly payment and then they pay the annual premium. This is, of course, to ensure that the premium is paid and their asset – your home – is insured. If this is an arrangement you have with your lender, it’s possible to ask them to allow you to pay your insurance without having to escrow for it monthly. Usually, you have to have owned your home for several years and have demonstrated a good credit score and your ability to pay your mortgage payment consistently on time.

However, if you’re a gambler, you can “self-insure,” assuming your bottom-line savings will outweigh any repairs you might have to undertake in the event of a storm or fire. Wealthy people say they have enough money saved to rebuild or move even if their house is destroyed, but for the average homeowner, it’s a bit more of a challenge.

A standard insurance policy typically covers the cost of replacement of the home and some of its contents in the event of damage or theft. Some average homeowners who have satisfied their mortgage choose to drop their insurance and bank the annual premium. Sometimes they come out ahead, especially if they have the ability to invest the money not paid for premiums at a good return, but it’s a risk not everyone can or should take. In addition, some homeowners who live in vulnerable waterfront locations are pushed into going bare when their policies are dropped and/or are renewed at a very high rate.

The increased cost of homeowner’s policies is hitting the real estate market heavily. Potential buyers can’t afford the double whammy of higher interest rates and higher insurance premiums, freezing the real estate market further. Pay the price or go bare – no good options.

Castles in the Sand

New homes a no-brainer for some

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Sometimes choosing something that you thought was totally out of your range becomes the obvious choice. In a tight real estate market with little inventory, for some buyers, new construction is the best choice.

I don’t need to tell anyone reading this that the sound of hammering has become the backdrop music on Anna Maria Island. New homes are going up all over the place, some built on spec and some custom. This is also happening all over the country to compensate for the national lack of inventory.

Newly-built homes accounted for nearly one-third of single-family homes for sale nationwide in May. Historically, new homes represent between 10% to 20% of the market. Even investors are getting into the new home market to use as rentals or to flip down the road and there are plenty of these buyers represented around the Island.

With no inventory to choose from, buyers across the country are improving new home builders’ bottom line. The big builders are offering incentives to buy one of their new homes, some even with temporary advantageous financing benefits. Based on rising demand, builders are adding more homes to their inventory and buyers are more than happy to find a home that doesn’t need renovation.

As always, what happens on Anna Maria stays on Anna Maria, and very little of what happens in the Midwest or western parts of the country transfers to Florida. But there are still some basic caveats to follow when buying a new home.

Builders always want you to add upgrades to their basis home price. If you can afford major upgrades, better to do it while the home is under construction, but chose your upgrades carefully. Upgrading plumbing and electrical is smarter than upgrading kitchen cabinets, tile and countertops.

Look for areas during construction to cut corners without sacrificing quality. Sounds impossible, but an honest conversation with the contractor may reveal ideas you never thought of.

Read the fine print on the contract. Are appliances included and what are they? Be specific. What paint colors are included in the contract? If everything is getting a couple of coats of builder’s white, what will it cost you to have the builder paint colors in specific areas? New construction contracts usually have construction timelines with deadlines. This frequently coincides with incremental payments either from a cash buyer or draws from a bank construction loan.

Finally, even though it’s new, it may not be perfect. Don’t think that because you have a warranty it covers everything. A warranty on new homes covers items like materials, workmanship, systems and structural defects. A bad paint job may not come under the workmanship umbrella and may require more specific wording in the contract.

It’s also recommended that buyers hire a structural inspector to check the property at specific times during the construction process. This might be before the foundation is poured, and before the drywall is installed to make sure anything behind the walls like electrical work is up to code. The last inspection is at the completion of the home.

Local contractors are pouncing on older Island cottages, calling in the bulldozers and erecting mega homes. With little coming on the market and even less in pristine condition, new construction may be the only viable game in town, a no-brainer for those who can afford it.

Castles in the Sand

Higher rates here to stay

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

On Aug. 17, mortgage interest rates spiked to 7.09%, the highest in years per Freddie Mac. A lot of this has to do with the 10-year treasury yield, which hit its highest level since 2008 on the same day. Since mortgage rates tend to move somewhat with the 10-year treasury, rates went up combined with the Fed’s ongoing attempt to tame inflation.

Last year when rates started going up, except with a brief decline at the end of 2022, the consensus was that the higher cost to borrow would be temporary. Now, however, eight months later, all players in the real estate market are adjusting to the idea that higher rates are either here to stay or at least will be around for a long time.

So, what does that mean to the average home buyer? Essentially it means it’s time to get off the bench and make a commitment since things aren’t changing any time soon. That, of course, is easy for me to say but the truth is buyers are finding it is the hardest thing to accomplish even after they adjust to higher rates.

The lack of inventory all across the country is pushing prices up to a level many buyers can’t afford. After all, if you had a 3% or 4% mortgage, would you sell your home and move on to something else unless you absolutely had to? Probably not, and that is the log jam in the real estate market. About 60% of the country has mortgages below 4% and even homeowners who missed the absolute bottom are still ahead of the curve by at least 2 percentage points.

Buyers need to understand there is no crystal ball and even the real estate gurus called it wrong with their temporary thinking. Now is the time buyers have to bite the bullet by downsizing their expectations and being flexible. Not all of your children need their own bathroom or even their own bedroom, and you can prepare dinner in a kitchen without a quartz island; millions of people do.

Look at the additional expense of a higher mortgage from a monthly payment perspective. When you break it down into financial pieces, it may not be as intimidating, kind of like upgrading your iPhone. Don’t ask what it costs, just what it will cost monthly.

Let’s look at Manatee County’s July sales statistics reported by the Realtor Association of Sarasota & Manatee:

Single-family homes closed 10.1% more properties this July compared to last July. However, the median sale price of $515,000 was down by 1.2% and the average sale price of $641,991 was also down by 6.9%. The median time to contract was 29 days this July compared to 9 days last year and the month’s supply of properties was 2.7 months, about the same as last year.

Condo sales were down 8.0%, the median sale price was $389,500, down 0.4% from last year and the average sale price was $523,922, down 2.5%. The median time to contract was 36 days this year compared to 10 days last year, and the month’s supply of properties was 3.4 months compared to 1.6 months last year.

The Association of Realtors states, “Despite higher interest rates, the housing market in Sarasota and Manatee counties stays strong due to low supply and continued demand with relatively stable prices.”

A lot of what’s going on in other parts of the country does not aways apply to Florida, which tends to march to its own drummer. All real estate markets are local, and all states have different economic challenges. Sales are taking longer to book, but overall, Manatee County is hanging in there.

Castles in the Sand

Has Anna Maria Island been gentrified?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I’m working on my 14-hour real estate continuing education course which I am required to do thankfully only every two years to keep my Florida real estate license. Every time I work through the questions and answers I almost always learn something new, and I guess that’s the point. This time I learned about gentrification, and I knew from the very first page that this would be a column.

To quote my course book, “Gentrification is a process of changing the character of a neighborhood through the influx of more affluent residents and businesses. This is a common and often controversial topic in politics and urban planning. Gentrification often increases the economic value of a neighborhood but can force out low-income residents due to the increased cost of rent and higher cost of goods.”

And there’s more, “The gentrification process is typically the result of increasing attraction to an area by people with higher incomes spilling over from neighboring communities.” Does any of this sound familiar to you? It certainly should since we’ve been living through island gentrification for the last 10 to 15 years – we just didn’t give it a name.

Anna Maria Island was discovered by a vast number of vacationers when the Island started hitting national publications at least 10 years ago. At first, I thought what fun, little Anna Maria Island has been discovered, but I never dreamed it would keep going to the degree that almost every month you can find something about Anna Maria Island in print. My family in Connecticut told me that Connecticut Magazine has an advertisement saying to come to Anna Maria Island and its Old Florida charm courtesy of Avelo Airlines.

As recently as January of this year, the Wall Street Journal profiled just the city of Anna Maria “which is on the north end of a 7-mile-long tropical oasis.” They were profiling the city of Anna Maria’s zip code, which they pointed out is home to Florida’s second most expensive ranked median listing price properties. Miami’s Fisher Island is first.

Florida’s growth is no secret. It was growing before World War II and after the war, it boomed. I once heard a lecturer in a real estate seminar say the growth of Florida is primarily due to air conditioning and mosquito control. Now we can add to that the COVID-19 pandemic, which sent hundreds of thousands of new residents and even more new visitors to our shores.

The result is all based on economics. Old Florida cottages and some not-so-old single-family homes are being replaced with huge new homes sporting multi-million-dollar price tags designed to rent to vacationers or flip as the prices keep going up.

Recently in this newspaper, one of our reporters wrote a very enlightening story about the decline in population on the Island. That doesn’t mean fewer people are walking, riding bikes or eating in local restaurants on the Island, it means there are fewer full-time residents. She reported in one year from 2020 to 2021, the Island lost 1,322 residents, 26.75% from Holmes Beach, 4% from Bradenton Beach and 13% from Anna Maria.

Gentrification is all about changing the character of a community and infusing it with tons of money. Sometimes that’s good and sometimes it’s not. Out with the old and in with the new. The only thing they can’t change is the beach – or can they?

Castles in the Sand

Money, money, money

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

There’s a great song from the movie Cabaret that goes something like this: “Money makes the world go ’round, the world go ’round, the world go ‘round.” I like it because it says so much in such a short lyric and is understood by everyone. For buyers and sellers in this real estate market, the money is represented by mortgage interest rates which change so quickly your head could go ‘round and ‘round.

At the July meeting of the Federal Reserve, they raised interest rates by another quarter percent, which was expected, but they did indicate the possibility of easing towards the end of the year. According to Forbes on Aug. 2, the average residential 30-year fixed rate mortgage was 7.47%, not making buyers feel warm and fuzzy.

Interest rates are impacting the real estate sales market as frustrated home shoppers are facing high rates combined with a shortage of available properties that are not moving substantially down. Sellers are happily sitting tight on their 3% mortgages with Cheshire cat smiles on their faces for being so smart.

According to the National Association of Realtors, June sales fell 18.9% nationally compared to June of last year. Manatee County had 17.7% more sales for single-family homes compared to June of last year.

Sale prices are down slightly but still historically high. The national median existing-home price fell 0.9% in June from last year to $410,200, and the Manatee County median sale price for single-family homes was down 4.5% to $525,000. However, based on the new listings coming out daily, I wouldn’t be too worried about our values taking a deep dive any time soon.

There is another way for buyers and those sellers who want to sell to come together despite high rates that may be disqualifying some buyers. Sellers could offer or buyers could suggest that sellers finance a buyer’s purchase of their home. This is called taking back a mortgage and is more common for investment properties but could also offer a solution for some buyers with an interested seller.

Seller financing helps buyers increase their purchasing power by saving on closing costs, setting up escrow accounts, and application fees or paying lower interest rates. It could also help sellers who want buyers to make a full-price or higher offer on the home and are concerned about the property appraising through a conventional bank lender. The transaction is similar to closing with a lender; the buyer receives title to the property at the closing as with a traditional mortgage.

Sellers are assuming the larger risk of taking back a mortgage on their property. If the buyer defaults or doesn’t pay their real estate taxes or insurance, the seller will need to proceed with a foreclosure which is expensive and time-consuming. It’s all a little complicated and risky for all parties including getting a tax advisor involved and, of course, an attorney.

Anxious sellers who have properties that have been on the market for some time could consider holding the mortgage. This could also produce a steady stream of income for the seller if they are in a financial position to delay receiving the proceeds from the sale.

Typically, buyers can negotiate an interest rate lower than the prevailing rate, however, there is a minimum interest rate regulated by the IRS to consider. Sellers could wait out the higher rates hoping for a future decline then apply for a conventional mortgage and pay off the seller.

Money makes the world go ‘round and trying to understand it can make your head explode. Proceed with caution.

Castles in the Sand

The value of a renovated home

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Most homebuyers today want to buy a home, but very few want to buy a project. Nice work if you can get it, but even in our slightly leveling-off market, it may not be so easy.

Unfortunately for buyers, there is still a lack of inventory in most markets around the country. Our local market is no different with only a 2.7-month supply of available properties as of the end of May, higher than last year but still well below a 6-month availability, which is considered a healthy market.

The challenge for buyers has a lot to do with increased mortgage rates. Purchasing a home that is fully renovated may cost more but if the buyer is qualified, this additional cost can be financed and become part of the overall underlying mortgage. Even at today’s higher rates, 6.67% on average at the end of June, it’s still better to have the work done before purchase than to renovate after purchasing. Coming up with the cash to renovate or finance the renovation is also subject to today’s higher interest rates and shorter repayment terms.

The challenge for sellers is that they are no longer getting multiple offers on their property no matter what condition it’s in. According to the National Association of Realtors, sellers are receiving an average of three offers now, compared with around six a year ago. The consensus is that renovated properties sell quicker than unrenovated properties, which appears to be true for both primary homes and second homes.

Real estate professionals feel that anything that sits on the market for more than a month is usually either overpriced or in need of significant repairs or updates. In Manatee County as of the end of May, single-family homes were in contract an average of 32 days from listing. How long a property is on the market can be influenced by a variety of factors. Here in Florida, the season is a major factor. The market traditionally slows down in the summer, so there are fewer buyers in the pool. That said, some buyers simply have no choice but to purchase a home that needs renovation.

Despite fewer offers on properties, the prices haven’t declined as much as many economists expected. Because of higher mortgage rates, current homeowners are reluctant to sell their properties, keeping the supply of homes on the market lower than normal. Home prices peaked in June of 2022 and declined until January of 2023 when they started to recover.

However, even homes that need renovations are still selling near the list price or slightly higher because there aren’t enough homes on the market to meet the demand. Nationally, the median existing-home price fell 3.1% in May from a year earlier to $396,100, according to the National Associations of Realtors. Manatee County’s median single-family home price at the end of May fell by 6.4% to $515,000.

Buyers with busy lifestyles are less inclined to buy a home requiring major renovations. This is especially true for many buyers in our area who are second homeowners and live out of state. It’s difficult to manage a home renovation when you’re local but almost impossible from 1,000 miles away.

Nevertheless, if you’re in the market for a project, and have the funds to renovate and manage the project, you may be able to come out ahead. Picking your kitchen cabinets and bathroom tile does have an advantage and is nice work if you can get it.

Castles in the Sand

Is having two homes too much?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

This column is all about being careful what you wish for. Some people love their childhood home and long for the day they will inherit it from their parents. Others know if they just had that beach house their life would be complete. Well, I’m here to tell you that both dreams do not come as easy as you might think.

Inheriting the family home has been a tradition in the country for a century. It made a lot of sense to children who needed the space and location where they grew up for their new families. It wasn’t uncommon for siblings to make arrangements to buy out other siblings who wanted the property and, mostly, it was a good idea and worked.

Now, however, the family home may be worth a lot more than anyone in the family anticipated. Higher mortgage rates can make it impossible or impractical for any of the heirs to maintain the property or buy it outright. In addition, tax liabilities need to be calculated by a professional to determine if or when the best time to sell is.

If keeping the family home is a viable option for the heirs, then it might be a good option to use this windfall as a second vacation or investment home. Owning a second home comes with a long list of pros and cons, just ask any owner on Anna Maria Island. But, if you’re starting with a property that is inherited, you’re at least starting at the top of the pro list.

The biggest expense in owning a second home is financing it. Financing costs are typically higher for vacation homes with higher interest rates and larger down payments generally required. Fannie Mae and Freddie Mac have also raised fees for second home loans recently. If this is an inherited home, financing is not the issue, but there are plenty of other issues.

Coastal Florida, in case you haven’t noticed, is experiencing insurance premiums that are rising with shrinking options. The closer you are to the water, the greater your risk of flooding and wind damage in a storm, especially for older homes that may not have been built to current code. It’s certainly not impossible to get insurance on older properties but insurance companies are looking for new roofs at a minimum. In fact, you don’t even need to have a waterfront home for insurance companies to require a new roof before they will write insurance or give you a deadline for when that new roof needs to be installed.

Maintenance of a second home is always an issue, especially if the owner resides several hours or several states away. Maintenance companies will maintain issues in the home and check on it regularly if no one is there, but these services all come with a price. Renting a second home certainly is an option, but at the end of the rental, the property needs to be cleaned and checked for repairs. It’s a lot of work for owners and it’s not unusual for second homeowners to decide at some point it’s too much work for the time they use the property.

The flip side of this is the income that can be realized from second homes. Just look at the rental prices on Anna Maria Island. Again, consult your tax professional if you plan to use the property for both personal and business use. Every owner’s situation is different based on their personal use, the amount that can be written off and income.

There is no one answer for everyone. Owning a beachfront property or a ski-in, ski-out chalet may be your dream. Just be careful what you wish for.