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Tag: Anna Maria Island real estate

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.

Castles in the Sand

100 years of paradise

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

Anna Maria is celebrating 100 years of providing exquisite beaches and aqua water to beachgoers and visitors. The celebration started on Memorial Day and will probably go on for several months and rightly so since the Island is something to be celebrated.

Down through the years when I interviewed new business owners or friends who moved to Anna Maria Island, I always asked how they found it. Many of them came as children to visit grandparents and always vowed to return. One drove over the Manatee Avenue bridge because she was early to visit a relative in Bradenton and couldn’t believe what she found, buying a Gulf-front piece of property the same day on a credit card. And one of my favorite stories was when a couple on vacation in their RV drove over the Cortez Bridge and turned right instead of left. They too bought a home the same day and opened a business.

My personal story happened in 1995 when I was visiting a friend in Bradenton and was taken to Anna Maria for dinner. That was the first of many visits to the Island, including the one that sent us home to sell our house. In January of 1997, my husband and I rented a beach house on the Gulf side of North Shore Drive. It turned out to be one of the best vacations I ever had and I knew then this is where I wanted to be.

To say Anna Maria Island has changed since those years would be a vast understatement and the thing that has changed the most is real estate construction and values. May sales statistics released by the Realtor Association of Sarasota and Manatee is showing our market is still moving forward.

Single-family closed properties were up 17.2% compared to May of last year. The median sale price for single-family homes was down 6.4% to $515,000 and the average selling price for single-family properties was also down by 4.1% to $686,015. The median time to contract was 32 days, compared to six days last year. Pending inventory was up by 31.8% and the month’s supply of available properties was 2.7 months, compared to last year at 1.2 months.

Condo sales were up 5% when compared to May of last year. The median sale price was up 3.4% to $382,645 and the average sale price was also up by 37.3% to $606,255. The median time to contract was 37 days, compared to 6 days last year, and pending inventory was up 8.9%. The month’s supply of available properties was 3.4 months, compared to one month last year.

Condo sales had the edge this month in both sales and selling price, which in this market could change in a heartbeat. That said, the market is starting to settle down, as stated by the press release issued by the Realtor Association.

“Sarasota-Manatee housing market begins to stabilize but remains a seller’s market,” the press release said.

The summer months have always been the slow time in Island real estate, but don’t bet on that to continue when we’re in a seller’s market.

Anna Maria Island is so much more than its beaches; it’s a lifestyle I fear is slowly eroding just like the beach sand. If there is anything that can be done to slow this progression, I don’t know what it is. I only hope that our little paradise isn’t lost in the name of progress.

Castles in the Sand

Timing is everything

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

In life, sometimes it’s just luck that makes the life-changing decisions we make look genius. In real estate, the importance of the old adage, “location, location, location” is only surpassed by timing – and you can’t plan timing.

The summer of 2020 started the pandemic buying spree and combined with interest rates dropping to 3% it was all-out insanity. Nationally, the median number of days on the market in 2019 pre-pandemic was 30 to 40. In 2020 that number started to drop into the 20s and into the teens in 2021-22.

Florida in general has experienced a longer number of days to get properties into contract. Specifically, Manatee County, as of the last set of statistics released by the Realtor Association of Sarasota and Manatee, reports that single-family homes took 28 days to get into contract as opposed to 5 days last year. Most of this is a reflection of the low inventory available, slightly higher than last year but still historically low.

Buyers who were lucky enough to buy when mortgage rates were low and homes were still available will benefit from that decision for decades, affecting every other aspect of their life choices. Those buyers who missed the market blame themselves for taking their eye off the ball and not acting faster or not taking a risk. Some of this may be true, but frankly, no one during those years really knew what was going to happen. The entire population of the country was frozen in place both literally and figuratively, making decision-making difficult, especially for first-time and marginal buyers.

Similarly, the run-up to the financial crisis and the bursting of the housing bubble in 2008 was unpredictable. Buyers and investors were buying anything and everything for overinflated prices. When the bubble exploded, the value of their properties declined so much it took a decade for some of it to come back.

An economics professor at the University of Georgia presented this hypothetical I recently read. A buyer who purchased a house in June of 2020 for $300,000 – about the median for homes at the time – with a 20% down payment and a 3% mortgage rate would pay about $89,000 in interest over the first 15 years of a 30-year loan. By comparison, someone who bought at the same price in June of 2022 with a 6% mortgage rate would pay about $190,000 in interest over 15 years. Two years made an enormous difference.

But this is now and even if you feel you didn’t act three years ago, you can act now. Economists have always believed that homeownership is an important generator of wealth. They focus on moving forward, especially for young first-time buyers who have years ahead of them to create wealth. Americans have more faith in real estate that in any other investment. A recent Gallup survey indicated that 34% of Americans rated real estate the best long-term investment, down from 41% in 2021 and 45% in 2022.

The lesson here is that buying a home is a more important decision than when you buy that home. You have to be in it to win it, you have to be in it to create a family home, and you have to be in it to create the biggest generator of wealth this country has ever consistently had. Timing is important, but action is long-term.

Castles in the Sand

It can’t hurt to ask

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

In certain parts of the world, the marketplace is designed for negotiation. Don’t ever offer full price and don’t ever accept the first negotiation are two commonly employed strategies. It’s a culture that was pretty common in this country in generations past. Now it’s rare to purchase a car, an appliance or bike for your child and not pay the asking price.

Even purchasing a home during the past several years has almost lost the art of negotiation with values going crazy and offers being accepted at or well over full price. With the market stabilizing, buyers and sellers are starting to negotiate offers again, but there are other areas in the process of home buying where savings can be achieved. It never hurts to ask.

So, as a buyer or seller, you negotiated the accepted price of a home, but don’t think you’re done. I bet there are a few things you never thought of. They say a good negotiation is when both parties to the transaction come away thinking they left something on the table. Every property comes with stuff. It may be stuff that the buyer wants and the seller can’t take with them, making this a good starting place for negotiations.

Furniture is always negotiable even if the seller was planning on taking it. Furniture is expensive to move and, unless there are some valuable pieces, it may not make sense to hire a mover or shipper to relocate it. This is the time when the buyer can evaluate whether the furnishings have value and negotiate an offer to purchase. Not having to furnish a home can mean really big savings. Many homes in Florida come “turnkey” furnished and this can be a financial asset, especially for a second home purchase.

Everyone reading this lives on or near the water. What floats on the water? Boats. If the seller owns a boat and is moving to Colorado, it’s possible to take it off their hands, especially if the buyer was planning on buying one. This is a win-win for all parties. It’s the same with cars. Shipping a car that might be a few years old may not be cost-effective for a seller and buyers may be looking for another vehicle for their second home or their upcoming teenager’s driver’s license.

There are other ways to reduce expenses when purchasing a property, including negotiating with moving companies that are starting to see a reduction in activity. Try three different moving companies and see what the spread is. Moving companies also have other services like packing and unpacking which, if you ask, you can sometimes get a nice upgrade for not much more money.

As we know, mortgage rates have been fluctuating. Don’t be shy about negotiating origination fees, underwriting and loan application fees. Even the rate can be negotiated, just make sure the lender isn’t adding fees in the form of points to a negotiated interest rate. According to Freddie Mac, between 2010 and 2021, borrowers who applied with two different lenders reduced their mortgage rate by an average of 0.10%.

Sellers generally pay the broker commission on the sale of a property. Remember that realtor commissions are not regulated and can be negotiated as well. That said, I generally don’t like sellers negotiating realtor commissions since I think it can hurt the marketability of the property.

Good negotiating is an art. If you develop the skill to think creatively, you’ll be surprised how much money you can save. My mother grew up in the never pay full-price generation. Sometimes this was embarrassing, but most of the time she was right.

Castles in the Sand

More fraud red flags

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

Summer is here and while you’re sitting on the beach you might not want to think about real estate fraud, but fraudsters may be thinking about you. Over the past few weeks, we’ve gone over different kinds of real estate fraud, but there’s more – lots more.

Deed fraud is something most people don’t even think about. How can someone get a lender to give them money against the equity of your home or indeed take over your identity? It might be easier than you think.

There are many identity theft monitoring subscriptions you can purchase that will alert you if there is a new credit check on your credit report or a new loan or credit card. I have one of these and it is very effective, if occasionally annoying, especially if your credit card has an unusual charge which you know about. Nevertheless, I, for one, think it’s a good investment.

The one thing that may be more difficult to be alerted about is deed fraud, another form of identity theft. Deed fraud occurs when someone steals your identity, forges your name on a deed and takes title to your home. This can be more difficult than it sounds to sort out even if you know about it quickly.

Every state has different regulations on executing a deed of sale, but a sure way to check to see if your deed has been tampered with, especially if you have reason to believe this is the case, is to search Manatee County property records. This is a simple and quick process that involves just entering your name and finding your property records. You will see immediately if the deed has been transferred to someone else just like when you sell or buy a property. It’s a nice little habit to get into once a month considering that identity theft is on the rise.

Another popular fraud is wire fraud starting with scammers checking online multiple listings. They wait for a pending sale then profile as many parties to the transaction as they can and research email addresses. When you purchase or sell a property these days, most of the transaction is done online. With so many people involved in the transaction, there is sensitive paperwork flying around the internet. It’s easy for even the most trusted person to make a mistake or not check details, leaving that up to you as the buyer or seller. Look over everything carefully, don’t just do your online signature and move on to the next page.

There are red flags to look for before you sign off and these are just a few of a long list:  deletions, corrections or other alterations; someone other than the seller is shown on the sales contract; purchase price is substantially higher or lower than current market value; date and amount of existing encumbrances appear suspicious; real estate commission is excessive; chain of title includes an unknown interested party or the buyer and seller have similar names but haven’t disclosed a relationship.

Finally, you can keep up with scams by logging on to the FBI or the Financial Fraud Enforcement Task Force websites if you are suspicious of something related to your transaction or by emails you received online. Don’t open any emails that look official unless you’re positive it’s legitimate.

There are many anti-fraud acts enacted by states and the federal government. The most well-known one is the Dodd-Frank Act enacted in July 2010 as a result of the prior financial crisis. This act places regulation of the financial industry in the hands of the government to limit risk and enhance transparency. However, don’t assume everyone involved in a real estate transaction or an existing deed is competent and honest. As a homeowner and potential homeowner, you need to be proactive.

This may not be your favorite beach reading, but it is important.

Castles in the Sand

Condominium insurance and assessments

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

Does the talk of insurance make your eyes glaze over? If it does, join the club. Insurance of all types is complex and difficult to understand but in the case of homeowner’s insurance, condominium insurance and flood insurance, it’s getting worse.

I recently learned that condominium insurance in coastal areas is skyrocketing by as much as double over last year’s renewal. This is primarily because 2022’s busy hurricane and storm season left the southwest coast of Florida with unimaginable damage. Insurance companies have left the state leaving very few options for coastal communities. This has compounded the existing problem of fraudulent lawsuits being brought against insurance companies that would not reimburse for overinflated home repairs.

Now we’re also facing increases in flood insurance based on a 2021 FEMA decision calculating policy costs. FEMA’s new method is to equitably distribute premiums across all policyholders based on the value of their properties in addition to their location. The increases will give sticker shock to everyone in both single-family homes and condos. The good news is that readjustments will be phased in over a period of 10-15 years.

The challenge specifically to condominium associations is to come up with the unexpected premium payment. Most associations will need to special assess their owners which creates a potential problem for owners who are considering selling.

The Florida condominium rider requires a seller of a condominium to make the following representation: “Seller represents that seller is not aware of any special or other assessment that has been levied by the association or that has been an item on the agenda or reported in the minutes of the association within 12 months prior to the effective date of a contract for sale.” This is a mouthful, but it’s pretty clear language. The problem is when does a “potential” assessment need to be disclosed?

Like any other disclosure when selling property, always err on the side of caution and disclose everything. For instance, possible disclosures could include if an improvement that could lead to a future assessment is in the minutes from a previous meeting or on an agenda for an upcoming meeting, if there is any indication that an improvement could lead to a future assessment included in any mailing to any unit owner or even if a conversation with a board member indicates the possibility of an assessment.

Anything that even has a hint of a special assessment needs to be disclosed to a potential buyer to protect the seller from future liability. On the other hand, if a seller truly had no knowledge of the possibility of an assessment and it was never discussed at a meeting or was never an agenda item, the seller is likely protected from post-closing liability.

As far as insurance increases, there is a glimmer of hope. The lawsuits against insurers have been somewhat addressed by the Florida Legislature putting in place tort reform starting next year. Hopefully, this will encourage insurers to return to Florida’s enormous marketplace, creating some competition with the benefit of leveling premium costs.

We live in litigious times in a state surrounded by water and prone to hurricanes. Sure, it’s the price we pay for living in what most of us feel is a little bit of paradise. Nevertheless, stay on top of all the insurance issues and what your obligation is for disclosure with a clear eye.

Castles in the Sand

Too good to give up

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

According to Lawrence Yen, whom I quote frequently, “It’s a unique market condition.”

Coming from the chief economist for the National Association of Realtors, this is saying something considering all of the other unique markets we’ve lived through. This particular unique market is the continuation of a lack of inventory even though sales are down in most areas of the country including many parts of Florida, as well as ours.

The problem is that a large portion of homeowners in the country don’t want to sell. This group may actually want to sell and move on to a larger family home or retire to a smaller home, but they feel they are locked into very low-rate mortgages. The “golden handcuffs” homeowners find themselves locked into are keeping the supply of homes for sale unusually low.

The lack of properties is not the first time this has happened. The sub-prime mortgage crisis slowed things down, as did COVID-19 when buyers rushed to snap up larger homes when remote work and school necessitated more family space.

So, what happens when supplies go down or at least don’t go significantly up? Supply and demand kicks in and prices go up. A healthy housing market is traditionally described as having four to six months’ supply of homes. Right now, Manatee County is at 2.7 months for single-family homes.

However, builders are getting a boost from the lack of resales and are starting to build again now that the supply chain is improving. And home improvement contractors are also benefiting since those homeowners who are staying put are expanding and remodeling.

According to the mortgage data firm Black Knight, as of March 31, nearly two-thirds of primary mortgages had an interest rate below 4%. In addition, about 73% of primary mortgages have fixed rates for 30 years; these mortgages are “golden” and something homeowners won’t easily give up. Current mortgage rates are approximately in the mid-6% range and have fortunately been steady for a while.

The April sales statistics for Manatee County were released at the end of last week so it’s time to report what the Realtor Association of Sarasota and Manatee published.

Single-family homes in Manatee County hit a record median sale price of $570,000, 10.7% more than in April last year. This surpasses the previous record for median home prices, meaning so far, our local market continues to be strong relative to the country as a whole. Here’s the rest of the story.

Single-family homes closed with 4.3% fewer properties from April of last year. The median sales price was $570,000, up 10.7% from last April, and the average sale price was $735,779, up 0.9%. The median time to contract was 28 days versus five days last year. New pending sales were up 30.2% and the month’s supply of properties was 2.7 months.

Condos closed 15.8% fewer properties from April of last year. The median sales price was $380,795, up 8.8%, and the average sale price was $452,160, up 12.9%. The median time to contract was 27 days versus five days last year. New pending sales were up 4% and the month’s supply of properties was 3.5 months.

One of the advantageous side effects of this unique market is the fact that in spite of inflation and job layoffs, the housing market and housing prices may stay strong nationally. Not great news for marginal buyers or first-time buyers, but buyers with equity from a previous home and income to cover the additional mortgage rates will keep things afloat.

Unique can be a good or a bad thing; either way, we’re still struggling with a lack of inventory.

Pines Trailer Park purchase offer accepted

Pines Trailer Park purchase offer accepted

Written by Joe Hendricks on . Posted in Bradenton Beach, Community News, Featured.

BRADENTON BEACH – A May 8 letter Largo-based attorney David Luczak sent to the Pines Trailer Park Homeowners Association board members addresses the sale of the waterfront mobile home park. The accepted purchase offer appears to give the Pines Trailer Park’s permanent and seasonal residents at least five years to remain in their mobile homes and make their future plans.

The pending sale follows the Pines Trailer Park residents’ unsuccessful efforts to form a co-op and raise enough money to purchase the mobile home park owned by Richard and William Jackson’s Jackson Partnership LLLP.

Pines Trailer Park purchase offer accepted
Some of the mobile homes in the Pines Trailer Park have direct waterfront views. – Joe Hendricks | Sun

Luczak’s letter begins by saying, “As you know, this office represents the owners and management of the Pines Trailer Park. In accordance with the provisions of Florida Statutes 723.071(2), we hereby notify you that we have received a bona fide offer to purchase Pines Trailer Park. We intend to consider and accept this offer. The terms are as follows:

  • Purchase Price: $16.25 million, which includes all park-owned mobile homes, recreational vehicles, equipment, materials, vehicles, buildings, etc.
  • Initial deposit: $1 million non-refundable deposit within three days of the execution and delivery of the purchase and sale agreement.
  • Due diligence: The due diligence period shall run for 15 days from the date of the execution of the purchase and sale agreement.
  • Additional deposit: At the end of the due diligence period, the buyer shall deposit an additional $1 million. At that time, the entire $2 million deposit shall be non-refundable.
  • Closing: Forty-five days from the successful completion of the due diligence period this transaction shall close unless extended by agreement of the buyer and seller,” according to Luczak’s letter.”

Luczak’s letter does not identify the person or entity purchasing the park.

The final term of the offer appears to allow the current Pines residents and mobile homeowners five to seven more years to remain in the park:

  • “Seller financing: Seller to hold a purchase money mortgage on the subject property in the amount of $8.125 million at 4.5% interest payable with interest-only payments for five years and no right of pre-payment. Buyer may not seek a land use change during the period of the mortgage financing. Seller may agree to a two-year extension on financing with interest-only monthly payments and the same terms as the original five-year mortgage,” according to Luczak’s letter.
Pines Trailer Park purchase offer accepted
Several residents’ meetings were held inside the Pines clubhouse. – Joe Hendricks | Sun

While attempting to raise the money needed to buy the park, the Pines residents and homeowners participated in several community meetings that were held in the Pines clubhouse building. The printed minutes for the April 18 meeting address the rezoning that would be required in order to redevelop the Pines property as something other than a mobile home park.

“The new purchaser of the park will have to get the property rezoned in order to change the land use from a resident park to something else. It is hard to guess how long that process would take,” according to the April 18 meeting minutes.

Rezoning the Pines’ property from its current M-1 Mobile Home Park District zoning designation would require the approval of the Bradenton Beach City Commission after the proposed rezoning is first reviewed by city staff and the city’s planning and zoning board.

Related coverage

 

Pines purchase efforts fall short

Castles in the Sand

Fraud by any other name is still fraud

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

For many of us who hold Florida real estate licenses in the state, you will be renewing this year. Renewal is pretty easy, it’s a 14-hour open book test and a state fee. Every renewal period addresses different aspects of real estate and this year one of the modules, as they’re called, addresses fraud in real estate transactions, specifically in real estate financing. So, I’m sharing some of what I’ve learned with you.

Mortgage fraud manifests in many ways, so many that it’s impossible to review every law-breaking scheme creative fraudsters come up with, however, mortgage fraud is at the top of the list. Any misstatement, misrepresentation or omission of information that lenders relied upon to fund the purchase of a property is considered fraud.

An outright lie by a homeowner or their broker relative to a structural defect for example, is fraud. Likewise, fraud can also be the omission of a material fact that involves the structure of a property, like not disclosing that you have a leak in the bedroom from the roof and simply painted over the stain. This all goes back to the seller’s disclosure obligation as we discussed several weeks ago.

An anxious seller may also commit fraud by improving the financial position of a marginal buyer by offering them cash, enhancing their ability to qualify for a mortgage. Any money exchanged between a buyer and seller without the knowledge of a mortgage lender that affects the value of the property could be viewed as fraud. This isn’t to say that a buyer can’t offer their furniture for sale to a seller for a dollar amount separate from the purchase price.

Anyone who has applied for a mortgage since 2010 wonders why their lender is putting them through financial hoops and asking all kinds of questions, requiring a variety of documents to prove who you are and a signature on multiple disclosure forms. The answer is that in the wake of the financial crisis, The Dodd-Frank Act was enacted in 2010 and added a whole new level of regulations affecting the financial industry. Nevertheless, there is still room for fraud.

Probably the most frequent fraud by buyers is not being truthful about their income and/or their other financial obligations. Income that cannot be verified because of self-employment or being paid off the books is a red flag for lender underwriters. Likewise, not disclosing what your actual monthly debt obligation is and getting away with it is fraud and punishable by the law. Fortunately, lenders will pull a credit report and, most of the time, will know if you have more than one mortgage on your current property, a car loan or credit cards you have not disclosed.

Also, lender applications will ask what the intended use of a property is. If the buyer is intending to set up the property as an income rental but does not disclose this to the lender, this too is fraud. Buyers who are intending fraud may also misrepresent the value of the property in order to qualify for a larger mortgage. This is where property appraisers come in. The majority are honest, but when a dishonest appraiser works with a dishonest buyer they can produce a fraudulent appraisal. This particular fraud was not uncommon in the run up of the financial crisis where loans were placed on properties because of fraudulent appraisals and/or misrepresentations of buyer qualifications.

Where there’s money there’s fraud and I’m saving a few other frauds for another week. Be careful out there. There’s always someone out to get your money. You need to outsmart them.

Castles in the Sand

Packing up the wealth

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

Pity the poor governors of some of the large metropolitan areas in the Northeast, West and Mid-west. Specifically, New York and Illinois, where their mostly wealthy and upper-middle-class residents are packing their bags and their money and heading to other states where they think they will be more appreciated.

The IRS’s adjusted gross income statistics show a startling pattern of migration within the United States; two of the most astounding states are Illinois and New York. The IRS data shows a net 105,000 people left Illinois in 2021, costing the state approximately $10.9 billion in adjusted gross income. That’s up from $8.5 billion in 2020 and $6 billion in 2019. New York’s income loss increased to $24.5 billion in 2021 from $19.5 billion in 2020, and $9 billion in 2019. In addition, California lost $29.1 billion in 2021, more than triple what it did in 2019.

By comparison, the lowest tax states kept adding income even during the COVID-19 pandemic. Florida, a state with zero income tax, gained $39.2 billion, up from $23.7 billion in 2020, and $17.1 billion in 2019. The states that contributed the most to Florida’s billion-dollar bonuses were New York, Illinois, New Jersey and California. Florida certainly isn’t alone – many other low-tax states like Texas, Arizona and Nevada have also benefited from this wealth migration. In addition, Florida and other low-tax states led the country in job growth. Florida’s employment grew 4.5% over the past year and Illinois’ gain was 2.2%.

As great as Florida’s wealth gain is, we have dropped out of the Emerging Housing Markets Index compiled by Realtor.com. Although Florida regions have typically been in the top 10, in some of our smaller and growing areas they are not within the top 10 on this most recent index. This is the good and the bad of being a very popular state. Everything becomes more expensive and housing costs, as we all know, are not nearly as affordable in Florida as they once were.

The first quarter index indicates that buyers demand affordable homes and most of these are in the small Midwest cities. The top-ranking area is Lafayette, Indiana and the 10th ranking is the Manchester-Nashua, New Hampshire region. The index ranks the 300 biggest metro areas in the United States. In addition to housing market indicators, the index incorporates economic and lifestyle data. Real estate taxes, unemployment, wages, commute time and small business loans are all factored in.

Finally, I would be remiss not to point out that as of May 1, Fannie Mae and Freddie Mac, the quasi-government agency that controls and insures most of the residential mortgage financing in the country, has changed some of the agency’s mortgage pricing.

The new rules add fees for many borrowers with high credit ratings and large down payments and use them to reduce the cost of borrowing for those with lesser credit ratings and smaller down payments. There is a formula that factors in the borrower’s credit rating and the down payment, but the spirit of the change is to support lower-income homebuyers who, in the opinion of the Federal Housing Finance Agency that regulates Fannie Mae and Freddie Mac, have the “financial capacity to sustain a mortgage.” Congress is naturally taking a look at this new fee schedule and comparing it to the subprime debacle prior to the 2006-07 financial meltdown.

Next time one of the high-tax states evacuees move in next door, greet them and their bags of money. Florida has indisputably changed from when my parents moved here in the 70s and I’m pretty sure they would think it’s a good thing. My father always said Florida has the best roads in the country. He should see the traffic now.