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Tag: Florida real estate

Disclosure vital in ‘stigmatized’ property sale

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

You may think in the land of sunshine, surf and sand there can be nothing defined as stigmatized. Maybe not, since the word can mean different things to different buyers.

The National Association of Realtors refers to “stigmatized property” as a property that has been psychologically impacted by an event occurring on the property, even where there was no physical harm to the property.

The typical property that is considered stigmatized by events occurring there is one where a crime occurred. A violent crime is a problem for both buyers and sellers. Buyers may not feel comfortable buying the home since they might be uncomfortable living in a property with a violent history. Because of this, sellers may face the possibility of an adjustment to their price or a renovation to remove any reminders of the event. Two infamous stigmatized properties are the house in Fall River, Massachusetts where Lizzie Bordon is said to have murdered her father and stepmother in 1892. The Borden house has been turned into a tourist attraction for those with a macabre interest. And, of course, the most well-known murder home in the country is where actress Sharon Tate and four others were murdered by the Manson Family cult in 1969. The Los Angeles house was ultimately demolished and a new home with a different address was built in its place.

A price adjustment can depend on whether the property has any notoriety attached to the violent act, especially if the event was reported in the newspapers with details and police involvement. A death on the property, whether natural or suicide, is less of an issue to most buyers. Nevertheless, in the real estate market, we’re experiencing a shortage of available properties. Buyers may be willing to overlook many negatives, especially if the pricing is favorable.

Another potential problem for sellers is not necessarily a property stigmatized because of a death or violent act, but because it is out of the norm for the region. For example, something quirky about the property, whether it’s construction or decorating that can’t be easily removed.

One-of-a-kind architectural properties not compatible with everyday living, actual castles, or castle-like construction, and caves built into the side of a mountain are all examples of stigmatized properties. The problem here is the narrow market for unusual properties and the impact that may have on their value.

The National Association of Realtors goes on to say that selling a property with a reputation may be difficult. In Florida, state laws do not oblige a seller to reveal extraordinary occurrences such as a crime, suicide or unnatural death that occurred on the property or even cases where there are reported hauntings.

However, sellers and their agents would be advised to disclose all potential psychological negatives about the property. Hauntings might be a stretch to disclose but certainly, deaths of any kind could come back to haunt the seller if withheld.

That said, there are certain disease-related negatives that buyers may want to know about, like AIDS and COVID-19. This is a very gray area and may be considered a protected class and not able to be disclosed. This type of situation requires careful consideration and legal input if you are an owner getting ready to sell a similar property.

Like all discussions about disclosure, whether it’s water pipes or death, always best to be cautious and disclose. Grandma’s ghost and nasty sharks in Tampa Bay may be exceptions.

Castles in the Sand

Honesty is such a lonely word

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

In 1978, Billy Joel won a Grammy Award for his song “Honesty.” The premise of the song was how dishonest relations between lovers can be. But honesty, integrity and straightforwardness of conduct are key elements in a real estate transaction, which essentially is a relationship between people.

It’s been a long time since I wrote about property disclosures when purchasing primarily residential property, so it’s probably time for a few reminders.

In real estate purchases, the buyer needs to be aware of potential problems with the property and employ the proper inspectors to inspect and verify the home is free of major defects. Helping buyers in this area are Florida state laws that require sellers to disclose defects before the property closes. Since 1985, Florida law has provided that with some exceptions, the seller must disclose any facts or conditions about the property that may have a substantial impact on the value or desirability of the property that may not be visibly obvious.

The Florida Association of Realtors provides a standard form that covers many common property characteristics about which buyers want to know. Some of these items are potential claims or court proceedings; nature of condominium or HOA associations rules; boundary issues; status of any sinkholes; any environmental hazards such as asbestos, lead paint, mold, Chinese drywall; damage from wood destroying organisms; flooding or ground leaks; disclosure of the condition of major systems such as central air and heat, plumbing and electrical systems and brands and condition of appliances.

Although sellers are not required to complete and sign this form, they are still required to disclose all relevant information to buyers even when it may not be obvious. The disclosure of hidden problems is, of course, the most important information, and I would be careful if a seller refuses to put in writing the property disclosure information.

Sellers do have some protection regarding disclosure; they are not required to disclose those property defects of which they have no actual knowledge. If buyers discover a material problem after closing, the onus is on them to prove the seller knew about the defect and did not disclose it, as well as justify that the defect has had a substantial impact on the value of the property.

In addition, homeowners do not need to disclose to buyers if the property has been inhabited by a person infected with HIV or AIDS or that a murder or suicide has occurred or is suspected to have occurred on the property. I would add that reports of a property being “haunted” also do not have to be disclosed.

A word of caution: Homeowners may think that if they are selling the property in an “as is” condition, that absolves them from the requirement of full disclosure. This is not the case and sellers will have to disclose any material defects even if the property is listed as “as is” condition.

The lesson here is that buyers need to do their due diligence to uncover any hidden problems in a property. Sellers must adhere to the principles of honesty in making any pertinent disclosures to buyers and instill confidence in the buyers.

Billy may have had it right in 1978 when he wrote “everyone is so untrue.” But I prefer to believe that most people are basically honest and transparent; hopefully, I’m not wrong.

Castles in the Sand

Rate sensitive

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

Mortgage rates appear to be controlling the real estate market across the country. My new favorite term is “rate sensitive.” This means that a buyer who would have been happy at 6.75% ran for the hills when the rates rose to 7%, about where they are as of this writing for a 30-year, fixed-rate mortgage.

I’m not dismissing the importance of rate increases in real money to buyers’ budgets, but nevertheless, a lot of them are walking for not a lot of money. To be fair, a one-point increase in a mortgage rate would have the same effect on affordability as a 10% increase in home prices, per First American Financial Corp. This could eliminate the buyer from qualifying for the home they are currently considering, lower their home buying expectations or cause them to disappear completely from the marketplace.

Earlier in the year when the rates were solidly in the 6% or a little over range, buyers were on the move. This may explain why our Manatee County statistics this

month show more pending properties in February 2023 compared to January 2023 even though the annual trend has been going down monthly. This was a surprise to many professionals in the housing market who now think that gain may be given back. The general consensus is that buyers now are much more cautious and are paying more attention than the people that were buying last year.

Here are the February sales statistics for Manatee County reported by the Realtor Association of Sarasota and Manatee:

Single-family homes closed 10% fewer properties than last year. The median selling price was $490,000, up 2.5% from last year, and the average selling price was $639,562, down 7.7% from last year. The median time to contract was 39 days compared to six days and the month’s supply of properties is 3.1 months compared to 0.6 months last year.

Condos closed 21.1% fewer properties than last year. The median selling price was $369,900, up 13.8%, and the average selling price was $435,748, up 17.3% from last year. The median time to contract was 29 days compared to 5 days and the month’s supply of properties was 3.4 months compared to 0.5 months last year.

March and April generally are busy months for closings in Florida before buy- ers return north. The next two months may tell a slightly different story, but there is no doubt that higher interest rates are having an effect.

One quick note about your home’s as- sessed value. Property taxes across the country have risen in recent years based on the increased value of your home. When you receive the new assessment and tax bill, don’t just file it in one of those folders that you’ll never look at again. Read it over for errors that could be anything from the size of your lot to the size of your home and the size of your new pool. Don’t be afraid to contact the assessor’s office and review this with them.

It’s also a good idea to stay on top of the recent sales in your neighborhood. Zillow, Trulia and Realtor.com will give you just about anything you need to know in addition to the Manatee County public records. If you really feel your home has been appraised higher than it should be, you can ask a licensed Realtor for an evaluation or a licensed appraiser. A Realtor may prepare an evaluation as a goodwill measure, but a licensed appraiser will charge a fee, however, an appraiser’s evaluation may hold more weight. And don’t forget to apply for any exemptions you may be entitled to.

We are living through a sensitive time for just about anything related to finances. Keep the tissues handy and your head on straight.

Castles in the Sand

Condo ownership and Florida law

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

I have a condo personality. Not everyone does, but I do. Down through the years, I’ve written quite a bit about condo ownership, culture and personality. I have very happily been living in a condo for over 20 years; it suits me. I despise gardening, cleaning the pool and worrying about the roof, all of which were part of my previous everyday life. But there is one aspect of condo ownership that frankly I haven’t thought much about until the last few years.

After the collapse of the residential condo building in Surfside, there were developers hovering around older condo buildings, especially those with Florida’s most precious commodity, waterfront locations. The interest in these buildings became more intense after the subsequent passage of a Florida law that requires most condo buildings over 30 years old to undergo structural inspections and correct structural failures. Owners and their boards of directors were approached by developers and started conversations about condominium termination rather than perform expensive repairs many long-time owners couldn’t afford.

Florida condominiums are by definition considered legal entities, just like corporations. They have boards of directors, owners, financial budgets and reserves and creditors. It’s different from single-family homes in that once you become an owner, you become part of this legal entity as just one of its unit owners. And that, of course, is where the condo personality or lack thereof comes in. If you don’t like making decisions by committee, better keep looking for the single-family home.

Condo terminations have been more prevalent in Florida than in other parts of the country because of the large number of aging condo units in South Florida and the lack of developable land near the water. According to the Florida Department of Business and Professional Regulation, over the past decade there have been at least 400 buildings that have undergone condo termination.

So how do you actually achieve a condo termination? All condominiums have bylaws that address condo termination and what the required number of owners must agree to in order to take this action. Some are 80%, some are less, and some are 100%. Realistically, under the best of circumstances, getting 100% of anything is virtually impossible.

In 2007, the state of Florida stepped in and passed legislation that essentially contradicted some condo bylaws by allowing 80% of the condo unit owners to agree to dissolve or terminate the condo regardless of what was written in the original bylaws. The state decided it was to the advantage of current owners who were considering condo termination but were stuck. This was also during the period of foreclosure fraud and the real estate crisis impacting the country. The statute goes on to say that once a developer acquires 80% of the units, it can terminate the condo.

Granted, it appears the law was decided in favor of developers, but individual owners are also benefiting. Some of the buildings being terminated would be staring down the barrel of major special assessments in order to bring the property up to code, making it unaffordable for owners and downgrading the value of their units. Developers state they are offering market value to owners, eliminating structural risks to the building and its owners and enhancing the aesthetics of the area.

Could this happen in Manatee County? Of course it could, but because we have height restrictions in many areas of the county, our waterfront condos may not be as tempting to developers. Nevertheless, all condo owners need to be aware of the change in legislation and the reality that termination of condos is happening in Florida.

In the meantime, my condo personality will help me overcome whatever happens.

Castles in the Sand

When old is too old

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

Last week we talked about interest rates and the effect they may be having on the national and local real estate markets. But what if you’re a senior citizen, retired and want to buy another home? There may be barriers to obtaining that loan you never considered.

No secret that lots of real estate is sold to seniors in the state of Florida, and not just Florida. The Consumer Financial Protection Bureau reports that 13% of all mortgages originated in 2021 were by people 65 years of age and older; that is over 1.9 million mortgages.

Nevertheless, older borrowers who no longer draw a paycheck and rely on investments and the interest they generate may have a problem proving to a lender that they have sufficient income and assets to qualify for a mortgage. This is especially true now as housing prices have gone up substantially over the past couple of years.

In addition, widows and widowers could have another problem qualifying if they have lost income after their spouse has passed. Frequently pension benefits are lost or reduced and Social Security benefits will also be reduced. A woman I met told me that after the loss of her husband, she couldn’t afford to stay in her house and didn’t qualify for a home equity loan to help with expenses even though there was adequate equity in the property.

Seniors who are depending on investments to cover living expenses will qualify if they are taking regular distributions from IRA accounts, which are considered income. However, if they are just withdrawing funds as needed, lenders may not consider that as income. Every lender is different, so finding one that has worked with seniors in similar positions is helpful. And of course, keeping your credit score up is essential, so be prudent when considering cosigning a car loan for your grandson.

Last week, we also reported on the sales statistics for Manatee County and the national sales statistics came out right around the same time. The National Association of Realtors said the number of closed sales fell 36.9% from last January; this is in line with our statistics that single-family closings were down by 31.7% in Manatee from last year.

Not similar, however, were the national median existing-home prices, which rose 1.3% in January from a year earlier. Manatee County’s median sale price for single-family homes was up 5.4% compared to last January. This should be expected when you see the selling prices on Island homes and other coastal areas in Manatee County.

Also, according to the National Association of Realtors, seven of the top 10 cities with the largest year-over-year increases are in Florida or the Carolinas. Sarasota is up 19.5%, Naples is up 17.2%, Punta Gorda is up 15.2% and Daytona Beach is up 14.5% – the Florida hot spots. Lawrence Yun, the Chief Economist for the National Association of Realtors, says, “Even with a projected reduction in home sales this year, prices are expected to remain stable in the vast majority of the markets due to extremely limited supply.” I would add that supply is gradually improving with the possibility of it impacting sales values.

If you’re a senior and are experiencing a problem getting financing, remember that it is against the law to discriminate because of age. But it’s not against the law to discriminate because of a lack of income. Use the tools available to get that mortgage done before the prices go up again.

Castles in the Sand

When the numbers are too high to count

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

Several years ago, I started writing a monthly column analyzing the over $1 million properties on the Island and in Cortez. Then, because of the volume of properties, I amended that to do the analysis quarterly. Now I’m faced with the reality of having so many properties over $1 million that it’s easier to count the ones under a million and provide an overview of what’s going on. And what’s going on is mind blowing, probably something I don’t need to tell you.

Little Cortez has 19 properties either available or pending. Twelve of them are $1 million or over, counting a $999,000 property. The properties start with $4,999,999 and several of the properties are part of the new Hunters Point community.

The city of Anna Maria, which everyone knows by now is the second most expensive zip code in the state of Florida, continues to grow. There are 80 properties either available or pending on the north end and only two of those listings are under $1 million. It starts at $12,775,000 and ends at $1,399,900 with only 16 properties between $1 million and $2 million.

The combined cities of Bradenton Beach and Holmes Beach have 172 available or pending properties. They start at $12,995,000 and end at $999,000. There are only 53 out of 172 properties listed under $1 million.

All of the above numbers are based on the available information as of this writing, which changes daily. Nevertheless, it’s pretty obvious that we have broken records and keep breaking them. But why?

It seems like the world is moving to Florida and based on the increase in population numbers it very well may be. The population of Florida in 2022 was 22,244,823, an increase of 1.91% from 2021. The population of Florida at the end of 2019, when the COVID-19 pandemic was just starting, was 21,492,056, an increase of 752,767 in just three years.

As a comparison, the state of New York for the year 2022 had a population of 19,677,151. You would have to go back to 2014, long before COVID was even a word, when Florida’s population was 19,853,880 to come close to New York state’s current population. The increases in Florida’s population show a consistent growth pattern, with only two states, California and Texas, having higher populations.

And there are other reasons for Florida’s expanding population. Certainly, the lack of state income tax is a huge draw for wealthy individuals and businesses alike. Florida has a lower budget by billions than other large states and a higher GDP rate. And, although our sales tax and some permitting fees may be higher than other large states, in the end, it’s generally a more affordable state to live in.

Finally, do I even want to go down the lifestyle road, something it’s impossible to put a number on? For the most part, properties are being bought by buyers from out of state and it’s not all about the money.

I guess I really do know the reason the sales numbers are too high to count and the population keeps increasing. In spite of some adjustments to the real estate market all over the state, chances are it will continue, especially when buyers and sellers realize it’s now or never.

Castles in the Sand

Building for rent, not sale

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

The American dream of single-family home ownership, according to certain builders and financial wizards who are paid to know these things, is on the decline. Well, maybe not a decline but certainly a shake-up in the way single-family home living is viewed.

If you haven’t heard of SFRs, which is short for single-family home rentals, don’t feel uninformed since I too just stumbled on it myself. Apparently, while almost everyone was consumed by the escalating single-family home market, the SFR snuck in and is now a hot area in the real estate market. So hot, in fact, that entire communities are being built by enterprising builders comprised of all single-family homes strictly for rent.

The National Association of Home Builders indicate that the $4.4 trillion SFR market is one of the fastest-growing sectors in real estate. They go on to say that single-family built-for-rent homes account for 11% of all single-family home construction in the housing market. This market share is way more than the 3% that was typical over the last several decades.

The demand for single-family rental homes fills a gap on several different levels. With interest rates going up and the price of homes going up, buyers are having a much more difficult time finding a home. So here comes brand new single-family home communities of smart homes with amenities and upgraded fixtures without any of the home ownership hassle. This has a lot of appeal to remote workers who may be transitory and may be more interested in holding on to their cash while still living in a home. Not to mention seniors who have sold their larger properties to cash in on their equity and don’t want to make another financial commitment.

This trend is happening even though rents on single-family homes have risen 10.2% year-over-year through September 2022 due to inflation, per CoreLogic’s single-family rent index. The most recent information is that the median rental cost for a three-bedroom, single-family, detached home is $1,900 per month nationally. Compare this to mortgage payments on a comparable home that have increased 50% since the beginning of the year. Buyers are doing the math and have determined that renting is a lot more cost-effective than owning in today’s market with interest rates double what they were two years ago.

There are a handful of companies around the country that are constructing built-for-rent communities and quite a bit of information is available on the internet about these companies and their homes. In Florida, I did find a few built-to-rent communities in Palmetto, Plant City and Wesley Chapel near Tampa, but so far Florida has not caught the built-to-rent bug on a grand scale.

We all know the benefits of owning your own home – building equity, pride of ownership, freedom to do what you want with your property and the consistency of neighborhoods not always guaranteed in rental communities. However, despite this, buyers are sitting out buying and waiting for what they think will be a single-family correction to the market. Investing their down payment money in high-interest savings accounts and waiting to see if the dust settles on the housing market has become a real development.

Real estate is always dynamic and hard to predict. Every buyer’s family and financial situation is unique so if SFRs works for you this might be the time to dive in. However, you may think interest rates are high, but historically under 7%, where they are now, is a good rate so if that’s the only thing stopping you from buying, think about it. Happy New Year!

Castles in the Sand

Homebuyers getting hit every day

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

Buying a home was once a happy time for families. Homes were plentiful to choose from, and imagining your grandmother’s credenza in the dining room and the Christmas tree in the living room front window made for happy thoughts.

Now, however, looking for a home is a stressful event if you’re just the average potential homeowner. Inventory is low, prices are high, and, of course, now we have to stress even more about the increase in mortgage interest rates.

As of June 23, according to Forbes, the average rate for a 30-year, fixed-rate mortgage was 5.89% and the average rate for a 15-year, fixed-rate mortgage was 5.13%. These numbers are slightly down. However, typically they are going up, forcing buyers to make some serious decisions, especially if they may not qualify for the additional monthly cost of the increased financing rate.

They can come up with more cash and apply for a smaller loan – usually not a good option for marginal buyers. They can lower their criteria for what kind of home they want at a lower price point and hope it exists. Or they can drop out of the market completely with the hope things improve in a year or whenever. Unfortunately, this is an option that is happening more and more as the interest rates and the selling prices keep going up.

New home buyers are getting hit even harder. Buyers who are in contract for new construction but haven’t closed are facing mortgage interest rates that are getting close to doubling since they agreed to purchase the home. In addition, they are also confronting construction that is taking longer than usual due to supply-chain and labor constraints. Some new home buyers also have to make difficult decisions; how long can they hold out while they’re watching mortgage interest rates go up and the construction on their new home crawling along?

Time now for the May Manatee County sales statistics published by the Realtor Association of Sarasota and Manatee.

Single-family homes closed 7.3% less than last May. The median sale price was $550,000, 37.5% higher, and the average sale price was $715,504, 26.1% higher. The median time to contract has not changed at six days but the month’s sup- ply of available properties has changed to 1.2 months availability. The good news is new listings are up 17.2%.

Condo sales were up 6.3% over last year. The median sale price was $369,900, 51.9% higher, and the average sale price was $441,674, 41.5% higher. The median time to contract is six days, the same as single family, and the month’s supply of available properties is one month. The good news for condos is also that new listings are up 15.5%.

A combination of higher interest rates and our normal summer slowdown is resulting in a fewer number of sales and more available properties on the market. However, prices, both average and median, remain very strong, according to the president of the Realtor Association, and are still increasing.

Making the biggest investment of your life has always been a stressful event, but it was also mixed with pleasant thoughts of the future and paint colors. Now, however, for the average buyer who needs to watch their dollars, the pleasant thoughts are gone, and they’re left with the stress. My heart goes out to them.

Castles in the Sand

Money flowing into Florida

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

I recently read an interesting historical novel about the wealthy landowners in the South in the years just before the Civil War. These privileged folks moved their entire households, including their money – carried in the form of gold transported in chests – to escape the summer heat. Well, things haven’t changed that much, only this time the money is in the form of wire transfers and the migration isn’t from a warm climate but to a warm climate.

According to the IRS’s report about migration of taxpayers between states, 2020 was a banner year for states with low tax policies, and guess which state accrued the most income? Florida had $23.7 billion more in income for 2020, followed by Texas with $6.3 billion and Arizona with $4.8 billion. Of the remaining top income-producing states, no one was even close to Florida, which stands alone in this area.

I probably don’t need to tell you where all of this wealth is being transferred from, but I will: California, Illinois, Massachusetts, New York, New Jersey and other Northeastern states. New York state lost the most income, topping out at $19.5 billion.

Obviously, the flow of money is attached to their owners moving to our state and looking for properties to purchase, which accounts for the following analysis of $1-million-and-over properties in our area. This report covers six months from Nov. 1, 2021, through April 30, 2022. The available and pending properties are from the realtor.com website and the closed properties are from the Manatee County Property Appraiser’s website.

In Cortez, currently on the market or pending there are three properties listed over $1 million;  at $4,750,000, $3,350,000 and $2,950,000. The new community of Hunters Point has several properties listed, all of them over $1 million, starting at $1,850,000.

Anna Maria has 44 properties listed or pending $1 million or over; three over $8 million, two over $6 million, three over $5 million, seven over $4 million, nine over $3 million, 17 over $2 million and three over $1 million. The combined cities of Holmes Beach and Bradenton Beach have 69 properties listed or pending over $1 million; one listed over $28 million, one listed over $14 million, one listed over $11 million, one listed over $19 million and one listed over $7 million. There are also four listed over $6 million, one listed over $5 million, five listed over $4 million, seven listed over $3 million, 24 listed over $2 million and 23 listed over $1 million.

As far as closed properties, Cortez had five over $1 million. Anna Maria had 82 over $1 million, two over $9 million, one over $7 million, two over $6 million, three over $5 million, five over $4 million, six over $3 million, 29 over $2 million and 34 over $1 million. The combined cities of Holmes Beach and Bradenton Beach closed 128 properties over $1 million, five over $9 million, one over $8 million, one over $5 million, 12 over $4 million, eight over $3 million, 26 over $2 million and 75 over $1 million.

All three areas increased their closed sales from the previous six months by approximately 30% to 50%. The available and pending listings also increased, but by a much smaller amount. In addition, the selling and listing prices are also higher than six months ago.

Our new residents may not have gold in their suitcases, but the cash keeps flowing into Florida anyway, and not for just a visit, as in years past, but for a lifetime. The rest of the country may be slowing down, but Florida isn’t getting the message.

Castles in the Sand

What does a mortgage broker do?

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

I’ve talked many times in this space about getting a mortgage for a home and how it is one of the most stressful aspects of purchasing. Many people don’t have the time to contact numerous lenders and comb through the details when shopping around and choose instead to go to a mortgage broker for help. But what do they really do and how much does it cost?

Mortgage brokers are licensed in the state of Florida and most states as well. They are financial professionals who act as the bridge between borrowers and lenders. They originate loans and help you connect with a variety of lenders who best fit your financial situation. Working directly with a bank will not give borrowers any flexibility in rates or loan requirements, however, mortgage brokers can offer buyers products of many banks and many more options. This is particularly important for buyers who may not have perfect credit scores and have small down payments.

In addition, mortgage brokers coordinate and manage paperwork and typically close a home loan faster than a traditional bank. They work in cooperation with real estate agents, underwriters, lenders, title companies and attorneys. They are part of the closing team and are trained to anticipate glitches and troubleshoot problems standing in the way of a closing.

There are disadvantages to using a mortgage broker. Since they are motivated to close as many properties as possible, keeping up with the hands-on service can be a challenge for them. It’s critical that you choose a broker who comes with a good recommendation from a friend, family member or real estate professional who has had recent transactions with the broker. Also, you must feel comfortable with the mortgage broker and feel you can tell them anything since you are essentially telling them everything about your personal finances.

Mortgage brokers are paid by commission by either the borrower or the lender. The fee is typically 1% or 2% of the total loan amount and usually is rolled into the loan in the case of a no-cost loan. However, be alert since rolling in the mortgage broker origination fee could result in a higher interest rate.  The other option is to pay a loan origination fee to the broker separately, again 1% to 2% of the loan amount.

Mortgage brokers are required to disclose all fees up front and can charge only that disclosed fee amount. Further, each fee should be itemized, and the broker should be ready to tell you, the borrower, exactly what each fee was for. Mortgage brokers, like real estate brokers, do not get paid unless there are a closed loan and a closed transaction regardless of how much work they do prior to closing.

After the financial crisis, the Dodd-Frank Act restructured how mortgage brokers get paid. Before this legislation came into effect, lenders could compensate mortgage brokers for getting their clients to agree to high-interest rate loans and signing off on costly fees. This left the door open to an unscrupulous loan broker and hidden fees, affecting many inexperienced buyers.

With so many details involved in purchasing a home, working with a competent mortgage broker whom you’re comfortable with can be a good idea to help you get through the process. They could be invaluable in procuring the best loan for your financial situation and taking some of the work off your shoulders.

More Castles in the Sand

 

Real estate winter

 

Is Anna Maria Island still Old Florida?

 

Happy new real estate year

Castles in the Sand

Real estate winter

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

It’s winter in southwest Florida and although we talk a lot about beach, road and Publix congestion, we really do love visitors to the Island. We, of course, would love them even more if the visitors converted to owners and not just on Anna Maria Island.

Florida and Arizona have built a real estate market catering largely to retirees, specifically baby boomer retirees. As much as we boomers want to continue influencing the culture and finances of the country, we will inevitably pass away. Not only do we have to face death we may also need to face not being able to live in our homes and migrating to family or assisted living facilities.

Now that I’ve completely ruined your day, these numbers will further depress you. According to Zillow, one in eight owner-occupied homes in the U.S., or roughly nine million residences, are set to hit the market from 2017 through 2027. In addition, Zillow calculates that by 2037 one-quarter of the U.S. homes for sale, or roughly 21 million homes, will be vacated by seniors.

This is a lot of real estate and a good percentage of these homes are in over 55 communities where at least one owner needs to meet that age criteria. These communities have been popular with baby boomers for decades. However, the concern is that the next generation of homeowners are not only looking for a different lifestyle but there aren’t even enough of them to fill the vacancies.

In theory, older homeowners are replaced by younger homeowners and the recent lack of available properties to purchase has kept many millennials stuck in rentals, so this should be a good thing. However, in the case of many of the baby boomer properties, the properties are located in areas where younger buyers don’t want to buy. Suburban living is less of a draw than for previous generations and millennials prefer cities and major metropolitan areas. In addition, even generations below the baby boomers who may be in pre-retirement years have little or no interest in living in planned, age-restricted enclaves no matter how great the weather is.

Economists worry about what the impact of unpopular large retirement communities will have on the local economy surrounding these areas. There are some market experts who suggest that a retooling of these communities to make them more attractive to families and lifting the age restrictions could be a better use of these properties down the road. Arizona and Florida are naturally in the crosshairs of potentially having an overabundance of senior housing. Thankfully for us, Florida’s east coast will be harder impacted.

Real estate markets are a balancing act. If one part of the market has a problem, another part may benefit from those problems. For example, the beautiful and exotic state of Hawaii.

Who doesn’t love Hawaii for vacations, but do you want to live there? Apparently lots of people don’t since Hawaii is experiencing the third straight year of negative migration, with the young, highly educated and well-off being the ones most likely to leave.

Hawaii has the highest cost of living in the country, and according to the Tax Foundation, the real value of $100 in Hawaii is $84.39. According to Zillow, the median list price for a house is $630,000 compared with $284,999 for the U.S. as a whole. In Hawaii, gasoline has been as high at $5.00 a gallon and a gallon of milk $7.00. Hawaiians may be going kicking and screaming from their beautiful state but they’re leaving for the same reasons residents of New York, California, Illinois and New Jersey are leaving – taxes, cost of living and public education.

Inevitably, we will see a dramatic change in the real estate market in the near future. Right now, the baby boomers still rule and will for a while.

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Happy new real estate year

 

Home ownership matters

Castles in the Sand

The Grinch that stole your real estate deal

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

If you’re in a home negotiation, whether you’re the buyer or seller you better watch out for the home inspection grinch. To the buyer, the grinch is a kindly and informed fellow who will uncover all of the home’s secrets and to the seller, the grinch is a nosey picky guy who when he uncovers all of your home’s secrets will tell the buyer. Whichever grinch you see he is a necessary evil to the purchase transaction.
Home inspections have become standard operating procedure for both single-family homes and condos all over the country. Generally, a seller is entitled to a home inspection within a specified number of days after both parties have signed the purchase of sale agreement and/or contract of sale. The number of days is determined by the culture of the region and the availability of inspectors in that region.
Inspectors are looking for defects in major systems like electrical, plumbing and heating and air conditioning. In Florida in particular, inspectors are very sensitive to mold and mildew and may use a moisture meter looking for damp areas behind walls from a plumbing leak. They will also check for water pressure in toilets, tubs and dishwashers, as well as the condition of appliances and outdated wiring.
If an inspection comes back with legitimate problems, the buyer and seller should come to an agreement and time frame for repairs. If they fail to do so, the contract is voided, the buyer gets their earnest money back and everyone walks away.
Some buyers will waive the contingency of inspection in an effort to make their offer more appealing, however, they may still have an inspection. This means that in theory if an inspector finds a problem the buyer cannot walk away from the contract and will forfeit their earnest money. But, as we all know, anything can be litigated, tying the house up in court while the buyer tries to get his money back or renegotiates a new price. The point is, be careful with a buyer who removes the inspection contingency as a strategy.
As a seller, there are a couple of ways to keep the real estate grinch away from your door. One is to have your own home inspection prior to putting your home on the market. This will give you a heads up on any problems you may not know about or may not think are serious. An inspection is also a useful tool to provide your broker with to pass on to potential buyers along with other disclosure documents. Buyers will likely still want their own inspection, but it will give them a nice warm feeling about the home and you as a seller.
Another positive to present to buyers is a gift of a home warranty that covers certain repairs to appliances, plumbing, electrical systems and heating and air conditioning units. Warranties are typically for a year and will cost about $700 for the average single-family home. According to the National Association of Realtors, only 17% of all sellers offer a home warranty as an incentive to potential buyers. Again, buyers will get a nice warm feeling about the transaction and it will also make your home stand out among others. Home warranties included in the sale should not, however, remove the home inspection from the buyer’s list of due diligence items.
Even though the inventory of homes is way down, sellers should still attempt to provide quality disclosure about their property and remedy serious issues. It’s the ethical thing to do and it’s the best way to keep the Grinch from stealing your real estate transaction.

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When did $100,000 not become enough?

Castles in the Sand

When did $100,000 not become enough?

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

Once upon a time if you were earning a six-figure salary you were sitting pretty. You could easily buy a home, make sure your kids went to the right schools and take that one family trip a year. Well, those days are over and have been for a while.

There has been a lot of talk about owning versus renting in the low inventory, high priced real estate market that has taken over most of the country. Some of the newly-minted renters are happy to be renters avoiding the responsibilities, cost and repairs of owning a home. But more and more high-earning Americans who would ordinarily own a home are renting.

In 2019 about 19% of U.S. households with six-figure incomes rented their homes. This is up from about 12% in 2006 according to the Census Bureau data. This increase is equal to about 3.4 million new renters who would have likely been homeowners a generation ago, and builders and investors of rental properties have taken notice.

Two of the largest single-family landlords in the country, Invitation Homes and America Homes 4 Rent, report that their average tenant earns $100,000 a year. These companies and others who are targeting this specific market say they like the high earners who aren’t interested in moving around and are willing to absorb regular rent increases and other financial blips in their lives. These are the people who previously would own a home.

Although a $100,000 income is still comfortably higher than the median household in the country at $63,179 in 2018, it’s still short to get into many homes. Americans today have more debt because of car payments, college loans, health care premiums and credit cards than their parents and grandparents who lived more prudently. Most middle-class Americans accumulated wealth by owning a home which was the great wealth leveler with half of the housing wealth owned by the middle class. This happened right after World War II when owning a home became the expected norm.

But norms change especially in real estate and young singles and families have no qualms about paying high rent for what their grandparents would have considered a waste of money. The danger here is that once you’re in an expensive rental it becomes harder and harder to save the 20% usually required to purchase a home creating a permanent renter class.

All of this said, there are indicators recently released by the Commerce Department that the number of Americans who own a home grew through the summer months. The homeownership rate modestly ticked up to 64.8% in the third quarter from 64.4% a year earlier. This number matches the highest levels in five years and is getting close to the long-run average of 65.2% of people in the country owning homes.

In addition, according to S & P Core-Logic Case-Schiller National Home Price Index, the average national home prices grew 3.2% in the year ending in August up slightly from 3.1% the prior month. And, of course, this is all on the background of still extraordinarily low mortgage rates staying below 4% in most regions on a 30-year, fixed-rate loan.

In the instant gratification world we live in, it’s not surprising that younger generations don’t care a fig about building wealth. That’s a concept so far down the road for many of them it might as well be in a different solar system. But I’m old fashioned, and it bothers me that homeownership may become a victim of the six-figure income. Say it isn’t so.

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Castles in the Sand

The fun and not-so-fun of selling a home

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

Last week we talked about the fun and not-so-much fun of buying a home. This week we’ll talk a little about selling your home, choosing the perfect realtor and not necessarily one you’re related to. But before we do that, let’s review the June and July Manatee County sales statistics as reported by the Realtor Association of Sarasota and Manatee.

In June, Manatee County closed 2.2% fewer homes than last year, not surprising for this time of year. In spite of that the median sale price, half above and half below, increased by 5% from last year to $315,000. The average sale price was $397,987, up 8.8%, and the month’s supply of properties is down to 3.6 months.

June’s condo sales increased for the number of sales by 6.1%, the median sale price was $210,000, up 14.3%, and the average sale price was $246,381, up 5.2%, all impressive numbers. The month’s supply of properties was 4.2%.

July single-family sales were down slightly by 1.8%, but the median sale price broke a record at $325,000 up 5% from last year. This is the highest median price since the housing crisis more than a decade ago and near historic levels. The average single-family home price was $391,049, up 2%, and the month’s supply of properties was down to 3.4%.

Condo sales were up by 8.7% with a median sale price of $191,000, down 4.1%. The average sale price for condos was $216,523, down 6.6% from last year and the month’s supply of properties was 3.7%.

Do these numbers give you incentive to find that perfect realtor and consider selling? Maybe, but remember statistics are only a snapshot in time and, although our sales and appreciation rates continue to go up every month, it could change in a heartbeat.

But just in case you’re ready to cash in, here are a few tips for choosing a realtor:

Although there are many questions you should ask a real estate professional before you turn over what may be your biggest asset to them, the two that are most important to me are how long have you been in residential real estate sales and what is your specific marketing plan?

Much of real estate experience is an on-the-job learning experience but choosing an agent who has accumulated a few designations or certifications shows a commitment to his/her profession. Certainly, you should ask if real estate sales are their full-time job. There are sales agents who get into the field thinking it’s a part-time job they can fit around their children’s school schedule. Trust me you don’t want this person.

As far as a marketing plan, the agent should be prepared to show you a written plan involving print advertising, open houses and digital participation. They may also include a pricing schedule suggesting a step-down pricing recommendation for 30, 60 or 90 days in the event offers are not coming in. As part of this plan, your agent should advise how frequently he/she will be in touch with you regarding showings and feedback.

It is also important for you to know how long homes in your area are taking to sell and the variation between the listing and final sales prices. I frequently note these statistics in my monthly updates for Manatee County because they are so important to the overall picture of the market.

Finally, giving your listing to a relative may look appealing since you already have a relationship and he/she may offer to reduce commission for you. However, it takes away the business aspect of the transaction and gets into the emotional aspect. My advice is don’t do it.

I’m looking forward to receiving the August Manatee County real estate numbers and hope you have a fun selling experience with a qualified broker.

More Castles in the Sand:

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The challenges of inheriting a house

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Castles in the Sand

The challenges of inheriting a house

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

No one wants to see a loved one pass away, but it’s inevitable that we all will have that experience and along with the grief comes the distribution of personal items and property. As emotional as sifting through your family’s papers and clothing is, the real challenge at this time of your life will be selling their property.

The important thing to be clarified before death is if there is a will or trust in place. Dying without a will causes the estate to default to the statutes of the state to determine who the legal heirs are. Needless to say, that will be a time-consuming and possibly costly process involving probate. Even a will needs to go through a probate process, however, living trusts will avoid probate. These are all legal issues which will need a legal opinion.

If there is a home to be sold and there is a legal will or trust, that responsibility will fall to the executor of the estate. The executor has the power to make all decisions but should certainly confer with all other beneficiaries to the sale of the house.

As in all property sales, decisions need to be made starting with a reasonable selling price. More than one estimate of value should be obtained from real estate professionals and a licensed appraiser should also be considered, especially if there are multiple heirs, to avoid any appearance of impropriety.

Whoever is handling the sale of the property should be prepared to spend some money before the home is sold. Property taxes, utility bills, lawn maintenance and unforeseen repairs all have to be considered prior to sale.

In addition, the property needs to be cleaned out of personal items and, based on the recommendation of a real estate professional, the furniture removed. There are companies that take care of this and any furniture not sold at an estate sale is removed by the estate person for a fee. However, the family will still need to decide which items will go into the sale, which will be passed along to other family members and which will get destroyed – not an easy process.

Then, of course, as in any property sale, decide whether renovations and/or cosmetic fixes should be made. Most professionals will tell you that this is not the time for major renovations. If necessary, cosmetic fixes would be a better choice. Cleaning, painting, yard and garage clean up is probably the most practical and least expensive way to go. Here again, the advice of a competent and experienced real estate professional is essential to understanding the local market.

Heirs who are in a tight financial position and need to sell quickly could consider one of the quick-sale companies as long as they are willing to take a discounted price. The heir’s tax consequences should also be considered before any money is spent and sale offers are considered, especially if the property has been in the deceased’s name for a long time.

Here in Florida it’s very common for parents to pass away and leave property in their estate to be sold by their heirs. This is a little more of a problem if the beneficiaries are out of state, but again because it’s common in Florida, there are several companies to assist heirs in the disposal of personal property and furniture.

Selling a family home is always emotional and more so on the heels of a loved one’s death. Ask for help during this time; it’s out there.

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Uncovering a home’s defects

How to determine the truth about home flooding

It’s all about the kitchen