Florida REALTORS® Districts 8 & 9 Conference

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On May 30, 2014 REALTORS® from District 8 and District 9 met in Panama City Beach for the annual District Conference. 

Events of the day included a personal visit from the Florida REALTORS® leadership team and support staff who gave an interactive report of the State of the Association. This presentation included a summary of the financial state of the Association and RPAC donations. It also included presentations on the strength of our advocacy efforts, video presentations which showcased the upcoming August Florida REALTORS® Annual Conference and some of the highlights of this event. The leadership team arrived in the “Believe” Tour Bus dedicated to travel across the state to each District, touching REALTORS® and their efforts to support the homeless in their areas. 

Second, came a lively, fun, and motivational presentation by Darryl Davis who spoke on “Living a Life Worth Smiling About.” Participants were entertained, were challenged professionally and personally to live, to encourage others, and to grow productively, noting tons of tips for organization and interaction with customers. Conference goers were also the first to receive Darryl’s new book, hot off the press.

The last half of the day was a nine session, open discussion, and participatory Real Estate BarCamp event where tips, expertise, and knowledge were shared on a variety of topics ranging from video and listing photography to international business and global engagement, mobile apps, and productivity of working with teams. A great day was had by all and ended with a happy hour by the beach where lots of networking and more BarCamp discussions took place. A dunking booth with local celebrities was located on the beach and over $700 was raised for RPAC as participants took turns attempting to “dunk-a-friend.” 

On behalf of myself and Vince Price, District 9 Vice President, we thank you for your participation.

Debbie Kirkland
Armor Realty of Tallahassee
Florida REALTORS® District 8 Vice-President

Preparing and Conducting a Real Estate Transaction

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With the real estate, title, and mortgage industry changing on an almost daily basis, it is imperative that every real estate agent is armed with the necessary knowledge to successfully close a real estate transaction.  Ask yourself about these three scenarios:

Jimmy Smith – Living in New York with property in Florida
Jimmy Smith was a mail-away listing, mail-away contract, and mail-away closing. When the title agent received the Warranty Deed from Jimmy along with his driver’s license, she was unable to close the transaction. Why was the closing cancelled?

The CFPB
Who is the CFPB and how do they affect the closing of a residential sales transaction when the buyer is obtaining a mortgage? Will there be more changes on the way and how will they affect the buyer, seller and real estate agents?

Evidence of Title and Survey
Pursuant to the Tallahassee Board of REALTORS® Contract for Sale and Purchase, the buyer is advised to have a survey on all transactions as well as owner’s title insurance. Why are these documents so important to anyone purchasing a property?

The answer to these questions as well a title company’s reliance on the Contract for sale and Purchase, a review of the title commitment, survey and tips for every real estate agent for a successful closing will be discussed during this three hour FREC credit course. Please join your host, Richard Santurri of Mang and Santurri and your presenter, Susan Dutcher of First American Title at TBR on July 9—earn three hours of CE credit and gain valuable knowledge.

“Preparing and Conducting a Real Estate Transaction: What Every Real Estate Agent Should Know,” provides 3 hours CE – register to attend this class, which will be held at TBR on Wednesday, July 9, from 9 a.m. – noon.

Susan Dutcher
First American Title

Mineral Rights

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Have you ever looked closely at a title commitment for the purchase of a property? It typically excepts from insurance coverage any parties’ rights to the minerals. The implications of this can be great.  At any given time a person with mineral rights and a right of entry can enter the property and explore and mine for minerals.  However, the key issue is the right of access. The typical title insurance commitment and resulting policy must contain the mineral rights exception pursuant to underwriting guidelines. The important question is does it also contain an exception for access for the mineral rights owner.

Mineral rights are important because Florida law recognizes the division of real property in layers. That is what allows the minerals contained under the ground to be sold separately from the property and its improvements – the surface property. When the minerals are sold or reserved in a conveyance, a separate estate is created. This subsurface estate can then be sold and conveyed separately from the surface property.   

The two most common means of creating a separate estate in the mineral rights are a conveyance or reservation. In a conveyance, a grant of the mineral rights is made to a third party. In a reservation, the party selling property reserves all rights, title, and interest to the mineral rights. Either way, the ownership of the mineral rights is severed from the surface property. In addition, with the grant or reservation of mineral rights, an implied access easement is created unless otherwise expressed. The implied grant of access is what allows a party the right to enter upon the property to explore and mine for minerals. The mineral rights owner often needs the right of entry to gain access to their property right. (There are other means a mineral rights owner can use to gain access, but they are not discussed in this article.)

In Florida, the Marketable Record Title Act (“MRTA”) changed an individual’s rights of access regarding mineral rights. Enacted in 1963, MRTA extinguishes a party’s right of access if the grant of the access does not occur within the conveyances and documents before the “root of title.” Root of title is a statutorily defined term found in Florida Statute section 712.01. In an example, if a mineral right is reserved in a 1930 deed, but there is another deed of record prior to 1984 that does not mention the mineral rights reservation, the right of access is extinguished by MRTA if it is not in use or was not renewed under the statutory provisions Florida allows. 

Mineral rights are something to be aware of when purchasing property in Florida, but to many property owners, mineral rights will not be an issue as the right of access has been eliminated under MRTA. However, when reviewing a title commitment prior to the purchase of property, make sure the mineral rights exception does not include the right of access.

Mary W. Colón
Smith, Thompson, Shaw, Minacci & Colón, PA

Understanding Florida’s Property Tax Amendments, Part Three

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As we continue the series on understanding Florida’s property tax system, we’ll explore the provision of the 2008 property tax amendment that allows homestead properties an additional $25,000 exemption. Simply stated, the amendment allows homestead properties to receive an additional exemption of $25,000 of assessed value. Combined with the original exemption of the same amount, this should equate to a total of $50,000 of exempt value. However, there are two rules that apply to the calculation. 

Rule one: The additional exemption applies to assessed value between $50,000 and $75,000. This concept is best illustrated in an example in the following table, where the taxable value is calculated using four properties with different assessed values: 

Comparison of Properties with Different Assessed Values

 

Property 1

Property 2

Property 3

Property 4

Assessed Value (SOH)

$50,000

$60,000

$70,000

$90,000

Homestead Exemption

$25,000

$25,000

$25,000

$25,000

Additional Exemption

0

$10,000

$20,000

$25,000

Total Exemption

$25,000

$35,000

$45,000

$50,000

Taxable Value

$25,000

$25,000

$25,000

$40,000

Notice that property 1 has no value between $50,000 and $75,000 that meets the criteria for the additional exemption. Property 2 has $10,000 of value between $50,000 and $75,000, and property 3 has $20,000 of value that meets the criteria for the exemption. Note how this creates a taxable value that is equal for these three properties. Property 4, however, with an assessed value of $90,000, is allowed all of the additional exemption of the value between $50,000 and $75,000. 

Rule two: The additional exemption does not apply to the taxable value of the school board. Using property 4 from the table above, the school board millage would apply to $65,000 ($90,000 – $25,000) while the millage rates for other taxing authorities would apply to $40,000 ($90,000 – $50,000). The exemptions for property 4 are illustrated below in an example of a TRIM notice using the various taxing authorities. TRIM, meaning “truth in millage,” are notices of proposed property taxes mailed from our office on or about the middle of August each year.   

Example of Property 4 – Taxable Value

Taxing Authority

Market Value

Assessed Value (SOH)

Exemption

Taxable Value

City

$100,000

$90,000

$50,000

$40,000

County

$100,000

$90,000

$50,000

$40,000

MSTU-EMS

$100,000

$90,000

$50,000

$40,000

School

$100,000

$90,000

$25,000

$65,000

Water Management

$100,000

$90,000

$50,000

$40,000

Notice the taxable value pertaining to the school millage is $25,000 higher than the other taxing authorities because of this rule. 

Both rules for this additional exemption can be summarized together as follows: the assessed value, between $50,000 and $75,000 is exempt for all taxing authorities with the exception of the school board. With the original homestead exemption of $25,000, there is a total exemption available of up to $50,000.   

Doug Will, AAS, CFE
Chief Deputy-Appraisal Services
Leon County Property Appraiser’s Office

Understanding Florida’s Property Tax Amendments, Part Two

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This is the second article in a series on understanding Florida’s property tax system, and the statutes regulating the assessment process. Previously, we reviewed amendment 10, known as the “Save Our Homes” (SOH) amendment, passed by Florida voters in 1992, which capped annual increases at a maximum of three percent annually for homestead properties. Remember, upon the sale of the home, the SOH value had to be reset to the current market value in the year following the sale. To help combat the effects of the resetting of the SOH, amendment 1 was born in 2008, containing four separate provisions relating to property tax issues. The portability of SOH benefits is one such provision.  

The portability of SOH benefits means if there is a difference between the market value and the assessed (SOH) value, the new home can enjoy that same benefit without having to be reset at the market value.  In other words, the SOH savings can be taken to the new homestead; they are “portable”.  Consider the following example illustrating the relationship between the market value and the assessed value over time.  As market values increase, and the assessed value is capped, a differential is created between the two.  For illustration purposes, three percent is used as the SOH increase even though in certain years the CPI was less.  This differential is the amount that is portable to the new homestead.  

 

YEAR 1

YEAR 2

YEAR 3

YEAR 4

YEAR 5

Market Value

$240,000

$254,400

$284,928

$296,325

$281,510

Assessed Value

$240,000

$247,200

$254,616

$262,254

$270,122

Differential

$0

$7,200

$30,312

$34,071

$11,388

 

Notice the differential in year three from the table. The difference between the market value and the assessed value is $30,312, which is the value that is portable to the new home if you were to move that year. The assessed value of the new property would be set $30,312 below the market value, and capped forward from there. 

Also, please note that in year five the market value decreased while the assessed value increased by three percent from year four, causing the portable value to decrease. This illustrates the independent relationship between the market value and the assessed value, and is commonly known as the “Recapture Provision.” Florida Administrative Code Rule 12D-8.0062(5) states: “where the current year just value of an individual property exceeds the prior year assessed value, the property appraiser is required to increase the prior year’s assessed value by the lower of”:

1)      Three percent; or
2)      The percentage change in the CPI.  

Essentially, the rule states that as long as there is a difference between the market value and the SOH value, the SOH will increase even if the market declines. As such, the amount of portability benefits tends to be a moving target that can change from year to year due to changing market conditions as illustrated in the table above. 

Next in this series, we’ll explore the effects of an additional $25,000 exemption for homestead properties, which is another provision of amendment 1 from the year 2008.   

Doug Will, AAS, CFE
Chief Deputy-Appraisal Services
Leon County Property Appraiser’s Office           

 

NAR Board OKs Mandatory Core Association Standards

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Editor’s Note: This is information taken from NAR Communications. The good news for the Tallahassee Board of REALTORS® is we meet or exceed all the Core Standards.

In a sweeping move to improve the professionalism of associations of REALTORS® across the country and the level of service they provide to members, the NAR Board of Directors passed a set of mandatory standards that touch on every aspect of association operations.

“This is an issue of professionalism in our industry,” said Andrea Bushnell, chair of the Organizational Alignment Presidential Advisory Group (PAG), which drafted the standards. “We want to ensure unity within—and the long-term viability of— the 100-year-old REALTOR® organization. All three levels of the organization must thrive together as a true and strong association, rather than acting as group of independent but federated organizations.”

Specifically, the country’s approximately 1,400 state, local, and territorial associations have to meet standards in six areas: 1) Code of Ethics education and enforcement; 2) advocacy; 3) consumer outreach; 4) organizational unification; 5) technology; and 6) financial solvency. Among other things, under the new standards, associations must:

  • Provide Code of Ethics training
  • Participate in Calls for Action
  • Make an effort to collect fair-share contributions to the REALTORS® Political Action Committee, or write a check to cover the fair share
  • Promote the value proposition of using a REALTOR®
  • Maintain a strategic or business plan
  • Maintain a website with links to other levels of the association
  • Meet minimum financial performance

Read more:

Legal Update: Judgments and Homestead

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Florida is generally considered a “debtor friendly” state. I know that may defy what all we hear about running the state like a business and having a strong ethic about everyone paying their debts. 

But the framers of our state constitution, and the amenders and legislators after that, have taken the position that your homestead should be sacred. They too have included special legislative provisions limiting some of the means of garnishment. And during the terrible recession, people have suffered court judgments who would never have missed the first payment to a bank, assuming they had the means. 

So judgments have been entered against people who own their homes. And with few exceptions, there is nothing the bank can do, if the property is their homestead. 

Those exceptions include actual mortgages on the home, construction liens for improvements to the property, and real estate taxes. 

But what happens when the homeowner wants to sell the homestead, and there is a judgment against the homeowner? The answer is he or she may sell it, and keep the money, if they follow certain steps. 

Judgments are mostly entered under Chapter 55, Florida Statutes, in order to become a lien on real estate, once recorded. A homeowner may follow, exactly, section 222.01, Florida Statutes, to bypass the lien and sell the property.

To do this, the judgment lien must be for $500,000 or less. The homeowner must record a Notice of Homestead in the county where the homestead is located.  The judgment must have been entered by a state court. 

The clerk of court must send the notice by certified mail to the holder of the judgment, at the address in the judgment. The judgment holder has 45 days to initiate a challenge to the notice of homestead. If not filed by then, the sale or refinance may proceed. 

The effect of this process is to then allow the owner 180 days to close on the sale or refinance of the homestead. If a challenge is filed by the judgment holder, either a bond will need to be posted to cover the judgment, or the sale or refinance has to be postponed until the challenge is concluded. 

This process does not apply to liens related to support, welfare, or public defender liens. 

The process is very detailed. It has been in effect since 2000 but only applied to liens up to $50,000; all others required a judicial determination. Now with the amount being raised to $500,000, the use of this tool may be more common. 

Joe R. Boyd
TBR Legal Counsel
Board Certified Real Estate Attorney
Boyd & DuRant, P.L.

Renovation is the New Affordable

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I recently took a buyer to view a property in the Jake Gaither/University Park neighborhood, a wonderfully canopied area close to a golf course and recreation center in Southside Tallahassee.   The property was not a foreclosure, just a seller trying to dispose of a family property at a fair price. The home, as far as we could tell, was in pretty good shape: the wood around the home looked good and not decayed, the interior of the home was extremely dated but charming, and research of recent permits revealed that the roof had been replaced in 2009. Upon home inspection, we found a few more issues of concern but nothing that was a deal-breaker. 

The buyer made an offer which put him at a payment of $720/month (PITIA), even with all closing costs paid by the seller and $20,000 in renovation allowance post-closing. In this area, homes comparable to this one rent for $900-$1200/month. This mortgage payment is less than 30% of his net income and his value range will be around $99,000-$110,000 post-renovation. Although the customer will not receive down payment assistance (DPA), they will qualify for the Mortgage Credit Certificate program through Florida Housing Finance, which will allow them to use 50% of their annual mortgage interest (up to a maximum of $2,000) as a direct federal tax credit, resulting in a dollar-for-dollar reduction of their annual federal income tax liability for as long as he lives in the property. 

That’s what I call affordable housing. 

In the past, there has been this mindset that deep subsidies are programs that “create” affordability by creating high-balance, silent second mortgages that deduct from the overall principal balance. However, with the availability of older housing stock in need of “re-visioning,” the strengthening and stabilization of local neighborhood home values in some pockets, and a local and statewide movement towards encouraging the renovation opportunity, affordability can be created through the negotiation process instead of taxpayer subsidy. This places incredible power in the hands of the REALTOR® to effect positive change and future value for their clients. As real estate professionals, we can appreciate this “paradoxical market” where the proportion of properties in judicial limbo, homeowners still facing mortgage crisis, and “new homebuyer optimism” provides the opportunity to make long-term impact through the facilitation of renovation sales.  

So allow me to state the obvious: people don’t generally want to purchase something they have to fix post-closing. Add to that the hassle of submitting bids through HUD, dealing with multiple-offer situations with Fannie Mae, and the fact that the majority of Lender Real Estate Owned (REO) have strict “For Sale As-Is” guidelines, even if the repair is documented on the appraisal—so the fear of getting stuck with an issue that may be a deal-breaker after investment in various inspections and escrow deposits is a real one. All of these are valid fears that can be overcome by REALTOR® expertise; relationships with trusted, licensed contractors; and working knowledge of lending programs for properties in need of renovation, such as FHA’s 203B with repair escrow, 203K Streamline, 203K Full Renovation, Fannie Mae Homepath, and Freddie Mac Homesteps Renovation loan programs.  

The most important lesson I learned from the past mortgage crisis is that my job as a REALTOR® is to ensure that customers are presented all options for purchasing a home that meets their aesthetic, geographic, and affordability criteria. I must also have a reasonable working understanding of how affordability undergirds the future health of the real estate market in our region. When potential buyers are provided options which meet the “strike zone”—that place where desirability meets affordability—we are setting them up for a successful journey in homeownership and adding to the long-term health and growth of our local real estate market.  

Editor’s Note: TBR members interested in renovation loan options should register for our upcoming Lunch & Learn: 203K and Renovation Mortgages from A to Z, taught by Ron Byrom, June 12, noon – 1:30 p.m. TBR Lunch & Learns are offered at no charge to members.

Christic Henry
Kingdom First Realty

Environmental Assessments of Commercial Properties

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Wetlands: Do Your Due Diligence 

Besides hurricanes, mosquitoes, pythons, alligators, sunburned tourists, sinkholes and snowbirds, what is one thing that you can always count on in Florida? How about water? Or, more specifically, wetlands. We have lots of those here in Florida, which is mostly a good thing.  However, when it comes to purchasing vacant land, it is important to understand the extent of wetlands on the property, and the potential they have to impact your client’s plans. 

What exactly is a wetland? Scientists define wetlands as areas where the soils are either permanently hydric (wet), or are wet for sufficient enough periods of time to support wetland-type vegetation. Wetland plants have adapted to thrive in soils where there is a lower amount of oxygen available to them. For obvious adaptations, think cypress knees or the long prop roots of mangroves. 

More than two-thirds of Florida’s original wetlands are long gone now, having been ditched, drained, and filled to make the state habitable for people. The State of Florida and the federal government are tasked with protecting our remaining wetlands by regulating land use concerning any proposed impacts to wetlands under their jurisdiction.  

When evaluating land for purchase, one of the first items on your list of things to do should be to determine the extent of wetlands on the property. Prior to paying for a full-blown wetland delineation by a professional, you can take on some of the preliminary investigation yourself during the due diligence period by looking at some of these nifty mapping websites: 

National Wetlands Inventory. Operated by the U.S. Fish and Wildlife Service, the “NWI” site has a Wetlands Mapper function that lets you view the federal government’s estimate of the extent of wetlands on a site. You can also export the Mapper to Google Earth for use when you are in that program. While the NWI is not always accurate, it can give you an idea of a parcel’s potential for wetlands. You should never rely solely on the NWI, as it is just an estimate that many times is achieved through aerial interpretation conducted in an office.

Web Soil Survey. This site is operated by the United States Department of Agriculture, and it can show you the extent of hydric (wet) soils on a parcel. Soils maps are reliable and fairly accurate, so this is an excellent site. The site also has information on soil structure and suitability factors, such as building sites, agriculture, and timber.

Land Boundary Information System. The State of Florida maintains this site, which has various map features. Digital Orthoquads use infrared photography that shows the extent of wetlands using different colors on the map. These maps are accurate and easy to understand. 

If you believe your potential development site contains jurisdictional wetlands, you should prepare your client that additional costs may be incurred to formally delineate the wetlands and to apply for permits for any proposed impacts. If the wetlands appear extensive, it may be best to walk away from the site and find a parcel more suitable for the desired project. 

Valerie Weeks
The Phoenix Environmental Group, Inc.

Understanding Florida’s Property Tax Amendments

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No matter where you live in the United States, if you own real estate, you must pay property taxes. According to a recent study by Zillow, a U.S. property owner pays an average of approximately 1.4 percent of their home’s value each year in property taxes. Of course, that “average” figure indicates some homeowners pay more while others pay less. Deciphering how property tax rates are set is not easy, and there is no single formula used by states and/or counties to calculate property taxes. This article begins a series designed to highlight the essential provisions of Florida’s property tax system, and the constitutional changes for the implementation of the tax roll.  

The “Save Our Homes” (SOH) amendment, passed by Florida voters in 1992, was the first of several changes to the administration of property tax in the state. The SOH language provides benefits to homestead property owners by capping the annual increase in assessed value at three percent or a figure equal to the percent change in the Consumer Price Index (CPI), whichever is less. Stated another way, as long as you own and occupy your home, and maintain your homestead there, your assessed value cannot increase more than three percent annually. As market values increased over time, this provided much needed relief for property owners. However, upon any subsequent sale of the home, the buyers could not continue with the SOH benefits from the previous owner, the assessed value had to be reset at the current market value. This “spike” in assessed value, and the resulting increase in property taxes, caused many escrow accounts to be short in the year following the sale. Statewide, this created a challenge for estimating property taxes to be prorated on the settlement statement, for buyers and sellers alike. 

The difficulty in estimating taxes for escrow accounts has been mitigated through a great working relationship between the Leon County Property Appraiser’s office and REALTORS®, title companies, and closing agents. Upon request, our office routinely sends tax estimates for a more accurate proration at closing. In recent years, the need for a more precise estimate of property taxes has become more important with the passage of an additional constitutional amendment. The next article in this series will highlight the first of several provisions relating to property taxes in Florida as a result of the passage of amendment 1 in the year 2008. Stay tuned.      

Doug Will, AAS, CFE
Chief Deputy-Appraisal Services
Leon County Property Appraiser’s Office