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          

DBPR Report: Recommend Licensed Contractors

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Help combat unlicensed activity by only recommending licensed contractors to your clients. 

After handing a client the keys to their new home, they mention a long list of renovation projects to turn their new home into their dream home. Or maybe after purchasing a fixer-upper, a client is faced with the reality of months of construction ahead of them. Choosing the right contractor can be a daunting task for many homeowners, especially if they have never supervised a major home renovation before, or are new to the area. If clients turn to you for advice or recommendations, make sure to only recommend licensed contractors. 

References are crucial to choosing a contractor to repair or renovate a home. Turning to reference sites, such as Angie’s List, is a helpful start, but does not replace approval from a trusted source. 

As a licensed professional, you understand the importance of working against unlicensed activity. The Department of Business & Professional Regulation takes unlicensed activity very seriously because it threatens the livelihood of Florida’s consumers as well as takes away business from licensed professionals throughout the state. Some of the dangers of hiring an unlicensed individual include poor qualifications, poor quality work, possible criminal background, likelihood of being the victim of a scam, limited resources for broken contracts, and no insurance and liability for injuries to others.   

To help protect clients when researching who to hire, they can ask for a second opinion to verify that the first estimate or assessment by a contractor does not contradict the second. They can also ask for a formal quote and should never make a payment or provide personal or financial information on the spot. Oftentimes, scams are committed by individuals who pressure consumers to make a decision on the spot by greatly reducing the price; they should be attentive to these high-pressure sales tactics and make informed decisions. 

The State of Florida regulates structural trades, such as roofing, plumbing, and swimming pools, which can impact or affect public safety; a general list of which services require a state of Florida license can be found here. To verify a contractor’s license, call the department at (850) 487-1395, visit the website at www.myfloridalicense.com or search on the DBPR Mobile app. 

Help your clients save time and the potential hazard of working with an unlicensed individual by always verifying someone’s professional license before recommending them for renovation projects. 

Florida Department of Business and Professional Regulation
www.MyFloridaLicense.com
850-487-1395

Professionalism

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“In this corner, weighing 175 lbs. (don’t judge), from Coldwell Banker Hartung and Noblin… Jimmmmmmm Butlerrrrrrrrrr!” 

This is how I feel sometimes during a transaction. It may be difficult at times dealing with the agent on the other side of the transaction, but I know I must. While we’re all here to make a living, and do the best work we possibly can, we’re also here assisting people with a life-changing event. Sometimes it takes that one customer to remind us what an enormous responsibility we have as REALTORS®, and we really need to be mindful of that. We need to be respectful not only to our customers, but to one another. 

     Etiquette: the code of ethical behavior regarding professional practice or action among the members of a profession in their dealings with each other.
     Respect: proper acceptance or courtesy; acknowledgement.  

These concepts seem to be forgotten at times. The other agent isn’t out to get you, or to steal your customer, or purposely ignore your calls, or any number of other negative scenarios that can run through your head. If you’re working diligently to get a transaction to close, most likely the agent on the other side is working just as hard – remember that! I recently had a transaction where the listing agent told me, “You know, working with you is so easy.” Granted, there weren’t any inspection issues, and just some small WDO repairs, but still, the lines of communication were always left open throughout the transaction.

Communication and respect are key – just put yourself in the other agent’s scenario. Would you want calls returned? Would you want answers quickly? Would you want documents emailed to you in a timely fashion? These simple tasks help you gain the respect of your peers, which is invaluable in this profession. 

The National Association of REALTORS®’ Pathways to Professionalism begins with the Golden Rule: to do unto others as you would have them do unto you. The importance of respect for the public, property, and peers is enumerated, and it concludes with the reminder that “[r]eal estate is a reputation business.” We live in a small community, and our actions are remembered, good or bad. So, let’s lose the gloves and treat one another with respect. 

Jim Butler
Coldwell Banker Hartung & Noblin

Legal Update: Title Insurance

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Inducements for Title Insurance

That is the title of the April bulletin of the Florida Land Title Association, the professional association dedicated to the interests of title insurance. Without title insurance, today’s real estate market would stop in its tracks. Gone are the days 50 years ago when only attorneys could issue title assurances in the way of title opinions, and that was only after an exhaustive search of an expensive title abstract. 

But the title insurance industry and those related to it, including REALTORS®, are expected to follow the law. Some are not doing so. 

We have said it every year: you, as a REALTOR®, cannot receive—and a title insurance may not give—anything of value in return for the referral of title insurance business. 

But the Florida Department of Financial Services, based in Tallahassee, in its recent newsletter, thought the problem so blatant that it opined that a title insurance agent may not sponsor an open house for a REALTOR® or pay the expenses for same as it may be an illegal inducement for title insurance referral. A title agent may have a table or a booth at an event or an open house. The difference is that they are both offering services to a third person. 

It is a $1,500 fine and one year probation for a first offense of illegally inducing the referral of title insurance business. Section 626.9541(1)(h)3, Florida Statutes contains the state prohibition. 

Federal law goes further. Regulation X of the Code of Federal Regulations says that such activity could be a violation of RESPA. A person may not give or receive a thing of value incident to settlement services involving a federally related mortgage loan. 

It goes on to define a “thing of value” very broadly. It includes, but is not limited to, discounts, fees, commissions, salaries, franchise royalties, partnership profits, special banking terms, trips, payment of another person’s expenses, special or free rates, or unusual lease payments. 

The department has made it clear that if payments are exorbitant in those categories that otherwise may be safe, it will investigate, and may find in such case that the excessive payment is an illegal inducement. 

A word to the wise: DFS is looking. Tallahassee REALTORS® know this rule as we have been preaching it for 10 years, but others may not know. Do not let yourself get caught up in an illegal referral.

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

DBPR Report: Unlicensed Activity

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Help combat unlicensed activity by encouraging your clients to verify your license. 

As a REALTOR®, you understand the value being licensed offers both your customers and the real estate profession. From initial property tour to closing, navigating your clients through the home-buying process requires specific knowledge and skills and cannot be completed by just anyone. In order to help protect homebuyers and sellers from unlicensed real estate activity, it is crucial to spread the word that unlicensed real estate activity is a crime. In Florida, it is a third-degree felony for someone to act as a real estate broker or sales associate without a license from the Florida Department of Business & Professional Regulation (DBPR). 

Your clients may not be aware of the dangers unlicensed real estate agents pose to their financial and personal safety. To help educate the public about unlicensed activity, be proactive and encourage your clients to verify your real estate license. Not only will it increase your credibility in their eyes, but it will also remind them to always verify licenses before doing business with professionals. If their new home requires renovations, they will know how to verify their contractors’ licenses as well. 

It’s a simple process. Using the DBPR Mobile app, clients can easily verify licensees by name or license number, no matter where they are. With a few taps and swipes of a finger, they have the peace of mind knowing they are working with a licensed real estate agent. The mobile app is free to download and available in both the iTunes and Google Play app stores. 

To report unlicensed activity, consumers can call the toll-free hotline 1-866-532-1440, file a complaint online at www.myfloridalicense.com or through the DBPR Mobile app. Reporting unlicensed activity is not limited to consumers. If you come across someone advertising real estate services and are not sure if they are licensed, check it out. 

The public trusts real estate agents with their largest financial investment; help protect future homebuyers and sellers from being scammed by unlicensed real estate agents and ensure you are not losing clients to frauds. 

Florida Department of Business and Professional Regulation
www.MyFloridaLicense.com
850-487-1395

 

The Rear-View Mirror

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Appraisers are often accused of focusing on the rear-view mirror, concentrating on what has happened rather than what is occurring in the market right now. Whether the market is declining or improving, utilizing past sales to support a current estimate of market value can be challenging. But that is what the client is looking for, proof of the value, namely comparable sales. 

A typical appraisal report today is at least fifteen pages long, full of sales, listings, maps, market conditions, data, etc. Sometimes the most relevant data in the report are pending or contingent sales; they are “real time” indications of the market, even if they have not closed. Yes, the underwriters who review appraisal reports will consider pending and contingent sales, as long as there are several closed sales also included in the report.   

Overall, most of our market segments are nearing or have already achieved a relative balance. Yet a closer look reveals there is still an oversupply in some segments and an apparent increasing value trends in others. So the challenge for appraisers is to know the market segment, to understand current trends and stay plugged into the market. We are not on the “front line” every day as you are; we are inspecting homes but we are typically not part of the marketing or the negotiations. Most of my colleagues agree that constant contact with agents, sellers, and buyers is vital in our attempt to stay up to date on market trends.  I interview buyers, sellers, agents, the milkman, anybody I meet at the house. I want to know what affected their buying decision and why they bought or sold the subject property. 

If you find that an appraiser is not up to date, be proactive and tell him/her about any pending sales, contingent sales, or transactions that occurred that are not in MLS. You should never try to influence an appraiser, but you should always be willing to help the appraiser to bridge the gap between the rear-view mirror and the “front line.” 

Greg Lane
Timberlane Appraisal

President’s Message, April 2014

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We are having a busy spring at TBR! 

Great American REALTOR® Day. Our CEO, Steven Louchheim; DVP, Debbie Kirkland; president-elect, Mariela Santurri; past-president, Bert Bevis; other TBR members, including Joy Woodruff; and I attended the Florida REALTORS® Meet & Greet with Governor Scott at the Governor’s Mansion. Governor Scott reinforced his support of Florida REALTORS®’ continued efforts to improve the state’s economy. He also mentioned how much he valued the Florida REALTORS®’ friendship and John Sebree keeping him informed of pertinent public policy issues. 

Each year, Great American REALTOR® Day provides an opportunity for delegation of TBR members to visit the Capital to talk to our legislators about REALTOR® Party issues. This year, we had meetings scheduled with Senator Bill Montford and representatives Alan Williams and Michele Rehwinkle Vasilinda.

As most of you know, we are advocates for our clients’ private property rights, as well as protecting the means of making a living for our REALTORS® and business partners. Some of the key issues this year include:

1. Taxes on commercial leases. This tax on Florida businesses is a deterrent to those looking to relocate to our state.

2. The Sadowski Fund. We have been paying into this fund with every closed transaction, specifically to help first-time homebuyers and other real estate buyers, and this fund has been raided by the State of Florida as a general revenue source. We are trying to either discontinue this fee or have it be used for its intended purpose. [Note: As of this writing, the Florida Senate has approved full funding for the Sadowski fund ($275 million). We are now waiting for the House to act on this issue.]

3. Clean water. We are trying to enforce laws to protect our waterways and ensure all communities have clean water. 

Springtime Tallahassee. TBR had our first professionally decorated float in the Springtime Tallahassee parade! While the weather started out raining (and threatening more bad weather), by the time the parade kicked off and started down the route, the skies opened up and the sun came shining through! Thanks again to the hard-working Communications Committee for bringing it all together. 

Habitat for Humanity. Our TBR/FSU Habitat Build is coming along nicely; we have had groups of 15 to 20 REALTORS® and affiliate business partners each Build Day. We’re looking forward to the dedication ceremony—stay tuned to eBoard Briefs for the announcement, and make plans to join us in presenting this beautiful new home to a happy new homeowner. 

#CTF2014. Our annual CATRS Tech Forum will be coming up May 8. You do not want to miss this opportunity—the event sold out last year! In addition to the latest tech tips and news, we’ll have over10 exhibitors—from cell phones and electronics, to Paragon MLS and REALTORS® Property Resource—and they are sure to have some fantastic door prizes for attendees. 

Professional Development. If you don’t already have your REP pass, we have so many great classes coming up that you may want to get it! April classes include one on home inspections, and an informative look at what it takes to make the leap from salesperson to broker. 

Another REP class is of interest to appraisers—the Florida Appraisers State Law Update on April 18. And we’re offering two other courses required for appraisers, with great tuition rates for TBR members: the USPAP National Update course on April 17 and Appraiser Supervisor/Trainee class on April 18. 

Interested in designation courses? At Home with Diversity on May 1 provides seven hours continuing education credit, and can be credited towards several real estate designations: ABR, CIPS, CRS, PMN, AHWD, RSPS. And after taking the class, participants can apply to NAR to receive the AHWD certification. 

Jeffrey D. Doxsee, Sr.
2014 TBR President
Capital Property Consultants