Positive News: Realtor-favored legislation in Florida addresses housing and property concerns.

The 2010 Florida Legislature adjourned in May, but not before taking action on a bevy of real-estate related issues supported by Florida’s Realtors. Most of the bills were approved by Gov. Christ:

• HB 109 — legislates a current Florida Department of Revenue practice of basing documentary stamp taxes on the sale price of a property and not on the amount of its outstanding mortgage balance. This issue was brought about by the wave of short sales that is currently pummeling Florida’s housing market. Approved.

• HB 303 — requires state oversight of the companies that administer networks of independent appraisers to fulfill appraisal assignments on behalf of lenders. The bill requires registration with the Department of Business and Professional Regulation and establishes application requirements, registration qualifications (including background checks) and disciplinary action standards. The bill also allows the Florida Real Estate Appraisal Board to adopt rules to institute requirements for the protection of appraisers’ signatures. Approved.

• HB 545 — repeals a disclosure requirement that, beginning in 2011, would have forced sellers of homes located in windborne debris regions to provide buyers with the building’s hurricane resistance rating and three improvement plan costs. Realtors believed the inspection process was rife with fraud and provided buyers with inaccurate information. Vetoed.

• SB 550 — requires the Department of Health to inspect of Florida’s 2.6 million septic tanks every five years, beginning in 2011. Property owners are responsible for the inspection fee, which cannot exceed $30, and for costs associated with having their tanks emptied prior to inspection. The legislation also creates a grant program for low-income homeowners whose septic tanks need repairs. Approved.

  
  

• HB 965 — requires property adjusters to adjust the assessed value of single-family residential properties affected by tainted drywall. Approved.

• SB 1196 — seeks to reduce the state’s inventory of condos by encouraging investors to purchase blocks of condo unit by: Lowering the cost of condo ownership by repealing the requirement that owners purchase individual unit owner insurance coverage; Removing the requirement for mandatory retrofits of sprinkler systems in condos more than 75-feet high; Requiring lenders to pay more in past-due assessments on foreclosed properties; Allowing associations to deny owners or occupants the use of common areas and recreational amenities when the owner is more than 90 days delinquent in paying financial obligations due to the association; and allowing associations to divert tenant rents to pay for delinquent assessments owed by unit owners. Approved.

• SB 2044 — raises the capital requirements for property insurance companies and reduces fraudulent claims by public adjusters. The bill also allows for rate increases due to inflation and reinsurance costs. Vetoed.
• HB 7179 — allows local governments to loan money to residential and commercial property owners for energy and storm-resistance improvements. The loans would be repaid via non-ad valorem assessments. To ensure buyers don’t pay twice for the improvements, through both higher sales prices and the assessments, sellers participating in the program will have to provide a disclosure at or before contract, informing buyers of the assessment. Approved.

The state budget addresses several issues of importance to real estate, including the allocation of $2 million to continue studying ways to reduce the amount of nitrogen released from conventional septic tank systems and $400,000 to combat and prosecute unlicensed real estate activity.

The Orange County Neighborhood Stabilization Program offers valuable new down-payment assistance.

If you aren't aware of the Orange County Neighborhood Stabilization Program (NSP), now is the time to learn.

The NSP was created by the U.S. Department of Housing and Urban Development to respond to residential foreclosures, and it’s a new source of down-payment assistance. Program participants have a choice of purchasing either one of Orange County’s own rehabilitated homes (Option A) or a foreclosed home located within one of the program’s five targeted areas (Option B). Either way, homebuyers may receive up to $35,000 in assistance with additional funds for closing costs.

Buyers using the NSP can save $87 on their monthly payment. This comparison shows how:

FHA Loan $150,000 with a 3.5% down payment

Rate 5.5% / APR 6.316%

PITI $1,131.57

FHA Loan $130,000 with a Community Second NSP $20,000

Rate 5/5% / APR 6.39%

PITI $1,051.00

In this scenario, the buyer received $20,000 in assistance (another advantage is that the savings may also give the buyer access to homes in a wider price range).

Program participants may buy any NSP Option A home and apply for NSP assistance ($20,000, $30,000 or $35,000) as well as for additional funds to cover closing costs.

Eligibility Requirements

Buyers are not required to be first-time buyers. However, they must complete a homebuyers’ educational class. They also must be approved for a home loan and meet debt-to-income ratios and credit requirements to receive the assistance. The following requirements also apply:

• Home sale price may not exceed $219,000;
• Buyers must contribute 1.75 percent of the contract price;
• Buyers  may not currently own a home (no investors);
• Buyers must meet income requirements;
• Buyers must have a minimum credit score of 620 with satisfactory credit;
• Buyers must have two years of re-established credit after if they have had a bankruptcy, foreclosure and judgment; and
• Buyers must have a legal right to live in the United States permanently.
• Buyers may use conventional, VA and FHA loans.

NSP Option A

Under Option A, foreclosure homes have been purchased by Orange County at a discount, rehabilitated by private companies, inspected by county inspectors and offered for sale. The homes are listed in the local Multiple Listing Service, are on the county’s Web site and are marketed at community events. Buyers are required to have a Realtor to access the homes, negotiate contracts and coordinate inspections. It generally takes 30 to 60 days to complete a transaction on an NSP home.

These homes are hot commodities. They show like builder models, some with granite countertops and others with crown molding. There is also a one-year warranty on the rehabilitation work performed, and best of all, the seller (Orange County) responds promptly to phone calls.  As the program picks up speed and recognition, buyers may experience competition and multiple-offer situations. Buyers should work closely with lenders to provide proof of application, credit verification and debt-to-income ratios to help secure their contract offers for consideration. The program does not require this, but doing it may benefit the buyer if the home receives multiple purchase offers.

NSP Option B

Option B involves the purchase of a foreclosed home with buyers utilizing the NSP down-payment assistance funds. Buyers must meet the eligibility guidelines and buy a home located in one the five target areas (Pine Hills, Meadow Woods, Azalea Park, Holden Heights/Oak Ridge and Union Park).

Tip: Property eligibility can be verified on the Orange County Web site at www.ocfl.net.

A home inspection and termite/WDO (wood destroying organism) report is required, and the appraised value must be at least 1 percent higher than the contract. Homebuyers purchasing a bank-owned home that needs repair may use an FHA 203k home loan, but NSP funds, to address repairs.

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Editor's note: Doreen Hargreaves, of Fidelity Mortgage Services, is an affiliate member of the Orlando Regional Realtor Association. This article was produced in partnership with the Orlando Regional Realtor Association.

For commercial property owners, understanding receivership and some simple tips for salvaging value can deliver relief and diminish the chances of foreclosure.

Given the current economic climate, it’s increasingly difficult to ignore the situation of many investors, owners and financial institutions dealing with distressed or underperforming properties. And commercial real estate experts are quick to note that the climate isn’t expected to change overnight.

So, as an owner of a business, property or other asset, what options do you have for maintaining value and even avoiding foreclosure?

No Prize for Second Place

According to a fourth-quarter 2009 report by CoStar Group Inc., Florida has the second-largest number of distressed commercial properties in the nation. At the time of the report, Florida’s distressed properties included 3,469 office buildings, 3,576 industrial complexes and 715 shopping centers. If you’ve driven around Central Florida recently, you’ve probably noticed the vacancies.

Unfortunately, as more loan notes mature each month, it’s likely that bankruptcies and foreclosures will continue throughout 2010. At times, it may seem as though there isn’t much the average property owner can do. Yet, there is. By educating yourself about the available options, you can put your property in a better position to withstand current market conditions. Whether it is nonperforming (currently in foreclosure) or underperforming (headed toward foreclosure), or you’re lucky enough to have a performing asset, working with a receiver or property manager can greatly increase your chances for long-term success.

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Benefits of Receivership

When a property is involved in a legal process, such as entering into bank-owned foreclosure, the court handling the matter often appoints a trustee/receiver. In some cases, the bank might recommend a specific company, instead of a lawyer, to manage the property. Commercial real estate management companies gain receivership to save properties – nonperforming and underperforming – from further distress.

A receiver is a neutral party whose first priority is to act as a financial manager. The receiver fills the critical role of protecting the property and the interests of the parties associated with it. In this role, the receiver collects rent, renews leases and provides monthly financial statements. The receiver’s key role is to secure the rental income and preserve the asset.

In addition to serving as financial manager, the receiver completes a full property assessment to determine whether money is being spent efficiently. When working with a property, one of the first things I do as a receiver is assess operating expenses, an area prone to overspending. Take landscaping, for example. Before the recession hit, many business owners got a quote from only one landscaper, and if it fit into their budget, they signed a contract. A better approach is to bid out all maintenance to a minimum of three companies, to find the most cost-effective resource. Under this scenario, one former client realized a $300,000 saving in annual operating expenses, just by conducting an energy audit.

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Proactive Approach to Tenant Retention

Even if you own a performing property, the economy puts you at risk of losing tenants, who may leave for their own financial reasons, including moving to a different property because another landlord has lured them with lower lease rates or incentives. I work with my clients to develop a proactive strategy for successful tenant retention. Here are some of my recommendations:

• Don’t wait for leases to expire. Contact renters six months to one year before their lease ends and offer them a 10 percent discount if they sign a five-year contract. Don’t get stuck on pre-recession pricing levels. It’s smart to lock renters in now at a slightly discounted rate and avoid having to attract new tenants, at possibly a significantly lower price, in six months.

• Market aggressively. If you don’t negotiate lease rates and incentivize your renters, they’ll find someone who will. Make it known that you are offering discounts and added services to drive traffic to your property.

• Sign only approved tenants with a high potential for success. In a tough market, it’s tempting to compromise on tenant quality. However, it’s important to avoid payment issues by making sure all tenants are credit approved.
  

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Turn to the Pros

Without appropriate professional guidance from a commercial real estate expert, a nonperforming or underperforming asset is a liability to property owners, lenders and tenants. Contact a property management firm to develop a strategy for stabilizing your property’s capital and revenue. It’s a smart investment in your financial future.

Bob Owens, co-founder and president/CEO of O,R&L Corp. (www.or-l.com), has more than 22 years of experience in the real estate management and construction industries. Under his leadership, O,R&L Facility Services, with an office in Winter Park, has become an industry leader in facility management, property management and janitorial services for properties and companies.

Wither FHA? No way, contend Realtor officials, who point out that half of Orlando buyers relied on FHA loans to purchase new homes in 2009.

The Federal Housing Administration mortgage insurance program has seen good days, but even amid some controversy, never better than in today’s market.

According to the 2009 Orlando Regional Realtor Association Profile of Homebuyer and Sellers, more than 50 percent of all buyers of homes in Orlando in 2009 did so with an FHA loan. In addition, 69 percent of first-time buyers used an FHA loan.

“FHA helps provide affordable mortgage financing to homeowners, particularly first-time homebuyers, who are so important in drawing down inventory to help stabilize the current housing market,” comments ORRA Chairman of the Board Kathleen Gallagher McIver of RE/MAX Town & Country Realty. “FHA is a critical part of the American housing fabric.” Read more

The homebuyer tax credit has been expanded and extended — but only until April.

President Barack Obama has signed into law an extension and expansion of the $8,000 first-time homebuyer tax credit, but people thinking of buying a home can’t dawdle if they want to claim it. In order to qualify, a transaction must be completed by April 30 of this year.

Among other provisions, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a qualifying home’s purchase price to $800,000.

“Extending the homebuyer tax credit and expanding it to reach more homebuyers is the right thing to do,” said 2009 Florida Realtors’ President Cynthia Shelton. “It is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy. Extending the homebuyer tax credit into 2010 will help Florida families realize their dream of homeownership, improve our communities and strengthen our economy.”

Studies from economists and housing industry analysts show that the homebuyer tax credit has been working, with home sales increasing and housing inventory declining in recent months, Shelton notes. According to research from the National Association of Realtors, the 2009 homebuyer tax credit has unleashed sales on the lower end of the market and brought into the market up to 400,000 first-time buyers who wouldn’t have bought otherwise. Similarly, in Orlando, sales of existing single-family homes for $250,000 or less accounted for roughly 80 percent of all sales through much of 2009. And sales of existing condos for $50,000 or less alone accounted for nearly half of all condo sales.

Since each home sale generates, on average, about $63,000 in additional economic activity, the 2009 tax credit has contributed approximately $22 billion to the national economy.

“Market activity has certainly picked up; [as of the end of September] we’ve experienced 13 months of increased home sales in Florida,” says John Sebree, vice president of public policy for Florida Realtors. “In addition to bringing new families into the housing market, [the tax credit] has helped stabilize property values. And current owners of Florida properties who will now be eligible for the $6,500 tax credit as [move-up buyers] will also see the added bonus of portability — the ability to take a portion of their Save Our Homes tax savings with them when they move. That is an incredible added incentive.”

While most details of the extension for first-time homebuyers mirror the rules currently in existence, the new law extends the $8,000 tax credit to homes under a sales contract by April 30, with the home purchase under contract completed by June 30. It has been expanded to include a new $6,500 credit for owners of existing homes buying a new principal residence (existing homeowners can claim the $6,500 tax credit if they lived in their principal residence for five consecutive years out of the last eight). And, effective Dec. 1, 2009, income eligibility limits to claim the full credit for both groups of homebuyers were raised to $125,000 for individuals and $225,000 for married couples.

Editor’s note: This article was produced in partnership with the Orlando Regional Realtor Association.

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Homebuyer Tax Credit At A Glance

* Extends through April 30, 2010, the tax credit for first-time homebuyers — up to $8,000 or up to 10 percent of the purchase price of the home.

* Provides a homebuyer tax credit of up to $6,500 to owners who have been in the same principal residence for five consecutive years during the previous eight years and are moving up to a higher-priced property.

* Increases the income eligibility limits to $125,000 for individuals and $225,000 for joint filers.

* Phases out the credit for individuals with incomes above $125,000 for individuals and joint filers above $225,000 at the same rate as current law (over the next $20,000).

* Limits the credit to purchases of principal residences valued at $800,000 or less.

Florida —Orlando, in particular — attracts international homebuyers that shore up the housing market.

Florida again leads the nation as international homebuyers’ location of choice, with 23 percent of all international buyers in the United States choosing to buy a home for investment or vacation purchases in the state. California follows, with 13 percent of buyers, along with Texas (10.7 percent) and Arizona (7.1 percent). Read more

Survey: State and federal programs are helping to overcome Americans’ concerns about down-payment costs and job security while other issues persist.

Most Americans still consider accumulating enough money for down-payment and closing costs to be the biggest obstacles to buying a home. That’s according to the 2009 National Housing Pulse Survey, published annually by the National Association of Realtors.

The survey, which measures the way affordable-housing issues affect consumers, also found job security concerns to be the highest in seven years of sampling. Two-thirds of respondents think job layoffs and unemployment are big problems; eight in 10 cite these issues as barriers to homeownership. Read more

Orlando’s current housing market is ripe with available affordable homes. The area’s affordability index has hovered near the 200 percent mark for months.

An affordability index of 99 means that buyers earning the state-reported median income are 1 percentage point short of earning the income necessary to buy a median-priced home. Conversely, an affordability index greater than 100 means that median-income earners make more than is necessary to buy a median-priced home. Buyers who earn the reported median income of $52,421 can qualify to buy one of 9,318 homes in Orange and Seminole counties currently listed in the local Multiple Listing Service for $238,757 or less.

As of June, first-time homebuyer affordability, while slightly lower than previously to accommodate lower median income levels, was nevertheless also at a record level (130.60 percent). At that time, first-time buyers who earned the reported median income of $35,646 could qualify to buy one of 5,462 homes in Orange and Seminole counties listed in the local MLS for $144,316 or less.

For first-time homebuyers, the Florida Homebuyer Opportunity Program can turn a tax rebate tomorrow into a down payment today.

Most first-time homebuyers qualify for the $8,000 first-time homebuyer tax credit, established through the American Recovery and Reinvestment Act of 2009 as an income tax rebate regardless of tax owed. To qualify, they must first buy a home, submit the information to the IRS through their tax return and wait for the $8,000 rebate.

Yet now, to help Florida’s first-time homebuyers secure money early enough in the home-purchase process to use it as a down payment, the state of Florida has created assistance: the Florida Homebuyer Opportunity Program.

The program provides state-funded bridge loans for first-time homebuyers to use for a down payment and then repay after the new homeowners receive their federal tax credit.  Read more