Saturday, July 13, 2013

Realtors see increase in fair housing complaints

ORLANDO, Fla. – July 12, 2013 – The Florida Realtors Legal Hotline has received an increase in calls relating to lawsuits alleging fair housing discrimination. Florida Realtors’ Vice President and General Counsel Margy Grant says that Realtors must remain vigilant to ensure they’re complying with U.S. fair housing laws.

Thanks to Internet listings, it’s easy to read real estate ads anywhere in the world. That has led to a larger pool of fair housing “testers” to scan all U.S. media for real estate ads that violate the Fair Housing Act.

While most real estate agents understand that ads cannot discriminate against the seven classes protected by The Fair Housing Act – race, color, sex, national origin, religion, handicap and familial status – the “testers” have made it even more important to consider how an ad is worded. A broker owner and a listing agent can be considered at fault for discrimination, even if it’s inadvertent.

“Most of the plaintiffs are fair housing organizations designed to help enforce the law,” says Grant. “To combat violations, they file lawsuits against all offending parties.”

Once a lawsuit has been filed, a broker’s errors and omissions insurance (E&O) usually gets involved. At that point, many insurers prefer to settle the case rather than pursue it, usually because the Realtor has violated the fair housing laws.

“A common violation is an ad that says ‘no kids,’” says Grant. “We have seen cases where a agent has been discriminating for years and just never got caught.”

While the “testers” tactics may seem odd, a case decided by the U.S. Supreme Court – Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) – rejected arguments by the real estate community and affirmed that the “testers” have a right to file a complaint as an “aggrieved person.”

Realtors have some protection under the Communications Decency Act for ads that appear on their website authored by someone else, such as a home listing uploaded through an Internet Data Exchange (IDX) program. However, that protection does not apply to any ad written by an agent or advertised by a broker.

“Overall, the real estate industry is very good at understanding and following the nation’s fair housing laws, but that’s part of the problem,” says Grant. “We sometimes don’t focus on it as much as we should. Overt discrimination is extremely rare, but agents and brokers should make sure that their ads don’t subtly steer a protected class away from a rental or listing.”

For more information on fair housing issues related to IDX and potential liability, National Association of Realtors® (NAR) General Counsel Laurie Janik has posted a podcast on NAR’s website (password required).

© 2013 Florida Realtors®

Wednesday, July 10, 2013

.NAR survey: Younger buyers more optimistic

NAR survey: Younger buyers more optimistic
WASHINGTON – July 9, 2013 – Millennials are more confident than any other age group that their recent home purchase was a good financial investment, according to the inaugural 2013 National Association of Realtors® Home Buyer and Seller Generational Trends.

NAR evaluated the generational differences of recent home buyers and sellers. It found that eight out of 10 recent buyers considered their home purchase a good financial investment, but the number was even higher, 85 percent, for buyers under the age of 32.

“The oldest of the millennial generation are now entering the years in which people typically buy a first home, and despite the recent downturn, homeownership still matters to them,” says Paul Bishop, NAR vice president of research. “The sheer size of the Millennial generation, the largest in history after baby boomers, is expected to give a powerful boost to long-run housing demand.”

Bishop says that Millennials do face some hurdles, however – short-term mortgage accessibility and student debt repayments.”

The study found that the largest group of recent buyers (31 percent) was Generation X, those born between 1965 and 1979. Millennials, sometimes called Generation Y and born between 1980 and 2000, came in second at 28 percent.

Younger Boomers, those born between 1955 and 1964, made up only 18 percent of buyers; 14 percent were Older Boomers, Americans born between 1946 and 1954; and 10 percent were from the Silent Generation, those born between 1925 and 1945.

Survey results

Home buyers
• The median age of Millennial home buyers was 28, their median income was $66,200 and they typically bought a 1,700-square foot home costing $165,000. The typical Gen X buyer was 39 years old, had a median income of $93,100, and purchased a 2,100-square foot home costing $235,000.

• The previous living arrangement of recent buyers varied greatly across the generations; among Millennials, 65 percent rented an apartment or house and 22 percent lived with their parents, relatives or friends. More than half of all Baby Boomer and Silent Generation buyers owned their previous residence.

• The study found that older generations of home buyers prefer more recently built homes. Millennials typically bought homes built around 1986, nearly a decade older than the homes typically bought by the Silent Generation.

• Younger buyers had a tendency to stay closer to their previous residence, often within 10 miles, whereas older buyers moved longer distances, typically more than 20 miles from their previous home.

• Younger buyers were more likely to buy in an urban or central city area than older buyers; 21 percent of Millennials bought a home in an urban location compared to only 13 percent of Older Boomer and Silent Generation buyers.

• The reason for buying a home also varies across the generations. Younger buyers most often cited a desire to own a home of their own, while older buyers wanted to be closer to family and friends.

• When it comes to factors neighborhood choice, younger generations cited convenience to jobs, affordability of homes and quality of the school district. Older generations placed higher importance on convenience to family, friends and healthcare.

• In looking at green features, younger buyers placed a higher importance on commuting costs than older generations. But older generations placed a higher importance on a home’s energy efficient features and an environmentally friendly community.

• Millennials tended to make more compromises with their home purchase than any other generation. They conceded more often on the price and size of the home, lot size, distance from job and style of home. At the opposite end of the spectrum, Boomer and Silent Generation buyers made no compromises on their recent home purchase.

• As the age of recent buyers increases, so does the rate of owning more than one home. Among Millennials, 8 percent own more than one home, which could include either a vacation home or investment property, compared to 21 percent of Gen X-ers, 28 percent of Younger Boomers, 27 percent of Older Boomers and 26 percent of the Silent Generation.

• Home buyers of all ages often begin the home buying process by looking online for properties for sales, but the frequency of Internet use decreases for older buyers. Ninety percent of Millennials frequently used the Internet to search for homes compared to less than half of Silent Generation buyers. Younger generations of buyers were also more likely to find the home they purchased through the Internet; older buyers most often learned about the home they purchased from their real estate agent.

• Younger buyers are more likely to want a real estate agent’s help understanding the home buying process, presumably because many are buying a home for the first time. A friend, neighbor or relative most often referred younger buyers to their agent, whereas older buyers were increasingly likely to work with the same agent they previously used to buy or sell a home.

•  In choosing an agent, reputation was important to buyers of all ages; however, younger buyers more often cited an agent’s honesty and trustworthiness as the most important factor compared to older buyers who most often cited the agent’s knowledge of the neighborhood – perhaps because older buyers tend to move further distances and may have less familiarity with area.

• The median downpayment for Millennials was 5 percent – considerably less than older generations of buyers whose downpayment ranged from 8 percent for Gen X buyers to 22 percent for Silent Generation buyers. Younger buyers who financed their home purchase most often relied on savings for their downpayment, whereas older buyers were more likely use proceeds from the sale of a primary residence.

“An interesting finding is that Older Boomers and Silent Generation buyers found the mortgage application and approval process more difficult than expected compared to younger buyers,” said Bishop. “This underscores the ongoing challenges that many creditworthy home buyers face with today’s tight credit standards.”

Home sellers
• The largest group of recent home sellers was from Generation X, comprising 30 percent of recent sales, followed by Younger Boomers (21 percent), Older Boomers (21 percent) and the Silent Generation (19 percent). As the age of sellers increased, the share of married and unmarried couples declined, and the percentage of single female home buyers increased, from 4 percent among Millennials to more than 17 percent among Boomer and Silent Generation sellers, perhaps due to death or divorce.

• Like buyers, older sellers tend to move greater distances and are more likely than younger generations to move out of the state or region. While younger buyers typically moved to larger, higher-priced homes, Older Boomer and Silent Generations tended to downsize.

• Typically, the older the seller, the longer their tenure in the home. Millennials lived in their previous home a median of five years, Gen X-ers stayed 8 years, Younger Boomers 11 years, Older Boomers 13 years, and the Silent Generation 15 years.

• The reasons for selling a home also varied among the generations. Younger buyers were more likely to move for job relocation or upgrade to a larger home. In comparison, older buyers often looked for a smaller home due to retirement, because upkeep was difficult, or to be closer to family or friends.

• When it comes to negotiating, older sellers are often more willing to reduce their home’s asking price, but are less likely to offer buyer incentives such as home warranty policies or assistance with closing costs.

• Of sellers working with real estate agents, the study found that older generations of buyers are more likely to use full-service brokerages. While more than two-thirds of Millennials used full-service brokerages, they were more likely than other generations to choose limited service, which includes discount brokerage, or minimal service, such as simply listing the home on a multiple listing service.

• Sellers of all ages typically found a real estate agent through a referral or friend; however, younger sellers were more likely to also use the same real estate broker or agent for their home purchase; 59 percent of Millennials used the same agent compared to 42 percent of Older Boomer sellers. Younger sellers typically want their selling agents help with selling the home within a specific timeframe and pricing the home competitively, whereas older buyers are looking for their agent’s help with marketing the home and finding a buyer.

The report is free and can be downloaded through NAR’s website. (Link underlined to:

© 2013 Florida Realtors®

Short sale listings must have five days in MLS

WASHINGTON – July 9, 2013 – Fannie Mae recently announced requirements for Fannie Mae short sales listed in a multiple listing service (MLS). Starting August 1st, each new short sale listing must maintain an “active” status for a minimum of five days; and that timeframe must include at least one weekend. Freddie Mac announced similar guidance for Freddie Mac short sales.

“Along with our regulator, the Federal Housing Finance Authority (FHFA), we decided to take this step in response to Realtors’ concerns,” says Jane Severn, director of marketing at Fannie Mae. “We’ve had cases where a short sale property is listed in the MLS as ‘active’ and, in less than an hour, it goes into ‘pending’ status.”

Florida Realtors’ Vice President and General Counsel Margy Grant says the requirement will change the way some members list a home in their MLS.

“Realtors should identify any short-sale listings that would require approval by Fannie Mae or Freddie Mac,” Grant says. “If the new rules apply to a listing added to the MLS after Aug. 1, we recommend that agents put a disclaimer in MLS comments telling cooperating brokers that the seller must keep the listing active for five days, including a weekend. This disclaimer would allow cooperating agents to structure their offers accordingly.”

Grant says it’s important to remember two things: that the new rule only affects Fannie Mae and Freddie Mac short sales; and, though it directly affects sellers, it also indirectly impacts buyers’ offers.

“The rule doesn’t regulate the timing of an offer,” she says. “An offer can be submitted at any time – but a seller following these rules cannot accept any offer until the required five-day marketing period ends. A buyer’s agent could, for example, submit an offer on the first day a home is listed. However, they may want to include contract wording that gives the seller five days to accept the offer if the property must follow Fannie Mae or Freddie Mac’s rules.”

Severn says Fannie Mae wants their “short sale listings to be marketed in a manner that allows the market to see the listing.” She notes that their current policy for properties Fannie Mae owns (REO listings) reflects the same philosophy since Fannie Mae won’t evaluate offers until the listing has been in the MLS and “active” for at least three days.

Under Fannie Mae and Freddie Mac’s rules, the short sale property must be listed in an MLS that covers its geographic area, and a printed copy of the property’s MLS listing must be kept on file. If a property is located in an area not covered by an MLS, it must be advertised in a manner customary for the same period of time – at least five consecutive calendar days that includes one weekend.

Fannie Mae announced the change in a Servicing Guide announcement in June, applicable to “Multiple Listing Service Requirements for Standard Short Sale/HAFA II.” The Servicing Guide is published on Fannie Mae’s website.

© 2013 Florida Realtors®

Tuesday, July 9, 2013

10 tips for buying real estate with IRAs

NEW YORK – July 8, 2013 – Want to invest in real estate through a retirement account? It’s possible, but it’s also far more difficult than simply buying and selling investment property.

“Given the combination of bottomed-out home prices and a still-tight lending environment, utilizing funds from a retirement account to purchase investment homes with cash, or at least with a large downpayment, can give individual buyers a better chance of competing in this tight housing market,” says Daren Blomquist, vice president at RealtyTrac.

Blomquist says investing with retirement money “gives consumers a path to more quickly build their nest egg since all proceeds from the real estate investment – whether that be from rental cash flow or from selling the property – go directly back into the retirement account.”

However, he also says retirement investors should conduct thorough research first.

Look before you leap
Retirement funds can be a good fit for some investors but it’s not for everyone. “It depends on the person’s age and the type of property,” says Sheldon Detrick, CEO of Prudential Alliance Realty in Oklahoma City, Okla. “Rental property, especially on the lower end, can be a good investment at any age. It’s usually profitable and easy to sell. On the other hand, buying land in outlying areas in anticipation of population growth is something only those under 50 should consider.”
Know the ground rules

Lorraine and Richard Walls, a couple in Midlothian, Va., decided to use their retirement accounts to buy investment properties in Southwest Florida. But before making the plunge, the Walls spent a full year researching how self-directed real estate IRAs work, learning the basic ground rules every investor should know before they get started. Those ground rules include:

• Title: Any property purchased by an IRA is owned by the IRA – not an individual.
• Purchase money: any money used to purchase a property with an IRA has to come directly from your IRA, not you individually, and you can’t be reimbursed by your IRA. This includes earnest money and closing.
• Rehab and carrying costs: similar to purchase money, any costs associated with rehabbing or carrying the property must be paid directly by the IRA. An IRA custodian can help with this.
• Income: any income generated from the property has to flow back into the IRA.
• Prohibited transactions: purchases made with an IRA need to be for investment, not personal use. Also an IRA cannot do business with family members of “lineal descent,” which includes you, a spouse, parents, children, grandparents, grandchildren and great-grandchildren. In addition, you cannot borrow money from a self-directed IRA or use it as security for a loan.
Use a Roth IRA to “pay taxes on the seed, not the crop”

According to Jeff Desich, chief executive of Equity Trust Company, choosing a Roth IRA over a traditional IRA is a “no brainer” for most real estate investors because although a traditional IRA allows for tax-free contributions, the earnings are taxed when pulled out for retirement down the road. “My dad would always say would you rather pay tax on the seed or on the crop,” Desich says.

Buy in your comfort zone

“We stuck to Lehigh (Acres, Fla.), which everyone said don’t do it,” says Lorraine Walls, adding that the couple now owns a total of nine properties in Lehigh Acres, one of the nation’s hardest-hit real estate markets. “I went with what I was comfortable with. We don’t need to make millions straight away.”
Plan your exit strategy but be flexible

Although she purchased the Lehigh Acres homes primarily for the long-term cash flow, Walls said steady gains in home price appreciation have her rethinking that strategy. “Actually, I’m thinking about selling because the prices have almost doubled in the last two years,” she said, noting that her real estate agent is urging her to list one home in particular. “I paid $58,000 for this property, and he wants to list it for about $105,000.”
Consider creative investing strategies

Early in his career, veteran real estate investor Stan Brady said he focused mostly on fix-and-flip properties that he sold to owner-occupant buyers. But his strategies have evolved over time to focus on optioning investment deals that he finds and negotiates for other investors who don’t have the time to find and negotiate those deals.

“A typical transaction for me would be taking an option contract … and then turn around and resell the property to a group of investors,” says the Atlanta-based investor. “Now they have a portfolio rental and I get back the profit in my IRA.”
Set up a 401(k) under real estate investing business

While a normal employer 401(k) plan won’t allow you to invest in real estate, everyone who invests in real estate is in business for themselves, Desich says, which gives him or her the right to have a retirement plan for that business. If someone is investing in real estate and finding success, then that person can set up a 401(k) that permits real estate investments and allows contributions up to $50,000 per year plus $50,000 for a spouse.
Make it a family affair and multiply your purchasing power

Investors have the option of partnering their IRA with others, according to Desich. For example, a husband and wife might each have a Roth IRA, and both may have a 401(k). Add in two kids who each might have a Roth IRA and the family can use all six accounts to purchase a deal and share the percentage.
Pay all cash or make a large downpayment to compete with institutional buyers

Besides the tax breaks that allow investors to build their retirement nest egg, self-directed IRAs give buyers the option of paying all cash or making a sizable downpayment – helping to compete in a market where multiple bids are the norm.

“Offer a high deposit and close within two weeks,” Walls says is her rule of thumb. “Offer them 50 percent, and bingo you’ll get it.”
Build a strong team around you

“You want to choose your partners wisely,” says Desich. “Biggest point outside the IRA, we help to connect the dots. Whoever you use, you need to have an attorney or accountant you work with who can help you; or find a custodian who can help you answer questions. We’re not all created the same.”

© 2013 Florida Realtors®

Tuesday, July 2, 2013

All Fla. public notices will now appear online

TALLAHASSEE, Fla. – July 2, 2013 – Effective yesterday, Florida newspapers that carry public notices must post those notices on their individual websites. That rule is in addition to postings on Florida Public Notices, an independent website operated by the Florida Press Association (FPA), where posting of public notices began last summer.

The change is part of legislation passed by the 2012 Florida Legislature in cooperation with the FPA. Public notices impact the real estate industry in a number of ways. They include updates about government hearings and meetings; zoning, annexation and land use changes; election notices; municipal budgets, taxes and special assessment information; requests for bids on government construction and service contracts; permit and licensing applications, land and water use regulations; judicial and executive sales, disposal of foreclosed and abandoned property and more.

“The posting to the newspapers’ websites, as well as the FPA website, are free and accessible to the public 24 hours a day, 365 days a year,” says Dean Ridings, FPA President & CEO.

The Florida Public Notices website is a statewide database of public notices for people who want information that has been published statewide. It’s operated by FPA and its members upload the information.

Florida Public Notices visitors can search public notices by keyword, date and newspaper. Once registered with the website, they can also request email notifications.

New rules boost homeowner association regulations

TALLAHASSEE, Fla. – July 2, 2013 – The recent housing downturn created some unexpected problems within Florida’s planned communities thanks to drops in home sales, developer bankruptcies and other problems. As a result, a bill (HB 7119) – which was passed by the Florida Legislature and signed into law by Gov. Rick Scott – went into effect on Monday, giving the state more oversight of planned communities.

Major provisions

• All Florida Homeowners Associations (HOAs) must register with the state Department of Business and Professional Regulation (DBPR) by Nov. 22, 2013. When registering, they must include their a) name, b) federal ID number, c) mailing and location addresses, d) total number of parcels, and e) total revenue and expenses in annual budget.

• HOA directors must disclose any affiliation they have with a vendor, and approval of those contracts requires a two-thirds vote of the directors. It also gives HOA members the right to disaffirm one of these contracts at a future members’ meeting with a simple majority vote.

• HOA directors cannot personally receive goods or services from any providers working with the association.

• Once a developer sells 50 percent of the parcels, the association must add one non-developer HOA member to its Board of Directors.

• Prohibits a community’s developer from making a unilateral amendment to the declaration governing an association if that amendment is arbitrary, capricious or in bad faith; or if it destroys the general plan of development, prejudices the rights of members to use common property, or materially shifts economic burdens from the developer to members.

In addition to major provisions, the new law also creates rules for troubled associations, such as oversight into the way a development is turned over to members if the developer faces bankruptcy or abandons the project.

The complete bill is posted online by the Florida Legislature.

© 2013 Florida Realtors®

New law allows longer homestead rentals in Florida

TALLAHASSEE, Fla. – July 1, 2013 – For many property owners, big weeklong sporting events – the Tournament Players Championship at Sawgrass and the Daytona 500, just to name two – are an opportunity to rent their homes to fans, media outlets and the professional athletes and their staff. By renting their homes, however, are owners jeopardizing their homestead exemption, which offers a property tax discount and some protection from higher taxes when tax appraisal values rise quickly?

Until now, the answer depended on whom you asked. SB 342 is one of at least a half dozen real estate-related bills effective today. Sponsored by Sen. John Thrasher (R-St. Augustine) and supported by Florida Realtors, the measure helps to define how long and how often a property may be rented to preserve the homestead exemption.

“St. Johns County hosts the annual Tournament Players Championship at Sawgrass. Volusia County annually hosts a number of motorsport events, and some homeowners want to offer their homes for rent during these annual events but run the risk of losing their homestead exemption by doing so,” says Sen. Thrasher. “This new law will allow homeowners to accommodate visitors and guests annually on a limited, less than 30-day timeframe, without jeopardizing their exemption. This change is good for the homeowner and good for the communities that benefit from the increased revenues brought in by these annual events.”

A law enacted in 1996 stated that a homeowner’s rental of “all or substantially all” of his homesteaded property constituted “abandonment,” thereby removing the homestead exemption. One exception to the abandonment: An owner could rent his homestead after Jan. 1 and not lose his exemption for that calendar year, so long as the property was not rented the previous calendar year.

In the past, property appraisers applied this law in different ways. Some took the position that any rental for two consecutive years constitutes a loss of the exemption in the second year. Others have allowed short-term rentals in consecutive years.

Court decisions also added to the confusion by saying abandonment of a homestead should be decided on a case-by-case basis.

Starting today, however, property owners may rent their homesteads for up to 30 days every year without jeopardizing their homestead exemption. However, they lose the protection of this safe harbor if they rent their property more than 30 days per year for two consecutive years. The law is still unclear regarding how many days beyond the 30-day safe harbor period one can rent in a single year without triggering abandonment of homestead.

“Florida Realtors was happy to work with Sen. Thrasher on this bill,” says Trey Price, public policy representative for Florida Realtors. “This bill simply allows the ‘safe harbor’ of 30 days every year with no danger of losing the homestead exemption.”

For specific questions regarding loss of homestead exemption status for rentals longer than 30 days, property owners should contact their local county property appraiser.

© 2013 Florida Realtors®