Legal News You Can Use

Posted 3/25/09

Pearls of Wisdom

for the New Year

Yes, yes, yes, I know it’s been a few months since you received my “pearls of wisdom,” but, hey, I’ve been busy, like you, making up for 2008 – it’s nothing personal, really. Oddly enough, from the pulse I have been detecting in our real estate market, it sounds like we’ve all gotten a little busier, and the 2008-2009 season brought buyers who actually signed contracts and closed them.

With the new year successfully underway, it’s time to review what the government and courts have been doing since the end of 2008. Yes, I realize I missed wishing you Happy Valentine’s Day and Happy St. Patrick’s day, but at least this isn’t an April Fool! Finally, between the courts, the government and the voters, I’ve got a reason to drop Legal News You Can Use into your e-mail box, other than to hit you up for business – although, that’s never a bad idea, either.

With this issue, we review the activities of the Florida Courts, in the first quarter of the year, in the latest Case Law Updates section. There is also an analysis of the three constitutional amendments affecting real estate which were approved by the voters, and their impact, in the Constitutional Amendments section.

With oil in check, a rising stock market, an increase in durable goods orders, new construction starts going up, and interest rates coming down, our real estate market could very well be on its way to the long awaited recovery. Now, that’s some news to celebrate – “no foolin’!”

As always, if you, or your clients and customers, have any real estate needs,

from advice and contracts to closings and title insurance,

with a little fun at the end,

give me a call at 408-8200, or drop me a line at evk-pa@sterlingcrest.com,

and see what I can do for you and your customers and clients.

Posted 12/15/08

Happy New Year

I hope this article finds you sufficiently recovered from a pleasant Thanksgiving celebration and ready to enjoy a very Merry Christmas and a Happy New Year. The holidays not only bring a time of a joy and celebration with family and friends, but an opportunity to reflect upon the year, and prepare for the opportunities of the New Year.

Let’s be honest, this last year has been a tough one. With the bust in the real estate market, coupled with the financial meltdown, 2008 will be remembered as a year that broke many. But, it didn’t break us. We’re still here, and in 2009, we’ll be able to take advantage of what are predicted to be the lowest mortgage rates in decades, pending sales finally holding steady, an increase in sales for the 3rd quarter of 2008, and a market priced to attract even the most skittish snowbird investors.

There is no question, the future is not perfect, nor is every problem solved. With statistics like over half of the “saved” borrowers back in default, and mortgage delinquencies increasing with the spate of year-end layoffs, it will take hard work, determined effort and singular creativity to make 2009 the rebound from the bottom, and not just another holding pattern of handwringing. We are the experts, and it is time for our individual expertise to coalesce into a coordinated effort in selling this as the best market to buy since the end of savings & loans.

Most of all, it is important to remember the true numbers behind this “crisis”. Currently, less than 7% of all mortgages are delinquent (defined as 30 days late), and less than 3% of all mortgages are in foreclosure. Look at this in light of the cascading effects of the Wall Street meltdown, and resulting credit crunch, the massive layoffs in that industry across the country, and huge condominium surpluses in Florida and Nevada, and these numbers are anything but the “end of the world.” Even factoring in the Fed Chairman stating possibly 20% of home mortgages are “underwater,” and foreclosures are still only about double what their normal rate has been historically.

The fact remains, the real estate market is no different than the economy in general – if consumers are positive, the economy improves, and if they’re negative, it doesn’t. We’ve all had our dose of reality, and there are no ostriches left in our business. Now is the time to start selling our market, and make believers in real estate, again. We can all do it together, the prices are there, the rates are there, even the customers are there, and most importantly, we’re still there.

In the spirit of giving, I offer the last installment of the 2008 Legislative Update, just follow the link to review the Legislature’s final activity. And, I offer you all the best wishes for 2009.

As always, if you, or your clients and customers, have any real estate needs, from advice to closings, with a little fun at the end, give me a call at 408-8200, or drop me a line at evk-pa@sterlingcrest.com, and see what I can do for you and your customers and clients.

Posted 10/29/08

"Trick or Treat" has been the Metaphor

for the Financial News

we've been sifting through in the last two weeks,

that "witch" has been "conjured up"

by the financial wizards like a witch's brew!

Fall is in swing, we have football all weekend long, our Northern guests are arriving in droves, and the economy is actually showing signs of life. New home sales are up 2.7% – not a huge number, but a POSITIVE number. Existing home sales are at their highest monthly rate in 13 months and the highest percentage increase in 5 years! And, yes, I realize that rise may be at the expense of a 17.7% drop in home prices over the last 12 months, but AFFORDABILITY is what will drive a rebound in real estate. Interest rates have moderated, again, 30-year fixed loans hovering around 6% and mortgage applications up 17%, and with the Fed lowering interest rates another half point to 1%, the credit iceberg, upon which our industry’s ship has foundered, is thawing quickly.

There is also great news about the $300 billion FHA Refi Program through HUD. For those of you who have had clients “upside” on their homes, especially with a large second mortgage or home equity line, this program was not even close to the Godsend many had hoped for. The original program required the lender to reappraise the property and then write off 10 percent of the new value. In a one mortgage situation, this worked, but in a multi-mortgage situation the second lender, more often than not, balked. The rules have recently been modified to give HUD more flexibility in not only setting the new loan level, but in allowing the second lien holder to be bought out, if necessary.

One last note of importance is a new Federal law regarding identity theft, which goes into effect on November 1^st. Why this law is important to Realtors® is that it is “aimed at any business that issues consumer credit or accesses credit reports.” Obviously, if you are involved in rentals, a credit check and/or report is many times part of the equation. The law provides that businesses must have written policies and procedures for “detecting, preventing and mitigating” identity theft. Therefore, if you are in the “business” of obtaining credit reports, you will need to have written policies in place, educate those in your office, and take appropriate steps if and when a breach occurs.

Follow the link to a review of the Legislature’s recent changes to the Homeowners Association lien law, and be sure to review the last Legislative Update regarding a change in the manner that Property Appraisers go about valuing property.

As always, if you, or your clients and customers, have any real estate needs, from advice to closings, with a little fun at the end, give me a call at 408-8200, or drop me a line at evk-pa@sterlingcrest.com , and see what I can do for you and your customers and clients.

Posted 10/29/08

Link to update regarding Homeowners Association Lien Law

Does it feel like Fall to you? Well, other than a couple of nights last week, it still pretty much feels like summer. But, I’ve started seeing the traffic of season, and whether it’s Publix on the weekend or waiting for a treadmill at the Y, our winter guests are arriving daily, and they are legion. Being the eternal optimist that I am, a very good season for our local businesses, could very well translate into a very good season for us.

Speaking of optimism, the economy is a mixed bag, yet again. In the housing arena, we have the lowest rate of new home sales in 17 years, and housing prices plummeted 16.3% in July. As I have said previously, more affordable housing in our area is not a bad thing! Offsetting this news is that consumer confidence rose an unexpected 1.3 points in September to 59.8 (of course, a year ago it was sitting at 99.5), and the economy still grew 2.8% in the second quarter. As Austin Powers once said, “What does it all mean, Basil?” It means the much lampooned comments of John McCain might actually have been correct, “the underlying fundamentals of our economy remain strong.”

You can read my opinion on the bailout by clicking on the article link - The Bailout, an Opinion.

The Courts and Legislature have been pretty quiet of late, but be sure to check the third installment of the Legislative Update, the portable homestead exemption has finally arrived.

If you missed my article about the good news for short sales in the Venice Board V-News, I’ve included it at the following link – Good News on Short Sales.

I hope to see you at the golf tournament this Friday, let’s spend the day celebrating our camaraderie and playing bad golf.

As always, if you, or your clients and customers, have any real estate needs, from advice to closings, with a little fun at the end, give me a call at 408-8200, or drop me a line at EVK-PA@SterlingCrest.com , and see what I can do for you and your customers and clients.

Well, summer is over, the kids are back to school, and hurricane season is warming up. In the grand scheme of real estate, season is just around the corner, people have more time during the day while the kids are at school, and insurance issues become paramount once again. Of course, the other proverbial “shoe” just dropped as well, your TRIM notice. And, this year, a more than glancing perusal should give you a little insight as to where things stand.

First, look at what TRIM stands for, “TRuth In Millage.” This is rather misleading because there are apparently two “truths”. There is the “if proposed budget change is made” truth and the “if no budget change is made” truth. For the past few years, I’ve actually preferred the “if proposed budget change is made” truth. However, the deviation of the “truths” is quite substantial. From my own tax bill, there is a 16.8% difference in the amount of the “truths,” so I REALLY want the proposed changes!

Most importantly, this year’s tax bill will incorporate the increase of the Homestead Exemption to $50,000.00 (from $25,000.00) for county ad valorem taxes. Be aware, only $25,000.00 of the exemption applies to the taxes for the School Board (which make up 60% of your final tax bill). Therefore, the true effect of the additional exemption is blunted to less than 40% when factoring in the fact that non-ad valorem assessments, such as stormwater, fire and garbage, have no exemption applied to them.

Finally, there is the issue of “Market Value” versus “Assessed Value.” The controversy over this issue may very well have led to the change in the Property Appraiser for Sarasota County. For many, this year’s TRIM notice shows a marked drop in the “Market Value,” reflecting the depressed real estate market in which we find ourselves. However, most would say it is at least “a year late and thousands of dollars short,” so to speak. Now, add to this the fact that for many, who purchased their home more than ten years ago, their assessed value actually went up because of the substantial lag of their “Assessed Value” due to the effect of the 3% cap of the Save Our Homes Amendment.

So, when you peruse your TRIM notice, keep in mind that although the “devil is in the details,” most of the time, it isn’t hard to see him.

On a positive note, we also received some positive economic news from the real estate front in the form of a better-than-expected rise in existing home sales and a 1% rise in mortgage originations, but, at the expense of a 15.4% drop in U.S. home prices. For me, there is a direct correlation. Homes sell better when more people can afford them. And yes, this has become the ultimate zero-sum game, with each loser’s loss equal to each winner’s gain. However, looked at from the global perspective of our market and industry, this is a correction we desperately needed to occur. And, that is what we have experienced, a correction, not a depression.

Another nugget of hope stems from a recent comment by Bob Toll (C.E.O. of Toll Brothers, a leading luxury-home builder), made in the August, 2008, issue of Condé Nast Portfolio (Page 28). Mr. Toll was asked, “Which real estate markets will turn around first?” To which he responded, “Florida is also counted out. But that will also turn around faster than people expect.” Finally, someone who actually makes the bulk of his money in our business stating on the record that things are going to turnaround faster than people expect!

Enjoy your Labor Day weekend, and return refreshed, rejuvenated and ready to go!

As always, if you, or your clients and customers, have any real estate needs, from advice to closings, with a little fun at the end, give me a call at 408-8200, or drop me a line at EVK-PA@SterlingCrest.com , and see what I can do for you and your customers and clients.

We’re back, and we’re better than ever. Welcome to the online version of Legal News You Can Use. How long has it been since the last inkjet printer version graced your desk? Don’t answer that! But, it’s been too long since I put fingers to keyboard and scripted a few gems for your consideration. And yes, I really did write this ALL BY MYSELF. In this age of pre-fab, homogenized newsletters that may, or may not, actually contain something other than a thinly veiled solicitation for business, I take credit for all that you are about to enjoy (now that’s the Erik you all remember). And, along the way, you might even recall, back when we all actually had closings, why you used to show up at my office – yes, it’s ok to answer, “because of playing the slot machine for gift certificates after closing!” – it’s still here and waiting for you.

For those of you who want to just dive in and “get the good stuff,” click on one of the links to CASE LAW UPDATE or LEGISLATIVE UPDATE and see what the courts and the legislature have done for, and to, us. And, if you like your information on a slightly more “fireside chat” basis, as the Joker says, “here … we… go.”

I guess what really put me back in the mood was a recent lender/developer conference I attended in Las Vegas (yes, I actually spent 3 days in Vegas attending a conference – no “wink, wink!” – my wife will verify). It was enlightening, depressing, hopeful, and discouraging, all at the same time – just like the real estate market in which we find ourselves here in beautiful Sarasota County. Sure, to us, we in Venice are the crown jewel, but we’re still part of the Sarasota crown. And, in Sarasota County, there is reason to be optimistic, while at the same time discouraged.

However, it is time to rid ourselves of the tired clichés! Please, let the media beat that horse, both pro and con, but we as real estate professionals need to consider factual data and real market trends.

So, what are the “factual data” and “real market trends,” at least from the perspective of the nation’s lender/developer elite? Depends on what you’re looking for.

First and foremost, the state of lending is in shambles, and that isn’t just the sub-prime market, that’s commercial lending (the lending that creates new buildings and subdivisions).

As one speaker put it, the secondary financing necessary for development, “is one step short of loan sharking.” Therefore, projects that would make sense, even in today’s weakened market, have no chance of proceeding because the money is at 15%-18%. Volume is down 60% and rates are up 6%! 60% of the capital to invest was lost in 2007-2008. He proceeded to state that, “For the short-term, lenders are irrational and are looking for acquisitions rather than new construction and development. Equity funds are being put together in order to scrape up the good projects that are dying on the vine.” It was the consensus that lending would not return to some semblance of normalcy until 2009-2010.

So, as I’m sure you’ve all seen, we have PLENTY, of resales to concentrate on until the new construction market returns to our area. BTW, 2009 seems to be the consensus on a true turnaround of both sales and values and 2010-2011 for sufficient absorption of existing product to trigger new construction. However, a word of caution came from a couple of speakers. One stated, “2005 land prices are now selling at 30 cents on the dollar,” and another felt that, “new dirt has a 5 to 10 year holding period in the truly over built markets.” (In my next article, I’ll cover, in detail, Florida’s “Number 1 Economist,” Hank Fishkind’s, comments on the real estate recovery conveyed recently at The Fund Assembly in Orlando.)

For those of you who saw the savior of the condominium industry as the condo-hotel/fractional ownership, the news is rather morbid, it’s DOA, plain and simple. Las Vegas killed this goose, there are no more golden eggs. In fact, one savvy lender stated, "the industry now looks at condos as rentals in the making.” Remember one important fact, our buyers come from the rest of the country, and this is what they are hearing before they arrive to look – be prepared.

As the market soared for almost a decade, we all heard how real estate was the life blood of the U.S. economy. It was “can’t miss,” no matter how far beyond the line we stepped. None of us, and I do mean none of us, failed to see the end coming – but, instead of a dip in the road, we found a precipitous cliff. All the signs were there, markets near and far were throwing off clues on a daily basis, but we seemed insulated from the impending doom. That was until the industries dependent upon our success all heaved a collective sigh and collapsed.

The commercial lending and brokerage industry was 48 hours away from reliving the events of Black Monday, 1929 and 1987. On Friday, March 14, 2008, Bear Stearns, one of the nation’s largest brokerages, was on the verge collapse. Those in the know predicted that at least 2 or 3 equally high-profile brokerage houses would follow suit in the next week if Bear Stearns failed. In the next 2 days, an extraordinary event occurred, JPMorganChase and the New York Federal Reserve Chairman brokered a deal for the purchase of Bear Stearns for what amounted to $2 a share, when the exact same share had traded at $171.51 on January 12, 2007. So, instead of Black Monday, 2008, for the entire market, Bear Stearns shareholders awakened to a loss in value of 98.95%. That’s just a little worse than what some of our customers have experienced in our down real estate market. And, Goldman Sachs, the nation's most prestigious investment banker, still predicts 100-200 commercial banks will fail.

But, you would think that people staying in their homes would be using this time to repair or replace – not so. Lowes and Home Depot have seen a 30% drop in floor traffic. This is echoed by the fact the construction labor prices have plummeted, framing costs have dropped, for example in California, from $21 a square foot to $8 a square foot. Now is the time for repairing and upgrading homes because the consensus seems to be that the depressed construction market will only last for another 12 months.

Things really are tough all over, and you can see it’s not just Realtors® who are hurting anymore. Everyday, if you care to read, housing news continues to disappoint (the most recent is the 120% increase in foreclosure filings, a 5% drop in existing sales contracts, a 15.8% drop in home prices and a 14.1% decline in mortgage applications), while at the same time give hope (interest rates finally drop after three weeks of increases). But, we have finally been swept from the front page by a new economy killer, $4.00 gallons of gas and $140+ barrels of oil. We have a short time to catch our breath, develop a realistic strategy, and return to what we do best – help people find the home of their dreams. That’s what we do, and there was a time when we didn’t lose sight of that – a time when the market actually worked.

Positive thinking is a powerful force, but in and of itself does not bring an escrow check and a signed contract. Our current affairs are neither rosy, nor insignificant. A full 75% of those recently polled believe the United States is in a recession (even though we may never actually meet the criteria). A corporate client of mine who owns body shops throughout Florida told me his business, which was literally “economy proof,” was significantly down at every shop. Pretty platitudes will not assuage Chicken Little.

So, what is the strategy that will work? Unfortunately, simply saying things aren’t as bad as they seem will accomplish zip. Try telling someone who has lost two or three hundred thousand dollars in value that things aren’t as bad they seem – and watch for flying shoes in response. One of the factors hurting us most is our success. The very Realtors® that sold buyers houses for $600,000 to $700,000 are now returning to those buyers-turned-sellers with CMAs in the $300,000 to $400,000 range. Tell me how that works for you.

Remaining an avid pessimist will guarantee that nothing positive will happen. I love to listen to people tell me how bad things are, and then wonder why it doesn’t get better. I suppose the only upside to this “strategy” is that if you always expect the worst you will never be disappointed.

Perhaps how best to proceed is metaphorically illustrated by an unlikely character, the star of America’s biggest blockbuster thus far, Iron Man – a human being surrounded by armor. That is what we all need to become – not a superhero, but human beings surrounded by the best tools to protect us, while at the same time making us vital to the success of the real estate transaction.

First and foremost is the armor of knowledge. People will always come to us seeking our knowledge and expertise. If they had it themselves, or even if they had confidence in what little they did have, they wouldn’t need us. Well, I don’t know about you, but to date, I have yet to see us replaced by the Internet. No question, the Internet is a superb tool, but best used by experienced fingers, those most likely attached to a Realtor®. All the knowledge you possess, from the years of training and experience, are what protect you, not only from dangers inherent in a real estate transaction (the Johnson v. Davis cloud, requiring disclosure of material defects in residential transactions) but of those potential slings of arrows from all those who question your worth.

Remember, it is not the Realtor® who tanked the market, it is the almost incalculable greed of the buyer and seller, combined with "overly zealous" lenders, who transformed our real estate market into something just short of hedge fund derivative trading (think Jerome Kerviel, who lost Societe Generale $7.1 billion). Let them know that through your experience in the community, your involvement in the regional MLS, and the NAR® and FAR® seminars you’ve attended and reviewed on short sales (selling real estate for less than what is owed on it with lender approval), marketing and creative strategies for just this kind of market, you can open their home to the widest marketplace of buyers.

Sounds simple, but you already know how much work it has taken you to get where you are able to say, “I can do that.” You also know that is what sets you apart. It is what provides you with the final piece in your arsenal, your weapon of choice. And, that is focused determination, creativity and above all, integrity. Your name and your reputation are what puts you at the top of each customer’s list. It’s also what opens the door to our lifeblood, customer-based referrals. The business hasn’t changed, just the market. We can be no less professional now, at the bottom, than when it was easy to be at the top.

Well, it’s great to be back in the swing of Legal News You Can Use, and I hope to “see” you all soon for another great article. And, remember, if you want to have the same fun at a real estate closing, in, dare we say an “attorney’s office,” as you did reading this installment, give me a call at 408-8200 and see what I can do for you and your customers.