Published Articles
Updated 1/1/2000
Buying A Home? Consider This...
Searching for a home can be really exciting but it can also be very stressful. Having an idea of what you can afford and what you are looking for can eliminate some of the stress associated with searching for a home. Consider the following:
- What can you afford? You should consider talking to a loan officer or a mortgage broker both to determine what you can actually afford and to obtain a pre-qualification letter. With interest rates likely on the rise, you may want to inquire how much it would cost to "lock in" a certain interest rate.
- Have you sold your existing home? If you have not sold your existing home, can you afford two homes? If not, you may want to consider making the purchase of the new home contingent upon selling your existing home. If you do not have an existing home, are you leasing? If so, when does your lease expire? If you break your lease, you might lose your security deposit and the landlord may attempt to seek rent from you for the remainder of the lease unless you negotiate a termination of the lease.
- Are you working with a realtor? Realtors who are familiar with the area where you want to purchase can be extremely helpful especially if you do not have a lot of time to search for a home. Generally, if you are purchasing a home that is already listed with a broker, your realtor will be paid by the seller.
- Do you want new construction or existing construction? Sometimes this depends upon how quickly you need to move into your new home and whether or not you want to have the option of selecting the colors and/or patterns for your new home.
- Are there schools and parks in the area? If you have children, it will be important for you to determine where your children will be attending school and whether there are parks in the area. After finding a home, consider consulting an attorney before signing a contract for purchase. An attorney can review the contract with you, make any necessary changes, and negotiate with the seller. Good luck finding a home!
FLORIDA HOMESTEAD EXEMPTIONS:
The concept of homestead is as old as the State of Florida. There are only a few states with homestead exemptions. Florida is considered one of the most generous. There are 2 types of homestead exemptions available to property owners in Florida: (a) homestead exemption for real property tax purposes and (b) homestead exemption for asset protection purposes. The fact that you have one type of exemption does not necessarily mean that you have the other type of exemption as each exemption has distinct requirements.
Specifically, the homestead exemption for real property tax purposes provides an owner of property with a $25,000.00 reduction from the assessed value of the property thereby currently reducing the amount of real property taxes by approximately $650.00 each year. Since real property taxes are paid in arrears in Florida (just like interest on your mortgage), this type of homestead exemption is only available if the owner is the permanent resident of residential property as of December 31 of the prior year and owner makes application for the exemption at the property appraiser's office on or before March 1 of the following year. If you are widowed or permanently disabled, you may be entitled to an additional reduction from the assessed value of the property.
The homestead exemption for asset protection purposes provides the owner of property with a shield from virtually all non-lien creditors. This type of homestead exemption is only available if the property is your primary residence and a court makes a determination that the property is within a municipality or outside of a municipality. If your property is within a municipality, protection is provided for only one half acre of contiguous land. If your property is outside of a municipality, protection is provided for 160 acres of contiguous land.
Know Your Rights Concerning Real Estate Deposits On New Homes
Typically when you buy a new home in Florida, the builder will require that you make a deposit equal to 10% of the purchase price of the home. Sometimes for homes less than $150,000.00 the builder may accept a deposit of a lesser amount. On occasion when a buyer is purchasing a new home in excess of $500,000.00, the builder will attempt to obtain a deposit for as much as 20% or 30% of the purchase price. Naturally, as most things in real estate, the amount of the deposit is negotiable including the timing of the payment of the deposits.
If one is buying a new home, the question that always arises is whether or not to place your deposit in escrow or release the funds to the builder. Under Florida law, the Buyer has a choice and must decide in writing which option to choose. While at first glance the decision would appear simple: Put the money in escrow. Indeed, the decision requires carefully weighing factors such as whether or not the builder is likely to complete the project and the general risk tolerance of the Buyer.
If the Buyer elects to place the earnest money deposit in escrow, the builder has the right under Florida law to charge the purchaser the builder's cost of borrowing that amount of money, less any interest that the builder is able to obtain on the escrow's while the deposits are being held in the bank. What does that exactly mean?
For example, if it costs the builder 12% in annual interest to obtain an unsecured loan and the Buyer's deposit is $20,000.00 and during the course of construction, which we shall assume for purposes here is one year, the builder obtains interest at the rate of 3% for the Buyer's Deposit, at closing the builder will charge the Buyer 9% (12% ? 3%) or $1,800.00 for the "privilege" of having the funds held in escrow.
So as you can see, that for the privilege of being able to sleep well at night knowing that your funds are safe and secure, you have effectively purchased an insurance policy for $1,800.00. Naturally, if your deposit is for less, or the interest rate that the builder obtains for you is more, and if the builder can complete the home in less than twelve months the cost to you for having your funds secure and safe will be less.
Having said all this, sometimes builders during the course of construction will provide an incentive to the Buyer to release their escrow to the builder. Such an incentive usually includes an abatement of costs associated with the escrow. Some buyers who had previously escrowed their funds and now see that construction is progressing and their builder appears not to be having financial problems, will then consider releasing their escrow to their builder.
Remember, the decision of whether to release your escrow is yours. Never allow a builder to talk you into releasing your escrow if you do not want to do so. In fact, if a builder appears too eager to have you release the escrow to them, maybe, just maybe, that is a warning signal.
Selling Your Home? Consider This...
- Are you ready to sell your home? Beware of "seller's remorse" which may appear immediately after signing a contract for sale. Be sure that you and your family are ready to move out of your home within the time frame in the contract for sale. Consider whether or not your children will be able to remain in the same school for the remainder of the school year after you close on the sale of your home.
- What is your ideal sales price? This may depend upon whether you are selling your home For Sale By Owner or with the help of a Real Estate Broker? If you are going to sell your home with the help of a Real Estate Broker, ask the Real Estate Broker to do a comparable to determine what the homes in your neighborhood are selling for and consider that amount of the real estate commission when determining a sales price for your home. Before entering into a listing agreement with a Real Estate Broker, negotiate the real estate commission and ask the Real Estate Broker what he or she will do to market your home.
- Is the purchaser seeking financing? If your contract for sale is contingent on the purchaser obtaining a mortgage, you may want to require the prospective purchaser to provide you with a letter from a bank or a mortgage broker indicating that the purchaser is pre-qualified.
- Where will you and your family live after you sell your home? Do you have another home or are you in the process of purchasing another home? If you are in the process of purchasing another home, you may want to make the sale of your home contingent upon the purchasing of your new home and you may want to schedule the sale of your old home and the purchase of your new home back to back.
You should also consider what personal property is included in the sale of your home, if any, and whether you are going to sell your home in "as is" condition or whether you are going to pay up to a certain amount of percentage for repairs.
These are only some of the things you should think about when selling your home. After finding a purchaser for your home, you should consider consulting with an attorney before signing a contract for sale. Good luck selling your home!
Is Your Home Like Your Car?
First of all, like many things in American life, supply and demand is a major factor. Therefore, if your home is truly "unique" it will always fetch a value for unique homes. Less supply and high demand equals a higher price. Unfortunately, since most of us do not live in unique homes, our property values will only rise based on a few circumstances:
- Simple inflation: Just like in the late 70's and early 80's homes increased substantially because of inflation where everything was going up more than 10% a year.
- Sometimes we luck out and end up living in an area or development that is perceived as "hot" and therefore demand far exceeds supply;
- If we stay in our homes long enough, the simple replacement value will in all likelihood exceed the original cost of our home.
Factors of course that lend to a home being unique are water views, such as living on the beach or a large lake, or living on a golf course.
On the flip side, many homes in fact will depreciate in part over time unless they are impeccable maintained. For example, most equipment used to run the home such as air conditioners, refrigerators, water heaters, outdoor ceiling fans, swimming pools, and their pumps, will wear out over time and will require replacement. Thus, certain portions of the home will indeed depreciate. The same also holds true for the structure. The roof needs to be regularly cleaned and eventually replaced. The outside of the house needs to be kept painted and flooring and wall treatments need also to be maintained and also eventually replaced.
Also, if developers continue to build a similar house in your area their pricing will obviously affect the value of your home. If their prices are going up, your will likely to. Putting it simply, strictly as an investment, buying a home may not be your best investment. In fact, the average American family has now more money invested in stocks and bonds then they do in the equity of their home. So again what does this all come down to. It's very simple. When you're buying a home, do so because you want to create a certain lifestyle and comfort level for you and your family. Buy a home because it is a safe place to place your money since in Florida your judgment creditors generally will not be able to attach the equity in your home if it is indeed your homestead.
If inflation rears its head again, you will have a good hedge to protect the real value of the money you put in your house. Of course, if you purchase your home with a mortgage, each monthly payment you make is effectively a form of forced savings since, initially a small portion, but later a larger portion of your payment will go towards building up equity in your home.
Finally, if you sell your home and the value has not increased remember, the house has created both psychological and economic value to you in that you have, just like a car, enjoyed the use of the house.
