Homebuyers get bolder: Inspections used to boost demands

MILWAUKEE – March 20, 2008 – You should hear what people say behind Scott LeMarr’s back.

He’s a Muskego, Wis.-based home inspector who operates Honest Home Inspections LLC. House hunters call him in to examine a house they want to buy, and his job is to sniff out impending collapse of expensive necessities like the heating system, major appliances, the roof and so on.

While he’s inspecting away, the buyers often speculate about what they’d like to change about the house and how they might get the sellers to cave in to their demands.

“I look at structural and mechanical, but I hear them talking: ‘This carpet is the wrong color, maybe we can get them to put new carpet in,’” says LeMarr. “Women run around with a tape measure saying, ‘we can change this’ and men are concerned with the mechanicals.”

And more often than not these days, the buyers assume that they can force the sellers to swallow the cost of anything that LeMarr flags.

Real estate agents put on a polite face when they talk about the attitudes of today’s buyers. It’s a buyer’s market, they say, citing the backlog of houses on the market. But privately, agents say that some buyers are out of control.

Some buyers flagellate sellers at every step in the process with demands for improvements to suit their decorating preferences; for givebacks to cover closing costs, taxes, homeowners’ association fees, even down payments. They declare that if sellers don’t cave in, they’ll move on to the next house.

“Clearly, buyers are in the driver’s seat and so they’re able to get away with that sort of conduct,” says Milwaukee real estate attorney Richard Frederick. “Nowadays it’s almost expected to get an inspection report and use that as leverage to reduce the price.”

Attorneys, agents and inspectors say that buyers openly brag about their leverage during the inspection and financing phases, saying that if they don’t press buyers for concessions then, they’ll lose one of their best negotiating tools.

“They’ll make an offer low, generally 10 percent below asking, and then they’ll play the counteroffer game,” says Dave Schmidt, owner of Dave Schmidt Realty in Milwaukee. “Some look at the inspection process as a chance to renegotiate the deal.

“Things that would have slid, now they’re making the sellers go back and fix - a drippy faucet or a cracked window. Little things that in the past aren’t a big deal, now are a big deal. They want to move into a perfect house.”

New homeowner Cassandra Downey was a demanding buyer, and she has no apologies for it.

She and husband Jeffrey pursued homeownership for five years, much of that time spent topping off their down payment fund to keep up with rising home prices. The couple also strove to improve their credit scores.

In early 2007, they finally received a mortgage preapproval for a purchase price of $150,000 to $187,000 and started house-hunting in earnest.

“I knew it was going to be a headache because I’m very finicky. It was our first time, but I wanted to be sure it would be comfortable. I refused to get a home that needed gutter work,” says Downey, who works full-time as a teacher, is earning a master’s degree in the evening and helps care for her grandchildren. “I eliminated a lot of houses because they did not meet my standards. A lot of them had leaky faucets. One needed electrical work, the garage was falling over, the landscaping needed to be done.”

Thirty houses later, the couple made an offer, but the sellers refused to fix some minor electrical and plumbing problems, landscape and repair the gutters. That deal fell through.

Then, the Downeys found a $170,000 Milwaukee house in good condition with new appliances. The seller agreed to replace the main electrical box, and the Downeys conceded that repainting was their responsibility. Their offer of $167,000 was accepted and the deal closed.

“We’re asking quite a bit, and we’re getting it, too,” gloats Michael Nencka, with First Weber. He specializes as a buyer’s broker – an agent who contracts with buyers and represents only their interests in negotiations.

His laundry list of demands includes “gap insurance,” to cover the house while it is under contract, at a typical cost of $150; a one-year home warranty, which usually costs about $425; and the closing costs, which can reach $3,000, and translates to lower mortgage payments for the buyers.

“That’s $3,500 in concessions on top of the negotiated price,” rejoices Nencka. “In this market, sellers will do anything.”

Well, some will.

Other agents say that they caution greedy buyers that they will likely have to choose between a hefty discount from the asking price or several rounds of concessions as the deal progresses – but not both.

And LeMarr says that he tries to temper buyers’ expectations by telling them that he thinks it’s only reasonable for sellers to pay to repair safety hazards, not to replace worn or annoying finishes, such as scuffed tile or unfashionable light fixtures.

He also sets higher standards for new houses than he does for historic houses.

People buying vintage houses should mainly be concerned with the foundation, roof, furnace and possibly misguided attempts of prior owners to maintain the electrical and plumbing systems.

“When we walk up to a historic house, I’ll warn them, ‘this is a 100-year-old house,’“ he says.

He has no patience for shoddy work in brand-new houses - like the builder’s model home that didn’t have a single puff of insulation in the supposedly blanketed attic.

Veteran real estate agent Barb McGill, based in the Brookfield, Wis., office of First Weber, says that both buyers and sellers seem increasingly willing to let deals die.

“Buyers have been told that they’re in the driver’s seat and they should ask for what they want. But it’s only as much as a seller will do,” she says. “A seller will say, ‘enough’ and the buyer is out of a really good property.”

© 2008 Milwaukee Journal Sentinel, Joanne Cleaver. Distributed by McClatchy-Tribune News Service.

NOW IS A GREAT TIME TO BUY AND TAMPA BAY IS THE PLACE!

Great news from our recent December 2007 MFRMLS Statistics!

Monthly Sales = 1099 (up from 977)
Average Sales Price = $267,117 (up from $250,283)
Average List Price = $281,151 (up from $265,194)

For more statistics visit GTAR.org – Market Statistics – December 2007

Granted one month is not a trend, but if we keep heading in this direction for a couple more months, we’ll have a good quarter under our belts. Tampa Bay also leads the state of Florida in home sales volume.

Congratulations to Marc Vitorillo, Broker/Owner Schaaf & Vitorillo Realty. Marc was selected by HGTV to appear as a Tampa Bay Real Estate Expert on “My House is Worth What?” January 27th and March 18th. Way to go Marc!

In 9 days we will have the opportunity to lower property taxes by Voting YES ON Amendment 1 on Jan. 29th. Please support this Amendment. For an in-depth look at the Amendment go to a vidcast by me at:
http://www.gtar.org/files/documents/videos/VoteYesOn1_Farmer_512K_Stream.wmv

If you are still undecided, I invite you to watch ABC "Flash Point" on Channel 11 Sunday, January 27th 11:00 AM when I will be discussing this with Brendan McLaughlin.

Crist continues to advocate passage of Amendment 1

TALLAHASSEE, Fla. – Jan. 14, 2008 – Governor Charlie Crist will spend a lot of time this week advocating passage of Amendment 1, the property tax reform proposal voters will consider on Jan. 29. The governor continues to visit families who will benefit from passage, and plans a promotional bus tour around the state on Wednesday.

“With a little more than two weeks before Election Day, the Yes on 1 campaign continues to gain momentum with new endorsements, our first commercial and several visits with homeowners across the state,” said Crist in a letter to voters. “You can expect to see more in the coming weeks … Support for Amendment 1 continues to grow and just (last) week the Construction Executives’ Association and the Florida Bankers Association joined several other organizations and associations supporting Amendment 1.
 
Other groups supporting Amendment 1 include:

• Association of Builders and Contractors
• Associated Industries of Florida
• Construction Executives’ Association
• Florida Association of Realtors
• Florida Bankers Association
• Florida Carpenters Regional Council
• Florida Chamber
• Florida Home Furnishings Association
• Florida Homebuilders Association
• Florida Manufactured Homes Association
• Florida Medical Association
 
The bus tour on Wednesday will cross the state with tentative stops planned in Volusia, Orange, Hillsborough and Lee Counties. For more information, visit the “Yes on 1” Web site at: http://www.yeson1florida.com)

© 2008 FLORIDA ASSOCIATION OF REALTORS®

Before You Look at Your First House

Experienced home buyers know that one of the first-steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home - including how we write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.

Here are the questions that each home buyer should ask: How much cash is available for a down payment? The amount you have available for a down payment will affect what types of loans for which you can qualify. Learn more. Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer. How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and the seller, as spelled out in the sales contract. Learn more. What is the maximum monthly mortgage payment that I can afford? Most lenders will use the 28/36 rule to determine the maximum mortgage payment you can afford.

The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).

Florida Legislature passes property tax reform in time for January ballot

TALLAHASSEE, Fla. – Oct. 30, 2007 – It’s voters’ turn: The Florida Legislature passed property tax reform and a proposed amendment will appear on the January ballot. The amendment offers moderate relief for homeowners and slight relief for commercial property, but it does not go as far as an earlier House proposal. To become law, the proposal must still receive 60 percent of the votes in the Jan. 29, 2008, election.

The vote went down to the wire. Had the House and Senate not agreed by today, it would have been too late to get it on the January ballot, postponing any kind of tax relief.

“We are pleased the Legislature understood that missing the deadline for a January vote of the people was not an option,” says the Florida Association of Realtors (FAR) President Nancy Riley.  “Tax reform is necessary to stimulate our economy. To put tax relief off to November 2008 would have been devastating to our state.”

The discussion included a number of considerations and not all made it into the final version. A complete breakdown of the individual considerations and how they fared in the final tax proposal is available in chart format at www.floridarelators.org under “What’s New.” Highlights of the passed legislation include:

• Double the homestead exemption, but only for homes valued at more than $75,000 and not for school taxes

• Allow owners of homestead property to transfer up to $500,000 in Save Our Homes benefits, including school taxes, to a new home

• Impose a 10 percent assessment cap on non-homestead property for the next 10 years. The cap does not apply to school taxes. After 10 years, voters will have the option to restore the 10 percent cap

• Allow businesses to exempt $25,000 in taxes paid on computers, office equipment and other personal property

With the deadline at hand, lawmakers had to quickly agree, and the final package represents a product that everyone could accept. The House, however, emphasized repeatedly that it would continue to work on property tax reform during the Legislature’s regular session next year, an opinion echoed by FAR.

While in favor of portability, FAR worries about including a portability provision without also adding some kind of relief for first-time homebuyers, a move promoted heavily but one that did not make it into the final version. Without any kind of first-time homebuyer protection, the U.S. constitution’s “right to travel” provision could be the basis of a court challenge.

© 2007 FLORIDA ASSOCIATION OF REALTORS®

Tampa Considers Raising Cost Of Building Permits

Economist: Florida housing market will rebound, but not yet

PALM BEACH COUNTY, Fla. – Oct. 15, 2007 – Local housing markets are not going to turn around this year or next year – and might not get better even by 2009, a noted economist said Thursday at the sixth annual conference on “Real Estate Development Trends” at the Palm Beach County Convention Center.

“There are people who want to buy a home now and are waiting because of fear,” said Bradley Hunter, director of the South Florida division of Metrostudy in West Palm Beach, which conducts housing research.

“I think the way it will play out is that people are still getting married and they’re still having babies,” Hunter said. “People who need a house will be the first to come back [into the market]. The others will come back when they see that, and this will create your next ‘up market.’“ However, Hunter dodged repeated attempts to pin down just when this “up market” might show up.

Metrostudy’s clients include most of the developers in South Florida.

He did provide lots of other specifics in his speech, however.

“It might be corny,” he said, “but the most useful way to look at today’s housing market is ‘the good, the bad and the ugly.’“

The good: Listings on the MLS have peaked.

There’s no recession. People are buying when the price is right. Florida Power & Light’s new customers show population growth.

The bad: Buyers are still unenthusiastic. It’s hard to get loans, and jumbo loans are expensive. The Fed can’t fix these problems.

And the ugly: Foreclosures and currently rented investor units are causing the inventory of unsold homes to surge.

The conference, sponsored by the Urban Land Institute, was well-represented by the leadership of numerous public and private real estate ventures in South Florida.

If a meteor had dropped on the convention center Thursday, real estate development throughout Palm Beach, Martin and St. Lucie counties would have come to a complete halt.

In the meantime, Marcela Camblor – urban design director for the Treasure Coast Regional Planning Council – told the audience of about 300 people “What’s Hot in the Treasure Coast” and Gregg Logan, managing director of Robert Charles Lesser & Co., gave a brisk overview of commercial real estate in the three counties.

“It’s not possible for the residential sector to leave the commercial sector unscathed,” Logan said. “People living on credit cards impacts how much they’ll spend at Wal-Mart.” Despite that drag, St. Lucie County is poised for commercial growth, but with challenges that include increased land and construction costs, energy and environmental concerns, and escalating rent costs, property taxes and insurance.

The conference concluded with an optimistic outlook for Treasure Coast communities.

They are working together on the highly sought and much-touted scientific institutes that comprise the new Research Coast, said Harry Orf, vice president of scientific operations for Scripps Florida; Edwin Massey, president of Indian River Community College; and Richard Houghten, president of Torrey Pines Institute for Molecular Studies.

Copyright (c) 2007 The Palm Beach Post, Fla. Distributed by McClatchy-Tribune Information Services

House panel approves ballot question on property tax cut

TALLAHASSEE, Fla. (AP) – Oct. 16, 2007 – Voters would be asked to approve a wide-ranging plan to lower property taxes under a proposed ballot measure approved Monday by a House committee.

The plan passed by the House Government Efficiency and Accountability Council would double how much value is exempt from non-school taxes for many homeowners and provide tax breaks for people who move. It also would give new tax relief to people who buy their first home, among other changes.

The Senate Finance and Tax Committee was also working on the proposal, but wasn’t expected to vote until Tuesday. The full Legislature could vote on the proposal as early as this week, and if it passes, voters would get the chance to approve the change on Jan. 29 in the presidential primary.

The Legislature is in a special session trying to craft a ballot measure that would lower property taxes, which many homeowners have complained have become a major problem, particularly as property values have ballooned in recent years.

Lawmakers had earlier agreed on a proposal for the January ballot, but that plan was scrapped by a judge who ruled language describing what the measure would have done was inaccurate.

So they’re trying again this week.

The plan would continue the popular Save Our Homes law, which limits how much a homestead property’s taxable value can go up each year to 3 percent or the rate of inflation, whichever is lower, even if the actual value of the property goes up much more.

But under the law, when people move, their new house is assessed at its true value, meaning many homeowners can’t afford to move because their taxable value could jump enormously.

The measure lawmakers would be asking voters to approve would allow people to take the limit with them to a new house.

The proposal also would increase the homestead exemption. That exemption currently makes the first $25,000 of a home’s value tax-exempt. Under the proposal, the next $25,000 in value would be taxed, but above that, $25,000 more in value would be exempt from most local taxes. The exception would be school taxes, which are being kept out of the proposal because of fears that if it meant a cut to education spending, voters might not pass it.

Estimates for how much property owners would save under the proposal depend on how many of the various tax breaks they might be eligible for. Doubling the homestead exemption would save homeowners an average of $240 next year, according to legislative estimates. Being able to take the Save Our Homes cap to a new home could provide average savings of over $800 next year. Those purchasing their first home could save $500 on average just from the proposed break for first-time buyers.

Some House members say the proposal doesn’t go far enough to help homeowners or pull Florida out of its sluggish housing market. But they said it was a start and vowed to continue to seek ways to bring down property taxes.

“This is the very minimal of what we will accept,” said Rep. Frank Attkisson, R-Kissimmee and the House committee’s chairman. “We need to do more, and anybody who thinks this is going to be the last vote by this House, I think is poorly misinformed.”

Local governments are squeamish about the plan, or downright opposed – mainly because of a provision in the plan that would limit the authority of local governments, with the exception of school districts, to increase property tax rates.

Legislative estimates are that the total package would cost local governments just under $2 billion in 2008-09, rising to more than $3 billion by 2012 for a four-year loss of about $10.1 billion.

The Florida League of Cities says local voters are better at determining how much they should pay in property taxes than state lawmakers, because they know what their local needs are. In addition to schools, property taxes pay for local government services, including police and fire protection.

As with any tax cut proposal, the trick is to find a way to lower them without hurting people with service cuts, said Sen. Steve Geller, D-Cooper City, who opposes some parts of the plan and favors others.

“A lot of people seem to be making local government the enemy,” said Geller. “It is important to protect the police, the firefighters, the parks.”

Ron Beasley, a battalion chief for the Palm Beach County Fire and Rescue service, said earlier cuts already made by lawmakers have forced departments to put off hires they should be making to keep up with growth.

“The majority of our departments statewide, I believe, have gone to a pretty basic level of service,” Beasley said.

Another part of the plan would give first-time homebuyers an additional break above their normal homestead exemption.

Other parts of the plan would:

• Exempt homesteaded property owned by low-income seniors from all property taxes.

• Provide tax breaks for property on working waterfronts, such as land used for commercial fishing operations and land that is used as public waterfront access.

• Provide for tax breaks on certain affordable housing.

• Exempt up to $25,000 in “personal, tangible property,” an exemption aimed at giving businesses a tax break. Such property could include computers, machinery and other high-value items that would no longer be taxable, potentially saving businesses millions in taxes.

2007 © Associated Press David Royse, Associated Press Writer. Writer Brendan Farrington contributed to this report. All rights reserved.

Mortgage problems continue to hamper pending home sales

WASHINGTON – Oct. 3, 2007 – Pending sales of existing-homes activity will be dampened near-term as mortgage disruptions continue to impact the housing market, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index, a forward-looking indicator, fell 6.5 percent to a reading of 85.5 from an upwardly revised 91.4 in July, based on contracts signed in August. It was 21.5 percent below the August 2006 index of 108.9.

Lawrence Yun, NAR senior economist, says the mortgage market impact is quantifiable.  “Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments,” he says. “The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.

“The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked,” Yun says. “The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions. Therefore, sales activity in late fall will better reflect market fundamentals.”

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Annual changes in the index are more closely related to actual market performance than are month-to-month comparisons. As the relatively new index matures and seasonal adjustment factors are refined, the month-to-month comparisons will become more meaningful.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

The PHSI in the West was down 2.7 percent in August to 80.3 and was 27.1 percent below a year ago. In the Midwest, the index fell 2.9 percent from July to 78.1 and is 18.0 percent lower than August 2006. The index in the Northeast fell 8.3 percent in August to 77.3 and was 18.3 percent below a year ago. In the South, the index dropped 9.5 percent in August to 97.8 and was 21.3 percent below August 2006.

© 2007 FLORIDA ASSOCIATION OF REALTORS

Home construction is slowest in 12 years

WASHINGTON – Sept. 19, 2007 – Construction of new homes fell in August to the slowest pace in 12 years as troubles in the housing industry continued to intensify.

The Commerce Department reported Wednesday that construction of new homes fell by 2.6 percent in August to a seasonally adjusted annual rate of 1.331 million units.

The housing industry is experiencing its steepest downturn in 16 years with analysts forecasting weak prices and further declines in sales for months to come, given rising mortgage defaults which are dumping even more homes on an already glutted market.

On Tuesday, the National Association of Home Builders reported that its index of builder confidence fell in September to 20, tying the lowest level on record.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.