Foreclosure Assessments--WTF?

“How could I owe the association $10,000 in back assessments, I just bought the property at a foreclosure sale free and clear last week? Those fees are the responsibility of the prior owner, not me!”

It is no wonder that purchasers of foreclosure properties in Florida frequently have questions about whether they are liable for past due homeowners or condominium assessments after purchasing property at a foreclosure sale.

If you’re thinking that the next big “score” in your real estate portfolio might be a condo purchased at a foreclosure sale, call your lawyer before you sign on the dotted line.  After the initial excitement of the new purchase wears off, foreclosure purchasers are  frequently finding themselves the target of associations seeking to collect past due assessments owed by the previous homeowner.

Over the last half-dozen years, condos—many of which were only partially filled with owners or tenants—have not had the monthly income to cover their basic costs, ergo, there have been assessments to keep the buildings running.  And these assessments may or may not have been paid by the owners. When confronted with the scenario that old assessments may survive a foreclosure sale, new unit owners are often shocked at the notion that they could be responsible for the past due assessments.

Condominium association liens in Florida are governed by Sec. 718.116, Florida Statutes, whereas homeowners’ association liens are governed by Sec. 720.3085, Florida Statutes. Both statutes make the new owner “jointly and severally” liable for unpaid assessments.

The statutes specifically provide that:

A unit owner is jointly and severally liable with the previous owner for all unpaid assessments that came due up to the time of transfer of title.

Today’s Lesson:  The purchaser of a foreclosure is treated exactly the same as the prior owner and is equally responsible for the past due assessments.

All this may seem unfair to the new owner, but the law is clearly designed to assist association budget shortfalls. Further, while the law gives the new owner to the right to sue the prior owner for the recovery of any money spent paying off the old assessments, it is rarely a good idea to take advantage of such a right given that the prior owner is usually penniless and judgment proof.

And if you understood that the new owner only has to pay up to 12 months of back assessments, well, given Florida’s ever-changing foreclosure law, there is legitimate confusion about this issue. That 12-month rule only applies when the mortgage holder – i.e. the Bank – takes title to the property in a foreclosure sale, it does not apply to third-party purchasers who purchase properties at foreclosure sales.

New property owners wanting to reduce their obligations to the association by as much as possible, should be working with an experienced real estate lawyer who understands which assessments are valid and which assessments, fees or fines can be negotiated down is always the best bet.

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from bhis office at Sarasota Realty Associates in Venice.  You can reach him at 941-681-0312, or by email at dane.hahn@gmail.com

 

Keep the House Sold

Old time Realtors always say in order to get a house sold there are seven sales (or steps) that have to be made--before the seller gets his money.  (Or why selling real estate is so much fun...)

1. First of all, the owner needs to “sell” the house to his or her Realtor. Mostly this sale is an introduction to the house with a walk-through but is important because if the Realtor isn't sold, how can she or he represent the home in such a way that a potential buyer will see the value in the property? The seller has the responsibility to tell the listing agent the highpoints and also any the problems with the home, so the listing will be accurate.
   
   
2. Then the Realtor needs to collect the data that relates to the home including the tax cards, deeds, and disclosures so he can “sell” the house and all of it's wrinkles to the marketing department. The marketing department may be a real department or it may be the office secretary or even the classified department at the local newspaper, it doesn't matter, but the sale needs to be made again before it is offered to the public...
   
   
3. Next comes the internet advertising, there are many links and sites that need to have the data uploaded, The MLS material, which at first is mostly data, still needs to include good quality photos and a clear write-up. Because most buyers start out their search on the internet, this material really needs to tell about the house and sell the property. The say a picture is worth 1000 words, so the photos chosen need to tell all about the house and sell its benefits.
   
   
4. Now the area Realtors need to be told about the property. It's key to get them involved in the process right away, and to sell them on why this property is worth their client's time and money. They need to know why to show the property to their clients, how to find the property and how to get inside.
   
   
5. We reach out to buyers by advertising, by internet, by signs and by the buyers Realtors, because in order to make a sale, the buyer has to be told about the house, shown photos and come in person to actually see the property. This is the step that most folks think is the only one in the selling process—but it's not. Buyers must be sold over and over—and kept sold.
   
   
6. We're not done yet. There's still the home inspection, this is an important step because it's one of the last opportunites for the buyer to back out, so we are trying to keep the sale in place--the inspection is really an opportunity to sell the “deal” to the home inspector. If the inspector is satisfied and gives the condition of the house his approval, the deal moves forward.
   
   
7. And then there's the bank or lending company. Not everyone uses a bank, so this step may be skirted if the buyer has cash, but if there's a loan the bank has to approve the condition and price. Bankers generally don't come to see the house, they read the material the Realtors create and in order to make the loan, they will hire another set of eyes—known as an appraiser. Here's a dis-interested third party whose role is to see the house and simply determine if it is worth the money. The appraiser will look at the MLS listing, the tax cards, the neighborhood, and with good math skills and a tiny bit of black magic added in, make his determination.
   
   
   Appraisers are usually willing to review additional data, sales figures for similar homes, etc, so smart Realtors may provide all the material they used to set the price in the first place--even the appraiser needs to be sold in order to “green light” the transaction.

So there you have it, seven sales to get to one closing, but that's the goal when someone calls and says, “I'd like to sell my house—can you help...”

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from Sarasota Realty Associates in Venice, he can be reached at dane.hahn@gmail.com, or by phone at 941-681-0312. See him on the web at www.danesellsflorida.com

Fixer-Upper Before you Sell

I always smile when I talk to sellers who are convinced that the second we put a sign on their property, offers will come in from all corners. Mostly they have been living with their home for some years, and now that they have taken the “plunge” to get the house on the market, they are prepared to deal with buyers, starting on day one.

But really, not so fast. First you have to get the house ready. And by getting it ready, I mean not just signing a listing agreement, but cleaning it and painting and making the home what Realtors like to call “plain vanilla”. I say “first things first, let’s sell this home first and then you’ll have the money in hand to spend on your next home.”

Sometimes sellers follow their Realtor’s suggestions and really make the house like a new home. Some believe every suggestion as a criticism of how they have let the house dip into disrepair, and just get uncooperative.  The highest 1% may even bring in “stagers” who will move furniture, paintings, carpets and mirrors, change traffic patterns and shampoo rugs to make an older home seem like new, and to give potential buyers a sense of home and how the house will work for them.

Stagers and Decorators sometimes will paint or update tile, trim shrubs and fix gardens and even buy new furniture to make the home better than new—they’ll make an older home appear to be a “model home”. They do not provide these services for free however, and so can depending on the home, they can be pricey.

Other times sellers say, “there’s no sense in fixing the house up, it’s been good enough for us and it’s move-in ready.” Buyers may not share that opinion, especially if they don't want a fixer-upper.

And so I say, usually they are wrong. You don’t need a big budget to fix up a house, what you need is a sense of what’s wrong and the time and willingness to make the necessary changes—and the commitment to repair whatever you break while you are fixing what needs to be corrected.

Used homes can be like used cars. They can be low mileage creampuffs or dented and worn out beaters that still have the smell of their prior owners. Sometimes the prior owner smoked cigars, sometimes the prior owner wore perfume—but when you are the seller you’ll soon understand why God invented Fabrize.

I always tell my listing clients that we Realtors will manage the marketing and the sale of a property, but the homeowner needs to manage the condition. And the better the condition, the better a house will show and sooner it will sell. Think for a moment how buyers see houses.

Usually they see internet photos, so the property needs to look good. Then when they come to actually see the home in real life, they might be seeing 3 or 4 homes in a day (sometimes more than that) so each house needs to be at it’s best for the visit.

And you (and your house) only have once chance to make a good first impression. So as the clients first see the house from the street or driveway, they are already making up their mind. If the yard is a mess, or they see old bicycles and trash, or even a rusty front door, you are starting with one strike against you—before they even come in.

When that door is opened, what they notice next needs to be very appealing, or you are soon to have strike two. Be sure there are no barking dogs (even in expensive kennels), no cat or dog smells, no loose or dirty carpets, and no dishes in the sink or family photos on the fridge. The idea is to de-personalize the home so the buyers can visualize the house as their own. If you can, get cardboard boxes and start packing all the loose stuff—you’re going to move anyway, might as well get started. Clean out bookcases, put away bric-a-brac, get rid of half the clothes that fill the closets (and don’t fit anyway).

Sweep the garage or carport, if the floors are raw concrete or painted, repaint them, there’s nothing easier than painting a floor with a roller. Clean the kitchen cabinet doors and the appliances. It’s amazing all the dirt we just don’t see. And here’s a hint, take photos of your home, all around. Then look closely at what your house looks like to the camera, you’ll see finger prints, chipped paint, peeling wallpaper and all the flaws that you just don’t notice because you live there.

I have made these suggestions to hundreds of sellers, some took my advice, and some didn’t. Most of the houses I’ve listed over the years sold, but I can promise you this, the cleanest ones sold quickly and for the most money.

Mostly it’s just paint, but if you are earnest about selling think new screen and doors, and door hardware. Make the first impression one of newness. Have the carpets shampooed and wax or polish the floors. (Who still waxes floors? But what a difference gleaming floors make).

So marketing really does work, and the more a seller and a Realtor can work as a team, the more likely a house will sell for the most money in the least amount of time.

Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties from his office at Sarasota Realty Associates in Venice. You can reach him at 942-681-0312 or by email at dane.hahn@gmail.com

 

 

Get Out of the Market and into These Areas

As a long-time observer of real estate trends, I am satisfied with the sluggish growth I see in today’s market. Don’t get me wrong, I am working hard for my clients who want to sell their properties, and I am searching properties for clients who are planning to buy now or in the near future. But for the health of the market overall, I am seeing a healthier adolescent real estate market than we have had for some time.


I always smile at newspaper headlines that state that rental rates are getting too high, and these high rates will certainly drive potential tenants away. Naturally high rental rates are always onerous, but come on, if the rates were too high, the properties would not rent—and investors do not want empty buildings or apartments. So really what the newspapers are saying is, “the rental market is getting stronger than some can afford”. In truth, that will always be the case, no matter the price. I must say I could not afford to buy or even rent a place in New York City or Hong Kong—so I choose not to live there. It’s fair to say that rental rates and sales prices affect us all.


In many areas housing prices are rising and that has some investors thinking about if and where they should buy their next rental. But making an income on rental properties means the investment must offer not only good appreciation on the property but also a steady and lucrative rental income for the long haul. Without the rental return, the property can quickly become a major drain on the bank account.


Because the market was so slow for so long, many sellers became "accidental landlords" after realizing that they couldn’t sell their home for the price they wanted. Instead, they kept the home and became landlords. Some liked the rental business and decided to make this a second stream of income. The number of homes purchased with a mortgage loan has been dropping steadily since May. Instead, cash is king for many reasons. As mortgage rates began creeping up, investors and some homebuyers started opting to purchase with all cash. And that trend may continue as new stricter loan requirements are implemented and enforced.


The top rental return markets start off with Detroit ranked number one for rental returns thanks to its low-priced homes. A median home in Detroit is slightly under $45,000, giving investors a 30 percent annual gross yield, according to the report. Compare that to the national median home price of $189,000 and you can see why investors are heading to Detroit.


To determine the rental returns, statisticians used the 2014 fair market (monthly) rent for a three-bedroom home and multiplied that figure by 12 (months) and then divided that 12-month total by the median sales price of residential properties in the county. Positive cash-flow properties help investors build long-term wealth. And good cash-flowing rentals can be found in many U.S. markets, but rapidly appreciating home prices are making it more difficult.

Florida has three of the top 20 counties nationwide with the best rental returns:

 · Putnam County, Florida, - Palatka
 · Hernando County, Florida - Tampa, St Petersburg, Clearwater
 · Highlands County, Florida – Sebring

Investors would do well to review the sales and rental prices in these areas. Usually the least expensive properties in the most run down areas will over 10 to 20 years become the “newest, hottest” areas. Back in the 1980’s and 1990’s, run-down areas in Chicago or near New York City (think Hoboken, NJ) or around Boston and New Bedford, MA could be had for minimal amounts of money—but today these areas have become gentrified, and are now very appealing, and very expensive.

So I’ll say it again, so long as there are buyers or renters, no price is too high. But when the price becomes--in fact--too high, then there will be no buyers or renters. Dane Hahn is a real estate professional serving Sarasota and Charlotte Counties. He can be reached at 941-681-0312.