Monthly Archives: February 2016

End the IVA Tax on Real Estate Services

 

A healthy housing market is critical to our economic recovery.  Everyone knows how important it is to own your own home.  Home ownership provides stability, financial security, safety and a lifetime of memories.  But some people may not realize how critical home sales are to the island economy.  For example, the average home sale in Puerto Rico generates over $35,000 in economic activity from things like remodeling, appliance sales, new furniture, moving costs and sales commissions.

FOR THE ISLAND ECONOMY TO GET BETTER, WE NEED A HEALTHY HOUSING MARKET.

But now we are faced with new and higher sales taxes, not only on the things we buy everyday but also on many of the professional services that we use.  Puerto Rican families are already burdened by excessive sales taxes.  A poll conducted for the Puerto Rico Association of REALTORS shows that 86 percent of Puerto Ricans feel that island sales taxes are too high.  But now families have to pay even more in sales taxes, and a new sales tax on services.

These new sales taxes on services will have a devastating effect on the housing market.  Higher taxes mean people will have to pay more to buy or sell a home.  Many families will be priced out of the market, leading to fewer home sales and an additional drag on the economy.

For example, our research shows that the closing costs for a $200,000 home will increase by more than $1,700 in taxes!  If the seller passes those costs on to the buyer, around 3,600 families who currently qualify to buy this kind of home would no longer be eligible because their annual income would not qualify them for a bank loan.

Just those 3,600 home sales would result in $128 million dollars in economic activity – spending that will not happen with these new taxes in effect.

If the new taxes are not passed on to the buyer, the seller will have to pay the taxes, taking away hard earned equity and creating a disincentive to sell a home.

Enough is enough.  We need to tell our elected officials to stop raising our taxes.  These new taxes will make buying and selling a home too expensive for thousands of Puerto Rican families.  That is the last thing that we should be doing.  We should be encouraging home sales, not making it harder and more expensive.  Home sales are critical to getting our economy moving again.  Most importantly, we need to keep home ownership affordable for Puerto Rican families.

A Derogar El IVU/IVA En Los Bienes Raíces

Un mercado de vivienda saludable es fundamental para nuestra recuperación económica. Todos sabemos lo importante que es ser dueño de su propio hogar. Ser propietario de una vivienda ofrece estabilidad emocional, seguridad económica, protección.

Sin embargo, no siempre nos damos cuenta de lo importante que son la ventas y alquiler de propiedades para la economía de nuestra isla. Por ejemplo, la venta promedio de una propiedad en Puerto Rico genera más de $35,000 en actividad económica, procedentes de remodelaciones, ventas de enseres, muebles, costos de la mudanza y comisiones de la transaccion.

PARA QUE LA ECONOMÍA DE LA ISLA MEJORE, NECESITAMOS UN MERCADO DE VIVIENDA SALUDABLE.

Sin embargo, ahora enfrentamos nuevos y altos a impuestos de venta nuevos y altos impuestos no sólo en los artículos que compramos a diario, sino también los servicios profesionales que reciben aquellos consumidores que compran o alquilan una propiedad. Las familias puertorriqueñas están agobiadas por los excesivos impuestos de ventas.

Una encuesta realizada recientemente por la Puerto Rico Association of Realtors® refleja que el 86 por ciento de los puertorriqueños perciben, que los impuestos sobre las ventas en la isla son demasiado altos.

Estos nuevos impuestos sobre los servicios relacionados a los bienes raíces, tendrán un efecto devastador en el mercado de la vivienda. Este nuevo impuesto implica, que los consumidores tendrán que pagar más para comprar o vender una propiedad. Los precios serán inaccesibles para muchas familias, dando lugar a un menor número de ventas y a una carga adicional para la economía.

Por ejemplo, nuestra encuesta refleja que los costos de cierre para una adquirir casa de $200,000 se aumentarán en más de $1,700 en impuestos. De esta forma alrededor de 3,600 familias que actualmente cualifican para comprar este tipo de casas, ya no serían elegibles, debido a que a este nuevo impuesto, los cualificaría para un préstamo hipotecario. Esas 3,600 transacciones de viviendas se traducirían en $128 millones de dólares, se traducirían en una perdida económica para el país, como resultado de la imposición de dichos impuestos.

Ya es suficiente. Tenemos que dejarle saber nuestros legisladores, lo nocivo de estos impuestos y que hay que ponerle fin a los mismos. Estos nuevos impuestos harán que la compra, venta y alquiler venta de una casa.

3 Steps To Take Before Closing Your Mortgage

handshake

Congratulations, you found a mortgage that works for your household! But before you celebrate your new loan there are a few more steps to take in the process. The following excerpt from the Consumer Financial Protection Bureau’s Home Loan Toolkit may help. The complete toolkit, including financial worksheets and valuable tips, is available as a download.

Step 1 – Shop For Mortgage Closing Services

Once you’ve decided to move forward with a lender based on the Loan Estimate, you are ready to shop for the closing agent who gathers all the legal documents, closes the loan, and handles the money involved in your purchase.

After you apply for a loan, your lender gives you a list of companies that provide closing services. You may want to use one of the companies on the list. Or, you may be able to choose companies that are not on the list if your lender agrees to work with your choice. The seller cannot require you to buy a title insurance policy from a particular title company.

  1. Closing agent: In most of the country, a settlement agent does your closing. In other states, particularly several states in the West, the person is known as an escrow agent. And in some states, particularly in the Northeast and South, an attorney may be required.
  2. Title insurance: When you purchase your home, you receive a document most often called a deed, which shows the seller transferred their legal ownership, or “title,” to the home to you. Title insurance can provide protection if someone later sues and says they have a claim against the home.

Learn more about title insurance and how requirements may vary by state.

  1. Home inspector: When you are considering buying a home, it is smart to check it out carefully to see if it is in good condition. The person who does this for you is called a home inspector. The inspector works for you and should tell you whether the home you want to buy is in good condition and whether you are buying a “money pit” of expensive repairs. Get your inspection before you are finally committed to buy the home.
  2. Home appraiser: A home appraiser is different from a home inspector. The appraiser is an independent professional whose job is to give the lender an estimate of the home’s market value. You are entitled to a copy of the appraisal prior to your closing. This allows you to see how the price you agreed to pay compares to similar and recent property sales in your area.

Step 2 – Review Your Revised Loan Estimate

When important information changes, your lender is required to give you a new Loan Estimate that shows your new loan offer. It is illegal for a lender to quote you low fees and costs for its services on your Loan Estimate and then surprise you with much higher costs in a revised Loan Estimate or Closing Disclosure.

However, a lender may change the fees it quotes you for its services if the facts on your application were wrong or changed, you asked for a change, your lender found you did not qualify for the original loan offer, or your Loan Estimate expired.

Learn why your loan estimate might change and how to talk with your broker about it.

Step 3 – How To Understand and Use Your Closing Disclosure

You’ve chosen a home you want to buy and your offer has been accepted. You’ve also applied for and been approved for a mortgage. Now you are ready to take legal possession of the home and  promise to repay your loan.

At least three days before your closing, you should get your official Closing Disclosure, which is a five-page document that gives you more details about your loan, its key terms, and how much you are paying in fees and other costs to get your mortgage and buy your home.

Learn how closing costs are set and see a sample closing document that breaks down all the costs for you.

A Pause Before Closing

You’ve spent time understanding what you need to do and what you need to pay, as a new homeowner. Now is the time to step back and feel sure you want to proceed with the loan.

If you are not comfortable with your mortgage and your responsibility to make payments, you might not be able to keep your home. If you’ve made a careful decision about what you can afford and the mortgage you wanted, you will be able to balance owning your home and meeting your other financial goals.

The Consumer Financial Protection Bureau is a federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.  Have a question about a common consumer financial product or problem? You can find answers by visiting consumerfinance.gov/askcfpb.

 

Infographic: Dogs and Real Estate are a Perfect Fit

Realtors® know that pets make a house a home and work hard to find a house that is suitable for a buyer’s human and fur family. In acknowledgement of the 2016 Westminster Dog Show, beginning next week, the National Association of Realtors® has released a new infographic highlighting some dog-gone good information about pets and real estate.

NAR provides tips for making a house more dog friendly as well as statistics about Americans and their pets.

Dogs and real estate1

Las Vegas REALTORS Bet on Smart Growth, Win Big in Sahara/Decatur

In certain parts of Las Vegas, innovative buildings and exciting developments are being constructed. That is not the case, however, in the downtown Sahara/Decatur neighborhood, a neighborhood that is not far from the offices of the 12,500-member Greater Las Vegas Association of REALTORS® (GLVAR).

Dawn Lane, one of those members, and the founder of a community development corporation called the HOPE Home Foundation, had been working with numerous working families and struggling millennials in the area, and was seeing the great disparity through their eyes. She decided to do something about it.

“Dawn had the vision, and made it happen,” says Michele Caprio, Chief Executive Officer of GLVAR, “And Bobbi Miracle, our 2015 Commercial Alliance Las Vegas President, was exceptionally supportive of our working together with industry partners to cast a broader net and achieve a more powerful impact with the ambitious three-pronged program that Dawn was spearheading.” That strategy, based on “smart growth” principles, stacked three powerful components that all focused on elevating the livability and economic promise of the Sahara/Decatur area.

The first step was hosting NAR’s Smart Growth for the 21stCentury class for members of the coalition that GLVAR calls its “Sahara/Decatur Project Team”. For one day in March, architects, engineers, planners, city administrators, finance professionals, and REALTORS® came together to be educated about Smart Growth.  “The big take-away seemed to be, ‘Gee, we all have these common goals: it sure makes sense to work together!’” says Caprio.

In partnership with the Urban Land Institute, and with the support of many other members of the Sahara/Decatur Project Team, GLVAR then produced the second part of its plan, a Better Block event.

Over the course of a September weekend, on a corner of West Sahara Avenue and South Decatur Boulevard that Lane describes as “One of the most dangerous pedestrian intersections on the planet,” the event temporarily took over vast buildings.

During the Better Block event, the team got a head-start on the third component of the Sahara/Decatur Project.  In what was effectively a “living charrette,” volunteers collected data from the public to inform the formal charrette that took place in November. “While kids were having their faces painted, GLVAR members with clipboards asked the parents for ideas and suggestions, opinions about land use issues and thoughts about obstacles to re-urbanization, like lack of transportation options.” explains Lane.

The actual charrette brought the Sahara/Decatur Project Team together with residents, stakeholders, thought leaders and elected officials; a third-party facilitator kept the conversation moving forward.

The end product of their progress, says Lane, will be a marketing package, designs and plans to present to prospective developers, the next step in making the vision for Sahara/Decatur become a reality.

“From a city-wide perspective, Las Vegas is ripe for this kind of change.” says Caprio.  “Lots of younger people are moving downtown. Tony Hsieh, the forward-thinking CEO of Zappos, is a major landowner downtown, and young professionals he attracts here are very interested in quality of life issues, like walkability. It makes perfect sense for REALTORS® to be at the forefront of this kind of development,” she adds, “and we’re proud and grateful that NAR has made it possible.”

San Francisco REALTORS Help Mission District Residents Defeat A Crucial Housing Moratorium

The San Francisco REALTOR’s Association was key in the recent defeat of Prop. 1, The Mission Moratorium. The controversial moratorium would have instigated an 18-month pause on both new housing construction and the conversion of light industrial space into living accommodations.

Those in favor of the moratorium believed that the city needed more time to address the loss of working-class residents who have been priced out of the Mission area. Residents and REALTORS who opposed the moratorium believed that calling a halt to home development in the Mission district was not the solution. They felt that encouraging, not stopping, new construction would actually bring the city closer to solving the issue of housing affordability for all Mission residents.

“The city’s infamous affordability crisis has been brought about, in part, by decades of low housing production”, explains Jay Cheng, SFAR’s Deputy Director of Government Affairs and Community Relations.  “In the historically working-class Mission District, the situation is complicated by issues of gentrification. Ironically, last year’s proposed moratorium backed by housing activists threatened not only to further displace long-term residents, but it would actually have cut off affordable housing funding that is supported by fees from market-value housing projects in the district.” 

Thanks to an aggressive education campaign on the issue, the 4,600-member San Francisco Association of REALTORS® (SFAR) was able to educate voters and explain the potentially negative consequences the moratorium would bring to the city. SFAR reached voters through direct mail, online advertising, social media, cable and broadcast television advertising, and live phone banks. They also took to the streets with door-to-door canvassing.

“We respect the street fighters!” Cheng banters. “If you don’t knock on their door and explain your position on the issue, you won’t have their respect—and you’ll hear about it.”  That’s where SFAR’s 400 volunteers made the difference, putting in 3,000 volunteer-hours reaching out to the voting public.

SFAR and its coalition defeated the Mission Moratorium with 14.4% of the vote in an election with a fairly high turn-out. Previously, SFAR had overturned a 2014 proposed transfer tax by launching an energetic, multilingual campaign and get-out-the-vote effort, that was entirely funded by REALTORS®. Cheng felt that their successful 2014 campaign helped the association to put a strong coalition in place that was critical in defeating Prop 1.

Though pleased with SFAR’s ability to help San Francisco homeowners to date, Cheng is clear that plenty of work remains ahead.  “When you’re talking about housing in San Francisco,” says Cheng, “this campaign is just the latest maneuver in an ongoing battle.  We have to keep at it, to keep solving problems and move our city forward.” 

Cheng presently serves on the Mayor’s Housing Task Force, which convenes parties on all sides of the issue to sit down together to find lasting, viable housing solutions for San Francisco.

Minnesota REALTORS Successfully Protect the State’s Mortgage Interest Deduction For Homeowners

Minnesota residents have become increasingly aware that the existing economic recovery and incoming revenues would not be enough to cover the state’s $4 billion budget gap. Homeowners in particular have been worried about how legislators would address this deficit, and what impact it would have on them.

Minnesota REALTORS® (MNR) knew that the state’s precarious financial position put the existing mortgage interest deduction (MID) at risk of being eliminated. Threats to the MID were not new to the political scene in Minnesota. In fact, MNR and REALTOR® allies in the state senate had defeated previous attempts to eliminate the MID in 2009, 2011 and 2013.

MID immediately launched an 18-month proactive advocacy campaign called Minnesota Homes Matter. The campaign’s goal was to protect the mortgage interest deduction (MID) and homeownership statewide. Minnesota Homes Matter focused on educating REALTORS, legislators and homeowners statewide on the negative impacts of eliminating the MID and built a coalition of pro-housing supporters.

MHM also initiated face-to-face meetings with targeted legislators as well as spending the first few weeks of the 2015 Legislative Session conducting broad awareness efforts with educational resources.

An integral part of this campaign’s success was the participation of the  Minnesota Homeowners Alliance (MNHOA), a coalition of more than 30 companies determined to fight for Minnesota homeowners. As part of their overall effort, MNHOA created a comprehensive list of Minnesota tax benefits of homeownership and encouraged homeowners to ask their tax preparer if they were taking full advantage of MID.

“The Minnesota Homes Matter campaign was a collaborative effort,” said MNR Chief Executive Officer Chris Galler.  “Not only were we able to create key partnerships to protect mortgage interest deduction, but, I’m proud to say, we built a culture of advocacy beyond our association for continued legislative outreach.” The quick call to action and pooled resources paid off in the end, and the threat against the MID in the 2015 legislative session was neutralized.

Hopkinsville REALTORS Introduce Military Families to Housing Opportunities in Their Small Town

Even though the Kentucky town of Hopkinsville is a great place to live, many nearby military families were not aware of it. Thousands of families, stationed just 15 minutes south at nearby Fort Campbell, were making their home in a bigger, higher-profile metropolis instead.

In order to raise awareness about the town, the 64-member Hopkinsville Christian & Todd County Association of REALTORS® [HCCBOR] got their attention with a fun-filled “REALTOR® Military Appreciation Picnic.” this past September.

“We realized that the issue was promotion,” recalls HCCBOR Association Executive Gay Wilson “so we brainstormed ways to let the soldiers at Fort Campbell know about us, and at the same time, let them know how much we appreciate their service to our country.”

Working with the Military Affairs Committee of the local Chamber of Commerce, HCCBOR planned and promoted the picnic at an attractive working farm venue north of town, which forced its guests from Fort Campbell to drive through Hopkinsville en route to the event.

The association got the word out with radio spots and social media posts, specifically targeting military spouses on the base. Local businesses and HCCBOR affiliate members contributed gift cards, door prizes, and items for goody bags. The local electric company even provided bottled water.

Although they had no way of predicting how many people to expect, they were hoping to attract about 500 military family members. “Imagine our shock when over 700 military family members showed up!” laughs Wilson, “Luckily, we had increased our food order at the last minute, just in case.”

Almost half of HCCBOR’s membership worked the event, greeting the military families, thanking them personally, and sharing information about Hopkinsville and its small-town benefits, as well as housing opportunities in the community. Others manned the grills and served the hundreds upon hundreds of hotdogs.

“Everyone had a great time, and we kept hearing from our military guests, ‘We’d never even heard of Hopkinsville!’ So, it really was a huge success.” states Wilson, who would like to be able to repeat the event every few years.

Meanwhile, HCCBOR has been able to follow up with picnic guests who registered for door prizes. Businesses in Hopkinsville are benefiting from the military-spouse word-of mouth network. With the active support of HCCBOR, a member of the Military Affairs Committee of the Chamber of Commerce now attends a weekly orientation for new soldiers at Fort Campbell, to raise the town’s profile on the base.

And, since the picnic, Hopkinsville has seen steady home sales to military families. “We’re up to between 7-10 a month,” reports Wilson “and it has been awesome!”

How Do Changes to the FHA Condo Loan Rules Help You?

Fast Fact: When the bubble burst, FHA dramatically cut condo loans. But condos play an essential role for first-time buyers, creating a ripple effect for move-up buyers, home values, and local economies.

Since the real estate bubble burst,  more and more first-time and low- to moderate-income home buyers are using Federal Housing Administration loans, a trend expected to continue for years to come.

In 2010, the FHA significantly tightened requirements for condominium loans in order to protect itself from bad loans in the wake of the financial crisis.

New rules made selling condos harder, reducing the buying pool to only 40% of potential home buyers. Rules required that FHA not only approve the buyer, but it had to approve the the condominium building itself.

Deal killers could include too many renters in a building or low association reserves.  Many of these buildings became known as “blackballed” or “zombie” buildings.

Why does it matter?  Because condos tend to be lower priced than single family homes, making them the ideal, and sometimes only, option for first-time and lower- to middle-income buyers. The fact that inventory for these buyers has been so low for so long certainly didn’t help matters.

As a result, these stricter  requirements dashed the dreams of millions of potential home buyers, who abandoned their homeownership quests and instead remained renters.  It’s one of the reasons why, nationally, American homeownership is at a 30-year low!

It’s difficult to sell an existing unit if you can’t find a qualified buyer…A lot of       people are frozen in place:  Those in (a condo unit) can’t get out; those out can’t get in.” – Frank Kowalski, president of Florida Realtors in 2005

And the sellers of these condo units found themselves faced with fewer buyers, meaning fewer offers and lower sale prices.  Because these sellers are also typically “move-up” buyers, the impact has a ripple effect for home values and local economies.

The good news is that FHA recently provided new guidance on its rules for certifying condo buildings!

The new rules…

– Loosen the definition of owner-occupied units to include second homes that are not investor owned. FHA will not insure loans in a building where too many of the units are investor owned, rentals, or not occupied by the actual owner full-time.  In many areas, that’s a big deal since so many owners live up North during the warm weather, and then flock to second homes in southern climates when the weather gets cold.

The changes mean that more buildings will now qualify for the required FHA ratio of owner-occupied units, vastly increasing both the supply of buildings and units available, and the pool of buyers that can now qualify for a loan.

– Simplify the “recertification” process that condos must go through every two years in order to become and remain on the FHA approved list.

This should translate to more buildings on the market.

– Loosen up the type of insurance FHA requires.

This is especially important in coastal areas,  where affordable insurance is hard to come by.  In Florida, for example, FHA will now accept “Citizens Property Insurance” coverage, the insurance company owned by the state and largest condo insurer in Florida. In addition, FHA changed the way it will view “co-insurance” clauses, contained in most Florida condo policies. That’s expected to make up to 85% of Florida’s condominiums that didn’t quality previously, now available to FHA buyers.

What Does the FHA Require For a Condo to Be Approved?

  • Right of first refusal” in condo rules cannot violate discriminatory rules under the Fair Housing Act (Regulation 24 CFR part 100, to be specific).
  • No more than 50% of the property can be used as commercial space.
  • No more than 15% of units can be arrears more than 60 days.
  • No more than 50% of the units can be rentals.
  • No more than 50% concentration of FHA loans.
  • At least 10% of the building’s budgeted income must go toward a reserve account.
  • Specific insurance requirements must be met.

The new rules expire in a year so, but  it’s hoped the FHA will implement more comprehensive condo changes before then.  In the meantime, you can email your questions to asktheexpert@shariolefson.com.

More on this topic