Well, I thought about writing an article for this newsletter that would track the history of conveyance law, perhaps even a discussion of the Grantor-Grantee index, or the technical examination of abstracts. It occurred to me that this would be about as interesting as reading the Tax Code. Instead of an academic study, I instead offer some random real estate thoughts.
Why do I need title insurance and a survey? When I work with purchasers of real estate, periodically they will ask me why they need title insurance. I tell them they want it because it insures that the seller actually owns what they are proposing to sell. In other words, you are not buying the proverbial Brooklyn Bridge. You pay a premium one time, and the policy of insurance essentially runs forever. Even if you don’t think you will own the property for a long time, keep in mind that you will probably sign a warranty deed when you sell it, so either as an owner or as a person who has warranted the title, you will always have an interest in making sure that title is free and clear of any mortgages, liens, encumbrances, mechanic’s liens or other types of claims.
This is a close cousin to the title insurance discussion above. Sometimes we work with a buyer and they do not want to spend the money for a survey, particularly in a cash transaction where there are no independent bank requirements. They tell me that they have been to the property and they can “see the property lines.” In fact, what you probably see are lines of apparent occupation. The fact that teenagers might mow their grass in a particular fashion, or place a hedge in a spot, or maintain a tree in a certain way, does not mean that is where the legal property line is for those lots. When you buy a house, you want to make sure that your house is located inside your lot lines (what a delightful place for your house to be), and you want to make sure that none of your improvements intrude or extend into any easement areas, and you want to make sure that none of the neighbors’ improvements encroach onto your property. When you are spending hundreds of thousands of dollars, or even millions, on the purchase of a home, better to find out that there is an encroachment problem before you write the check.
Let me tell you about a story I heard. Someone from up north buying a parcel on one of the barrier islands and insisted that they needed neither a survey nor title insurance. What they really wanted was just a settlement agent to close the transaction. This means that the attorney who closed the transaction did not examine title to confirm exactly how the seller held title, nor to confirm that there were no title defects, liens, encumbrances or other matters of record that might be objectionable, and never reviewed a survey and examined the survey legal description against the historical chain of title legal description.
Guess what? That’s right. The deed in this instance was returned from the Courthouse with a directive to call the property appraiser’s office. They believed that the legal description did not “close” on the deed in question. In this instance, it was not the attorney’s fault. There had been an express letter recommending both survey and title insurance, and an express disclaimer from the client. Now that buyer has a million dollar property with a problem in the legal description, with no title insurance and no current survey.
Do I need to refile for Homestead Exemption if I move? Remember that when you acquire a new home intended as your primary residence, you need to re-file for your homestead exemption. People often ask me about the timing on that. It needs to be done not later than March 1st in the year following your closing.
What is a Trim Notice? Each August, you receive a document often referred to as a trim notice. This is the official notification to you of the proposed assessed value of your property. It is not a tax bill, because at this point the County Commission will not have adopted the tax mileage applicable for that year. However, if you have any questions, or more importantly objections, regarding that assessment, then it is incumbent upon you to file an objection in a timely fashion.
As you might imagine, we frequently receive telephone calls from people who are upset about the assessment amounts on their tax bills. While we are, of course, grateful for legal business, we nonetheless discourage most of those people from pursuing any sort of a formal legal challenge. The first questions we ask are how much did you pay for the property, and how much is your assessment? Florida is a full assessment state. That is, the Tax Collector is supposed to appraise properties at their full value. You would be amazed at how many people wish to file tax challenges when the assessed value for tax purposes is less than what they paid for the property one or even two years prior. As you might imagine, that would not be a particularly fruitful challenge.
Another question we sometimes ask is, “Would you sell the property for the appraisal amount?” Almost invariably, the people reply, “Absolutely not, I would want a lot more for the property than that.” After a few moments of silence, then they go, “Oh, I get it.” In other words, they acknowledge that the real market value of the property is more than what the assessment might be for tax purposes.
We do get a number of very valid objections each year, and we have several attorneys at the firm who actively pursue a practice of challenging those valuations. This can have important long-term ramifications, particularly if the property is your homestead, because that means that any reduction in the assessed value will also be “locked in” by the 3% cap on future increases. It is rather like an annuity where a primary residence is concerned, because it has ramifications in terms of reducing your tax liability for as long as you own that property.
One tip – when you are building a house, keep good track of your total costs and expenses. If the amount of the assessment substantially or materially exceeds the amount that you paid for the land and the actual cost of the improvements and construction thereof, then we have had instances where consultation with staff people rendered a reduction in the assessed value.
When will it stop? Did you know that as recently as early 2001, there was a home sale on Casey Key for $8,900,000, representing an all time residential individual sale record? This was the most expensive home sale in the history of Sarasota County. In just a short 36 months since that time, that dollar amount has already been exceeded by 67%! A sale on Westway Drive (Lido Shores, looking at New Pass and the Gulf) was recorded at over $13,200,000. Who knows where this will stop! By comparison, the most expensive home sale reported thus far in Manatee County was $5,800,000 back in January of this year.
How should I take title? We have clients from up north acquire residential property here, often times asking to take title as “joint tenants.” I explain to them that most of our married couples take title as “husband and wife.” In Florida, this is known as a tenancy by the entireties. It is a survivorship tenancy available only to married couples. Its benefit is that upon the passing of one spouse, title goes automatically to the other. In addition, a judgment against one spouse does not attach to the property title. Instead, it must be a judgment against both spouses (although certain types of tax liens may be an exception to this rule). There may be instances when one should take into account estate planning considerations when taking title to real estate. This might be for purposes of trying to get assets into one spouses name or the other, or to fund trusts that may already have been established. Before you take title to real estate in any transaction, always remember to check with your estate planning attorney and make sure that the manner in which you take title is consistent with the overall intent of your wills and trusts.
Do I really need a real estate broker? I occasionally hear people making critical comments about real estate brokers, particularly with regard to the amount of their commissions. “I saw my broker’s commission on the closing statement – what do they do to deserve that money?” The point is, a good broker is worth their weight in gold. First of all, one of the things you don’t see is how many listings a broker might have that don’t sell, or how many buyers they work with that never purchase a piece of property. The only time they get paid, generally speaking, is when a parcel actually closes. A good broker to list your property helps to make that sale. They coordinate showings, schmooze buyers, coordinate with selling brokers, advertise in the right places, and generally position the property for sale. A good broker working with a buyer helps to analyze a parcel, comparing it to other sales in that neighborhood or sales of homes of comparable quality in comparable neighborhoods, and making suggestions for improvements to get the maximum dollar out of your property. They work with you regarding association approvals, make recommendations about lenders, help out with inspections, help to order surveys and coordinate closing arrangements with the title insurance agent. Some of this is done behind the scenes, or otherwise done in ways which are not apparent on their face. Remember that an uneventful closing is the mark of a great closing. The emotion and drama should be at the time the contract is signed. By the time you get to closing, all of the details should have been addressed, and a broker is instrumental in assisting in that process.