Tag Archives: economy

4.2M Borrowers to Start Receiving Foreclosure Payouts

About 4.2 million eligible home owners who underwent foreclosure in 2009 and 2010 will start receiving cash payments on Friday, ranging from $300 to $125,000. The payouts are part of a $3.6 billion settlement over foreclosure mishandlings reached among 13 mortgage servicers and the government.

Military service members whose homes were repossessed while they were on active duty will receive the largest checks — $125,000. The Servicemembers Civil Relief Act prevents military personnel from being foreclosed on while on active duty.

Other home owners will receive payments from servicers that charged unfair fees or failed to do a loan modification.  Continue reading

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Empires of the Sun

New Yorkers Invade Miami

After a series of sluggish years, Miami’s luxury condo market is reviving, thanks in part to help from an unexpected source: New Yorkers.

Although buyers from Latin America and Europe have been lauded for helping to revive the city’s property prices, developers and real-estate agents now say it’s a new crop of Americans, mostly second-home buyers from New York, that has pushed luxury prices in Miami to a new level—and stirred a buying frenzy.

“A lot of them are buying now because Miami has really changed over the last couple of years, with a ton of New York restaurants and hotels opening up, with new development, and that has really made New Yorkers more comfortable with purchasing,” says Vanessa Grout, chief executive of Douglas Elliman’s Florida brokerage. She estimates that about 60% of her firm’s luxury buyers are from New York, about double the percentage of a year ago. Edgardo Defortuna, president and founder of Fortune International, a Miami development firm, says New Yorkers now make up about 25% of all luxury buyers, compared with around 10% a year ago. Continue reading

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Miami area ranks among top global markets for luxury homes

The Miami area ranked eighth among the top 10 luxury real estate markets in the world in a report from Christie’s International Real Estate, putting it in a league with London, New York, Paris and Hong Kong, (but also Dallas and Toronto).

Miami-Dade placed high in the percentage of second-home buyers, cash buyers, and foreign and other non-local buyers, according to Christie’s, a luxury brokerage whose local affiliate is Esslinger-Wooten-Maxwell Realtors in Coral Gables.

The priciest home sold in Miami in 2012 was the spectacular bayfront estate at 3 Indian Creek Drive in Indian Creek Village, which fetched a record-setting $47-million.

The trophy property — a 10-bedroom, 14-bathroom resort-like project constructed along a series of pavilions — went to a Russian buyer, whose identity hasn’t been disclosed.

The Miami-Dade deal paled compared to the top residential sales last year in London ($121.2 million) and New York ($88 million).

“Fueled by strong interest from South American buyers, Miami had a high percentage of both international and secondary and additional home buyers,” the Christie’s paper said. In Miami, 45 percent of the luxury buyers were from out of town, including foreign buyers.

Greater Miami’s luxury homes are still a relative bargain: For the year ended Sept. 30, 2012, for Miami residences listed at more than $1 million, the average was $764 per square foot. The record price in Miami was $3,463 per square foot, the report said.

By contrast, in New York, the average price for properties over $1 million was $1,810 per square foot, and the record was $13,049 per square foot, the highest of any city.

The top end of the residential market moves to its own rhythm, according to the report. “Residential real estate is a tale of two markets — luxury and everything else,” Christie’s CEO Bonnie Stone Sellers said in the report. “Prestige residential will more likely follow growth trends in non-consumable luxury goods than trends in the general housing market.”

Miami, which has a shortage of inventory across all sectors of the residential market, ranked seventh among the top 10 cities in luxury inventory, with just 2,036 residential listings for more than $1 million as of Sept. 30, 2012.

London had 7,741 such homes, Côte d’Azur had 7,000 and New York had 4,100, the report said.

Miami area ranks among top global markets for luxury homes. 2013, March 4. By Martha Brainnigan. Retrieved from http://www.miamiherald.com/2013/03/04/3266784/miami-ranks-among-top-global-markets.html.


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Venezuelans increasing their presence in South Florida’s real estate market

Amid the “uncertainty” under the on-again, off-again leadership of Venezuelan President Hugo Chavez, an estimated tens of thousands of Venezuelans living in South Florida are buying homes, running businesses and investing in real estate.

Venezuelans top the list of commercial real estate buyers in Florida compared to other foreign nationals, according to one recent study.

And since Chavez took office, Venezuelans’ hunger for Florida property has grown.

The number of Venezuelan-born residents in Broward andPalm Beach counties more than doubled between 2000 and 2011, according to the U.S. Census. Just a year after Chavez first entered office in 1999, there were an estimated 12,034 Venezuelan-born people in Broward and Palm Beach counties. In 2011, there were about 24,634.

In the Fort Lauderdale region, for example, Venezuelans were among the top three international homebuyers in 2012.

Ramon Peraza is one of them.

It’ll be a decade this year since Peraza, an electrical engineer in Venezuela, began to reinvent himself by moving his family to Weston and investing his money in opening Cafe Canela, a restaurant on the Sunrise/Weston border.

The 57-year-old father of three has celebrated one son graduating college, welcomed another into the family business and has a daughter studying at Florida International University.

“Once you’re established here you get used to the sense of security,” Peraza said. “In Venezuela life is worth very little, it’s a Russian Roulette.”

Venezuelans feel they have a greater sense of investment security in the U.S. than in their native country, said Ernesto Ackerman, president of Independent Venezuelan-American Citizens. They don’t fear their business will be taken away by the government, as can be the case in Venezuela, he said.

Statewide, Venezuelans accounted for 7 percent of homebuyers, and most of them are spending big: The median price of homes bought was between $200,000 and $299,999. At least 20 percent of them bought homes valued above $500,000.

In a breakdown of the type of property international homebuyers acquired in Florida — commercial, condo/apartment, detached single-family, townhouse or other — about 16 percent of properties bought by Venezuelans were commercial, according the National Association of Realtors. That’s compared to Western Europeans 6 percent (except U.K.) and 6 percent other Latin American nationalities, Brazilians 5 percent and Canadian’s 2 percent.

The data from the association do not break down the location of the 16 percent. However, Canadians topped the list at 34 percent, followed by Brazilians at 14 percent and Venezuelans at 11 percent.

In Palm Beach, Venezuelans represented 5 percent of homebuyers in 2012, with Canadians buying the greatest share at 38 percent.

While some of the Venezuelans opening businesses in South Florida are like Peraza who settle here, others remain business owners in Venezuela, said Luis David Ramirez, president of theCoral Gables-based Venezuelan American Chamber of Commerce of the United States.

They seek an alternative income in the U.S. because of “the uncertainty of what will happen with their businesses in Venezuela,” he said.

“The aim is creating a sustainable economic source in the U.S.,” Ramirez said.

Even if Chavez is out of office, the Venezuelan effect on South Florida will be lasting, Ackerman said.

“I think they will keep businesses here,” Ackerman said. “What you can see some people doing is go back to Venezuela, try to re-establish businesses and come back to the U.S. until the situation in Venezuela gets better, and it will take many years.”

Venezuelans increasing their presence in South Florida’s real estate market. 2013, 3 March. By Miriam Valvarde. Retrieved from http://www.sun-sentinel.com/fl-venezuelan-impact-south-florida-20130302,0,3913856.story.

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Is Rent-To-Own Homes and Seller-Financing the ‘New Bank’ for Americans?

Rent-to-own is known by many names, be it land contract, contract for deed, rent with option, owner carry back, owner’s terms, seller financing, lease with option and so forth. The terms are similar in their mission-i.e., a seller of real estate offers creative options to tenant/buyers. The means of accomplishing that goal may be with any of the aforementioned terms, many of which have legal definitions that may vary state by state. For this article I will stick to the more commonly known “rent-to-own’ and offer to the reader a broad overview of the elements of the concept.

In any real estate (rent-to-own) transaction there is a buyer and a seller, an agreed upon price and the terms. In a typical sale (bank financed) the parties agree on a price, a closing date is set and a lender steps in (if needed). Seller gets the cash, buyers gets the deed and it is a done deal. Not so in rent-to-own.

For example, a rent to own agreement can have a variable price. This is a common practice amongst investors like this author who sell rent to own properties. So what does a ‘variable price’ mean? A few years back when home prices headed up yearly there was significant value created simply by prices inching higher. A $300,000 house might climb to $360,000 in just two or three years. A savvy rent to own buyer who locked in three years earlier could cash out and many did.

The variable price idea basically was a negotiation between the parties to establish how that future value would be apportioned. The seller may have a clause in the agreement that states that for each year the tenant is in a rent-to-own agreement the price of the home shall be adjusted by the CPI (consumer price index). Or it may have a clause that says the actual selling price would be set at some future point in time (say three years) as determined by a reliable appraisal. In either scenario buyers and sellers can negotiate all the variables.

The other areas of negotiation are the payment amount and down payment. The monthly payment can be treated as simply rent with nothing going toward future equity, or it can be that the entirety of the payment goes towards the principal thereby reducing the balance owed by such amount as is the payment.

As for a down payment it is another area of slicing and dicing the rent-to-own recipe. Though there are many scenarios the most typical is a buyer who is usually a bit short of a cash down payment (not always of course) and may negotiate with the seller for down payment terms. I have seen buyers trade things of value, such as classic cars for a down payment. The down payment can be anything of which the two parties agree. In some rent to own agreements a seller may accept a portion of the monthly payment to go towards a down payment thereby giving the buyer a future ‘bank account’ on which to draw for the purpose of paying off the seller by obtaining a traditional bank mortgage.

One of the keys and the beauty of rent to own is this ‘flexibility’ between buyers and sellers, which is generally unheard by institutional lenders at this level of residential borrowing. The buyers and sellers have all this room to negotiate and it is all well and good yet it is in the end game where agreements often fall apart.

In the end game it is that portion or clause(s) of the sales agreement that states when and how the buyer shall cash out the seller. Now it may be that in an owner financed agreement where the seller creates a mortgage note, deeds the property to buyer and the seller is essentially ‘the bank.’ And this can be structured as a loan of whatever terms are agreed upon, say a 7% interest rate amortized over a 30-year mortgage.

On the other hand an agreement can be more of the typical deal where the buyer agrees to a term (say 2-5 years) and at the end of the term shall cash out the seller. How the buyer cashes out the seller should always be clearly defined in the agreement. The agreement might read that the buyer shall pay off the balance owing on such and such a date, the penalty (or fee) of which for not abiding by the terms of the agreement is the foregoing of any down payment monies, rent credit and actual cash value of home repairs incurred by the tenant/buyer.

It is in this end game that is more of a burden on the buyer. For if the buyer cannot come up with the money to complete the terms of the agreement the seller may be able to simply evict the tenant at that point in time and repeat the entire process with another tenant/buyer.

It is important to remember that this is but a broad stroke of the entirety of the rent to own home industry. There are many laws that discuss rent-to-own (be it lease purchase, land contract, etc.) and they vary by state. These laws can and will have the final say in the event of a dispute between buyers and sellers.

In many situations a seller can be an investor who with respect to the practice of selling in this manner has ‘been there, done that’. Most buyers, if new to the game are clearly at a disadvantage, simply because they are usually the more excited of the parties, and it is he who bears the emotional attachment to a deal who is at risk of not taking the time to examine the deal.

That being said it is always recommended for each party before signing on the dotted line to obtain the review of their agreement by at least an rto expert, and when needed a legal opinion, preferably by an attorney who specializes in real estate.

At the end of the day the rent-to-own program is a win-win as long as the parties to a deal go in with eyes wide open with a clear understanding of the path they will soon travel together. When banks are not lending the rent to own seller can often be the best choice as the lender of last resort.

Be safe my friends.

Bud Spofford,


Article Source: http://EzineArticles.com/?expert=Buddy_Spofford
Is Rent-To-Own Homes and Seller-Financing the ‘New Bank’ for Americans? 2013, Feb 18. By Buddy Spolford. Retrieved from http://ezinearticles.com/?Is-Rent-To-Own-Homes-and-Seller-Financing-the-New-Bank-for-Americans?&id=7512338.

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Housing Likely to Contribute to 2013 GDP


Housing will contribute to gross domestic product in 2013, barring some unforeseen double-digit recession or economic downturn, Fitch managing director Robert Curren said Tuesday.

Fitch projects single-family housing starts will grow 18% in 2013, with new home sales rising 22% and existing home sales edging up 7%.

The average single-family new home price edged up 3.5% in 2012 and is expected to rise 3.8% in 2013, Fitch said.

“Attractive home prices, persistently low mortgage rates and a rise in nominal incomes results in superior affordability and valuations,” Curren said. “Mortgage rates remain near their all-time recorded lows and housing appears more undervalued versus incomes than at any time in the past 35 years.”

Yet, Curren stopped short of making home sales and price growth a sure thing, with the economy still battling headwinds and mortgage lending still tight as lenders battle new rules, changing demographics and debt overhang that’s delaying new borrowers.

“Although home prices have stabilized and started to improve, home price appreciation will tend to be relatively narrowly focused and very sensitive to local economic, employment, and supply issues,” Curren wrote. “Demand will continue to be affected by widespread negative equity, challenging mortgage qualification standards and excess supply due to foreclosures.”

Curren described housing as a “net plus for the economy” in 2012 and said it could become a more robust jobs generator this year. Continue reading

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Congress May Tighten The Belt On Cute Tax Tricks


We haven’t seen the end of estate tax reform.

That’s the consensus of lawyers meeting in Orlando this week at the Heckerling Institute on Estate Planning, the annual Super Bowlon the subject sponsored by University of Miami School of Law.

The good news is that the New Year’s day passage of the American Taxpayer Relief Tax Act Of 2012 or ATRA ended 12 years of uncertainty about how much could pass tax free; what the tax will be on transfers above that amount; and even whether there would be an estate tax at all. Going forward,  it’s possible to transfer $5 million during life or at death, and this amount is adjusted for inflation — in 2013 it’s $5.25 million per person ($10.5 million for married couples). For a summary of the changes, see my post “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.”

What’s still in play are the cute tax tricks that some of the best minds in the field have devised to leverage or pack more into the tax-free amount. The Obama administration took aim at a bunch of old standbys and some new targets in its 2013 budget issued last February. Nothing became of it in the New Year’s day tax package–much to the relief of rich folks and their financial advisors. But we can expect renewed interest as the legislators tackle part two of the fiscal cliff crisis: cutting spending and raising revenue.

Don’t expect thoughtful estate tax reform — we’re talking congressional horsetrading, perhaps done incrementally.(Heads up: watch those transportation funding bills.) The following estate planning tools were mentioned in the last Obama budget, and might be expected to show up in the next one, which is likely to be issued in March.

Grantor trusts. This is not a single variety of trust, but a set of characteristics that can be incorporated into various types of popular trusts. The term refers to the fact that the person who creates the trust, known as the grantor, retains certain rights or powers. As a result, the trust is not treated as a separate entity for income tax purposes and the grantor, rather than the trust or its beneficiaries, must pay tax on trust earnings.

A 2004 Revenue Ruling made it clear that paying the tax is not considered a gift to the trust beneficiaries. Yet this tax, on income that the grantor probably never receives, shrinks his estate. At the same time, assets can appreciate inside the trust without being depleted by ordinary income taxes or capital gains taxes.

Until now, another attractive feature of these irrevocable trusts is that assets placed in the trust are removed from the senior family member’s estate. From an estate and gift tax perspective, the transfer is treated as a completed gift. The value of the assets is frozen at the time of the transfer, so that future appreciation is not subject to estate or gift tax. These hugely popular trusts have been used for a broad range of people, from young entrepreneurs with mushrooming assets to elderly couples with securities portfolios.

The President’s proposal would eliminate this additional feature of these trusts. This an enormous change that would wreck havoc with an important tax-saving tool. Going forward, Obama would like these trusts to be taxable as part of the grantor’s estate. And distributions from the trust to beneficiaries during the grantor’s life would be subject to gift tax.

Dynasty trusts. Some states allow trusts to continue in perpetuity (or for a very long time) and pass wealth through multiple generations without incurring estate, gift or generation-skipping transfer taxes. These trusts are allowed to continue in perpetuity only in states that have abolished the rule against perpetuities. These include Alaska,Delaware, South Dakota and Wisconsin. Residents of other states can choose one of these states as the situs, or location, of a trust; in most cases, some connection to the state is needed and certain conditions apply.

The president’s proposal would do away with dynasty trusts, limiting the generation-skipping transfer tax exemption to 90 years.

The low-risk grantor retained annuity trust or GRAT. This device allows someone to put assets into an irrevocable trust and retain the right to receive distributions back over the trust term. The annuity is equal to the value of what’s been contributed plus interest at a rate set each month by the Treasury called the Section 7520 rate (named after the section of the Internal Revenue Code that applies).

If the value of the trust assets increases by more than the hurdle rate, the GRAT will be economically successful. In that case, the excess appreciation will go to family members (the remainder beneficiaries) or to trusts for their benefit when the GRAT term ends. If the appreciation never occurs, the trust can satisfy its payout obligations by returning more of the assets to the grantor—the person who created the trust.

For the moment, it is possible to form what’s called a zeroed-out GRAT, in which the remainder is theoretically worth nothing so that there is no taxable gift. The President’s proposal would do away with zeroed-out GRATs. It would also require that a GRAT have a minimum term of 10 years, compared with the current two-year minimum.

This greatly accentuates what is called the “mortality risk” of a GRAT: If the grantor dies during the trust term, all or part of the trust assets will be included in her estate for estate tax purposes. Rich folks would no longer be able to use short-term GRATs to minimize that risk.

Using family entities to achieve discounts. Some people use closely held enterprises, such as family limited partnerships, or FLPs, and limited liability companies, or LLCs, to discount assets before transferring them to family members or trusts for their benefit.

Here is how these family-controlled entities work: A senior family member puts assets, such as marketable securities, real estate or shares of an operating business, into the entity, which is most often an FLP but may be a LLC (some lawyers are more familiar with that structure). Then the individual sells or gives away shares in the entity that holds the assets – not the assets themselves. Since the interests can’t readily be sold outside the family, their value is discounted for both lack of marketability and lack of control (typically a total discount of 20% to 30%).

By reducing the value of partnership units or membership shares for gift tax purposes, discounts enable you to minimize the tax cost of transferring assets.

Valuation discounts  have been the subject of multiple and protracted tax court battles, and the outcome of some cases are hard to reconcile. The budget proposal suggests that the Administration wants to scale back on the use of discounts, though the contours are not clearly spelled out. However, it clearly indicates that whatever restrictions emerge would apply retroactively to October 8, 1990 (the effective date of section 2704 of the Tax Code).

Congress May Tighten The Belt On Cute Tax Tricks. 2013, Jan. 16. By Deborah L. Jacobs retrieved from http://www.forbes.com/sites/deborahljacobs/2013/01/16/congress-may-tighten-the-belt-on-cute-tax-tricks/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social .

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