One of the effects of the great mortgage foreclosure recession is the large increase in rental properties in communities that were once generally owner-occupied (i.e., primary residences or vacation homes).
As prices plummeted after the foreclosure, investor groups sprung up to buy the now-cheap properties and turn them into rental properties as a long-term investment. One such company is Invitation Homes, founded in 2012, that now owns 80,000 properties in seventeen markets, including a substantial number in South Florida. A Property Appraiser search for IH3-IH6 Property Florida, LP (subsidiaries of Invitation Homes) showed ownership of 1,138 homes in Palm Beach County alone almost all available for rent.
Picture this… You’re about to sell your house and retire to Florida. The documents are signed, movers are hired, and all you need to do now is confirm that the title company’s wire has hit your account. You receive a call from the closer that the funds have been wired. You check your account—no wire.
An hour goes by, then two, then twenty-four hours, then two days. When you ask the title company to confirm the wire instruction from “your” email, you discover to your horror that the wire instructions “you” sent were not from you, but from a hacker who got into your email, found out you were selling your house, and sent fake instructions to the title company.
This has happened before and will almost certainly happen again. But it doesn’t have to if you are diligent and careful.
The commercial real estate market breathed a sigh of relief when President Trump’s new tax bill, Public Law 115-97, preserved the use of 1031 transactions for commercial real estate properties.
Let’s review what a 1031 Like-Kind Exchange is defined by the IRS:
Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.
With the domestic commercial real estate market thriving, income-producing real properties are being exchanged again with increasing popularity. Congress did not allow the continuation of 1031 exchanges for personal property, such as vehicles, jewels, and stocks, but the capital gains tax will continue to be deferred when parties exchange like properties—as long as the strict 1031 rules are met.
As a result, in this increasingly active real estate market, we are witnessing a revival of 1031 exchange transactions at our firm.
Over 300,000 new people became Florida residents in 2017, continuing a growth trend that shows no signs of slowing. With the new tax act squeezing many residents of high tax states in the northeast, the trend of continued population growth in the sunshine state is only expected to rise in 2018. Many new residents purchase new homes or convert their previous vacation or second homes in Florida into their primary residence. If this purchase or conversion is completed by December 31, those new residents may be eligible to apply for a Florida Homestead Exemption the following year.
Florida has two types of homestead:
The first is set forth in the Florida Constitution under Article X, Section 4, which is an automatic provision to protect homeowners from claims of creditors or spouses who exclusively hold title, and to insure that a surviving spouse is not made homeless. This protection is automatic based upon purchasing a house, condominium or cooperative and making it your primary residence.
The second form of homestead is known as the Homestead Exemption, and it is also set forth in the Florida Constitution under Article VII, Section 6, which provides a financial exemption from real property taxation of up to $50,000 in home value. Additional exemptions are available for veterans over 65, low income senior citizens, surviving spouses of a veteran or first responder that died in the line of duty, and certain disabled persons.
I often get calls from real estate agents regarding residential real estate deals that end in disputes. So the natural question I always get is, if the Seller refuses to return the deposit, how do I recover my client’s deposit?
Usually the call comes after the Seller refuses to sign a Cancellation of Contract arguing that the Buyer did not provide an adequate reason for termination or defaulted in some other way. Also note that when money is held by title companies, or other third parties acting as escrow agent, those parties can not release the deposit to the Buyer without a court order or signed release. In many cases the title company will instead transfer the deposit to the county court by filing an interpleader action, thus costing more fees and costs.
My initial answer is that there is no immediate solution. There isn’t much a real estate agent can do at this point. The Buyer and Seller need to resolve their legal dispute, either on their own or with the help of lawyers. Continue reading →