Monthly Archives: June 2022

Buyers Doubled Down Payments in Two Years

The average down payment in this year’s first quarter was $28K (13.1% of purchase price). Two years earlier, it was $14K (10.9% of purchase price).

CHICAGO – Thanks to rising home prices and buyer competition, homebuyers brought higher down payments in the first quarter of 2022 to make their offers more attractive to sellers, offering about twice as much than they did two years ago, according to realtor.com® data.

Buyers, on average, offered a $28,000 down payment in the first quarter. In 2020, down payments averaged $14,000.

The percentage of down payments grew, too. In the first quarter of 2020, buyers averaged a 10.9% down payment on the purchase price compared to 13.1% in the first quarter of this year.

“During the pandemic, people were not spending as much on entertainment and travel and received stimulus payments, which enabled them to put more cash down on homes,” says Hannah Jones, realtor.com economic data analyst.

Several Florida metro areas posted the largest increases in down payments, led by Cape Coral. Down payments there rose by 174.7% from the first quarter of 2020 to the first quarter of 2022. The average buyer had a down payment of $42,000, according to the realtor.com report.

However, the largest overall down payment averages for a home were in Silicon Valley. San Jose, Calif., averaged a 23.7% down payment of the purchase price of a home – $290,000, according to the report.

Source: “Here’s How Much Cash Homebuyers Are Putting Down to Have Their Offers Accepted,” realtor.com® (May 11, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Rate Increases Pressure Younger Adults to Buy Now

Buyers who can still afford a home feel they must act quickly in the face of rising mortgage rates: 36% of millennial owners said it happened earlier than planned.

NEW YORK – A third of homeowners recently surveyed by LendingTree say that mortgage rates affected their home purchase timelines, with young adults seemingly in the biggest hurry, a new survey from LendingTree found.

Thirty-six percent of millennial buyers say they bought a home earlier than they intended because they wanted to lock in a lower mortgage rate – significantly higher than the 19% of Gen Xers who sped up plans and 13% of baby boomers who did the same.

However, millennials are nearly three times as likely (13%) as Gen Xers (5%) to wait out the competitive housing market.

First-time homebuyers may be more sensitive to rates because they don’t have another house with built-up equity to leverage and face down payments and other homeownership costs for the first time. Many (28%) first-time homebuyers said they’re more likely to time their purchase based on interest rates compared to prior homeowners (18%), according to the survey.

Still, instead of trying to second-guess the timing of the market, house hunters should focus on whether buying a home makes sense based on their current finances, says Jacob Channel, LendingTree’s senior economic analyst. Rushing into homeownership over the fear of missing out – or waiting for a better deal that may never come – increases uncertainty.

When buyers do move forward, they should also look for the best mortgage rate. However, the survey also found that 56% of homebuyers took the first mortgage rate they were offered instead of gathering multiple quotes, a decision that could cost them thousands over the life of the loan.

Source: “56% of Mortgage Borrowers Didn’t Compare Rates, But Nearly Half of Those Who Did Saved Money,” LendingTree (May 17, 2022)


RE Q&A: Are Paint Color Rules Enforceable? Maybe

If an HOA’s paint-color rules haven’t been revised in decades, they’re still enforceable if nothing changed the rules. But who created these “rules”?

FORT LAUDERDALE, Fla. – Question: The guidelines in our homeowner’s association have not been revised for decades. A question came up about exterior paint colors. Are the homeowners still bound by the most recent, although antiquated, guidelines? – Ken

Answer: If the rules and guidelines were valid back then and nothing invalidated them, they are still enforceable.

Community associations can only mandate a color scheme if the community’s formative documents allow them to do so.

I have seen many communities without the authority to set specific guidelines, or require the approval of new residents, do so. When confronted with their acting outside their authority, the board members were genuinely surprised because previous boards had been doing it the same way for years.

First, you need to check your association’s documents to confirm that the board may have paint color guidelines. Then you will need to verify that the policy you are looking at is the correct one and was not replaced by rules you are unaware of.

Should this all check out, the community’s color scheme rules are enforceable.

A problem could happen if your community has long ignored these guidelines but is enforcing them now. All residents need to be treated equally, and a community association may not selectively enforce the rules. What is good for one resident should be good for them all.

If a board wants to implement the regulations again going forward, it will need to republish them, putting everyone on notice that the guidelines will be enforced again.

That said, any properties painted different colors when the rules were not being enforced cannot be made to repaint their home just to comply. When they decide to repaint their home in the future, however, they will need to follow the guidelines like everyone else.

Copyright © South Florida Sun Sentinel, Gary M. Singer. All rights reserved.


FHFA System Will Oversee Fair Lending Laws

The “Fair Lending Oversight Data System” is now active but also open for public comments. Among other things, it will track appraiser names and license numbers.

WASHINGTON – On May 20, the Federal Housing Finance Agency (FHFA) issued notice that it created a new “Fair Lending Oversight Data System” that will store, maintain and analyze information for fair lending oversight.

That oversight impacts mortgages backed by Fannie Mae and Freddie Mac, or over half of all conventional U.S. loans.

As part of the new system, it will include appraiser names and license numbers in connection with mortgage lending activities, according to the American Society of Appraisers (ASA). FHFA says the collected information will be shared among other federal agencies and appropriate third parties contracted by FHFA to conduct fair housing research, investigation, supervision and enforcement.

The new system went into effect on May 20, 2022, but FHFA will accept comments on the system and its effects through June 21, 2022. More information about the new program – and information for anyone who wishes to submit a comment – can be found in an FHFA notice published in the Federal Register.

© 2022 Florida Realtors®


Condo Q&A: Must a Treasurer Be on the Board?

Also: If the HOA hires a property management company, what tasks require a CAM license? And is it illegal to hire someone without a license?

FORT LAUDERDALE, Fla. – Question: My question is whether the treasurer of a condo association is required to be a board member? I have just recently been elected to the board and discovered that our treasurer is not actually a board member, even though I believe our bylaws state that the treasurer is supposed to be on the board.

He attends all the board meetings and prepares all the financial statements but does not have a vote. He does a good job as treasurer, and I am not sure that any other board member could (or wants to) do the job, so we would like to keep things as they are. I just want to make sure that we are doing it legally under Florida condo law. – A.B., Fort Lauderdale

Answer: The Florida Condominium Act actually does not specifically state that all officers, including, but not limited to, the treasurer, must be members of the board. However, if your bylaws require that the officers must be board members, then the association must adhere to that requirement.

Without reviewing your association’s governing documents, it is difficult to say what your options could be for keeping this person on as the treasurer. The answer will depend on what your documents say about the number of board members, the officers and their duties, and how each are elected (among other things). For example, if the number of current board members is less than the number of board seats provided for in your bylaws, the existing board could vote to appoint him as a board member to fill a vacant seat. You should have the association’s attorney review the documents in connection with this question and determine the best course of action for the association.

Question: If the HOA hires a property management company, what tasks require the manager to have a CAM (Community Association Manager) license – and is it illegal to hire someone without a license?

We have been told the manager of our community is covered under the management company’s license. She sets up and attends board meetings, inspects properties and prepares and sends out notices of violation. She is the point of contact for members to report items needing attention, solicits vendor bids and presents to the board, prepares meeting packets to include agendas, financial reports, and minutes of meetings, and takes payments and does the banking for the association. – J.K., Sunrise, FL

Answer: Chapter 468, Florida Statutes, includes the regulations for various professions and occupations, including licensed Community Association Managers. Section 468.431(2), Florida Statutes, gives the definition of “Community Association Management” and provides a list of specific practices which require licensure. Such practices include, but are not limited to, controlling or disbursing funds of a community association, assisting in the noticing or conduct of community association meetings, determining amounts due to the association, drafting meeting notices and agendas, and complying with the association’s governing documents and the requirements of law as necessary to perform such practices.

It would seem that your property manager, if operating without a CAM license, is performing a number of these duties in violation of the statute. However, that section goes on to clarify that, “A person who performs clerical or ministerial functions under the direct supervision and control of a licensed manager or who is charged only with performing the maintenance of a community association and who does not assist in any of the management services described in this subsection is not required to be licensed under this part.”

Therefore, it depends on the specific tasks that your manager performs, and whether such tasks can be classified as clerical or ministerial in nature. For example, is the manager actually drafting the meeting notices and agendas, or does the manager only post them after they have been drafted by an attorney or licensed CAM? The analysis will also depend on the level of direct supervision and control that the management company or licensed CAM keeps over her work.

The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, DeBoest & Cross, or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

© 2022 Journal Media Group. Avi S. Tryson, Esq., is a partner of the law firm Goede, DeBoest & Cross.


NAR: Home Prices Slowdown ‘Inevitable’

Chief Economist Yun said in an interview that it’s “just inevitable that home price appreciation will slow down in the upcoming months.”

WASHINGTON – Home prices are still hitting new highs, but the pace of appreciation is not likely to continue, Lawrence Yun, chief economist at the National Association of Realtors®, (NAR) said in an interview on CNBC’s “Power Lunch.”

“It’s just inevitable that home price appreciation will slow down in the upcoming months,” Yun says.

The housing market has shown signs of softening as rising mortgage rates add to already higher housing prices. Pending contracts and new-home sales are also dropping to pre-pandemic levels of sales activity, following a massive jump in the past two years, Yun says.

Pending sales hit slowest pace in nearly a decade

Home listings rose 9% last week compared to a year ago.

“The worst of the housing shortage is coming to an end, and that should be welcome news,” Yun says. “Consumers were chasing after limited choices.” The tight supply had also driven a spike in bidding wars and rising home prices. As more choices arrive on the market, the price pressure will lessen, Yun adds.

Buyers may get more choices, but now they’re up against higher mortgage rates, which have increased borrowing costs considerably over the last few weeks – and by more than 25% compared to last year. In many cases, that could mean the higher mortgage payments will cost $500 more per month for borrowers. The 30-year fixed-rate mortgage averaged 5.09% this week compared to 2.99% a year earlier, Freddie Mac reports.

Despite rising costs and some signs of a market slowdown, Yun says that homes are still selling fast: 88% of homes sold in April were on the market for less than a month, according to NAR.

Yun says home sellers must be realistic with their asking prices, as mispriced homes will linger on the market. A few weeks ago, sellers may have been able to list their homes 20% above what they could have a year ago, but now it may be 10% to 15%.

“Sellers must clearly recognize that higher mortgage rates are squeezing away some buyers,” Yun says, but homeowners are still seeing appreciation.

The median existing-home sales price increased at a slower year-over-year pace of 14.8% in April, according to NAR’s most recent data. The median home price nationally was $391,200.

Source: “It’s Inevitable Home Price Appreciation Will Slow in the Coming Months, Says Lawrence Yun,” CNBC (May 31, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Clients Don’t Know What You’re Talking About

A MoneyWise survey found top recognition for “closing costs” by two-thirds of respondents, but only 38% know what “mortgage rate” means.

NEW YORK – Watch the jargon you use in real estate. Many Americans are confused by terminology common in the industry, from “mortgage rates” to “down payments,” a new study shows.

More than 56% of respondents flunked a quiz of common home buying terms. A survey conducted by MoneyWise of 1,116 people finds that younger generations – mostly first-time homebuyers – struggled the most.

For example, less than a quarter of Gen Z respondents, who are in their early 20s, could pass a quiz on common terms. Only baby boomers, who may have more real estate experience, typically passed the real estate quiz.

The older the generation, the higher percentage of terms they understand. “Closing costs,” for example, was the most recognized term by 78.4% of baby boomers, but that drops to 64.9% of Gen X, 59.9% of millennials and 46.6% of Gen Z.

Overall customer knowledge of real estate terms

  • Closing costs: 61.8% know what this means
  • Annual percentage rate (APR): 58%
  • Mortgage: 57.6%
  • Appreciation: 53.7%
  • Down payment: 52.2%
  • Offer: 51.9%
  • Interest: 50.0%
  • Mortgage rate: 38.1%

Most people get their real estate information from friends and close family members, the survey finds. Real estate experts and online articles also were helpful.

Gen Z respondents – the youngest age segment active in real estate – tend to tune in to social platforms for their real estate knowledge; 30% of Gen Zers, for example, say they learned about home buying on Reddit and nearly one in four learned about it from TikTok.

Source: “How Much Do Americans Know About Buying a Home?” MoneyWise (April 28, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Why Have Mortgage Rates Been Falling?

Mortgage rates tend to follow yields in 10-year government bonds, which have been sliding. Plus without many refinances, lenders have more money to move.

NEW YORK – One impediment to buying a home lately has been the rising cost of mortgages. The average interest rate on a 30-year fixed mortgage has risen over 2 percentage points in the last 12 months, according to Freddie Mac, the government-backed mortgage corporation. But in the last few weeks, those rates have fallen slightly.

Mortgage rates tend to move along with the yield on the 10-year government bond, and lately that yield has been sliding.

“And that’s meant that mortgage rates are coming down as well,” said Mark Fleming, chief economist at First American.

It might sound strange that 10-year bond yields and mortgage rates are falling when the Federal Reserve has been raising interest rates. But many investors who are nervous about a potential economic downturn have been buying those safer government bonds, said Winnie Cisar at CreditSights.

“Which means that prices are going to increase and yields are going to fall,” she said.

And given how much mortgage rates have risen over the last year, Cisar said, demand for mortgages could be slowing down and lenders will have to get more competitive.

“Which means they have to lower the mortgage rates to make them more attractive to people to either buy a new house or refinance their existing mortgage.”

Sales of new and existing homes have been falling too, in line with the Federal Reserve’s goal of slowing demand to cool down the economy.

Copyright © Marketplace Morning Report, © 2022 APM. All rights reserved.


Mortgage Rates Edge Down, Still Over 5%

The average 30-year, fixed-rate mortgage was virtually unchanged this week, dropping from last week’s 5.1% to 5.09%. But the 15-year loan rate moved higher.

WASHINGTON (AP) – Average long-term U.S. mortgage rates edged down slightly this week, though interest rates on the key 30-year home loan remain elevated.

Mortgage buyer Freddie Mac reported Thursday that the 30-year rate ticked down to 5.09% from 5.1% last week. By contrast, the average rate stood at 2.99% a year ago. Until about six weeks ago, rates hadn’t breached 5% in more than a decade.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, edged up to 4.32% from 4.31% last week.

Last month, the Federal Reserve intensified its fight against the worst inflation in 40 years by raising its benchmark interest rate by a half-percentage point and signaling more big rate hikes to come. The Fed’s move, its most aggressive since 2000, means higher costs for mortgages as well as credit cards, auto loans and other borrowing for individuals and businesses.

Higher borrowing rates appear to be slowing the housing market, a crucial sector of the economy. In April, sales of both existing homes and new homes showed signs of faltering, worsened by sharply higher home prices and a shrunken supply of available properties.

Homeownership has become an increasingly difficult aspiration, especially for first-time buyers. Besides staggering inflation, rising mortgage rates and soaring home prices, the supply of homes for sale continues to be scarce.

The U.S. remains stuck in the painful grip of high inflation, which has caused particularly severe hardships for lower-income households, many of them people of color. Though many U.S. workers have been receiving sizable pay raises, their wages in most cases haven’t kept pace with inflation. In April, consumer prices jumped 8.3% from a year earlier, just below the fastest such rise in four decades, set one month earlier.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.


State $10K Grants to Harden Homes: When Can You Apply?

TALLAHASSEE, Fla. – Florida residents will soon be eligible for up to $10,000 in state grants for home hardening projects like roof reinforcement and garage door replacement.

A $150 million revival of a 16-year-old program, My Safe Florida Home, was included in a wide-ranging insurance bill enacted by the state Legislature and Gov. Ron DeSantis during last week’s special legislative session on property insurance.

The program will provide $115 million in two-to-one grant funding – meaning that qualifying homeowners can receive $2 back for every $1 they spend on improvements meant to strengthen their home against damage from hurricane-force winds.

Because the funding is limited, homeowners who would like to participate are likely looking for ways to get in line now so they can be among the first recipients. If all participants qualified for the maximum $10,000 grant, then just 11,500 homeowners will qualify. That number will be higher depending on how many applicants qualify for grants under $10,000.

While the Department of Financial Services, which will run the program, expects grants to be awarded on a first-come, first-serve basis, homeowners will have to wait for the department to develop application procedures and eligibility requirements, department spokesman Devin Galetta said in an email.

Chief Financial Officer Jimmy Patronis is working to set up the program “as quickly and efficiently as possible to allow homeowners to start hardening their homes against storms,” Galetta said. After the program is launched, qualifying homeowners will be able to combine the matching grant benefit with a sales tax exemption for storm-resistant windows, exterior doors and garage doors that will take effect for two years beginning July 1, he said.

Homeowners will have to begin the process by scheduling a hurricane mitigation inspection to identify improvements that will protect their homes from hurricane-force winds and qualify them for maximum available insurance discounts, Galetta said.

“As the program is stood up, we will be clarifying [grant] eligibility requirements according to the insured value of the home, location, prior inspection history and home hardening needs,” Galetta said.

It’s not yet known exactly what improvements will be eligible for grant funding. The original version of the program, which operated from 2006 to 2008, limited funding to specific needs such as roof deck attachments, secondary water barriers, roof covering, reinforcements for roof-to-wall connections, opening protections and exterior doors, including garage doors.

But with more money being made available, it’s possible the list of eligible improvements will be expanded as well.

Patronis has received authority to develop the program under the state’s emergency rule making process, which will allow the department to bypass requirements that could delay a launch until well into hurricane season. Galetta did not project a launch date for the program.

Language in the statute lays out the program’s basic parameters. Most of that language is unchanged from when the program was originally authorized. The original $250 million version of the program funded 400,000 inspections and nearly 39,000 home improvement grants, according to published reports.

But the program was tainted by reports of contractors failing to complete jobs and performing shoddy work, and of inspectors submitting fake reports just to collect payments from the state. It was also slow to gain traction during its first year, leaving applications backlogged for months and some homeowners waiting up to a year to be reimbursed.

After the 2008 housing market crash, many applicants who were approved for grant funding let their grants expire because they could not afford to pay their portion of the project costs. In 2009, the Legislature declined to provide funding to extend the program.

Sponsors of the bill that emerged from the House and Senate last week pledged that the Department of Financial Services will more closely monitor participating contractors and inspectors and do a better job preventing fraud this time around.

Galetta said, “We will be researching the prior program and enacting lessons learned to reduce fraud and streamline the program’s implementation.”

Critics in the Legislature will be watching the rollout closely. Rep. Anna Eskamani, an Orlando-area Democrat, called on the department to confirm that only qualified, credible home inspectors are hired. “Fraud prevention will be key here, as we don’t want Floridians receiving inaccurate inspections.”

Michael Burrman, owner of Burrman Home Inspections in Spring Hill, reviewed inspections for the state during the program’s first iteration. He said that unqualified people who previously worked at desk jobs in insurance companies were getting certified to perform home inspections.

“Then they’d run around and do 20 jobs a day,” he said. “If the homeowner wasn’t home, they’d falsify a report, take a photo of the house, submit it and get paid.”

Eskamani would like to see the $500,000 replacement value limit removed and eligibility opened beyond the wind-borne debris region.

She also urged the department to ensure that homeowners can apply with paper forms, over the phone or at a physical location.

“Far too many Florida programs are only available to people who are tech savvy, leaving those with no computer access or who are not computer fluent struggling to apply and participate,” she said.

Burrman, who served on Hernando County’s Housing Authority, said the funding might be put to better use by allocating it to local governments and let them determine what’s most needed. As an example, he cited a discovery of at least 500 homes built several decades ago that had only two nails holding the metal hurricane truss straps to the frame of the house. Two nails per strap protected the roof from uplift in winds up to 90 mph.

Three screws increases the protection to 120 mph winds – and gets the homeowner a $300 to $500 discount, Burrman said.

The housing authority found a way to tap into its available State Housing Initiatives Partnership Program (SHIP) funds, which can be used for various types of assistance for low-income home buyers and homeowners, to create a program that added the third nail to low-income residents’ hurricane straps, Burrman said.

“It was a win-win-win. They got a safer house. It made the neighbors safer. Plus it got them an insurance discount,” he said. “The closer you get to the community, the more the decision makers know what the community needs.”

© 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.


Rising Rates Pressing Apartment Owners Too

New investors pay higher rates for acquisitions and higher mortgage rates too. As a result, some new investors are feeling pressured to keep increasing rents.

NEW YORK – High mortgage rates don’t just affect homeowners. The higher rates also make it more difficult for apartment owners to pay back their loans – and they may be forced to raise their rents even higher to generate more income to do so, The Wall Street Journal reports.

Apartment building sales have been breaking records ever since the pandemic as investors have been drawn to the surging demand for apartments and betting that rents will continue to rise. From 2019 to 2021, the annual volume of rental-apartment purchases nearly doubled, according to CBRE Group Inc. data.

But owner profits are coming under pressure. Investors have been purchasing apartment buildings at escalating prices, and their return rates are shrinking.

Prices paid for apartment buildings increased 22.4% in the first quarter compared to a year earlier, according to MSCI Real Assets data. Coupled with that, interest rates have risen quickly and that has meant property owners are making less money on their buildings and many are now entering into what’s known in the industry as “negative leverage.”

Tenants are already feeling the impact of higher rents.

So how much more can owners raise rents to make up the difference? After all, the median asking rent for a rental unit was at a record high of $1,827 in April, according to realtor.com, nearly a 17% increase from a year ago.

“Owners who paid steep prices for apartment buildings could be at risk if rent growth slows, while rising interest rates threaten to push down building values and make it harder to refinance mortgages,” The Wall Street Journal reports. “Even a wave of minor distress could have far-reaching consequences for the financial sector because of the sheer amount of money that is now tied up in the rental-apartment sector.”

The Mortgage Bankers Association reports that outstanding mortgage debt backed by multifamily buildings is more than double since the financial crisis – at $1.8 trillion.

Source: “Rising Interest Rates Concern Apartment-Building Owners, Renters,” The Wall Street Journal (May 24, 2022)

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Listing Presentation? What Are Sellers NOT Saying?

Sellers of higher-end properties often interview three agents before making a decision. Listening – and asking open-ended questions – can move you to the top.

NEW YORK – Clients whose properties sell for $500,000 or more usually take an average of three listing presentations before selecting an agent. As a result, real estate professionals should take charge of these presentations – but also focus on listening.

A successful listening presentation for any property has four key elements: ears, eyes, heart and gut.

Ears must be used for active listening, and the best way to get important data is to ask open-ended questions, such as, “Why are you selling your home?” and “What’s causing you to move or make a change?”

Next, agents should use their eyes to note a home’s décor – what is mounted on the walls – and a client’s body language in terms of how two clients interact with each other.

Heart means leading with compassion. If a person becomes emotional about selling their home, for example, the agent can remind the client why they’re going through this process.

Finally, gut indicates taking the meta-view by examining a home as a third-party observer. This “high-level view” can help identify things they wouldn’t have noticed otherwise.

After the listening presentation concludes, agents should take a moment to review their notes and process what they’ve learned. To conclude the session, they should repeat what they heard clients say, including keywords and phrases that appeared during the presentation.

Source: Inman (05/24/22) Carr, Christine

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Contractors Challenge New Insurance Law

A week after the Florida Legislature took steps to limit attorney fees in assignment-of-benefit lawsuits, an association and company filed a constitutional challenge.

TALLAHASSEE, Fla. – Less than a week after Florida lawmakers rushed to make property-insurance changes, a contractors group Tuesday filed a constitutional challenge that targets a new restriction on attorney fees in lawsuits against insurance companies.

The Restoration Association of Florida and Air Quality Assessors, LLC, an Orlando firm that does work such as mold testing and leak detection, filed the lawsuit in Leon County circuit court.

It came after lawmakers last week passed a measure (SB 2-D) to try to bolster a troubled property-insurance market that has led to homeowners losing coverage and seeing spiraling premiums. Lawmakers gave final approval to the bill on Wednesday, and Gov. Ron DeSantis signed it on Thursday.

Insurers have long blamed litigation and attorney fees for driving up costs. The new law took a series of steps to try to address those issues, but the constitutional challenge focuses on part of the measure that deals with what is known as “assignment of benefits.”

In assignment of benefits (AOB), homeowners sign over their insurance claims to contractors, who then seek payment from insurance companies – often spurring lawsuits about claims and payments.

Contractors in the past have been able to recover their attorney fees from insurers if they are successful in the lawsuits, a concept known as “prevailing party fees.” But the new law stripped contractors of being able to recover prevailing-party fees when they are assigned benefits.

Homeowners can still recover prevailing-party fees if they file lawsuits directly against insurers, but the contractors cannot. The lawsuit alleges that the change violates equal-protection and due-process rights and denies contractors access to courts.

“Claims submitted to insurers for work performed by contractors under an AOB are generally not large in monetary amount,” the lawsuit said. “When the insurer delays, underpays or does not pay a claim at all, contractors are forced to commence an action against the insurer to recover the full amount due for the work performed. Without the corresponding right to recover prevailing party fees, SB 2-D makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court. Invoices for work performed by contractors under AOBs are generally not significant enough for a lawyer to agree to represent the contractor on a contingency fee basis and it is not economically reasonable for the contractor to … pay a lawyer on an hourly basis to recover the amount(s) owed.”

The lawsuit said invoices for work done by Air Quality Assessors and many other members of the association often total $2,500 to $3,000.

“The inability to recover prevailing party attorneys’ fees will effectively shut the courthouse door to plaintiffs because it will be cost-prohibitive to pay an attorney for these types of small claims,” the lawsuit said.

But William Large, president of the Florida Justice Reform Institute, a business-backed group that lobbies to reduce litigation, said in a statement after the law passed that “property insurance lawsuits have exploded over the last several years, overwhelming Florida’s insurance market.”

“Senate Bill 2-D contains significant litigation reforms and gets to the heart of escalating rates and limited coverage – lawsuit abuse,” Large said.

Assignment of benefits has long been a contentious issue in the insurance industry. The Legislature in 2019 put additional restrictions on assignment of benefits, at least in part because of an increase in residential water-damage claims.

But contractors contend that assignment of benefits helps homeowners who are unfamiliar with making sure insurance claims are handled properly.

“AOBs are not new and have been used for a long time, especially during emergency weather situations,” the lawsuit said. “In Florida, AOBs are prevalent in the residential property context when homeowners suffer damage to their home and need to hire contractors to repair the issues.”

The lawsuit, which includes seeking a preliminary injunction against the law, names as defendants Melanie Griffin, secretary of the state Department of Business and Professional Regulation, and Donald Shaw, executive director of the Construction Industry Licensing Board. The case has been assigned to Leon County Circuit Judge Layne Smith, according to an online docket.

Source: News Service of Florida


Hurricane Season 2022: A Survival Guide

MIAMI – Get ready, Florida. The most dreaded time of the year (after Tax Day) is here: Hurricane season. It officially starts June 1 (though it unofficially started in May) and runs through Nov. 30.

Forecasters expect this will be another “above average” season, although it hopefully won’t be as bad as 2020, when COVID took off and a record-breaking number of storms zigzagged through the Atlantic.

Before you make jokes about hosting a hurricane party or dusting off your favorite storm memes, it’s time for some real talk: Tropical storms and hurricanes are dangerous, damage property and can be deadly. A tropical storm has a maximum sustained wind speed of 39 to 73 mph. If it becomes a hurricane, it will be rated based on its maximum sustained wind speed using the Saffir-Simpson Hurricane Wind Scale, which classifies hurricanes as Category 1 (74-95 mph winds) up to Cat 5 (157 mph or higher).

All are dangerous. A storm’s greatest threat is storm surge.

The good news is that as technology has improved, forecasters have become better at tracking a storm’s path, giving us time to prepare or leave an area.

Florida has one of the strictest building codes in the country. (A result of Hurricane Andrew’s 1992 devastation). But your safety is first.

Whether you’re a newbie to the region or a longtime Floridian, here’s your hurricane preparation guide:

What are the 2022 hurricane season storm names?

Some of the names on last year’s hurricane list reminded people of Disney’s “Frozen.” This year’s 2022 list has a few names that might make you think of Beauty and the Beast, Kim Possible and Shrek.

Here are the names:

Alex, Bonnie, Colin, Danielle, Earl, Fiona, Gaston, Hermine, Ian, Julia, Karl, Lisa, Martin, Nicole, Owen, Paula, Richard, Shary, Tobias, Virginie, Walter.

Potterheads, take note, while Hermine might make you think of Hermione from Harry Potter, the spelling is different.

Before storms are forecast

You should do a few things even before a storm is in the forecast:

Start prepping your hurricane kit. Each person in your home should have canned and/or nonperishable food for at least seven days and at least one gallon of water per person. Make sure you have enough food and water for your pet, too.

Your kit should also include flashlights, a battery-operated or cranked radio, cash, a first-aid kit, medicine.

TIP: Don’t wait until a storm is coming to stock up. Start buying items little by little ahead of time. That way you can shop around for bargains and have time to find items that are hard to find, like baby formula, due to shortages.

Also, only buy food you eat. This way, if a storm doesn’t come, it won’t go to waste.

Inspect your shutters, roof and fences in case repairs or replacements are needed. Start pruning your trees, too.

If you have home and flood insurance, check that your policies are current and if you have sufficient coverage for hurricane season.

Check to see if you live in an evacuation zone and discuss possible evacuation routes with your family.

In Miami-Dade, check your zone at miamidade.gov/hurricane. In Broward, visit broward.org/hurricane. In the Florida Keys, visit monroecounty-fl.gov/897/Evacuation-Information. If you’re planning to spend the storm elsewhere in Florida, the Florida Division of Emergency Management has online maps you can refer to for all 67 counties.

If a tropical storm or hurricane is coming

If a tropical storm or hurricane is forecast, here’s how to prepare:

Fuel up your car, charge your power banks, withdraw cash, buy supplies (food, water, medicine, etc.) you still need.

Bring your patio furniture, pets and potted plants inside. Tie down anything that could become airborne. If you have a boat, secure it properly.

Monitor local news for updates from the National Hurricane Center, your local National Weather Service office and local officials on the storm’s track, what type of hazards to expect and if there are any evacuation orders in effect.

Get sandbags.

Find a safe place to park your car.

Put your shutters up and don’t leave trash on the curb. If you don’t have shutters or hurricane-proof windows, board up your windows with 5/8-inch plywood. Do NOT tape your windows. It doesn’t work.

During the storm

The storm has arrived, the power’s out and your kids are making shadow puppets with the flashlight. Here’s what you should and shouldn’t do:

  • Keep your hurricane kit nearby at all times and try to stay in a room with few or no windows.
  • Don’t take a bath or shower during the storm, Miami-Dade County says. Lightning can travel through plumbing. Plus, if there’s an emergency, no one wants to see you in your birthday suit.
  • Don’t use your generator during the storm, even if you lose power. Generators and rain are a bad combo. Wait for the storm to pass before turning it on.
  • Don’t leave your house during the storm. Forecasters will say when it’s safe to do so. And remember, don’t let the eye of the hurricane or tropical storm deceive you. While it might seem calm, things can quickly change. The winds surrounding the center of the storm are the strongest.
  • If your home begins to fall apart, get in the tub and pull a mattress over yourself to protect from debris, Miami-Dade County says.

After the storm

The worst is over, the storm is gone and you need a drink. There’s still a few things to do first:

  • Report property damage and power outages.
  • Monitor for curfew and boil-water-order notices. Also, keep an eye out for price gouging.
  • If you want to use a generator, make sure to keep it at least 20 feet from a home, including your neighbors, to prevent carbon monoxide poisoning. Never use it indoors, including in your garage. If you live in an apartment, use a battery-powered generator or portable power station.
  • Put the shutters away, bring your patio furniture out again and start any yard/backyard cleanup.
  • If you plan to go out (maybe to seek air conditioning, a hot meal or to check on grandma) be careful on the roads. There might be downed trees, fallen power lines, traffic lights that aren’t working and debris. Some roads might also be flooded. Do not drive or walk through standing water.

OK, now you can kick back and relax. At least until the next storm comes.

© 2022 Miami Herald. Distributed by Tribune Content Agency, LLC.


How to Avoid HOA Fraud? Fla. Attorney Explains

Many community associations leveling fraud charges had a single person receiving and paying bills. To stay safe, a system of checks-and-balances should be a fundamental part of day-to-day operations

FORT MYERS, Fla. – How can homeowners protect their communities from fraud? We asked an expert, as dozens of Southwest Florida Homeowners Associations (HOAs) continue to cope with alleged financial crimes.

In Collier and Lee counties, 35 community associations have filed a civil suit against their former management company, accusing American Property Management Services of embezzling funds, draining reserve accounts and falsifying financial records. And in Fort Myers, The Landings Yacht, Golf and Tennis Club is fighting to recover $500,000 allegedly stolen by thieves who accessed the association’s account with the payroll services company Paychex.

In this Q&A, Rob Caves – a Fort Myers-based attorney with the Becker law firm who has practiced community association law for 16 years – explains how to spot and prevent HOA fraud.

The following has been lightly edited.

What kinds of fraud or financial mismanagement are most common in community associations?

In my experience, the most common type of fraud that community associations experience is a person in a position of trust, without proper oversight, who then misappropriates the funds of the association. This person can be a bookkeeper, manager, board member or other owner who has been put into a position of responsibility regarding the association’s funds. In Florida, community associations are required to carry fidelity bonding insurance to protect against these issues.

What diligence should prospective owners do before buying a property in an HOA or condo association?

Buyers are entitled to limited information regarding the association. The Condominium Act states that prospective purchasers are entitled to copies, at their expense, of the condominium documents, the question and answer sheet and year-end financial information. As such, any prospective buyer should obtain the information they are entitled to, particularly the year-end financial information.

Generally, this information should disclose the overall financial status of the association. However, if a person in a position of trust is committing intentional fraud, such conduct may not be apparent from the face of the year-end financial information.

What procedures should an association board follow to safeguard against fraud?

An association should review who has access to its funds and what procedures are in place to ensure that there are checks and balances. For example, if one person is generally the person who writes checks for the association, the bank statements should not be sent to that person and/or that person should not be the only person with online access to the accounts.

In most cases of fraud involving associations, one person has control of both the funds and the account information for the funds – this would prevent the board or others from confirming that no improper payments are being made.

Therefore, the most simple step a board can take is to ensure that multiple people have access to the account information for the association, can see how and where the association funds are being spent and can question any charge that appears unusual. Further, I would recommend that any association discuss proper safeguards with its accounting professional and insurance professionals to ensure that it is implementing best practices.

Additionally, all community associations governed by the Florida statues for condominiums and homeowners associations must prepare year-end financial statements. The type of financial statement that must be prepared is based on the total annual revenues of the association.

The year-end financial statements must be prepared and provided to the owners within 90 days of the end of the fiscal year or annually on the date provided in the bylaws. However, the owners can vote to reduce the level of required financial reporting on an annual basis and the vote must be taken prior to the end of the subject fiscal year.

For residents, what are some signs that their board is on top of things? What are some red flags?

Well-run associations are readily transparent regarding the association’s finances. A significant red flag is when financial information is not readily available and not timely provided by the association. Other potential red flags are unexpected special assessments or increases in the annual assessments the owner must pay.

How can fraud at a community association affect individual owners?

Ultimately, the owners will be responsible to pay for any shortfalls in the association’s budget, regardless of what causes that shortfall.

As such, if someone misappropriates funds of the association, at the end of the day the unit owners will have to make up the shortfall either through a special assessment or higher ongoing regular assessments. Further, the misappropriation of the association’s funds may also lead to higher insurance premiums and higher ongoing operating costs for the association.

What can owners do to hold their boards accountable?

The best thing owners can do is be involved. Attend board meetings, review the association’s financial statements regularly and run for the board. Many instances of fraud involve associations with uninvolved memberships and longstanding bookkeepers who have not had appropriate oversight.

How can associations recover stolen funds, and how long can that process take?

State statutes require that the association carry an insurance policy to protect against the theft or misappropriation of the association funds, and that policy must cover the maximum amount of funds the association has at any one time. It is important that boards of directors have annual conversations with the association’s insurance professional regarding the appropriate level of fidelity bonding insurance protection.

As such, if the association experiences a loss, the statutes anticipate that there will be an insurance policy in place to protect the association. However, making claims on these policies is a complicated process and under the best of circumstances would likely take months.

Further, attempting to recover the funds from the person who has improperly taken the funds is often pointless, as they have spent the funds and do not have any resources to make the association whole. Therefore, the best thing the association can do is take reasonable steps to prevent the loss in the first place rather than counting on any ability to recover the lost funds through either an insurance policy or from any responsible individual.

© 2022 Journal Media Group


Don’t Add Language to the Code of Ethics

Dear Shannon: What do I do when a buyer says they are working with another Realtor? A cohort says the Code of Ethics requires us to ask if they have signed a written exclusive agreement. And another person said we have to get a copy of it. Is that what the code says?

ORLANDO, Fla. – Dear Shannon: I’m a new Realtor® and read your last article, Must I Push and Probe for Representation Info? I now understand that when I’m showing one of my listings to a potential buyer who says they’re working with another Realtor, I should not just ignore that statement. I understand that I need to do something (I think your article said to make reasonable efforts) to find out if the buyer has an exclusive agreement with another Realtor. However, I’m confused about how far to go with this.

At an office meeting recently, a few of us discussed Standard of Practice 16-9 and how we are supposed find out if a buyer has an exclusive agreement. A fellow Realtor said that the Code requires us to ask if the buyer has signed a written exclusive; another Realtor said we have to ask for a copy of it.

There was quite a debate in our office but no consensus. Now I’m confused about what to do. When a buyer tells me that they’re working with another Realtor, do I have to ask if they signed a written exclusive agreement? Do I then have to ask for a copy of it? – New & Confused

Dear New & Confused: Thank you for reading my last article. It’s so important to stay plugged in to all the educational resources available to you. You may be new, but you’re making yourself a knowledgeable professional. Great job! Now, let’s unpack the different issues you’ve presented and get to an answer to your questions regarding Standard of Practice (SOP) 16-9.

SOP 16-9 says, “Realtors®, prior to entering into a representation agreement, have an affirmative obligation to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement to provide the same type of real estate service. (Amended 1/04)

When you’re showing a potential buyer one of your listings and they mention they’re working with another Realtor, SOP 16-9 says you have to do something to find out if the buyer has an exclusive agreement with that Realtor, because doing nothing spells potential trouble with the Code.

You are correct. SOP 16-9 says you have “an affirmative obligation to make reasonable efforts to determine whether” the buyer has an exclusive relationship with another Realtor. Unfortunately, the Code doesn’t define “reasonable efforts.” But, does it say what your fellow Realtors think it says regarding a signed written agreement in this scenario?

Let’s think this through and look carefully at the language of SOP 16-9 which says “current,” “valid,” and “exclusive.” Look again, carefully. Notice it does not say a “signed,” or “written,” agreement. SOP 16-9 does not contain language requiring you to ask the buyer if they have signed a written exclusive agreement, nor does it have language requiring you to obtain a copy of such agreement. The language just isn’t there. I encourage your fellow Realtors to resist the urge to add language to the Code.

In this case, when you show a potential buyer one of your listings and they mention that they’re working with another Realtor you have an affirmative obligation to make reasonable efforts to determine whether the buyer is subject to an current, valid exclusive agreement with another Realtor. However, SOP 16-9 does not require you to ask if they signed a written exclusive agreement, nor does it require you to obtain a copy of it.

Shannon Allen is an attorney and Florida Realtors Director of Local Association Services
Note: Advice deemed accurate on date of publication

© 2022 Florida Realtors®


Buyers Pondering Home Co-Ownership? 3 Tips

Friends or family members who say, “We’ll work it out later” set themselves up for trouble. The time to “work out” solutions for unexpected problems is before the purchase, not after.

CHICAGO – A growing number of consumers are exploring unconventional pathways to homeownership, including co-ownership – buying a home with a friend, family member or partner, according to the National Association of Realtors®’ (NAR) 2021 Home Buyers and Sellers Generational Trends Report.

With rising costs, homebuyers may find pooling their money together can put homeownership more within reach.

“This strategy can help ease the financial burden of purchasing a home to some degree,” says Glenn Brunker, president of Ally Home. “But buyers should be prepared to navigate the potential risks.”

Brunker recommends that buyers considering a co-ownership arrangement with friends, family members or partners keep these points in mind:

  1. Finalize and stick to a budget. Buyers should set their budget before starting a home search. The budget should include how much home they can afford but also how they will manage the additional expenses of homeownership, like closing costs, taxes, lawyer fees, utilities, maintenance and more. Each co-owner should consider how a lower budget may offer a chance to save more or even handle the mortgage payment on their own.

    “Ideally, the division of these costs should be put in writing to avoid any future conflicts as a result of planned or even unexpected costs,” Brunker says.


  2. Establish how the property will be titled. A legal professional can help both parties determine how they will title the property, Brunker says. For example, four friends may be purchasing a home together, but one makes the majority of the down payment. These buyers might structure a tenancy in common agreement so one party owns 40% of the home and the other three each own 20%.
  3. Consult with a legal professional. Along with a lender and real estate professional, buyers should meet with a title agent or real estate attorney to ensure all buyers understand the legal options available and implications of the agreement they choose, Brunker says.

    “This professional can help answer important but often overlooked questions like, what is the exit plan if one party wants to move? What are the rights of survivorship?” he says.

Source: Ally Home

© Copyright 2022 INFORMATION INC., Bethesda, MD (301) 215-4688


Sellers Staying? Post-Closing Occupancy Addendum

If sellers want a little more time in their property after a sale closes, it’s important they know how this negotiated term fits into their contract before committing to longer-term plans.

ORLANDO, Fla. – Sellers occasionally need more time in their house after closing. Sometimes they negotiate it as part of a whole contract, while other times they negotiate it after a contract has been signed. Either way, it’s helpful for both sides to understand how the form rider works.

The main form we hear about on the Florida Realtors Legal Hotline is the Florida Realtors®/Florida Bar CR-6 Rider U Post-Closing Occupancy by Seller. Is this the right form for a buyer and seller to use? Only if they are fine with the idea that either side can cancel the contract if they can’t successfully negotiate a lease.

Despite the title, this rider does not create an occupancy agreement. It creates a contingency.

Rider U centers around a deadline which, if left blank, will be 10 days before the closing date. That’s the deadline for one side or the other to deliver a mutually acceptable lease or occupancy agreement. Rider U prompts the buyer and seller to agree to the length of the post-closing occupancy and amount of monthly rent, but all additional terms of the lease (or occupancy agreement) are up for negotiation.

What if the buyer and seller can’t agree on terms? Then either side can cancel. That is the main function of Rider U, which provides “If the parties fail to deliver a mutually acceptable Post-Closing Agreement within the time period stated above, then either party by written notice to the other may terminate this Contract and Buyer shall be refunded the Deposit, thereby releasing Buyer and Seller from all further obligations under this Contract.”

What if a buyer, seller, or both really want the transaction to go through and don’t want to agree to a contingency that could lose them the deal? In that case, the parties are welcome to skip the rider and go straight to whatever form of post-closing occupancy agreement they can negotiate. Of course, if the contract is already in place, the seller should be hyper-aware that if their occupancy negotiations fail, they are likely obligated to move out on the closing date.

It’s worth noting that the Florida Supreme Court has only approved a single-family and multifamily lease form, so that is typically the only thing members will have to document a post-closing occupancy. If your brokerage has an additional form outside of the Florida Realtors forms library that could work, like a short-term rental agreement, check with an authority at your brokerage to see how that form works.

It’s also worth noting that the lease terms are always up to the buyer and seller, so defer to them if they have a preference. They may prefer a very casual and short agreement they put together. Or they may want to have their lawyer draw something up to document the occupancy. Still others may want to modify the purchase and sale contract to add some form of occupancy agreement that’s incorporated there.

One final note. CR-6 Rider T, Pre-Closing Occupancy by Buyer essentially mirrors the post-closing occupancy rider we just discussed. There are a few differences, such as the contingency deadline for the pre-closing occupancy rider is 10 days after the effective date, whereas the post-closing occupancy deadline is 10 days before the closing date. However, the key part of both is that they create a contingency deadline, after which either party can cancel, with the buyer receiving a return of the deposit.

Joel Maxson is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication

© 2022 Florida Realtors®