Signaling cash flow woes, Ginn Clubs and Resorts missed principal and interest payments on its first- and second-lien debt according to a LCD report. Lenders have agreed to not exercise remedies for 30 days but have not waived the default. The 30-day waiver on principal and interest payments was granted when Lubert-Adler agreed to kick in $5 million in cash for operations. The agreement affects only four Ginn properties.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news website for the City of Palm Coast, Flagler County and Northeast Florida. He is a licensed Florida Realtor® associated with Adams Cameron & Co.
It's said that sellers are the last ones to know the market has dropped. By most measures, the Palm Coast, Flagler County housing market peaked in the summer of 2005. Yet, 2 ½ years later, some sellers still haven't gotten the message. How can that be? It's certainly not because of the lack of media coverage.
People fall in love with their assets. They just can't believe that there isn't at least one person out there that values their property as much as they do. But after 2 ½ years, shouldn't they be waking up to reality? Here are a few things that sellers need to know:
Buyers don't care what you paid for your property.
Buyers don't care how much you think you need to break even.
Buyers don't care that your listing price is lower than the listing price of comparable properties. They care about how your listing price compares to the price at which comparable properties SOLD recently.
Buyers have lots of options. Your property is only one of several.
In a buyers market, buyers are not as anxious to make a deal as are sellers.
Carrying costs can eat you alive. If you're monthly carrying cost (interest, maintenance, insurance, association fees, etc.) is $2,500, your investment will be $15,000 higher in six months. Do you think you will get $15,000 more if you wait six months?
Think about how you would describe your property to the Property Appraiser's office in order to justify a lowered assessment. These are the reasons a buyer will offer less than you want.
Taking a loss on an investment does not make you a bad person. Even smart people make mistakes. Last year, multi-billionaire Carl Icahn offered $22 per share for WCI Communities, the developer of condos at Hammock Dunes. Today WCI trades for $1.81. But Carl got lucky. The company turned down his offer as too low.
Here are just a few examples of current local listings that I do not believe are justified by present market conditions:
Two North Riverwalk Drive Intracoastal lots in Palm Coast Plantation are listed at $379K and $375K respectively although two nearby lots recently sold for $225K and $215K.
Three adjacent Intracoastal lots on South Riverwalk are listed at $419K, $349K, and $480K. A fourth lot is listed at $299.9K and a nearby lot sold recently for $300K.
The median selling price of 52 Palm Coast lots (those platted by ITT when Palm Coast was first planned) sold since the first of the year was $30,000. The median listing price of the 1,202 lots still available is $59,045. Hello!!!
Of 39 lots listed in Ginn's Conservatory, 12 are above $300K. However, no lots have sold in that community in the past two years and there are 20 listed below $200K of which 2 are below $100K.
Two salt-water canal lots in the "C" section are listed above $450K although no similar lots have sold above $287K in the last six months.
An Intracoastal unit in Canopy Walk lists for $499K while an identical unit in the next building sold recently for $299K.
The list could go on for pages but I think you see my point. If you are serious about selling, discuss current sales of comparable properties with your Realtor® and adjust your listing price accordingly. Repeat the process at least every other week. If you are unwilling to do this, you are not seriously trying to sell your property. You are simply listing it. Your neighbors would rather you took down your sign. The properties that sell (and many more are selling today) are the ones that are competitively priced and/or attractively presented.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida. He is a licensed Florida Realtor® associated with Adams Cameron & Co.
In a heavy turnout on May 21st, voters in tiny Minturn, Colorado overwhelmingly (87%) supported a referendum to approve the annexation of 5,300 acres into their town. The land, located on Battle Mountain a short distance from Vail, was purchased by the Ginn Company for $32.75 million. Ginn plans to build a ski resort, including 1700 homes and condominiums, and up to two golf courses on the property.
The annexation was previously approved by a unanimous vote of the town council. However, a few locals felt that Minturn residents should have some say in the decision. This group gained enough support to force the referendum. 357 (50%) of the voters turned out to vote on the referendum compared to only 227 votes cast in April's general election.
To win local support for annexation, Ginn pledged $180 million to improve the town's infrastructure and services. Locals were also promised limited access to the resort's amenities, a concession not given by Ginn at his other private developments. Bobby Ginn has been active in Minturn lately personally lobbying residents.
While Bobby celebrates in Colorado, he faces increasing challenges at some of his other developments:
At Hammock Beach in Palm Coast, FL, the single family residential side is moving forward with several new housing starts. But while the resort gains recognition from the hospitality industry, condominium sales languish. Only a handful of units have changed hands in 2008. According to public records, none of the $million plus contracts for tower units reportedly signed at the Ginn Championship golf tournament in March has closed to date.
2007 property taxes are listed as delinquent on 128 of 337 lots in The Conservatory. 2006 property taxes remain delinquent on 52 of them. Meanwhile, several lots (originally purchased for between $329,900 and $529,900) now listed between $100,000 and $200,000 remain unsold. Ten Conservatory lots are now bank-owned (foreclosed). Fifty more are in foreclosure.
In Yacht Harbor Village, Ginn's marina community on the Intracoastal Waterway in Palm Coast, a handful of condominium units are still unsold. The building received its Certificate of Occupancy in 2006, but the lobby, restaurant, and ships store remain unfinished.
At Bella Collina, Ginn's premier resort on Lake Apopka north of Orlando, 292 of 823 properties are listed on Lake County's 2007 delinquent tax roll. Foreclosures are increasingly common there also, as they are in Tesoro, another Ginn community in Port St. Lucie and Reunion near Orlando. The planned Tesoro Beach Club was never built. Nor was the planned equestrian facility at Bella Collina.
Several lots reported as sold at a fall '07 release event at The BriarRose, a recently acquired Ginn property in Georgia, did not close. Jeff Davis, who recently headed Ginn's real estate sales division and originally developed The BriarRose is no longer with the company. BriarRose is now reportedly for sale.
A lawsuit filed last year in Michigan by disgruntled Ginn property investors has recently been assigned to a Florida jurisdiction. Ginn states that he will vigorously defend against the suit. Two additional lawsuits were reportedly filed in April by Orlando based law firms representing Bella Collina property owners. Several Ginn property owners have indicated that they have been contacted by the same law firms about similar suits the firms plan to file related to Reunion, Tesoro, and The Conservatory.
Hopefully things will go well for Bobby and the Minturn residents. But until a resurgent market arrives to lift the values of existing Ginn community properties, he will likely face continuing pressure from disgruntled property owner/investors and the lawyers who will seek them out.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida. He is a licensed Florida Realtor®.
I cannot count the number of times people have remarked to me that they believe that real estate commissions are too high. After all, why should someone pay 6% of the selling price of their property when the sales agent may have spent less than 20 hours dealing with the listing? Six percent of $200,000 is $12,000. For 20 hours of work, that's $600 per hour.
From the seller's perspective, the commission amount seems huge. But real estate transactions involve several people, each of whom gets a piece of the pie. While the pie seems big, sometimes it ends up in lots of little pieces. Let's look at the commission from that end.
Under Florida's real estate law, licensed real estate Sales Associates (agents) must work under the direction of a Licensed Real Estate Broker. Typically, agents are independent contractors, not employees of the broker. Still, the broker is ultimately responsible (and liable) for the agent's actions. Any listing agreement is between the property owner and the broker (not the agent) even though the agent secured the listing.
Sales commission distributed at closing is paid directly to the brokers. Sales agents cannot receive commission directly. The Broker, in turn, splits the commission with their agent on a negotiated percentage specified in an agreement between the broker and the agent. There is no set rule for the split, but the agent usually receives between 50% and 75% of the commission paid to the broker. Several factors determine the percentage:
Some brokers provide support services such as office space, desk, phone, office supplies, stationary, advertising, clerical assistance, administrative assistance through the closing process, computer work stations, etc. They may also subsidize some of the agent's related expenses such as E&O (Errors and Omissions) Insurance, postage or copying expenses. Such brokers usually keep a bigger slice of the pie.
Others provide little support. Some even charge a desk fee or a transaction charge for each sale. But these brokers usually give agents a larger split.
Some agents are more experienced and/or have a large stable of clients and proven track record. They typically can negotiate a better split arrangement with their broker.
Most listing brokers agree to cooperate with participating brokers, usually offering half the listing commission to the broker who's agent brings a buyer to the table. This practice helps expose the seller's property to the maximum number of potential buyers.
Let's take a simple example. Assume the selling price is $200,000 and the negotiated commission rate is 6%. In this example, the agent for the listing broker shares in 50% of the broker commission while the agent for the buyer's broker receives 70%.
Distribution of Real Estate Commissions
Total Commission
$12,000
Seller Broker @ 50%
$6,000
Buyer Broker @ 50%
$6,000
Seller Broker @ 50%
$3,000
Seller Agent @ 50%
$3,000
Buyer Broker @ 30%
$1,800
Buyer Agent @ 70%
$4,200
Totals
$12,000
$12,000
$12,000
Now let's add a twist. The buyers did not make the initial contact with the buyer agent. As often happens, the buyer was referred to the agent by another agent (a referring agent). In that case, the referring agent's broker and the buyer agent's broker agree on a referral fee (another commission split). Although individually negotiated, the most common referral fee is 25%. That means that if the referral results in a completed sale, the buyer broker pays 25% of the commission received to the referring broker. Each, in turn, split their share with their respective agents (buyer agent and referral agent) based on their respective commission split agreements.
Take the same example above but add the referral to the buyer's broker. The referring broker gives the referring agent 60% of any commissions. Here's what happens.
Effect of Referrals on Commission Distribution
Total Commission
$12,000
Seller Broker @ 50%
$6,000
Buyer Broker @ 50%
$6,000
Seller Broker @ 50%
$3,000
Seller Agent @ 50%
$3,000
Buyer Broker @ 75%
$4,500
Referral Broker @ 25%
$1,500
Seller Broker @50%
$3,000
Seller Agent @50%
$3,000
Buyer Broker @ 30%
$1,350
Buyer Agent @ 70%
$3,150
Referral Broker @40%
$600
Referral Agent @ 60%
$900
Total
$12,000
$12,000
$12,000
$12,000
It can get even more complex. Sometimes different referral brokers and agents are involved with each end of the sale, the listing and selling end. Worse yet is the situation where the buyer announces at the time they are about to sign the sales contract that they are a licensed real estate professional and they want a piece of the commission. Sometimes another agent is injected into the process to cover for the regular agent (who may be sick of out of the office). The assisting agent may feel that they contributed to the sale and should receive some compensation. Need I say more? And then there's the lender willing to approve a short sale only if the overall commission rate can be renegotiated to a lower level. Or the seller who wants the broker to absorb some of price his/her price concession.
And then there are the expenses, including but not limited to the following:
Local association dues - $336 annually
National association dues - $545 annually
Health Insurance - My premiums and co-pays average more than $1,100 per month as an individual (yes, I'm older than average)
Advertising and business cards
Postage - a 1500 piece mailing costs approximately $1500 including stationary, envelope, and postage (exclusive of labor)
Other association dues (Chamber of Commerce is $200)
Of the licensed real estate agents in Flagler County, FL about 1,200 are dues paying members of the local Association of Realtors®, which would classify them as active (at least in a part time sense). During the first four months of 2008, a total of 567 real estate sales transactions (all types of properties) were reported by the Flagler County MLS. The total value of these transactions was $130,733,453. At 6%, these sales would have generated $7.844 million in total commissions. Assuming agents receive, on average, 60% from their brokers, they would have collectively received commissions totaling $4.71 million. Divided equally among the 1,200 agents, each would have received a total of $3,922 in four months. And don't forget the expenses.
Seldom do people spend more money on an item than when they purchase their home. But few know much about the process and intricacies of buying and selling property; disclosures, contract terminology, inspections, title insurance, legal obligations and liabilities, pro-rating taxes, association fees, escrow, mortgage options, CCRs, deed restrictions, etc. Most also are unaware of how real estate sales people are compensated. They don't get paid to do a comparable listing analysis of your property, to list your house, to advertise and promote it, or to hold open houses. They don't get paid to search for and preview property meeting your requriements, schedule showings, or to drive you around to show properties. They only get paid IF a transaction happens.
As in any business, some of the players are not very competent while others are exceptional. Some work 7/24 while others hardly work at all. Take time to learn how to tell the difference. Then treat YOUR real estate professional as you would treat any other trusted business associate. Trust me. They will earn their commission.
I am strictly a referral agent. Whether my readers are buyers or sellers, I help them find that "right" agent. They will take good care of you while I concentrate on GoToby.com. Don't hesitate to call me (386) 931-7124.
I just finished covering the Ginn Championship at Hammock Beach. The tournament is part of the PGA Champions Tour. This was the second year Bobby Ginn's Ocean Course at Hammock Beach hosted the event. As a response to the downturn in the real estate market, Ginn made some changes from last year. The blimp was gone. It's now owned by Direct TV. The number of volunteers was down a little; as was the compensation package they were given. The Saturday night Smokey Robinson concert was limited to Ginn Club members only.
But the tournament did not suffer a bit. By all accounts, it was even better than the inaugural tournament last year. The pros were consistent in their praise for both the venue and the atmosphere surrounding the event. And the Ginn Company reportedly sold 4 of the Hammock Beach Tower condominiums for prices between $1.4 and $1.6 million each and has contracts "working" on two more.
There are signs locally that Ginn is cutting back in response to the present real estate slump. The lobby, restaurant, and ships store of the Admiral's Cove condominium at Yacht Harbor Village in Palm Coast remain unfinished. The Gardens at Hammock Beach along John Anderson and the Intracoastal Waterway shows little signs of construction activity. And there have been staff reductions. But amid persistent rumors of Bobby Ginn's financial demise, the company keeps plugging along.
I recently uncovered some information regarding the relationship between Ginn's Company and the Lubert-Adler Fund, his long time funding source. The relationship extends beyond that of lender and borrower. An undated document attributed to Lubert-Adler, reports that they own 50% of The Ginn Company and 80% of each project. It also states that the Ginn Company is the only residential asset in the fund and is the largest component and best performing asset in the fund over the past 10 years.
Institutions reported to be investors in the fund include:
Wells Fargo
Kodak retirement plan
Duke University
Harvard University
Princeton University
Pennsylvania State Teachers fund
Ohio Police and Fire
City of Philadelphia
Since it was founded in 1997 by Dean Adler, Lubert-Adler has invested in over $15 billion in real estate assets, according to its website. The website lists several of Ginn's properties in their portfolio but there is no mention of Ginn's biggest project, Ginn Sur Mer on Grand Bahama Island in the Bahamas. Another project, The Gardens at Hammock Beach, was once funded by Credit Suisse. When they pulled their backing last year, Lubert-Adler stepped in to fill the void. Both Ginn and Lubert-Adler are private companies, making it difficult to get detailed and complete information, but the ties between the two are obviously strong and deep (as deep as Lubert-Adler's pockets). They can take the "long view" because they don't have to report to stockholders and financial analysts every three months as do WCI Communities and Centex, two large developers also active in Palm Coast.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida. He is a licensed Florida Realtor®.
The last week of February, the Town Council of tiny Minturn, Colorado voted unanimously to annex 4300 acres of land on Battle Mountain owned by Ginn Resorts. Ginn plans to develop a billion dollar ski resort on the site. The annexation agreement includes a pledge by the developer of $180 million for improvements to the town's services and infrastructure. The 1,100 resident town's current budget is about $1.5 million.
The vote was preceded by two and a half years of planning and council meetings. Minturn, a sleepy former mining and railroad town long bypassed by Vail developers, bargained well. Ginn has pledged to:
Build affordable housing for 50 percent of the resort's future employees
Establish a scholarship fund for local kids
Provide money for Minturn to buy U.S Forest Service land within the town's boundaries
Clean up a toxic superfund site at a former mine nearby
Build a recreation center and bike path
Provide money for streets, sidewalks, lighting and water system upgrades
If additional approvals from the U.S. Fish and Wildlife Service and Environmental Protection Agency are obtained, the billion dollar project will proceed. Plans call for 1,200 acres of skiing, eight chair lifts, a gondola to link the base village to home sites and a golf course. The plan also involves construction of 1,700 luxury homes and condos worth an estimated $3.4 to $4 billion. Ginn reportedly purchased the land for $32.75 million.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida
The Palm Coast, Florida housing market may have reached bottom. February stats continue a trend first noticed in January. In each month, the number of homes available for sale on MLS declined and the number of signed sale contracts increased.
My February newsletter showed that even though the number of closings in January was the lowest in several years, the number of homes for sale declined. Obviously the reason for the decline was not that homes sold. It was, in fact, because prices have reached a level where discretionary sellers decided that they would not lower their asking price to the prevailing market. Instead, they took their homes off the market. In the supply and demand world of real estate, the reason for the decline in inventory is not nearly as important as the decline itself.By the end of February, the number of unsold MLS listed homes had dropped to 2,200, down about 10 percent in just two months.
Sales are registered when a contract closes, usually 30 - 60 days after the sale contract is signed. January's low number of closings reflected the low number of sale contracts signed in November (72) and December (57). 122 sale contracts were signed in January, about the same number as in January a year ago and the highest number since April '07. The February number of signed contracts stands at 139. This number will rise over the next few days as late February contracts are reported. Also, there will be some attrition in the number as some contracts may not complete (close). Regardless, February will compare very favorably to last February's 102 signed contracts.
The effects of foreclosures on the market
For at least a year, we have been bombarded with facts and rumors about the number of homes in foreclosure. Foreclosures take time to work through the process. All foreclosures do not end badly. Sometimes, the borrower is able to catch up with payments or refinance, either with their current lender or with another. Eventually many properties do come back to the banks. "Eventually" happened just a few months ago when an increased number of bank owned properties entered the market.
In February '07, only one of the MLS reported home sales in Flagler County was bank owned. Even as late as October '07, the number of bank owned homes sold was only 4. In both January and February this year, bank owned properties represented 20 percent of the homes sold. Banks do not want to own property. When they find themselves in possession of foreclosed property, they market it aggressively (low prices) to assure that they move quickly. This accounts for the drop in median selling price from $209,500 in October '07 to a low of $161,500 in January. It also is the reason so many sellers withdrew their homes from the market. The median selling price for Flagler homes in February actually rose slightly to $169,000.
Painful as it is, it's good for the market. Bank owned homes that sold in February were "on the market" an average of only 95 days before a sale contract was signed. This compares to 158 days for non-bank owned properties sold that month. The median selling price for bank owned homes in February was $160,000, slightly below the overall median of $169,000. Indicating that financing is still available, 17 of the 139 February contracts actually closed the same month. The 103 homes closed in February represent the highest monthly number of completed sales since August '07.
The Parade of Homes (March 1 - 16), kicks off the traditional peak selling season for the area. The process of flushing the market of "distressed sale" homes has already begun. The numbers of pending sales for single family Flagler County homes stands at 254, more than double the number of only a few months ago. The Parade of Homes should add additional momentum to the market.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida
Since the subprime loan sector is shut down, the mortgage industry is looking for new products to sell, products with less risk and with a broad appeal. With the baby boomer generation reaching retirement, the industry will find the perfect product in the reverse mortgage. Many have heard about reverse mortgages, but most don't really know what they are.
With a standard "forward" mortgage, a buyer borrows money to be used to purchase a home. It is also known as a "declining debt" loan. The loan amount is equal to the purchase price minus any down payment. At the onset, the down payment represents the total equity the owner has in the home. Amortized monthly payments made to the lender consist of both interest and principle. As the principle is paid down, the owner's equity rises. It also increases as the property appreciates over time. The loan amount declines while equity increases. When the final payment is made, the loan balance is zero and the owner's equity equals the current value of the home.
Just as when you look into a mirror, your right hand appears to be your left hand, a "reverse" mortgage is a mirror image of a forward mortgage. In the beginning, the homeowner has equity. This equity is used to get cash. With a reverse mortgage, the owner makes no payments. Interest accrues to the balance of the note. This is why reverse mortgages are also known as "rising debt" loans. The loan is repaid when the house is sold or the homeowner dies. Any sale proceeds in excess of the loan balance go to the owner or owner's estate.
With either type of loan, the borrower maintains title to the property.
The proceeds of a reverse mortgage are typically received as periodic payments, but can also be received in a lump sum or as a credit line against which the owner may draw as needed. Proceeds may be used for any purpose. They are commonly used to pay off an existing mortgage, to fund home repairs, to pay for long term care insurance, or to pay off debts. The loan balance increases with each cash payment to the homeowner and as interest accrues. Unlike a forward mortgage where income is a key determiner for approval, a reverse mortgage approval depends on the amount of equity and the owner's age. The older you are (you must be at least 62) and the more equity you have, the more cash you can get. Since the owner makes no payments, income is not required.
The loan amount can never exceed the value of the home. The home's value represents a non-recourse limit. The lender cannot take recourse against the owner or the owner's heirs for any deficiency that results when the sale price is less than the loan balance. With a reverse mortgage, the declining equity may be partially or totally offset by appreciation in the property's value. Monthly loan advance - $1,000iginal home value - $200,000
Why is the mortgage industry likely to exploit the reverse mortgage market? There are trillions of dollars locked up in homeowner equity and an aging population. Unlike subprime mortgages whose risks become apparent during the initial years of the life of the loan, reverse mortgage risk is back-ended. Risk becomes evident only later in the loan's life when the loan balance approximates the property's value.
Notes of caution:
Beware of efforts to sell reverse mortgages for the sole purpose of buying another financial vehicle. In one case a salesman talked an 80-year-old lady into getting a reverse mortgage to fund a deferred annuity. Annuities typically provide the seller with a high commission but may not make payments for years. She would have had to wait until her 100th birthday to see a cent of her money.
Loan costs are high. AARP reports that a 74 year-old borrower with a $300,000 home (equity) would pay about $30,000 in fees. This is likely to come down as more competitors enter the market.
As with any major financial decision, be informed, ask questions, and seek qualified advice. And educate your parents.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida
Amid an anemic domestic market and news of other developers facing financial crisis, Ginn Resorts presses on with their Ginn Sur Mer project at West End, Grand Bahama. The company released details on the project's progress at a press tour in late January. Bobby Ginn and John Davies, senior vice president of development offered their comments.
When built out, Ginn Sur Mer will include 4,400 condominium and hotel units, centered on a 20-story tower, 870 single family residences, Jack Nicklaus and Arnold Palmer signature golf courses, two large marinas able to handle mega-yachts, a casino, swimming pools and water park facilities, a beach club, salon and spa, restaurants, shops, and a private airport featuring a 5,500 foot runway and on-site customs. Sales are benefiting from favorable foreign exchange rates and the increased interest in the Bahamas. (site map)
Of the $3.7 billion budgeted for the project, the developer has spent about $150 million.
About 70% of the 2,000-acre site has been cleared over the past two years.
Ginn Sur Mer should be operational in five years in its core facility with amenities and real estate sales continuing to go on for years. Construction of 375 units is expected to begin in early summer of this year.
In many places, elevations were increased by up to ten feet, using fill from canals dug throughout the site. Canals are being constructed much deeper than necessary for boating traffic in order to obtain the added fill.
The several thousand acre site, contaminated in some spots by a former developer, will be properly drained and filled back in. Wetlands will be restored and environmental debris cleaned up.
"The first vertical construction you are going to see are the condominiums, the bungalows at the core," said Davis. "Later next year, you'll start to see our residences being built. It's going to be about nine months to a year to get all the utilities and the roads into where people can start building on the lots. We've sold well over 200 lots at this point and we have a lot of people who want to start building right now."
When discussing the company's commitment to the growth and development of the West End, Grand Bahamas economy, Bobby Ginn said, "There is a trickle down effect. Thousands of units in this property will be sold to people who are going to take possession of not only the piece of property they've got but also the community they've got, and the effect of that is a lot of jobs."
The project currently employs 230 Bahamians. At the peak of construction, this number is expected to grow to 3,700. More than 4,000 permanent jobs will be created.
Toby Tobin is a real estate commentator and Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast, Flagler County and Northeast Florida
Palm Coast, FL - I had an interesting meeting with Jay Gardner, Flagler County's Property Appraiser a few days ago. Our discussion dealt, in part, with Palm Coast and Flagler County's declining property values and the effect the decline might have on individual property taxes next year. Many counties in Florida will experience the same problems next year.
The Property Appraiser's job is to determine each property's just (market) value. To do this, his staff examines sales of "comparable" properties. By state law, each year's tax roll is determined by sales the previous year. Thus, each property's just value for the 2007 tax roll is based solely on comparable sales in 2006. Most of the decline in property values occurred since the first of this year so the effect will not be felt until the 2008 tax year. Following are some examples of Flagler County's declining property values.
In January 2006, the median price for a Palm Coast lot (exclusive of salt water canal lots) was $77,000. By the end of 2006, it had dropped to $62,500. In the most recent three months, the median sales price was down to $40,000.
The January 2006 median sale price for a single family residential home was $252,250. It dropped to $229,500 by December. It was $209,500 last month.
With your property's just value dropping, you might think that your property taxes will go down as well. Not if you are homesteaded. Your property record indicates four different values:
Just value - roughly approximating market value
Assessed value - generally lower than just value for homesteaded properties because increases in assessed value are limited to the increase in the consumers' price index (CPI) or three percent, whichever is less. For non-homesteaded properties, the assessed value equals the just market value.
Exempt value - $25,000 for homesteaded properties. Other exemptions may also apply.
Taxable value - assessed value minus exempt value.
The table below shows my house (homesteaded) compared to my house without the homestead exemption. We moved into our home in 2001, so the homestead exemption applied as of January 2002.
Homestead vs. Non-homestead Valuation
Homesteaded
Non-homesteaded
Just Value
$399,901
$399,901
Assessed Value
296,321
399,901
Exempt Value
25,000
0.00
Taxable Value
271,321
399,901
The assessor does not set the tax rate. He only determines the total taxable value of all property for each taxing district in the county. The various taxing districts (county and city) determine their individual budgets. Each district's millage rate is derived by dividing their budget by the total taxable value (within the district).
Over the past seven years, homesteaded property owners have been shielded from the huge increases (442%) in both city and county budgets. That's because the huge budget increases were matched by huge increases in the total taxable value, both from increases in the value of existing non-homesteaded property and from new construction.
Flagler County Taxable Value
Year
Taxable Value
2000
$2,756,505,596
2001
3,210,315,937
2002
3,745,981,194
2003
4,553,698,418
2004
5,785,625,646
2005
7,932,905,478
2006
10,958,081,820
2007
12,184,917,324
In a simplified example, let's assume that next year's budgets are the same as this year. If everybody's taxable value dropped by the same percentage, the result would be no change in your tax bill. That's because the millage rate would rise so that everyone would be paying the same amount as this year. The real world is not a simplified example, however.
The taxable value of a non-homesteaded property will drop by the same amount as its just value, which also equals the assessed value.
For homesteaded property, assessed value can still increase up to 3% even while just value falls as long as it remains equal to or less than the just value . Your taxable value and taxes can rise even though your propery is declining in value.
How would a 10% decrease in overall assessed value effect homesteaded vs. non-homesteaded prooperties? Let's look at my house again to see. Note that the assessed value can rise by 3%.
Homestead vs. Non-homestead after Just Value Decrease
Homesteaded
Non-homesteaded
Just Value
$359,911
$359,911
Assessed Value
305,211
359,911
Exempt Value
25,000
0.00
Taxable Value
280,211
359,911
The homesteaded taxable value rose while the non-homesteaded taxable value dropped. Even if the millage rate remained unchanged, my taxes would increase. For the millage rate to remain unchanged, the city and county would have to decrease their budgets by 8 - 10%. This is unlikely. Thus, we homesteaders can probably look forward to a combination of increased millage rate (taxes) and reduced government services. This might be what it takes for government officials to realize the importance of an industrial and commercial tax base.
Toby Tobin is Editor & Publisher of GoToby.com, the popular real estate news, information, and analysis website for the City of Palm Coast and Flagler and Volusia counties in Northeast Florida
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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