Will "Portability" help Miami real estate?

Tough times for tax savings
From the Miami Herald, December 8, 2007, Page 1 B.
State economists slashed up to $3.2 billion in estimated savings from the property-tax plan's portability proposal because Florida's housing market is `crashing.'
Posted on Sat, Dec. 08, 2007

BY MARC CAPUTO
TALLAHASSEE -- The value of Gov. Charlie Crist's property tax-cut plan is dropping like a rock.
It no longer would cut $12.4 billion in taxes statewide over five years.
It'd be more like $9.2 billion -- and perhaps even less, state economists said Friday.
The worsening economy, they said, is dragging down property values statewide and indicates homeowners won't take much advantage of the proposal's centerpiece: ''portability'' to transfer tax exemptions to a new primary residence.
''Florida, pretty much statewide, is into a housing crash right now,'' said chief state economist Amy Baker, quoting Moody's Investor Service, which said this week that the worst-hit states in terms of risky home loans are Florida and California.
Even Crist's economist, Christian Weiss, noted the tough times and wondered if the new downgraded numbers are ``too optimistic.''
The economists' language conflicts with that of Crist, who has repeatedly said he's optimistic about Florida's financial health. Earlier this year, the governor pledged to make property taxes ''drop like a rock'' and said this property-tax plan in particular would ``fire up Florida's economic engine.''
Florida voters will decide on the proposed constitutional amendment on Jan. 29.
The devaluation of the plan comes just a day after Crist attended a New York fundraiser hosted by Donald Trump -- who is also a Palm Beach County resident -- for a campaign to persuade voters to approve the proposed constitutional amendment.
Whether the lower bottom line helps or hurts the plan's chances at the polls is unclear. On one hand, compared to other proposals, it cuts so little money out of local government and schools that there won't be much organized opposition.
But the low number could threaten backers of alternate tax-cut plans proposed for future ballots. Many fear that if this tax cut passes, it will blunt the public's appetite for bigger cuts or reforming Florida's tax code.
House Speaker Marco Rubio, a West Miami Republican who trashed the property-tax proposal when it passed the Legislature in October, said he voted for it anyway because ''it does so little. Why not?'' He is backing other measures, among them one being debated by the state Taxation and Budget Reform Commission for the November ballot and another to limit government taxation that could be voted on in future years.
Another number also spells trouble for any plan on Election Day: 60 percent. That's the threshold by which any proposed constitutional amendment must be approved by voters.
TOUGH TO ESTIMATE
The new dollar figure for the property-tax plan is hardly set in stone. It's an estimate -- and a tough-to-determine one at that.
The economists largely left intact the projected numbers for the value of cutting taxes on some business equipment -- $1 billion -- and boosting homestead exemptions by about $15,000 -- a cost of $4.6 billion over five years.
But Baker, the state economist, wondered if the credit crunch and tough times would make more people either lose their homes or leave Florida, reducing the money statewide that the homestead-exemption increase would save.
The effect of two major parts of the plan are far harder to predict:
• A 10 percent limit on annual tax assessments increases for commercial and second-home properties. Revenue estimators struggled with determining how much non-homesteaded properties would increase in value and therefore how many of them would save money if their tax-assessments are capped.
The economists didn't officially agree on the bottom-line savings of this portion of the plan but guess it will likely be $931 million, down from about $1.2 billion due to falling property values. But that is good tax-cut news for businesses because falling property values will likely mean lower taxes.
• Portability. Figuring how much this saves requires predicting how many people would move from one house to another, how much in tax-exemption savings they could carry, and how much the new home would be valued at.
With most sales flat or falling and the availability of cash tightening, the number of people who could sell their homes for a good price and afford to buy a new one is far smaller than it was last year.
HOW IT WORKS
The portability plan allows homeowners to transfer a maximum of $500,000 in tax exemptions to another primary residence, depending on the values of the old home and the new one.
The proposal centers on the long-standing Save Our Homes tax cap that limits assessed value increases on homesteads to three percent annually. Over time, the difference between the market value and assessed value of a home increases, creating what's known as the ''differential,'' which is the amount of money a homesteader could transfer.
Statewide, the value of existing properties is expected to decline about 3 percent in 2008. With the decrease in value, the estimated worth of the differential exemption will decrease also -- from $425 million statewide in 2007 to a low of $334 million in 2008, before the value is expected to start ticking back up.
Also estimated to fall: the percentage of homeowners switching to new homes -- from 7.25 percent in 2007 to 4.12 percent in 2008 and then to a low of 0.6 percent in 2009.
Those two sets of numbers suggest that portability, if approved by voters, won't spark the real estate market much. The economists from the House, Senate, Department of Revenue and Governor's Office agreed that portability would save taxpayers about $2.67 billion statewide over five years -- not $5.62 billion.
The Senate's chief economist, Alan Johansen, acknowledged the difficulty of predicting the numbers, calling it ``augury based on reading high-tech information and not chicken entrails.''

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Inspections...What every homebuyer should ask

5 important questions to ask of any inspector you plan to hire;

1. ARE YOU QUALIFIED TO PERFORM THE 4-POINT AND MITIGATION INSURANCE INSPECTIONS? (you want an inspector who can do your general inspection and the insurance inspection so you do not have to pay twice but not all inspectors are licensed to perform the insurance inspection) If you are getting a mortgage your lender will require you to obtain a homeowner's insurance binder and you need a homeowner's insurance inspection report to get insurance. Homes older than 30 years need the so called "mitigation" inspection as well as the "4 point inspection".

2. ARE YOUR REPORTS GOING TO BE TYPEWRITTEN OR HANDWRITTEN (don't go with company that handwrites their report because usually no one can read it and everyone wastes time trying to decipher what it says and then you have to ask for a clarification, etc.)

3. WILL I GET COLOR, DIGITAL PHOTOS OF ANY STRUCTURAL DAMAGE NOTED IN YOUR REPORT? (the better companies provide this)

4. WILL THE PERSON WHO ACTUALLY PERFORMS THE INSPECTION (S) BE A LICENSED INSPECTOR? (some of these companies send out unlicensed, rookies to do the legwork and then the licensed inspector signs the report but has never been onsite)

5. WILL THE REPORT CONTAIN WRITTEN, DOLLAR AMOUNT ESTIMATES for any repairs/treatments/replacements of any items noted in the report?  This is essential and some inspectors fail to give you any idea of the costs for any recommended repairs.