Appraisal Management Companies

The rise of AMCs—which are unregulated under Florida law—is jeopardizing the basis for real estate transfers by undermining the credibility and accuracy of appraisals. Appraisal management companies (AMCs) are business entities that administer networks of independent contractor appraisers to fulfill real estate appraisal assignments on behalf of clients, primarily lenders. The advent of the appraisal management industry is the result of the outsourcing of appraisal functions by lenders. The industry has seen tremendous growth in the last several years, particularly as a result of the Home Valuation Code of Conduct (HVCC), which went into effect last year. HB 303 by Rep. Matt Hudson (R-Naples), SB 1552 (Sen. Mike Fasano, R-New Port Richey) and SB 2210 (Sen. Lee Constantine, R-Altamonte Springs) would require AMCs operating in Florida to register with the Department of Business and Professional Regulation (DBPR). In addition to providing some transparency into the operations of AMCs, the bill also intends to prevent mortgage fraud by prohibiting AMCs from taking any action that is intended to inappropriately influence the independent judgment of an appraiser in developing and reporting a real estate value. Both buyers and sellers rely on an accurate valuation to set the appropriate selling price for a property. And lenders need accurate valuations to set the right conditions — loanto-value ratio, downpayment amount, interest rate — for loans. Registering AMCs is necessary to restore consumer confidence in real estate lending practices and create a stable real estate market.

Florida Realtors® requests that you require AMCs operating in Florida to register with the DBPR by supporting HB 303/SB 1552 & SB 2210.

Housing & The Economy
In the next three weeks, you will be making important decisions impacting Florida’s economic future. Please give careful consideration to the following measures advanced by Florida Realtors® to expand housing opportunities, reduce inventory levels and provide jobs to thousands of Floridians. 1. This is the year to “Scrap the Cap” In 1992, the Florida Legislature adopted an extraordinary piece of legislation supported by Florida Realtors® and other housing advocates: The William E. Sadowski Affordable Housing Act. Realtors® agreed to increase doc stamp taxes by 10 cents per $100 of value to create a dedicated source of revenue for state and local housing programs. Since its inception, the Sadowski Trust Fund has enabled nearly 200,000 families to realize the American Dream of homeownership. At the height of the real estate boom, the Legislature imposed a $243 million cap on the amount that flows into the housing trust funds. Since then, $531.9 million has been swept from the funds for state expenses other than housing. Sadly, that $531.9 million would have generated $2.257 billion in housing, $4.074 billion in economic activity and 40,956 jobs. It’s time to restore the housing trust funds to their original and intended purpose. Doing so will not only make a significant difference in our economy, but also in Florida’s communities. For every $1 million in state funding, $7.66 million in economic activity is generated. Vote YES for SB 262 by Sen. Mike Bennett (R-Bradenton) and HB 665 by Rep. Gary Aubuchon (R-Cape Coral) to “Scrap the Cap.” 2. Housing funds create jobs and economic prosperity State economists estimate doc stamp taxes will provide nearly $200 million in FY 201011 for the Sadowski Trust Fund. Florida Realtors® applauds legislators for appropriating $37.5 million for downpayment assistance programs. Most Americans still consider having enough money for downpayment and closing costs to be the biggest obstacles to buying a home.

The remaining $162 million in the trust funds would provide more downpayment assistance and jobs. In today’s market, additional money is needed to rehab the 54,000plus Florida properties in foreclosure. If Sadowski funds were spent to rehab single-family homes and condos in foreclosure, it would put 12,000 Floridians back to work. With the state unemployment level at 12.2 percent, allocating funds to rehab existing inventory and create jobs is a smart investment. 3. Support the “Distressed Condo Relief Act” Reducing condo inventory throughout the state is key to strengthening the real estate market. Florida Realtors® asks you to support HB 561 (Rep. Ellyn Bogdanoff, R-Ft. Lauderdale), HB 327 (Rep. Julio Robaina, R-Miami) and SB 840 (Sen. Eleanor Sobel, D-Hollywood), which protect bulk buyers from warranty obligations and liabilities assigned to developers.

Property Insurance
A disclosure intended to inform prospective buyers of a home’s ability to withstand hurricane-force winds may actually mislead them. Florida Realtors® asks that legislators prevent the spread of misinformation by repealing the windstorm mitigation rating disclosure (s.689.262, FS), set to take effect Jan. 1, 2011. The disclosure is one of the last remnants of the My Safe Florida Home program, which expired in 2009. Effective next Jan. 1, 2011, sellers of homes located in the wind-borne debris region must provide buyers with a hurricane resistance rating, which is established by windstorm inspectors. When the My Safe Florida Home program was funded, these inspectors were certified by the state. Now they aren’t. There’s also substantial evidence that the inspection and reporting process is rife with fraud. It’s estimated that up to 50 percent of the mitigation premium discounts that Citizen’s Property Insurance Corporation offers — amounting to $390 million — may be false. Consequently, Florida’s taxpayers will be left paying the bill, in the form of assessments, if a hurricane strikes. There are other reasons to repeal the windstorm mitigation rating disclosure: • It will confuse the public. Two identical homes located in different areas of the state will receive a different rating. • Three different improvement plans are included in the disclosure, along with the

cost of each plan, each averaging thousands of dollars. Buyers will use the plans to renegotiate the price, but will fail to harden the home. • The decision to harden one’s home and seek insurance premium discounts is ultimately a matter between a homeowner and his or her insurer. The cost and benefits are different for each structure and each owner. The disclosure required in s.689.262, FS, however, will add the entire cost to each real estate transaction, without the benefit of a hardened home. Florida Realtors® favors hardening homes. But the state’s current laws and policies regarding mitigation inspection, reporting, credits and discounts are broken. We remain committed to helping the Legislature comprehensively address these important issues. Vote YES for SB 2190 by Sen. Thad Altman (R-Melbourne) and HB 545 (Rep. Pat Patterson, R-Deland) to repeal the windstorm mitigation rating disclosure.

Property Tax
With more than 80 million Baby Boomers about to retire in the next five to 10 years, it’s critical that Florida’s tax policy is attractive to out-of-state buyers, investors, international buyers and businesses. HJR 655 by Rep. Carl Domino (R-Juno Beach) and SJR 1254 by Sen. Mike Fasano (R-New Port Richey) will accomplish this and so much more. This measure is intended to replace Amendment 3 on the November ballot. This is the amendment that limits increases for non-school property tax assessments on all nonhomestead property to 5 percent every year. Under the current Amendment 3, first-time homebuyers would be exempt from paying taxes on 25 percent of their home's value. This is above and beyond the current $50,000 homestead exemption. There’s a problem with Amendment 3. As written, a first-time buyer is defined as someone who hasn’t owned a home anywhere in the U.S. in the past eight years. Given the historic level of homeownership in the past decade, this definition would prevent most buyers from qualifying. HJR 655/SJR 1254 keep the 5 percent assessment cap and allow someone who has not owned a homesteaded residence in Florida in the previous three years to be eligible for an additional exemption equal to 50 percent of the property’s just value in the first year.

The House bill was amended two weeks ago to exclude the school portion of taxes from the additional exemption, and to set the maximum amount of the exemption to an additional $200,000. The Senate version includes a maximum exemption of an additional $100,000. The additional exemption, whatever it ends up being, would decline by 20 percent each year over five years. But new Florida residents shouldn’t be concerned about being taxed out of their home because Save Our Homes kicks in during this five-year period. Florida Realtors® appreciates the property tax breaks provided to date. The housing crisis was severe and widespread. To speed the recovery, we need to expand the potential market. An economic recovery is not possible without a housing recovery. Please support HJR 655/SJR 1254, which replaces Amendment 3 with a new amendment that provides tax incentives for first-time homesteaders.