Hey guys, listen up. I’ve finally got my own TV Show! It’s called Party Line Real Estate, it’s loaded with real-time Real Estate news, and you are going to LOVE IT!
I LOVE IT when Real Estate agents get together and TALK! After all, that’s how they network! And we know there is no better way to network than at a party with the top agents in town, great food, a little string quartet music, and a Candy Bar! Well, we got a whole camera crew and invited Realtors to have some fun and give me the inside scoop on this crazy market. It was such a success, we are going to have a partyand a Candy Bar every month! And you are invited to come and share!
Our Miami correspondent, Andrea Kavanagh, is back and house-hunting for us! Calling all billionaire art aficionados and free-spending, globe-trotting investors! Miami is all a buzz over Ocean Drive’s most infamous residence to hit the sizzling hot real estate market at a whopping $125 million. Casa Casuarina, also known as the Versace mansion, is an iconic oasis – a piece of art and a piece of history sitting in the middle of South Beach. Located at 1116 Ocean Drive, the mansion is also notorious as the former home of Italian designer Gianni Versace who was shot to death at the front gate in 1997. Grisly as that was, it remains one of the most popular tourist sites in Miami.
The listing, one of the most expensive homes on the market in the United States, has made national news and prompted a CNBC feature on Miami’s booming real estate market. High-end real estate prices in Miami are breaking records as foreign investors and wealthy families from Brazil, Argentina, Venezuela, and Russia are looking for a safe place to store their cash.
So what will this $125M “investment” buy you in South Florida?
Casa Casuarina is a 23,462 square-foot gated home with 10 opulent bedroom and 11 bathrooms. It is highlighted by a 54-foot long mosaic pool lined in 24-karat gold, numerous frescos and ornate statues, arched doorways and an open air courtyard. It features an extravagant mosaic garden, European-inspired architecture and a tropical poolside paradise. Originally built in 1930, the property was designed to pay homage to the oldest existing house in the western hemisphere, the “Alcazar de Colon” in Santo Domingo, Dominican Republic. Versace purchased the home in 1992 and invested approximately $33M in expansions including the south wing and the pool and garden area, along with his artistic vision. The home’s current owner bought the property in 2000 and has preserved and maintained all of Versace’s design elements.
Listed by Coldwell Banker, interest in this property has been high, as buyers and investors are pouring money into the ultra-luxury market in South Florida. Within the first week on the market, the listing agents received 15 calls from serious potential buyers and investors. Casa Casuarina is available for purchase as either a single-family home or hotel. For those with the means, this is a once in a lifetime opportunity to own an unparalleled trophy property. For the rest of us, it is an opportunity to sit back and enjoy a sneak peek into this majestic master-piece, and dream.
Sigh. Somehow, they never show the kitchens in these palaces.
This is an exceptional time for owners of second homes to refinance. FRM (fixed-rate mortgages) are still at extremely low rates. With the 30-year FRM in the low-5%s and the 15-year FRM in the mid-4%s, refinance opportunities abound for borrowers with mortgage rates at 5.50% or greater. Doing so could reduce the monthly payment for the same loan product or reduce the term of their loan without little or no increase the monthly payment on the mortgage.
While there is a possibility that rates could drop even farther, the economic pressures that created today’s low rates make it hard to believe that there is enough additional downward pressure to make them fall even more. At some point, the rates will be at the lowest point for long-term fixed-rate mortgages and many of my peers believe we are there now. I believe there is a greater likelihood that rates will increase vs. decrease in the coming weeks.
Which borrowers will benefit most by refinancing now?
The best candidates for a refinance are borrowers who have mortgages in the 5.50% to 7% range and who want to either refinance the loan to decrease their cash outflow on the mortgage or reduce the loan’s term without much change to their monthly payment. For example, a borrower with a 30-year fixed-rate mortgage at 6.25% can refinance to a 15-year FRM at 4.125% with only a $150 increase in the monthly payment. Rates at 6.250% were the standard in the fall of 2008, so anyone who purchased or refinanced their home between 2004 and 2008 should investigate whether refinancing is prudent in light of closing costs.
An old rule of thumb was that those with rates 1% higher than current rates would benefit from refinancing. Today, there is no firm rule to determine if refinancing a loan is a smart move. The borrower should contact a mortgage professional to determine what costs will be incurred, the savings created by refinancing, and the break-even point. As long as the borrower will remain in the property beyond the break-even point, the lender can provide an estimate on the interest or cash-flow savings they will secure.
Have there been any changes that would make a second home refinance more attractive today than in the past?
As of April 1st of this year, second home rates are about 0.125% lower than they have been in the past on conforming loans. A change to the required rate adjustments from Freddie Mac and Fannie Mae have removed a risk adjustment for the property status being a “second home”. This means that prior to April 1st, 2011, the rate on a mortgage for a second home was typically 0.125% higher than a primary residence, not because of the credit quality or risk of the borrower, but simply because the property status was a second home and not a primary residence. With this rate adjustment removed, the second home rates and now the same as primary residence rates.
Is refinancing more difficult now than in previous years?
Refinancing mortgages is not necessarily more difficult today as compared to previous years. However, borrowers should understand that a new appraisal may be required even if they have just refinanced or purchased the home in the past couple of years. Given the challenges that have faced the residential real estate market, there are fewer and fewer waivers of appraisal available to lenders.
The key to approval and ensuring you get the best possible rate is your debt-to-income ratio (DTI Ratio) and credit score. Gone are the days when an approval was easily granted to a borrower with significant cash assets and little income. Verifiable income compared to monthly debt obligations is a critical focus of loan approval in today’s underwriting environment. In addition, the better the credit score the better the mortgage rate and lower the lender costs. This is especially important in refinancing where your focus is to get the lowest mortgage rate to gain monthly payment or interest savings over time.
Panel discussion this afternoon on how many reporters are leaving traditional print media and going into PR and marketing. Salaries for PR execs nice, real nice. But here on the panel was our very own Kyle Crews of Allie Beth Allman Urban.I mean, how much dedication is that to fly down to a national real estate editors convention, then fly back juggling closings in between. That’s what I call dedication and being one of the very best Realtors in Dallas!
Dear Tax Doctor: What are the typical arguments that the city makes for raising the value of the improvement when there have been no upgrades to the property since the previous evaluation? Also, what are the best counters to the city arguments other than comps. Thank you.
Christopher McGuire, Vice President, Briggs Freeman | Sotheby’s International Realty
Dear Christopher,
If you see an increase to the improvement value of your home and no improvements were done to the home, it is likely due to an increase in the average selling price of comparable homes around you. The improvement value is the easiest value to increase and lower. Lowering/increasing land, on the other hand, is a far more difficult because it has the domino effect—change one and you must change them all.
Your best ammunition to fight this is to bring in Comparable Sales. Texas Law requires that the homes be appraised at 100% of market—nothing better indicates market than comparable sales. You can also bring in pictures showing condition issues, but you can’t argue condition every year—your home doesn’t depreciate THAT quickly.
Tiffany Hamil –PS folks! The deadline is next week for filing your property tax protests! That means you have only a few more days to ask the Tax Doctor!
I was with some local Dallas real estate experts yesterday who told me something shocking: in some parts of town, square footage over 6500 square feet IS BEING DISCOUNTED for appraisal purposes. Shocking, shocking news. Let’s say you have an 8500 square foot house: anything over 6500 square feet — 2000 square feet — is now being appraised at one-third the full value, equivalent to storage space. Why? Because increasingly, big houses are being seen as a burden for taxes, utilities, maintenance and repair. Now I’m sure this does not apply to Beverly Drive or Meadowbrook, where the Barretts are building that 26,000 square foot mansion. But it applies to homes in suburban areas and north of LBJ. Any wonder why it is so hard to unload some of those gorgeous but enormous mansions in Preston Trails? Or Flower Mound?
What’s even worse: those 12,000 square foot homes. Sources tell me those monsters are just going to have to take a price tumble before anyone wants to buy them. It’s a totally new world!
“Smaller looking better” sure makes the folks at places like One Arts, The Azure and The Residences at the Ritz Carlton happy. In fact, the Ritz has turned one of its model units into a laboratory for downsizing. Surprise, surprise: Ann Sutherland says you can still keep your big pieces of furniture, even big art! And wait ’till you see how they’ve made every inch of this unit “smart space”:
Can you protest a 2011 valuation on a substantive residential improvement value increase on an old home to offset a land decrease (the 2011 value is the same as 2010). No change in valuation from 2011 to 2010, but there’s no way the 2010 residential improvement was correct.
Bruce,
Absolutely. This is the exact situation that I am seeing in the Preston Hollow area. The District has had to lower land values, but in order to keep revenues high, they have correspondingly increased the improvement value. You should protest this! The District is playing games, and the taxpayers that really suffer are those with the older homes in need of work.
Tiffany, DCCD reduced land values and increased improvements in the Park Cities last year because the builders are out of the market here so land values actually did go down. They lowered land but increased improvements so there was little if any net effect. Most people did not pay attention to DCAD playing with the numbers because their value did not change or went down. When the residential market comes back, DCAD will increase the land values back and there will be a big overall increase.
The Tax Doctor Responds:
Yes, I agree with you Stan. Because most people only look at total value, they will not realize the change. Ultimately, this really hurts individuals who own “tear down” properties. All of the a sudden their poor condition home previously worth $30,000 is now worth $230,000.
But, you should know that the District didn’t voluntarily lower land values. This was a result of litigation from last year. Ever been in an ARB hearing and tried to argue land? If so, you will know that you were speaking to deaf ears. The ARBs rarely, if ever, decrease land values. I would go as far as saying never because I’ve never seen it happen. In order to lower land, you must litigate. I know personally that two homes in this area were litigated last year as I participated in both. We argued both on land and had the land reduced to $390k. The District HAD to respond or else they would be setting themselves up for easy equity arguments. So, this was they way they responded. Homeowners should be on the lookout. Their solution isn’t proper, especially for homeowners with tear down homes.
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