What in the World is Amendment 1? Why You Should Care.
For starters, two reasons: tax portability and an increased homestead exemption.] Here’s how to help buyers and sellers benefit from property tax reform.
It’s been about six months since Florida’s voters passed Amendment 1, the property tax amendment referred to them by the legislature, and Susan Ball is starting to feel its impact as buyers and sellers begin to jump off of the fence and into the real estate market. “I’m trying to spread the word about Amendment 1 in my farm area,” says Ball, a sales associate with Coldwell Banker Residential Real Estate in Cape Coral, “telling folks that if they’ve felt like prisoners in their homes due to the potential for high taxation, now’s the time to move into a new home.”
In Ball’s corner is a state legislature and Florida Association of Realtors® that were bent on creating more movement in the real estate market by loosening the tax-related constraints put on buyers and sellers who stood to pay substantially more taxes when properties changed hands. Sellers who had enjoyed years of 3 percent property assessment caps and $25,000 homestead exemptions were finding themselves paying much higher rates on any new home they purchased, while buyers were shocked by their Truth in Millage notices informing them that the taxes they would be assessed on their new homes were much higher than those paid by the previous long-term owners. What Is Amendment 1?
To provide relief on both sides, state legislators put Amendment 1 on the ballot and it went into effect in January. Also known as ”portability of Save Our Homes,” this constitutional amendment was aggressively supported by Gov. Charlie Crist and the Florida Association of Realtors. As an update to the original Save Our Homes Amendment, which has been in effect since 1995, the new law allows homeowners to take (“port”) their property tax cap with them when they move, while also doubling the previous exemption for most homestead properties to $50,000.
To make sure her customers know and understand the new law, Ball puts information about it in the e-mail and prints newsletters that she sends out regularly, using statements like “Now may be the right time for you to move and take advantage of the portability that this amendment affords you.” To strengthen the message, Ball also tells sellers that any necessary price cuts could be offset by the tax savings made possible by Amendment 1.
While Ball says she hasn’t necessarily worked with any additional customers as a direct result of the new law, she is closing in on a new listing from an owner who didn’t want to sell his home in the “depressed market,” but who’s now more interested due to the amendment. Another pair of sellers moved to Cape Coral from Bonita Springs in 2007, but held off on selling their existing home until Amendment 1 passed. “They wanted to bring the property tax savings with them to Cape Coral,” says Ball, “and were able to do that, thanks to the new law.” The Basics
Across the state, real estate professionals are educating themselves and their customers on the fine points of Amendment 1 and what it means for them. According to John Sebree, vice president of public policy for the Florida Association of Realtors, an informal member survey conducted six weeks after the new law passed reveals that 33 percent of real estate professionals were witnessing an upswing in market activity as a result. “We expect that positive momentum to continue,” says Sebree.
Prior to Amendment 1’s passage, Sebree says, FAR heard numerous complaints from members frustrated because many of their potential buyers and sellers were “trapped” in their homes. “They really couldn’t move up or down,” says Sebree, “and this new portability was an answer to that need.”
After benefiting from strong real estate market activity from 2003 to 2005, Jimmy Parker, a sales associate with Resort Quest in Destin, is working hard to get the word out to his customers. Grateful to local politicians and the state government for helping to address the taxation issue, Parker e-mailed all past and prospective buyers and sellers to let them know the benefits of Amendment 1. He’s also targeting first-time homebuyers who may currently be renting and military personnel who have been reluctant to buy due to the high property tax issue. These buyers may gain an additional homestead exemption and also benefit from the larger inventory freed up by sellers taking advantage of the tax portability. “These types of buyers need a push to realize that the best move is to go ahead and purchase now,” says Parker.
Parker also discusses Amendment 1 during phone contacts with his customers, many of whom aren’t aware of the change to the law and/or don’t understand its impact. “We tune them in to the issue by giving them details on the law and what it means for them as buyers or sellers,” says Parker, who feels that the passage of Amendment 1 has already gone a long way in helping “change the public’s mind-set” about buying and selling. “I think it can be reasonably forecasted that the market will once again heat up as a result of this change,” says Parker. Spreading the Word
To get in on the Amendment 1 action, Ball suggests, start with a small farm area and work your way out from there. Let the population in that region know that Amendment 1 provides tax relief that could translate into a more fruitful real estate purchase or sale, she says, using simple communication tools like e-mail, snail mail newsletters and phone calls.
Current homeowners who have lived in their residences for 10 or more years are particularly good candidates, she says, since they’ll have incurred tax savings over the years and may not be willing to part with them to move up or down to a new dwelling. “When they have substantial Save Our Homes benefits, they’re probably on the fence about selling right now,” says Ball. “The portability factor could be the incentive they need to make the move.”
When working with customers who will benefit from Amendment 1, Sebree says, real estate professionals must understand that—like any new law—it has various gray areas, particularly when it comes to selling one home and buying another. “Realize that the tax base varies by municipality, city and county, and that you don’t have to put yourself in the position of answering every question for your client,” says Sebree. “You can simply inform them that the portability [amendment] has passed, explain what it means and then direct them to their local government Web site or property appraiser’s office (have this information on hand for customers) for more details.” Bridget McCrea is a Clearwater-based freelance writer.