It has been a rainy few days on Sanibel with off-and-on showers as Tropical Storm Andrea passed by Southwest Florida. Not very good beach days if you were lucky enough to be on the islands this week; but the parched lawns are greening up quickly – almost growing as one watches them! The rain finally abated today, but we are still waiting for blue skies again. Should happen by Sunday Her is one of SanibelSusan’s favorite island beach photos (by our pal, Jim Anderson of JMA Photography) to remind us of what it will look like!
Yesterday, only three new listings were on our Realtor® Caravan which is now on the biweekly summer schedule. Dave and Lisa checked those out for us and then held open houses trying to attract some of the island visitors looking for things to do on a soggy day. Elise’s report below covers the activity posted in the Sanibel Captiva Multiple Listing Service this week. Usually there is a downtrend in the number of sales this time of the year, but I’ve been working on an offer all week and Elise’s report shows I’m not the only one. All good progress in a recovering market. We hope it continues!
More on Flood Insurance
Even though I’ve mentioned this subject several times lately, here is more info on a topic that has been in the forefront recently with Realtors® working in waterfront areas. With the June 1 onset of Hurricane Season, the following article was in the Fort Myers “News Press” on Saturday.
“Starting in 2014, the Biggert-Waters Flood Insurance Reform Act of 2012 will phase out grandfathering practices for changes to Flood Insurance Rate Maps. Currently, some policyholders can keep their old flood insurance rates if changes to the Flood Insurance Rate Maps impact them negatively. According to a Federal Emergency Management Agency fact sheet, this practice will be phased out gradually.
“Some Southwest Florida property owners are going to see drastic increases in their flood insurance rates. A law passed by Congress in 2012 is working to phase out many of the nation’s subsidized flood insurance policies – which in Southwest Florida tend to be older houses in flood-prone coastal areas like Sanibel Island and Fort Myers Beach. The law’s goal, in part, is to make the National Flood Insurance Program financially stable and to have subsidized properties reflect their true flood risk.
“However, this law is especially troublesome for Southwest Florida residents who bought subsidized flood insurance policies after the law went into effect July 6. These policyholders will incur the full rate increase at once on October 1 when policies need to be renewed – despite many having purchased these policies before the Federal Emergency Management Agency began to understand the law’s impact. As of December 31, Lee County had 30,631 flood insurance policies affected by the 2012 legislation. Collier County had 17,224, according to a FEMA spreadsheet….
“According to a fact sheet from FEMA, the law known as Biggert-Waters Flood Insurance Reform Act of 2012 will affect subsidized properties first. Subsidized policies are on properties built before Flood Insurance Rate Maps were put in place, and different communities adopted these maps at different times. Sanibel, for example, adopted the maps in 1979 while Fort Myers Beach adopted them in 1984 when part of unincorporated Lee County.
“About 20% of flood policies nationwide receive subsidies. The immediate impact of the law is on vacation homes in areas defined by FEMA as having at least a 1% chance of flooding in any given year. These properties began seeing 25% annual increases on renewals following January 1. Likewise, properties with repeated or severe flooding and businesses located in flood zones will see 25% increases on renewals following October 1. These increases will continue until rates are high enough to cover the property’s risk.
“Primary residences won’t be hit as hard. These policyholders will continue to receive subsidized rates unless or until: the property is sold, the policy lapses, the property suffers severe or repeated flood loss, or a new policy is purchased. These policyholders may still see rate increases….”
5 Mistakes Foreign Buyers Make
“Florida Realtor®” June magazine had a good article about the mistakes foreign buyers often make when investing in U.S. real estate. Though most of our sellers are U.S. citizens, it has some good advice for those who are not. Here’s a synopsis:
“Mistake #1 – I don’t need to worry about estate taxes, I’m in good health – …The U.S. imposes an estate tax at a rate of up to 40% on the portion of a foreign individual’s gross estate (assets controlled by taxpayer) situated in the U.S. that exceeds $60K….” It is best to consult a tax attorney/certified public accountant.
“Mistake #2 – Believing that use of a foreign corporation will offer protection from U.S. estate tax – This may be true if it’s done correctly. In general, purchasing U.S. real property through a foreign corporation can shield a foreigner from the U.S. estate tax. The shares of a foreign corporation are considered non-U.S. situs property, which means the shares of the foreign corporation are considered as being situated outside the United States. As such, they are not subject to U.S. estate tax upon the foreigner’s death. However, for such corporate ownership to be respected for tax purposes, it is important that the foreign owner of the foreign corporation enter into a lease agreement with the foreign corporation any time that foreign owner uses the underlying real estate for personal purposes. Adequate rent for such personal use should be paid to the foreign corporation, which may have U.S. income tax consequences as well as require the filing of both a federal and a Florida corporate income tax return. Otherwise, the Internal Revenue Service could assert that the foreign corporation lacks substance and that the underlying U.S. real property is owned directly by the foreigner, thereby subjecting that U.S. property to estate taxation.”
“Mistake #3 – Deciding to use the same structure used by a friend – Buying U.S. real estate through a foreign corporation can potentially insulate a foreigner from U.S. estate tax if the sale is structured properly. However, this structure will result in significantly higher income tax when the foreigner sells the property. A foreign corporation’s capital gains from the sale of real estate is subject to combined U.S. federal and Florida corporate income tax rates totaling up to 38%. There is also the potential of an additional 30% U.S. branch profits tax, which is an extra income tax that the U.S. imposes on a foreign corporation’s earnings. On the other hand, capital gains earned by an individual or pass through entity, such as a limited liability company, are subject to capital gains tax of up to 20% in 2013. Accordingly, if a foreigner intends to invest in U.S. real estate and sell it for profit, a foreign corporation is clearly not a good ownership vehicle.”
“Mistake #4 – Transferring one’s U.S. real estate to someone else – A foreigner’s gift, sale or other transfer of U.S. real estate is generally subject to U.S. income tax under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal government collects this income tax (or at least a portion of it) by requiring the recipient (e.g. the buyer) of the U.S. real estate to withhold 10% of its gross proceeds or fair market value…Further, in 2013 the federal government imposed a gift tax on the transfer of U.S. real estate to the extent that the gift exceeds $14K (or $143K if the gift is made to a spouse)…Finally, Florida imposes a documentary stamp tax on the sale of real estate in Florida and certain other transfers to the extent that the real estate is mortgaged….”
“Mistake #5 – Thinking “I am fine as long as I don’t stay in the U.S. for more than six months in a year” – Many foreigners believe that they can be physically present in the U.S. up to six months each year without becoming a U.S. tax resident for income tax purposes. However, this is technically incorrect. A foreigner is deemed to be a U.S. resident for income tax purposes if the average number of days spent in the U.S. over a 3-year period equals or exceeds 183 per year. Under this “substantial presence” test, a foreigner will generally become a tax resident if he or she is physically present in the U.S. for more than 120 days per year….”
Again, early planning whether buying or selling, including consulting a U.S. tax professional who specializes in international taxation is best!
Sanibel & Captiva Islands Multiple Listing Service Activity May 31 – June 7
3 new listings: Duggers Tropical Cottages #2 1/1 $249K, Cottage Colony West #103 1/1 $538.9K, Heron at The Sanctuary II #2-A 3/2.5 $609K.
4 price changes: Sundial #G401 2/2 now $459K, Tarpon Beach #206 2/2 $667K, Sayana #103 2/2 now $769K, Seascape #104 3/3 now $2.495M.
5 new sales: Sanibel Arms West #M3 2/2 listed for $395K, Sanibel Arms West #M2 2/2 listed for $395.9K, Sanibel Arms #A1 2/2 listed for $420K, Sanibel Arms West #H2 2/2 listed for $469K, Pointe Santo #A22 2/2 listed for $759K.
8 closed sales: Captains Walk #D5 2/1 $195K, Lake Palms #7 2/2.5 $229K, Sundial #F307 1/1 $274K, Loggerhead Cay #432 2/2 $415K, Sundial #J107 2/2 $445K, Loggerhead Cay #583 2/2 $510K, Heron at The Sanctuary III #1B 3/2.5 $550K, Sanctuary Golf Villages I #5-2 3/3 $535K.
2 new listings: 1549 Wilton Ln 3/3 $499K, 236 Hurricane Ln 3/3 $555K.
5 price changes: 1021 Sand Castle Rd 2/2 now $409K (short sale), 1667 Sabal Sands Rd 3/3 now $450K, 1364 Jamaica Dr 2/2 now $499K, 5423 Osprey Ct 3/2.5 now $1.595M, 4717 Rue Belle Mer 3/3 now $2.45M (short sale).
4 new sales: 2560 Coconut Dr listed for $495K, 9319 Kincaid Ct 3/2 listed for $525K, 1316 Eagle Run Dr 4/3 listed for $899K, 1550 Angel Dr 3/2.5 listed for $995K.
5 closed sales: 531 Birdsong Place 2/2 $300K, 9484 Peaceful Dr 3/3.5 $565K, 1511 Angel Dr 2/2 $590K, 4207 Gulf Pines Dr 4/4.5 $870K, 4949 Joewood Dr 5/5 $2.3M.
No new listings or price changes.
1 new sale: 1503 San Carlos Bay Dr listed for $1.295M.
No closed sales.
1 new listing: Marina Villas #710 2/2 $559K.
3 price changes: Tennis Villas #3110 1/1 now $225K, Bayside Villas #5208 1/2 now $255K, Lands End Village #1665 2/2 now $1.225M.
No new sales.
1 closed sale: Beach Villas #2534 3/3 $738K.
1 new listing: 14980 Binder Dr 3/3 $1.465M.
1 price change: 15631 Captiva Dr 5/4.5 now $2.175M.
No new or closed sales.
Nothing to report.
This representation is based in whole or in part on data supplied by the Sanibel & Captiva Islands Association of Realtors or its Multiple Listing Service. Neither the association nor its MLS guarantees or is in any way responsible for its accuracy. Data maintained by the association or its MLS may not reflect all real estate activity in the market. The information provided represents the general real estate activity in the community and does not imply that SanibelSusan Realty Associates is participating or participated in these transactions. If your property currently is listed with another broker, this is not intended as a solicitation of that listing.
Happy Weekend, Bring on the Sun!