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Tuesday, June 12, 2007

Tax relief may work against real estate vultures

Tax relief may work against real estate vultures

For two years Magdiel Guillemi watched the condominium towers go up across South Florida and waited for his chance to buy in. Now the 25-year-old aluminum company executive thinks his time has arrived.

With the housing market stuck in slow motion, more and more condos nearing completion, and many jittery preconstruction buyers wanting out as closing day approaches, Guillemi's betting he'll be able to buy at steep discounts. Then he hopes to sell for a profit, just as flippers did when the market was on the way up a few years ago.

Call it the contrarian view of real estate investing. While the market appears stone-cold to many individual buyers and sellers, others -- the so-called vulture investors -- see opportunity.

Guillemi says he's already finding bargains but he wants to act fast: The Florida Legislature starts a special session this week to consider lowering property taxes -- a move he thinks could spur renewed buying activity and endanger the low-cost deals he's scouting.

''If they cut taxes that will motivate individual buyers,'' said Guillemi, who plans to start buying in the next few weeks. ``And I want to get in before they do. I don't want to be left with the crumbs.''

Large investor groups and hedge funds are also scouring the region for bulk deals at bargain prices.

At the height of the 2001-2005 housing boom, it seemed everyone was getting into real estate, hoping for fat profits. But a separate class of speculators sat out during those frenetic days, betting the market would be bid to unsustainable heights yet still hold long-term value.

Their gambit: Buy on the dip and ride the market up.

The question for these investors is when to buy. Many observers say the market hasn't yet hit bottom, others say the time is right.

But for the vulture investors, who have pooled cash and waited for their big chance to score from a market correction, this week's special session brings a twist. It's spurring some like Guillemi to accelerate their plans and others are hoping legislators don't accomplish much.

Peter Zalewski, a former journalist who a year ago started -- a company that helps buyers find bargains in a downturn, said he fears decisive action in Tallahassee will provide a jolt that could potentially undermine his plans.

''There is an urgency that is being created by the legislative issue,'' Zalewski said. ``If they resolve the property tax issue, the market will get some medical attention. We don't want that, we want to bleed out the market some more.''

Of course, few will feel badly if vulture investors' prospects evaporate. Home builders, brokers and many homeowners hope Zalewski's thinking that a cut in property taxes will give the region's anemic housing market a shot in the arm is right. The Latin Builders Association and Builders Association of South Florida are both pressuring leaders in Tallahassee for sharp cuts.

But not everyone is convinced a property tax cut in Tallahassee will cure the housing markets ills. Among the other issues the market must work through are:

• A giant oversupply of homes: more than 76,000 were listed for sale in April in Broward and Miami-Dade counties compared to some 50,000 a year ago. Over the next 18 months about 20,000 new condo units are expected to come onto the market in Miami-Dade County alone, possibly spiking unsold inventory as those units are put back on the market for resale.

• Insurance rates have not come down. Condo associations and individual homeowners are still grappling with hefty premiums.


Analyst Jack McCabe, who is advising large vulture investors on bulk deals, said big investment groups aren't as worried about tax rates as individuals -- saying such costs can be spread out across big buyers' portfolios.

Last week McCabe announced the completion of the first market-corrected deal he's worked on since the slowdown began. While short on specifics, McCabe said a multibillion-dollar private investment fund bought a substantial block of newly built condominiums from a publicly-held home builder in Florida. His investor client, he said, was chosen because of its ``ability to close quickly in an all-cash transaction, noncontingent on financing.''

Currently, he said the market is too sick to recover from a tax reduction alone. A big property tax cut may reignite buying now, he said, but would effectively create a false bottom.

''Meaningful reduction will slow down the correction cycle but the correction is still inevitable,'' said the Deerfield Beach analyst, who has warned for some time about too much construction going up too fast. ''The market is so sick it will take a while to cure this,'' he said. ``This is not a head cold, it is more like pneumonia.''

But such doomsayers also believe the market is poised for brighter days ahead. McCabe says that barring calamitous hurricanes, the market will have righted itself by 2010 -- just as the first baby boomers turn 65.

''No one is more bullish on Florida long-term than me,'' McCabe said.

It's such thinking that prompted corporate raider Carl Icahn to announce last week that he would continue efforts to buy Bonita Springs-based WCI Communities. And Zalewski spent last week showing property in South Florida and Central Florida to two investor groups, one from Michigan and another from Colorado.


Guillemi, meanwhile, is focusing on a unit at the Brickell on the River condo in Miami. He said the owner bought it for $341,000 and is trying to sell for $280,000.

''The seller has two other properties under foreclosure and is having trouble making mortgage payments,'' said Guillemi, operations director of FDS Aluminum in Pompano Beach. ``I'm trying to pick it up for $260,000.''

So with an eye on the special session in Tallahassee, he's ready to move now. ''With tax reform you will have two things pushing people into the market: lower prices and lower taxes,'' Guillemi said. ``I'm not going to wait. Of course, you have to be smart about it. There is a lot out there and you can't get married to the first girl you see.''

Posted at 2:41:31 PM
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Updated: Wednesday, March 21, 2018

HOA Meetings By Design

Meetings are the venues wherein homeowner association business decisions are made. Since these meetings are usually infrequent, the importance of the decisions made cannot be understated. However, some HOAs are decision challenged because:

The meetings ra>

Discussions are endless and often inconclusive.

Issues decided at a previous meeting continue to be revisited.

Disagreements frequently turn ugly.

Meetings end when members are exhausted, not because they have completed the business at hand.

Many boards manage to conduct their business with a minimum of fuss and a measure of efficiency. These meetings dont happen by chance; they happen by design, and that design begins with an agenda.

If you dont have a destination in mind, any path will do. If a meeting lacks an agenda, it will go anywhere and everywhere and end up going nowhere. The agenda provides a road map for the meeting, identifying the issues to be discussed and establishing the order in which business will be transacted.

Knowing what is on the agenda allows board members to begin formulating their views before the meeting begins. It helps, of course, if board members actually review the agenda and any accompanying information in advance. But it takes more than advance preparation and an agenda to produce a successful meeting; boards also need a set of rules to guide their discussions.

Meetings dont have to be rigid or overly formal, but they do have to be orderly. Some boards use a simplified version of Roberts Rules of Order which includes such concepts like:

  • When a topic is brought up, a formal motion is required before it is discussed. This will ensure that more than one person thinks the issue is worth discussing.
  • Only one person is recognized to speak at a time by the chair.
  • Standards of civility no personal attacks or interrupting.

A time limit for the meeting and for each speaker on each issue. Otherwise, boards end up spending too much time on >

A reasonable agenda, advance preparation and rules of order provide the foundation for an effective meeting, like the tracks on which a train runs. But like a train, a meeting needs a steady hand on the throttle to keep it moving forward. Conducting both a train and a meeting require a certain amount of skill. The person in charge needs to control with a firm but not a heavy hand. In HOA meetings, this means giving all board members a chance to express their views, but also requiring them to stick to the topic and the time limits.

Some owners think they have an absolute right to participate in board meetings and some boards think it is best to hold their meetings behind closed doors. Both are wrong. Many states have specific requirements for most board meetings to be open to members to audit not participate. Some have exceptions for "executive session", or a closed door session, which may exclude members which include:

  • Employment issues
  • Contract negotiations
  • Consultation with counsel or review of information provided by counsel.
  • Constitutionally or legally protected topics such as medical records and attorney-client privileged information
  • Privacy issues
  • If a board discussion item does not fall under one of these exceptions, it must be discussed at an open board meeting.

    As far as member participation in board meetings, state laws vary. However, regardless of state statute, its good policy to set aside time for an open forum so members can ask questions and express their views.

    Homeowner associations are required to hold annual meetings, but many governing documents are silent on how often the board must meet. The board is generally free to meet as often as it chooses. The size and complexity of the community and the personal commitments of board members will typically dictate the meeting schedule. Another consideration is that managers typically charge for their time to attend board meetings. Since its important for the manager to be present at board meetings, the board needs to weigh the cost and benefit of more or fewer meetings.

    When properly organized, smaller HOAs can usually suffice with quarterly board meetings while larger ones may need bi-monthly or monthly meetings. The more the meetings, the more important it is to have those meeting organized and efficiently executed. Volunteer time can only be stretched so far.

    What happens after board meetings can be almost as important as what happens during the meetings. Some board members take votes against their proposals personally rather than of the suggestions they have made. They sometimes take their disappointment and anger outside of the meeting room, complaining publicly about the decision and even encouraging owners to overturn it. This behavior undermines the decision-making process, exacerbates tension, and erodes trust. As long as the board action is legal and in compliance with the governing documents, board members should accept that "majority rules" applies to votes they dont like as well as to those with which they agree.

    All board decisions wont be unanimous, nor should they be. Honest differences of opinion are healthy, encouraging an exchange of ideas that improves the decision-making process and contributes to the successful meetings boards want to have. While board meetings wont always produce good decisions, they will almost certainly reduce the number of bad ones. To produce the likelihood of more good decisions, design your meetings for success.

    Excerpts from an article by For more on effective meetings, see

    > Full Story

    Condominium Mailing Lists Are Public Documents

    Question. I live in a large condominium complex. Many of the owners are becoming increasingly upset with the practices and the conduct of our Board of Directors. Our annual meeting is coming up in about three months, at which time we will be able to elect several new Board members. We have asked our management company for a copy of the mailing list of all unit owners, so we can send a position paper to everyone. However, we have just been informed that our Board has instructed management not to make this list available to anyone. What can we do?

    Answer. Whenever a condominium owner has a legal question regarding the operations of the Association, you must first look to your basic legal documents. In most associations throughout the country, there are generally four sets of documents governing a condominium association, although in some states, they have different names.

    The "Declaration" is the document that actually created declared the condominium. This document is recorded among the land records where the condominium is located. The Declaration, among lots of other things,defines what constitutes common and limited elements, as compared to units. The Declaration also spells out the percentage interests and voting rigohts that each unit owner holds within the Association.

    The "Bylaws" of the condominium outline the basic operating procedures as to how the Association functions. In effect, it is the "bible" of the association. For example, Bylaws generally define such matters as the number and role of the Board of Directors, what constitutes a quorum for voting at annual or special meetings, and what unit owners can and cannot do within their specific unit.

    The third set of documents are the "plats and plans" of the complex. If they were prepared properly and by a licensed architect, they are very valuable because the define and show -- right on the appropriate location on the plans -- what is a common element, and what is a limited common element. This is extremely important to give guidance as to whether ndash;for example -- the condo or the unit owner is responsible and has to pay for certain repairs, such as a pipe burst.

    The last set of documents are the "Rules and Regulations" of the Association. These are promulgated by the Board of Directors, and should be circulated to all owners prior to final implementation. Usually, these Rules deal with such issues as trash collection, keeping pets, use of the swimming pool and health club, and similar housekeeping matters.

    There is a legal heirarchy in connection with these legal condominium documents. Absolute priority must be given to the condominium law in your jurisdiction. Every state has a separate condominium law. Although most of the laws are substantially the same, there are some differences which must be carefully looked at when considering a legal issue.

    The next level of priority goes to the Declaration. If there is something specifically spelled out in that document, it must be followed, unless the Condominium law states otherwise. It takes a very large majority of the owners to amend the Declaration.

    The third level of priority is found in the Bylaws, which also requires amendment by a large majority, usually 66 2/3 of the percentage interests. Finally, we get to the lowest priority level -- namely the Rules and Regulations.

    The specific answer to your question probably lies in your Bylaws. Of all of the various condominium documents which I have reviewed, I cannot recall a single condominium association that does not contain language permitting unit owners and their mortgage lenders access to the books and records of the Association. Clearly, the mailing list of unit owners falls within the category of "books and records."

    The Board of Directors -- or the management company -- may charge you for copying this information. This is, in my opinion, fair and equitable, and you should be prepared to pay a reasonable copying fee. However, if the Board refuses to give you the current names and addresses of all the owners, you should bring this matter to the attention of the full membership at the next annual meeting.

    You should also consult your attorney -- as well as contact the attorney for the Condominium Association. You have the legal right to this information, and the Courts will enforce this right if you ultimately have to bring a lawsuit against your Association.

    There is, of course, a privacy issue involved. Clearly, unit owners do not want their names and addresses circulated for commercial or solicitation purposes. I do not think it appropriate for the mailing list to be used for such purposes. All too often, unit owners -- under the ruse of condominium business -- will obtain these mailing lists, only to use them for their own personal or professional reasons. Although living in a condominium subjects the unit owner to the concepts of democracy, the concept of privacy is -- or should be -- an important aspect of this democracy. Thus, if an owner does not wish to have his or her telephone number >

    However, the name and address of each unit owner is a matter of public record in the Office of the Recorder of Deeds for the jurisdiction in which the property is situated. Since this is public information -- and since the law the highest priority as well as your legal documents allows each owner access to all books and records -- there is no excuse for not giving you this important information.

    Often, however, in order to preserve privacy, on behalf of client association, I have negotiated with owners seeking the mailing list that if they submit in a closed envelope the information they want to circulate, and submit enough envelopes for all owners, and if they pay the mailing costs, the board ndash;through managementndash; will address the envelopes and mail them. I believe this is an appropriate solution.

    > Full Story

    No Such Thing As Real Estate Ethics?

    A delightful little book by John Maxwell is provocatively titled, Theres No Such Thing as Business Ethics. Now some might simply think, "no kidding." But for the curious, or those inclined to disagree, Maxwells book makes an interesting argument. His point is not that all of business is unethical. Rather, he disagrees with the point of view that the operative ethical principles of business are somehow specialized and different from occasionally, contrary to the ethical principles that govern our everyday lives.

    According to Maxwell, the test of what is ethically acceptable or unacceptable in the business context is exactly the same as that which applies in our everyday, non-work circumstances. For him, it is all summed up in one principle, The Golden Rule. "Do unto others as you would have them do unto you." If you follow that, your behavior will be ethical; if you depart from it, it wont be. At work or at home, in the office or in the neighborhood.

    I believe that Maxwell is correct that ethics in the context of business is simply an extension of ethics in general. There arent special exceptions for business. Its as wrong to lie to your competitor as it is to lie to your neighbor. All of us, of course, have encountered different attitudes. We have heard "But this is business" said as if it meant "Anything goes". Certainly, some people feel that way. People who would never cheat in a neighborhood card game can be perfectly content to deceive their customers or rip off their suppliers. But this doesnt show that such people are operating according to a special "business ethic"; rather, it simply reveals that, in the context of business, they have made the decision to be unethical.

    If it is true that ethics in business and ethics in everyday life are the same, it is legitimate to ask, why are codes of professional ethics sometimes so complicated?

    The National Association of REALTORSreg; is rightfully proud of its Code of Ethics, a document first formulated in 1913, and amended at more that 30 different national conventions since then. With 17 articles, supplemented by over 70 Standards of Practice and more than 140 official Case Interpretations, it presents a complex set of documents.

    Nor is the NARreg; Code of Ethics a unique phenomenon. There are hundreds of professional and trade group codes of ethics. Physicians, lawyers, funeral directors, and wedding planners -- to name just a few -- all have professional codes of ethics. So also do many individual companies and corporations. They vary, of course, in range and complexity. How is it that professional codes can become so complicated? People need to understand that there are various purposes served by professional codes, although not every code serves them all.

    1They bring to our attention and provide direction with respect to issues that might not otherwise even have been identified as matters for an ethical concern. While ethical principles may remain the same, frequently the circumstances encountered in business are quite different than anything we experience in the non-business world. A professional code can help us to decipher those situations.

    2 In many situations they provide us with the wisdom and insight of those who have preceded us. Quite simply, they save us the trouble of reinventing the wheel.

    3 Professional ethics codes sometimes also cover matters that are not so much ethical as they are issues of professional etiquette or proper procedure. They help to keep professionals "on the same page" when they are interacting with each other.

    4 Professional ethical codes are also sometimes used for the purposes of "drawing lines" in order to remove any unclarity about what may be considered acceptable or unacceptable. They help to remove the "shades of grey" that can be found in so many situations.

    Professional codes, such as that of the Realtors, are based on everyday ethical principles. Their value resides in the fact that they show us how those principles apply to specific business contexts that well may not be "everyday".
    > Full Story

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