New Yorkers are buying homes in Florida (particularly in Boca Raton, Delray Beach and Boynton Beach) at a record pace, either as a second home or permanently relocating to the sunshine state. This brief overview is intended to give readers from New York an idea of what to expect when embarking on the process of shopping for a home in So. Florida.
Although home prices have skyrocketed in the last 5 years, relative to NY prices, you can still buy a lot more house for your dollar in Florida. Homes in South Florida are currently selling pretty quickly with the average time on the market being about 30 days. If you are working with a real estate agent here and are serious about buying something, be prepared to make a trip down here on short notice. If you leave it until your next trip in a couple of months, chances are the home will no longer be available. Homes here typically sell anywhere from full asking price to $10k or $20k below asking price. Often times, homebuyers from other areas make offers of 10% below the asking price, only to loose a few homes before understanding that sellers here consider this insulting and typically won’t even respond with a counter offer. With 1,000 people per day making Florida their permanent residence, the demand for housing continues to increase while there is limited supply. For this reason it is anticipated that prices will remain strong for the foreseeable future.
Real Estate taxes are calculated using a millage rate which is applied to the assessed value of the property. Although the millage rate varies from one area to another, as a rule of thumb, your annual Real Estate taxes will be 2% of the value of your home. Property is re assessed every time it changes hands, so when you buy a home, you should expect it to be assessed at or about your purchase price, therefore your annual taxes will be about 2% of what you paid for your home. There are several tax exemptions available to Florida residents, the most significant one being the Homestead Exemption which is available to all permanent Florida residents. This exemption lowers your assessed value by $25k and shields your property from creditors, but more importantly homestead properties are protected by the Save Our Homes tax cap which limits the amount your taxes can increase by 3% annually. Since property values have been increasing about 25% annually, it is extremely important to file for homestead exemption as soon as you close on your new home. At the same time, since many current homeowners are paying a fraction of what they would if their homes were not protected, when looking at homes, you should pay no attention to what the current owner’s taxes are, instead you should calculate your new tax based on your purchase price. If you are discouraged by the high real estate taxes in Florida, don’t despair, there is good news yet – Florida has no income tax. When living in NY, you pay Federal, State and possibly City taxes on the money you earn. In Florida, while you still pay Federal income tax, there is no state income tax at all.
Most single family homes in Boca Raton are built in planned communities and are governed by homeowners associations. Townhouses or condominiums are similar but are governed by condo associations. In either case, the governing body will be responsible for maintenance of common areas and will impose rules on homeowners regarding the upkeep of the homes. Homeowners are required to pay monthly assessments to the association to cover the common costs of the community, which vary depending on what the association is responsible for. If you purchase a home in Country Club, membership in the club may be mandatory. Country Club membership typically entails an up front equity contribution to the club ranging from $20k to $100k and yearly membership dues ranging from $2k to $15k.
Your mortgage company will require that you maintain an insurance policy on your home equal to at least the amount of the mortgage or the replacement value of the home whichever is less. They will require that you have hurricane coverage and if you live in a flood zone, then flood insurance as well. Flood zones are determined by an elevation survey and while you may not be required to carry flood insurance, the incremental cost above your standard policy is minimal and it is worth having it anyway. There are several factors that will affect the cost of your homeowners insurance most of which are a function of the age of your home. Homes that are more than 20 years old are significantly more expensive to insure. Homes that where built after the new hurricane code was put into effect in 1998 are significantly less costly to insure due to the changes in how the homes are built including the requirement for storm shutters.
If you are relocating and seeking permanent employment in Florida, keep in mind that due to cost of living differences between NY and So. Florida, you need not earn the same dollar amount that you are currently earning in NY. As a rule of thumb, your FL salary should be approximately 80% of your NY salary. In other words, if you are earning $100k per year in NY, you need to earn $80k here in order to lead a similar lifestyle.
Home shopping can be an exhausting experience, especially when doing it long distance. With more than 16,000 Realtors in Palm Beach County, it is important that you select the right Realtor to work with. Make sure you are working with someone who is a full time Realtor, not a part timer who has a license and tries to make a deal here and there. A Realtor who is Internet savvy will make the process a lot easier by communicating with you via email, sending you listings, pictures and even virtual tours. It is also important to understand that unlike New York where Attorneys handle the contract, here in Florida contracts are prepared and executed by the Realtor, so a competent and professional Realtor can make all the difference.