Professor Real Estate® Suzanne Hollander and the National Association of Realtors® (“NAR”) look forward to a bright future of more women in commercial real estate and together are taking action to make it happen. Last week, NAR, America’s largest trade organization of over 1.5 million members, appointed Suzanne Hollander to its 7 person national focus group with the goals of promoting women in commercial real estate, addressing discrimination in commercial real estate and ultimately providing training to minimize/eliminate bias in this arena. Suzanne applauds NAR and her fellow focus group members for taking meaningful action to include women at the highest levels of leadership, investment and ownership of commercial real estate. As the only focus group appointee from Florida, Suzanne is proud to share her unique international experiences in commercial real estate in Miami. Suzanne’s representation of Florida is significant because Florida is the state that has over 14.5% of NAR members, the most NAR members of any state in the nation. According to NAR data, as of February 29, 2024 Florida has 218,605 NAR members. NAR launched its focus group during Women’s History Month and NAR shared, that like Suzanne, NAR is committed to promoting women in commercial real estate year round and is planning to offer training to its members to achieve this. Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues. Copyright 2024 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander |
Professor Real Estate® Suzanne Hollander celebrates Women beside Miami Dade County Mayor Daniella Levine Cava at Miami’s “In the Company of Women Awards” March 6, 2024 honoring women in all professions! In Miami, we have much to Celebrate! A Woman founded our Vibrant city (Julia Tuttle) , we elected a Woman Mayor, we elected 5 Women County Commissioners, we Elected 1 Woman to the City of Miami Commission, we have a Woman President of Miami Dade College! We still have work to do to Celebrate and Include Women in all facets of life and YOU can help us by taking actions detailed below: |
Professor Real Estate®’ Suzanne Hollander’s 8 actions to Celebrate Women Today on International Womens’ Day, This Month During Womens’ History Month and All Year Round!
1. Promote Women to Visible Senior Leadership Roles in Your Company
2. Include Women to be Leaders, Speakers on Industry Panels – Remember, “If You See It, You Can Be It”
3. Empower Women to be Life Long Learners, Always Adding New Skills to Their Tool Box
4. Include Women in Your Deals
5. Include Womens’ Voices and Perspectives in News/Media regarding their industry, profession and experience
6. Celebrate Womens’ Achievements
7. Institute Pay Equity
8. Appoint Women to Corporate Boards
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2024 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>If you’re a homeowner, you’ll need to cough up extra money every year to pay your property tax. This is a charge that local authorities assess based on property you own, including your house.
The higher the value of your property, the more you will likely pay in property tax.
Take the time to better understand how property tax works, who assesses your property, who sets the taxable rate, when and how property tax is paid, and why it can be a good idea to appeal your property tax.
Property tax is a levy that your local government charges based on the value of property you own. Property tax is often called an “ad valorem” tax, which means it is based on the assessed value of your property.
The more your home is worth, the more you will likely be required to pay in property tax.
“Property taxes are governed by state law within the state where your property is located,” explains Suzanne Hollander, a real estate attorney and broker who teaches real estate law in Miami at Florida International University. “Property taxes are used to fund local government services like public schools, police and fire departments, libraries, public parks, and other municipal services.”
Make no mistake: You are obligated to pay your property tax. Even if you send your children to a private school, you cannot opt out of paying the property tax portion to fund your local public schools, Hollander cautions.
Your local school district, municipality, county, and other area government taxing districts oversee and impose this tax. Administration is conducted by local officials like assessors in your township, chief county assessment officers, local boards of review, and county collectors.
The value of the property is determined by local officials like assessors in your township, chief county assessment officers, local boards of review, and county collectors. To determine the taxable value of your property, these local tax authorities will conduct a periodic property tax assessment.
“These parties will assess factors like location, size, and amenities of your property to evaluate its value,” notes Brian Quigley, a tax and finance expert with Beacon Lending in Denver. “The formula they use involves multiplying the assessed value by the local tax rate, which dictates your property’s tax liability.”
The tax rate (often called millage rate) is decided via public hearings by your local school district, municipality, county, and other area government entities where the property is located, per Hollander.
For example, let’s imagine your home has an assessed value of $250,000. Say the tax rate in your area is 1.7%. Multiply $250,000 x 1.7 and you get an annual property tax due of $4,200.
Drilling deeper, know that property taxes are commonly expressed in millage rates; this represents the tax paid per $1,000 of a home’s value. Case in point: if your millage rate is low, say $0.001, you would owe $1 for each $1,000 your home is worth.
Here, you would divide your millage rate by 1,000, then multiply your home’s assessed value (not appraised value) by the millage rate to calculate what you owe. Assume your area’s millage rate is 7.5. If so, 7.5/1000 = $0.0075; $250,000 (your home’s assessed value) x $0.0075 = $1,875 in property tax due annually.
According to Kathy Alfaro, CEO of Alfa Tax Service in San Antonio, your local taxing authorities will determine the millage rate for the assessed value of your property.
“They will have a set of rules on how your property’s value is determined in your jurisdiction, she says. “Some use the property’s appraised value while others use its market value.”
Every state has different rules. In the state of Florida, for instance, the County Property Appraiser’s office determines the taxable value of each parcel of real property each year, per Hollander; elected officials within the county or city will then determine the tax rate.
Property tax is typically paid annually or semi-annually, such as every six months. In some states, property taxes are paid in arrears (later), while in other states they are paid in advance.
You should automatically receive a property tax bill or statement, often by mail, well before the tax is due. The total payment owed and the deadline to pay will be indicated on the statement.
Even if you don’t receive your tax bill in the mail, you are obligated to pay your property tax.
“Homeowners either make property tax payments directly, or they have the tax automatically paid by a neutral third party via funds held in an escrow account,” adds Quigley.
An escrow account – often managed by your mortgage lender – ensures that necessary expenses, including your property taxes and homeowners insurance premiums, are paid punctually on your behalf.
If you pay your property tax yourself, you can usually send a check, electronically transfer funds from your bank account, or, if allowed, use a credit card.
The good news is that if you don’t agree with your property tax bill after receiving it, you can appeal the assessed value (but not the tax rate).
“It’s a good idea to try appealing your property tax assessment because it’s a right you have as a property owner. It’s also free or inexpensive to file an appeal – in Florida, the cost is $15. Additionally, you may be successful and able to reduce your property taxes, thereby decreasing your costs of ownership,” suggests Hollander.
Consider that assessments are often calculated as a blanket change.
“That means your local taxing authority may just apply a flat 2% increase on all homes, which may not be fair to your situation. Perhaps you had a flood or fire, or maybe a new housing development in your area has created horrible traffic congestion and homes are not selling like they used to, reducing their value,” Alfaro says. “Protesting your property tax gives you the opportunity to present your evidence that your property has been unfairly assessed.”
But don’t expect to win your appeal and get a lower tax bill without providing evidence.
“This usually involves gathering proof of nearby comparable properties valued less than yours based on recent sales or listed homes for sale, and then submitting the evidence to local assessment authorities,” says Min Hwan Ahn, an attorney in Philadelphia. “You can do this work yourself or hire a third party to assist with this process, although they will charge a flat fee or a percentage of your reduced taxes if your appeal is successful.”
Other evidence can include photos, repair estimates, fire reports, engineering reports, blueprints, deed records, or surveys that support your claim of overassessed value.
It’s important to learn the deadline and rules for filing an appeal in your area, which can differ across the country. Some tax assessors allow you to submit the appeal paperwork via email, fax, snail mail, or in person.
“After receiving your appeal, the taxing authority will respond with a settlement amount. If you disagree with it, you will have a hearing where you may present your evidence of why you believe the assessment is incorrect,” says Alfaro. “In other jurisdictions, you may have to go directly to a hearing. Check with your local tax assessor’s office to learn the exact process involved.”
Paying property tax is not optional. Failure to pay what’s owed can result in severe financial penalties or even the loss of your home, so take this responsibility seriously.
“Effective budgeting is imperative for punctual property tax payments. Be sure to set aside the necessary funds monthly or within your escrow account, carefully understand tax due dates, and maintain an emergency fund to address unforeseen financial challenges should they arise,” recommends Quigley.
It’s also a good idea to ask the property appraiser in your county if there are exemptions you qualify for that may reduce your property taxes.
“Many states offer reduced taxes to people for their primary residence—including seniors and veterans. Normally these exemptions are not automatic, you have to apply for them,” says Hollander.
Still have questions or remain unsure about property taxes or assessments? Contact your local tax assessor’s office and get the answers and information you need.
Kara Johnson
Kara is a novelist, poet and large-scale sculptor in addition to being a contributing writer for Refi.com. She lives with her family in Rye, New York and is a graduate of Hampshire College.
Shared from REFI January 3, 2024 Article written by Kara Johnson
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2024 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>WLRN Radio’s Tom Hudson interviewed Professor Real Estate® Suzanne Hollander on the future of real estate brokerage commissions. The article is shared below, listen to the interview here.
WLRN 91.3 FM | By Tom Hudson
Published January 16, 2024 at 7:00 AM EST
Published January 16, 2024 at 7:00 AM EST
The repercussions will be especially pronounced in Florida, which has more real estate agents than any other state in the nation.
Miami realtors’ board recently changed its long-standing policy of requiring listing agents to offer at least 1 cent commission to a buyer’s agent. Now, that listed cooperative commission can be zero. If an agent working with a buyer is involved in a deal with a cooperative commission of zero, that agent would not get paid the way residential real estate commissions have been structured for years.
The difference between 1 cent and zero may be financially trivial, but it could symbolize the beginning of the end for how real estate commissions historically have been paid for decades.
Before the change ,a South Florida real estate agent who listed a property for sale on the Miami Board of Realtors’ Multiple Listing Service was required to put some dollar figure as “cooperative commission.” It was a sign that the agent bringing in the eventual buyer would be paid a percentage of the sales price.
That mandatory minimum had been one penny, according to the board’s rules. “As close to zero as you can get,” it said in November.
In practice, the actual commission wasn’t a penny. Common practice is for a 5%-6% sales commission. Usually, it is evenly split between the agent working with the seller and the agent working with the buyer (though most agents do not represent the seller or buyer. More on that later.) Sometimes agents would agree to a slightly lower commission in order to get a deal closed.
The small monetary difference between one penny and zero belies the possible upheaval in how some real estate agents are paid, including in Florida. At stake, pending the outcome of courtroom battles across the country, are billions of dollars exchanged with the purchases of millions of properties.
Coupling commissions
The home at 296 Buttonwood Shores Drive in Key Largo includes three bedrooms, a newly renovated open-concept kitchen, a 29-foot dock with a boat lift and a footbridge with views of Florida Bay. It is a wood home that has a metal roof, impact windows and doors, and the property even stretches under part of the bay to a mangrove island.
The sale of the home also includes a 2.75% commission to a real estate agent who brings in a buyer, if that agent is a member of the Keys Multiple Listing Service. If the agent belongs to another service, they’ll make two percent of the sale price.
That commission is specified in the home’s sales information that appears on the Multiple Listing Service — the clearinghouse of homes and condominiums for sale. MLS is a cooperative database of real estate brokerages listing their properties for sale. The brokerages and agents agree to certain rules to gain access.
One of those rules is how agents working with buyers get paid. Traditionally, a listing would include information on how much an agent would earn if they bring in a buyer. It is listed in the part of the database agents see, followed by a percent — usually between 2.5 and 3.
That means the agent working with a buyer will be paid that percentage of what the eventual selling price of the property.
READ MORE: No more anonymous shell companies buying houses
The sellers of 296 Buttonwood Shores Drive are asking $2.7 million. If they get that, the total commission would be 5.75% — about $155,000. Karen Prince, as the listing agent, would get 3 percent — $81,000 — based on her percentage. The local agent who brought in the buyers would get the rest.
This is how real estate commissions have worked for decades. An agent selling the house offers a commission to an agent who works with the eventual buyer. That commission had been — and for some boards of realtors remains — mandatory in order to list a property for sale on a multiple listing service.
“I feel that it’s an advantage to the seller to continue to offer the buy-side commission because we’re going to get more buyers (and) agents who look at their property,” said Prince.
But some have been complaining about having the commission of the buyer’s agent come out of the selling price.
“We believe that the commissions are too high and they’re uniform, which means that they’ve basically been set by the industry,” said Steve Brobeck, executive director of Consumer Federation of America. “Consumers are overpaying for brokerage services.”
In 2019, Brobeck spoke with 200 real estate agents in the biggest cities, including agents in Florida. Almost three out of every four said they would not negotiate their commission. Most charged six percent, split with the agent who brings in the buyer.
There are a handful of lawsuits in federal court, including one involving some listing services in Florida.
Sellers have been suing in courts across the country over that coupled commission.
There are a handful of lawsuits in federal court, including one involving some listing services in Florida. The suits challenge this long-held practice of how real estate commissions work. The judge hearing the case involving Florida expects the trial to start late this year.
“Sellers are pushing back. They’re saying, ‘Why should I be paying the buyer’s commission?’” said FIU Real Estate Professor Suzanne Hollander.
One case already has gone to a jury, which determined that linking the selling and buying agents’ commissions was anti-competitive. Several real estate brokerages and the industry’s main trade organization were sued by home sellers in federal court in Kansas City, Missouri. Two firms, RE/MAX and Anywhere Real Estate, which owns brands such as Coldwell Banker and Century 21, settled before the jury got the case.
The panel decided the National Association of Realtors, Keller Williams, and HomeServices of America conspired by forcing home sellers to use a system that splits payment of a commission between sellers and buyers. The jury ordered the brokerages to pay $1.8 billion in damages. An appeal is expected.
“The reason we are in this situation is because it wasn’t transparent to buyers and sellers how commissions were shared,” said Brian Schmitt, owner of Coldwell Banker Schmitt Real Estate in the Keys. He has been selling homes in the Keys for 40 years. “There was no requirement for agents to share that information. It wasn’t hidden purposefully from anyone, but because people didn’t understand how agents got paid, it was pretty much left up to agents to determine how that happened.”
Big real estate brokerages and the industry’s trade association are facing potentially billions of dollars in damages for how agent commissions have been structured for decades.
“It represents the greatest threat to the price setting of the industry in the last 100 years.”
Consumer Federation of America Exec. Dir. Steve Brobeck
Back in Key Largo, Schmitt and Prince aren’t worried.
“I don’t think, just as a consequence of this, that commissions are going to be subject to significant decreases across the board, that buyers are going to somehow come in and buy properties without paying buyers’ brokers,” said Schmitt.
Prince agreed. She thinks that is especially true in the Keys with its complex environmental and building regulations.
“Someone’s going to have to pay (the commission). The buyers are going to need our expertise to navigate through the complicated process of buying a home here in the Florida Keys,” she said while standing just inside the front door of the house on Buttonwood Shores Drive.
Outside, it was overcast. Florida Bay and nearby marina were quiet from the second floor deck. A landscaping crew was at a neighborhood’s home crowding out the sounds of the bay breeze and birds.
“I still believe that based on how this industry has operated for 100 years, sellers are going to see that there is a benefit to offering a commission to a buyer-broker. It will make their property more marketable. More buyers’ agents will show a property where they know they’re being paid by the seller, than where they have to rely on the buyer to pay their commission,” Schmitt said.
The day the verdict was announced in Kansas City, the winning attorneys filed a nationwide lawsuit against the National Association of Realtors and seven brokerages. The suit aims to include everyone who sold a home in the U.S. who used a listing broker affiliated with the named brokerages and listed it for sale on a multiple listing service over the past four years.
About a week after the conspiracy verdict by the Missouri jury the Miami realtors association changed its rules to allow agents to enter any amount for a coupled commission — including zero.
WLRN requested interviews with the Miami Association of Realtors’ chairman and chief legal counsel. They turned down the invitations and sent the association’s explanation for the change that was posted on its website in early November. That statement said it made the change “to reinforce (real estate agents’) ability to engage in transparent negotiations with customers and prospective buyers.”
The Missouri case may be 1,400 miles away from South Florida but the Sunshine State is not immune to these legal challenges. The Florida Association of Realtors and more than a dozen brokers were sued last month, accused of conspiring over agent commissions, the same accusation that was in front of the jury in Missouri.
“We can’t put that toothpaste back in the tube,” said FIU’s Hollander. “And that discussion is going to be on every single table when we’re talking about signing a listing agreement.”
“It represents the greatest threat to the price setting of the industry in the last 100 years,” said Brobeck. He figures if real estate commissions drop by two percent, it would save home buyers and sellers $20 billion dollars a year.
The potential savings is enormous as it represents an enormous threat to how business is done and how agents are paid.
Not “your” agent
If you have bought or sold a home in Florida, chances are the real estate agent you worked with did not work for you.
“The public thinks that the realtors are on their team. The realtor represents the seller or the realtor represents the buyer. And in the state of Florida, we have a default to this idea. It’s called ‘transaction broker’,” said Hollander.
That means in most Florida residential real estate deals, the person you may call “your agent” does not — legally speaking — represent you. They represent the deal. Thus, a transaction broker.
“If you came to me and said, ‘Brian, I’d like to buy a house,’ and I never told you how I was going to represent you, what the law would say is that I didn’t actually represent you, that I represent the transaction,” said veteran real estate agent and brokerage owner Schmitt. “You, on the other hand, would believe that I represented you.”
Schmidt’s agency is not a transactional firm. It is a single agent company representing either the buyer or the seller and has to disclose its responsibilities. His agents, like Karen Prince, are considered independent contractors
“We represent people. We represent sellers,” said Schmitt.
Critics like Steve Brobeck of the Consumer Federation of America think the default relationship in Florida supports the argument that transaction brokers should be paid less because they have fewer obligations.
“Transactional brokers are basically facilitators with less liability than a fiduciary agent and they should not collect as much in compensation as a fiduciary agent,” Brobeck said. “They cannot, for example, say anything to one party that harms the interests of the other party. They are truly facilitators. And when there’s only one facilitator in the sale, we don’t really see any reason that they are to collect any more than 3%, especially on high priced homes.”
“For a lot of things, the more you unbundle services, the better you are because then people can pick what they want,” said University of Miami Herbert Business School Finance Professor Andrea Heusen. “I think people who are good will stay and adapt. The ones who are not so good will not be able to react and, you know, figure out a successful way to navigate this disruption.”
A glut of agents
Florida has a lot at stake with how real estate agents are paid.
There are about as many full-time real estate agents in South Florida as there are middle school teachers and slightly more than there are bartenders.
“They say that more people in Florida have real estate licenses than driver’s licenses,” said Hollander. “I looked it up. It’s not that’s not true. More people have driver’s licenses in the state of Florida.”
https://flo.uri.sh/visualisation/16450271/embed?auto=1
Still, Florida has more real estate agents than any other state. And South Florida has more real estate agents than any other major region. Add part-time agents selling real estate as a side hustle and there are tens of thousands of people whose paychecks could be impacted by any changes to how commissions are paid.
“This is a very part-time industry,” said Brobeck. “A very small minority are responsible for most of the sales.” A recent study from his organization found almost half of agents in diverse urban areas, including Orlando, sold one or no homes in the past year.
With so many people working part-time, or even just once in a while, that has implications for the industry in a market saturated with agents like South Florida.
“It means that very few agents can make a living selling real estate there. There are just too many agents for too few sales,” said Brobeck.
The Miami Association of Realtors claims to have about 60,000 members from Miami-Dade north to St. Lucie County. In October, there were fewer than 7,000 closed sales of homes and condos across the region. The average pay for a Florida real estate agent is about $54,000 a year, according to the latest data from the Bureau of Labor Statistics.
“I think you’re going to weed out a lot of those folks who are in that marginal category of agents. They’re going to have a harder time sustaining their business throughout this change,” said Schmitt.
Many agents were attracted to the industry because of the pay and flexibility. That’s why Karen Prince, who is the listing agent for the home on ButtonWood Shores Drive in Key Largo, became one. She was raising her two children and needed a career that would allow her to be at home when they needed her.
She had sold seven homes so far in 2023 when she spoke with WLRN in late November. She called it an average year. That pace would put her in the top 30% of agents, according to the study from the Consumer Federation of America.
“It has been very lucrative for me to stay in the case and send my two kids to college,” said Prince.
This year may be anything but average for the industry with several lawsuits pending over real estate agent commissions.
Tags
Business & Economy NewsLocal Newsreal estate
Tom Hudson is WLRN’s Senior Economics Editor and Special Correspondent.
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Shared from WLRN January 16, 2023 Article and Radio Broadcast.
Copyright 2024 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>Pedro Paiva
Brasil de Fato | New York (USA) |November 29, 2023 at 13:44
Buying a property in the United States is expensive. Very expensive. The dream of owning a home is increasingly becoming a distant dream, especially for the younger generations.
According to the U.S. Department of Housing, the median home price sold in the country has risen nearly 63% in 10 years, jumping from $265,000 in 2013 to $431,000 in 2023. According to experts, there are two major villains in this story: inflation and high interest rates.
The impact of high
interest rates Although far below the Brazilian base rate of 12.25%, interest rates in the US rose from 0.25% in March 2022 to 5.5% in July 2023. Such high interest rates have not been seen in the country for more than two decades. In the last four months, the rate has remained the same, but it is still too high for homeowners to want to move house.
The purpose of high interest rates, according to the Federal Reserve (FED), is to fight inflation. The Fed wants the ratio, which currently stands at 3.7 percent, to reach 2 percent a year.
The justification is that, with the financial aid given by the government during the pandemic, the increase in demand for goods and services overheated the economy, taking inflation from 1.4% in January 2021 to 9.1% in June 2022.
The pandemic
effect This, however, is not the only role of Covid-19 in the current crisis. Itzhack Ben-David, a professor at Ohio State University, spoke to the reporter about the issue.
“We had shortages in groceries,” Itzhak says. If we go back to 2020, 2021, you will remember that there was a shortage of wood for new construction, as well as other materials. And all of that has made building new homes more expensive, which eventually affects the secondary market for existing homes, and that market gets more expensive as well.”
The crisis in the supply chain is another cause of inflation around the world. With production being affected by measures to control the transmission of the Coronavirus, the supply of products has fallen, thus driving up prices.
Rent through the roof
The situation is also not easy for those who pay rent. In January 2020, the average monthly value for a 2-bedroom property in the country was $1,093, today the same property costs an average of $1,320 per month.
In large cities the situation is even worse. In August, New York City hit an all-time high, with median rent of $5,600, according to a survey by DouglasElliman and Miller Samuel.
Since September 5 of this year, a law has been in force in the country’s largest city that prohibits the rental of entire apartments on Airbnb, or other online rental platforms, for less than 30 days. The measure aims to add new properties to the market and try to contain the rise in prices.
Data recently released by the Fed show that inflation continues to fall. For market analysts, this is an indication that interest rates should decrease in the first half of next year.
Ben-David, however, warns that the problem is likely to persist and that new factors are likely to negatively affect home prices in the not-too-distant future.
“I would think that inflation and interest rates are the main causes,” he said. “At a certain point we should start to see the effect of climate change. This is also a possibility, even more so in relatively low-lying areas and close to the Atlantic or Pacific. This should impact prices in the housing market.”
Shared from Brasil De Fato November 29, 2023Television Segment and Article by Pedo Pavia edited by Leandro Melito
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2024 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>Homes listed for sale online aren’t the only available properties out there. Sometimes, homes are auctioned off due to foreclosure or other reasons. Buyers and investors can capitalize on these auction opportunities to purchase a home, sometimes at a significant discount. But they aren’t as easy to find as regular listings, and inexperience can be a barrier to entry. Here’s what to know about buying a house at auction.
A home can be auctioned for several reasons, but in many cases, it’s because the existing owner of the property is experiencing financial trouble. The most common reasons for an auction sale include foreclosure and failure to pay property taxes.
“When a homeowner doesn’t make regular payments to the lender, sometimes the lender has no choice but to foreclose on the property,” says Colby Hager, owner of Capstone Homebuyers in San Antonio, Texas. “When this happens, the property is often put up for auction.”
The foreclosure rate in the U.S. peaked in 2010 and steadily decreased due to a strong economy and job market. That trend continued through 2020, when foreclosure activity came to a halt as a result of the pandemic. Foreclosure levels have since risen some, but they’re down 2 percent since last year, according to ATTOM Data Solutions’ most recent U.S. Foreclosure Market Report.
There are various types of auctions, with rules and regulations surrounding participation. A real estate auction can be classified as one of three types: an absolute auction, a minimum bid auction or a reserve auction.
There are two types of bids at real estate auctions: open, meaning bid amounts are out in the open and known to all participants, and blind, meaning bid amounts are kept secret. “In an open auction, every bidder knows what others are bidding,” Castle says. “In a blind auction, the bidders don’t know.”
Open-bid auctions can be conducted online or in person. With the latter, bidding often occurs at an auction house, courthouse or city hall. Before participating, bidders must agree to the terms of the auction by completing the requisite paperwork or accepting an end-user license agreement, Castle says. A deposit is often required, and bidders must also verify their identity and demonstrate their authority over any legal entity (such as an LLC) that will take the title of the property, if applicable.
In a blind-bid auction, by contrast, a deposit is commonly submitted with the bid along with an agreement accepting the auction’s terms — all of which are usually enclosed in a sealed envelope. The bidder’s identification might be given to the party accepting the bid.
The main benefit of purchasing a home at auction is the ability to buy a property for below market value. Put another way: You might be able to score a sweet bargain.
There are risks too, though, says Suzanne Hollander, an attorney and real estate professor at Florida International University in Miami. These include:
You usually can’t have the property professionally inspected, which could lead to surprises like physical damage and structural problems.
It’s your responsibility to conduct the necessary due diligence. This includes investigating title issues and outstanding liens.
You generally must pay all-cash; financed funds are almost never accepted. And if you are able to finance the property with a mortgage, your lender might not release the funds until you complete any needed repairs.
You must pay for all back taxes in many jurisdictions. In addition, if it’s part of a homeowners association, you could be liable for unpaid HOA fees. (Before bidding, get an accounting from the HOA.)
There’s the danger you could overpay for an auctioned property, especially if you don’t have experience with property auctions and haven’t researched the home and its value carefully ahead of time.
Bottom line: Not every property up for auction is priced at a steal. But even if it is, you might be buying a home with major issues, and the money it takes to remedy them could cut into any gains.
You can find auction opportunities in local newspapers (most jurisdictions are required to advertise tax sales), online through auctioneer sites like Auction.com and posted in public places, like your county courthouse.
“In bigger markets, many real estate investors subscribe to specialized subscription services that provide precise information about properties that may be auctioned,” Hager says.
Additionally, some investors purchase foreclosure lists and property-related data to find out more about homes coming up for auction. There are also auction houses that regularly publish listings — you can sign up for their mailing lists.
Consult with an experienced real estate agent or appraiser before the auction to determine an estimated market value and what the property will likely sell for. This is especially important if you plan to flip the home. Castle notes that bidders are usually not allowed to walk through the home on the day of the auction, but your agent might be able to obtain permission for you to tour the property before the auction.
“A real estate attorney can also help you understand the terms of the auction,” Castle says. “Your attorney may be able to conduct a title search to ensure the property is free of liens and other encumbrances that you may have to pay if you are the winning bidder.”
In the majority of auctions, you can’t finance the purchase with a mortgage, so be prepared with cash in order to bid. You’ll likely also need to prequalify — in other words, demonstrate you have the means to pay — before you can participate.
“The most common rules are that you must conduct your due diligence prior to the auction, attend the auction with funding in hand, and often register with the auctioneer and receive a bidder number,” Hager says.
If you ultimately have the winning bid, you’ll have to complete paperwork and pay for the property either immediately or within 24 hours. Alternatively, you might be able to put down a portion of the price with your bid (such as 10 percent), then pay the remainder within 24 hours. If you don’t, you could lose the portion you already paid.
“The money is due at the time the auction concludes,” Hager says. “Most auctioneers take payment from verified funding sources, such as cashier’s checks.”
If you are the winning bidder, depending on the circumstances of the auction and applicable laws, you may or may not be provided access to the home on the same day. It’s possible that a foreclosed home, for example, may still be occupied by the delinquent borrower until the lender later gets possession of the property and the title, which will then be transferred to you.
Be aware that, in some states, a homeowner who loses his or her property at auction for unpaid property taxes can redeem their house or buy it back within a specific period of time, known as the redemption period. “But that homeowner must work with the local government agency that oversaw the process of the delinquent tax auction in order to redeem that property,” Hager says.
In this scenario, the delinquent homeowner is required to pay back the balance of their taxes during a cancellation period, which may extend for up to one year, Castle says.
If you purchased a home at auction that was later redeemed by the homeowner before the end of the cancellation period, you will be refunded your full purchase price, according to Hager.
Keep in mind: In a foreclosure situation, the lender will be looking to recoup the full amount of its debt, so you’d need to top that number in order to win. Weigh the upside of this carefully — it might not be worth it.
Buying a home at auction can yield a great bargain — if you do your homework and can withstand the risks. “You need to know how to research the title [and] make sure you are buying a first position lien, not a second position lien that could be wiped out,” Hollander says. “Understand your obligations to pay cash and when, and realize there are many risks involved.”
That’s why auctions are often attended by seasoned real estate investors seeking to flip a property and make a profit. “It works well for people with a great deal of experience or who are comfortable asking for help filling in gaps in their knowledge,” Castle says. “It’s smart to go into the process with ample cash reserves, as well, which will reduce associated risks.”
If you’re new to auctions, it can be helpful to attend a few (without the intention to bid) to get a sense of how they work. Here are some of the pros and cons to consider:
One alternative to purchasing a home at auction is buying a property via a short sale, which typically comes with the right to inspect the home in advance, a warranty deed and the requirement that the seller must pay any outstanding liens and taxes before closing. In a short sale, the mortgage lender agrees to accept a sale price less than the balance owed on the mortgage. This can happen when a borrower is in financial distress.
Similar to an auction, a short sale can be an opportunity to purchase a property for much less than its market value. Unlike at auction, though, you’ll have far more peace of mind about the home you’re buying.
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Shared from Bankrate November 7, 2023 Article
Copyright 2023 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>By Edwin Hickman, April 5, 2023
“Hope Has a New Home” is the Ronald McDonald House Charities (RMHC) South Florida Chapter capital campaign to raise $25 million to develop a new 63,000 square foot building, on land owned by Miami-Dade County on Jackson Memorial Hospital’s campus, to support more critically ill children and their families who need to stay near a hospital for treatment.
From left: RMHC South Florida Executive Director Soraya Rivera-Moya and Professor Suzanne Hollander
Soraya Rivera-Moya, Executive Director of the Ronald McDonald House for over 20 years, leads the campaign for the state-of-the-art facility that will have 54 rooms and is located less than 100 steps from Holtz Children’s Hospital. Rivera-Moya explains “$3 Million is needed to put a shovel in the ground, to start construction.”
On February 9th, 2023, Professor Suzanne Hollander, a member of the Ronald McDonald House Capital Campaign Committee, led a delegation from Commercial Real Estate Women (CREW) on a property tour and fundraising event for the campaign. Women real estate professionals, including bankers and construction executives, toured the current building and construction site, sponsored a dinner for and shared one on-one conversations with the families and children. Hollander is a real estate law professor at FIU and Program Director of Professional Development of its Office to Advance Women, Equity, and Diversity (AWED).
Delegation from CREW Miami led by Suzanne Hollander at the future location of the Ronald McDonald House on the Jackson Memorial Hospital Campus
Hollander and Moya explain the unique public-private financing structure of the new project: “Jackson Memorial is a public hospital, and the location for the new building is leased to RMHC by Miami-Dade County for the mere cost of $1 per year for a duration of fifty years. The $25 million will be raised through local fundraising initiatives and new market tax credit funds, which are forgivable loans granted by the federal government.”
Hollander served as the Director of Real Estate and Asset Management for the City of Miami in 2022, administering government owned properties. She knows government owned properties can be utilized to carry out important purposes such as this. Hollander explains that “the Miami Ronald McDonald House Project is an innovative and creative use of land in a way we don’t often see in Miami, it’s a case study in how to use government owned land in a public private partnership for a charitable purpose that makes a positive impact in people’s lives. This lesson can be applied globally.”
Hollander points out that “in Miami, a city with a booming real estate market full of luxury condos and hotels, the Ronald McDonald House development project really stands as unique three reasons, it is (1) a multi-million-dollar woman led development project; (2) for a charitable purpose to help families in need with sick children and (3) being built on government owned land.”
During the visit the women met a twelve-year-old boy named Jesus. Jesus’ mother shared that February 14th would be an important day for Jesus. When asked why, she answered “Because Jesus will finally have a kidney transplant, a kidney donated by his brother on that day.” Before the family connected with the Ronald McDonald House, the mother explained that they did not have funds to afford the kidney transplant or a place to recover.
Jesus’ transplant went well and he is recovering with his family at the house. Rivera-Moya explained that 40% of children staying at the house are awaiting transplants, 30% have cancer and the rest are premature or NICU patients.
Riviera-Moya is pleased to continue to operate the house during the construction process – this is because the current Ronald McDonald Building will remain open and operating during the construction process, anticipated to take eighteen to twenty-four months after groundbreaking.
RMHC is a global 501(c)(3) nonprofit charity dedicated to supporting families of hospitalized children. It provides families temporary housing and food to be enable them to stay together with their children who are receiving medical treatment for serious conditions.
The current Miami Ronald McDonald House Building, built in 1982, celebrated its 40th birthday last year. This facility has helped more than 32,000 families in Florida, across the nation, and internationally. It is structured similar to a hotel; the existing building’s capacity is limited to thirty-one rooms and there is a wait list of families with critically ill children who need to stay there.
The funds raised from this event served as contribution to RMHC’s Adopt-A-Meal Program, providing food for families staying at the Ronald McDonald House.
The Ronald McDonald House’s new project is relying on donations. Rivera-Moya, the Board of Directors and the Campaign Committee members such as Hollander, are working with the community to generate more engagement and introduce RMHC to new donors.
From left: Suzanne Hollander and Soraya Rivera-Moya
The project is also an example of a partnership between public and private actors. “Hope Has A New Home” Campaign is currently halfway to achieving its goal and 80% of the funds are needed in order to begin construction.
Shared with permission from Florida International University Office to Advance Women Equity & Diversity April 5, 2023 written by Edwin Hickman.
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Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2023 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>Sabina Covo was elected on February 27 for the Miami City Commission, District 2, after a short but intense campaign. Like most elections, it was rich in promises. Candidate Savina Covo promised to devote equal attention to all the neighborhoods that comprise District 2, including Downtown. Some Downtowners, not without reason, remained skeptical.
But once the new Commissioner was sworn-in, she reiterated a determination to be the steward for the entire district. Downtown News and a group of Downtown residents invited the new commissioner for a candid conversation —emphasis on conversation, an exchange of ideas aiming for solutions not a complaining festival. We met at the LOFT 2.
We divided the two-hour working-session into two parts. Part One, analyze the most pressing issues for the community with experts Downtown News invited, Urban Designer Aaron DeMayo, Suzanne Hollander, FIU Professor and former Director of the City of Miami Real Estate and Assets Management, Attorney Elena Bondarenko, and Loft 2 Property Manager Yadira Hernandez. For Part Two we walked the streets with Miami Chief of Police Manny Morales.
Flooding is an increasingly common reality for Downtown residents. “Weather effects from extreme rain events, king tides, and sea level rise appear to be more regularly disrupting daily life and causing unnecessary property damage as the flooding takes longer to subside and is happening more often, especially on Biscayne Boulevard and NE 11th Street, 11th Terrace, and stretching hundreds of feet to NE 13th Street. These have been problem locations for years, but the recent Signature Bridge construction has worsened the flooding, shutting down Biscayne Boulevard and the on and off ramps to 395 on multiple occasions,” indicated Aaron DeMayo. “The FEC train tracks are also affected by heavy rain as well, often with the gate arms lowering when the tracks flood, even though no trains are passing by, completely stalling movement on NE 2nd Avenue.”
On transportation, Aaron DeMayo observed: “Downtown Miami has a diverse transportation system, including the Metro Rail, Metro Mover, buses, trolleys, Freebee shuttles, protected bike lanes, and a ferry. However, many personal vehicles are still on the roads and seem to grow with the influx of development and new residents. Particular locations appear to create pinch points and exacerbate traffic throughout the transportation network. The I-395 Signature Bridge project substantially affects the regional transportation system, which will most likely not be relieved for years until completion, a heavy price to pay in addition to the $800M+ price tag. However, more precise surgical interventions can reduce congestion and keep people moving freely, safely, and efficiently, providing economic, social, and environmental benefits.” He discussed over a dozen small-scale urban updates on micro-mobility, vehicle movement, curbside management, crossing the Miami River, and increasing pedestrian safety, all to improve the function and quality of life with minimal impact and a significant ROI.
Commissioner Covo seconded Aaron DeMayo’s assessment that businesses and people are flocking to South Florida, bringing new energy, points of view, and capital. But were also creating more congestion on our roads, significantly driving up housing costs, and putting additional strain on the environment. It was time to assess the existing conditions of the city, and take action together to reshape and redefine it.
Professor Hollander highlighted to Commissioner Covo that the City of Miami owns a real estate portfolio that ballooned in value to over an estimated over $17 Billion USD. “The largest percentage of the value of City owned properties is located in District 2, many on long term leases (50–99 years). These properties include Olympia Theater complex (theater, apartments and ground floor retail), Fort Dallas, the Hyatt & James L. Knight Center, the land under the Centrust tower, Bayside Marketplace, Watson Island (Parrot Jungle, Island Gardens & Miami Yacht Club), the Rickenbacker Marina and all three-city owned and operated marinas totaling over 1,300 boat slips and dry docks at Dinner Key, Marine Stadium and MiaMarina.“
Suzanne Hollander brought the large zoning maps she sometimes uses in class. From the LOFT 2 rooftop she pointed out to the various City assets and noted: “It is important to remember the City has a duty to act as a steward and fiduciary to operate these City owned assets professionally by best-in-class real estate standards to preserve their value and physical structure for generations to come.”
One critical issue for Downtown residents, in particular the Central Business District, is homelessness. More so around the corner of NE Second Avenue and NE Second Street, where a 7-Eleven has been the epicenter for aggressive panhandling, criminality and vagrancy.
Can’t discuss homelessness without the participation of law enforcement. We invited Miami Chief of Police Manny Morales to join Commissioner Covo in conversation with residents of the LOFT 2 and Vizcayne Condominiums, two of the more affected residential towers.
Resident Jorge Sanchez and LOFT 2 Property Manager Yadira Hernandez pointed out the constant assault on residents and visitors — people drawn to Downtown who park at the College Park Garage and Metro mover riders. Vagrants spit on residents, physically threaten them if they don’t give them money, not to mention public drinking, public urination, etc., which more than an aesthetic affront constitutes a serious public health hazard for children, adults and pets.
Vizcayne Condominiums’ resident Roly Masferrer expanded on the issue of safety and cleanliness of the streets and the reduced police presence. “The current strategy of stationing empty police cars (on sidewalks no less) may work to prevent speeding in the suburbs, but it does little to improve safety downtown. I witnessed a clear drug dealing operation on the corner of 3rd Ave and NE 1st at 2:00 pm. My wife can’t walk the dog up NE Second Street. Just down our street my family and I encountered three instances of nudity in plain sight. The homeless population is increasing and becoming more aggressive. A recent morning, aside from the nudity, we were followed for half a block in an attempt to antagonize us.”
Dan Cruz corroborated: “This area is clearly a problem. I have called the police dozens of times to report incidents. When officers show up, one hour after they leave is back to business as usual.”
Attorney Elena Bondarenko has analyzed homelessness in-depth. She was with the Downtown Development Authority for years. She suggested that a social worker should accompany the police, a social worker trained in dealing with people with mental health issues and substance abuse, and the City should fund the social worker. “Homelessness it’s not only an issue of law enforcement.”
Chief Morales reminded residents that crime in Downtown is down to historical records, but he understood this was a hot corner. He would speak to the Commander in charge of Downtown to strategize a solution.
The consensus to eradicate the dangerous problem of vagrancy in this central Downtown area, one with a high concentration of residents — seven residential high-rises within a two-block radius — is adopting a measure proven to be an effective crime deterrent: the presence of beat officers, having uniformed officers patrolling the streets. Research by John Jay College of Criminal Justice shows that the presence of police officers walking the streets deter crime drastically and improves the relationship between police and community.
And there is a local antecedent. In February 2022, a group of residents with the President of the Downtown Neighbors Alliance met Chief Morales at the Police Headquarters to present the same idea. A week later, the then Commander for Downtown Antonio Regueira texted Downtown News: Having spoken with the Chief, he wrote, the program will start now. The program was very effective but short-lived.
We realize such initiatives require funds. Downtown News asked Commissioner Covo if she would sponsor legislation to fund beat officers. Her prompt reply: “Yes.” Downtown News asked Chief Morales if the community can count on the presence of uniformed officer walking the streets. “Can we publish that you have agreed to implement the initiative?” Half in jest, like a good diplomat, Chief Morales replied that we could publish that the Commissioner and the Chief of Police are committed to working on a solution.
The walk-through ended at the source of the many inconveniences the closure of NE Second Avenue has caused residents. The cost of redoing Flagler Street.
Commissioner Covo and residents walked to the intersection of Second Avenue and Flagler. It seemed ready to open but for the array of county and city inspections and permits.
The stretch from Biscayne Boulevard to NE 2nd Avenue has been completed, and, indeed, is beautiful and for now pedestrian only. Of course, residents appealed to what seems a logical conclusion: making Flagler Street pedestrian for good, like Lincoln Road and Espanola Way in South Beach.
On the matter, urbanist Victor Dover noted in his seminal book STREET DESIGN: The Secret to Great Cities and Towns. “Instead of being a dim, forgotten nowhere, Lincoln Road is now a bright social center of the city. Crowds stroll and dine there every night, even in the off-season. After languishing for decades, Mr. Dover observes, “Lincoln Road sprang back to life, with one of the highest concentrations of pedestrian activity in the American Sunbelt.” Perhaps a better model for Flagler Street will be Espanola Way, pedestrian but cars have limited access.
It was a lot to cover and digest in 2 hours. Commissioner Sabina Covo added her own ideas towards potential solutions, but contrary to many politicians, enamored of their own voices, she listened. Listening to constituents and building on their ideas is a good first step against demagoguery.
Shared from Downtown News.com Article March 19, 2023 by Raul Guerrero
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2023 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>Reprinted from Real Estate Issues Volume 47, Number 4 – February 10, 2023 with permission of Counselors of Real Estate® of the National Association of REALTORS®.
Written by: Professor Real Estate® Suzanne Hollander, Esq.
Shopping Malls1 in Latin America are full of people and fully leased to pre-pandemic levels. How can this be? The sociopolitical unrest in Latin America creates a roller coaster ride of highs and lows of inflation, currency fluctuation and political uncertainty, however, despite these challenges shopping centers in these countries are vibrant centers of commerce and community.
In the first 20 days of 2023, riots in Brazil and Peru were in international news headlines. During 2022, Chile suffered political unrest leading to a controversial attempt to alter its constitution and property rights. Argentina suffered a return of socialism and a populist government, political unrest and untamed inflation fueling an exodus of global retail brands (tenants). In Argentina I saw many retailers who instead of posting prices on goods for sale, posted signs that said, “Ask for Price” in order to address the impacts of inflation.
Is there something global shopping mall owners, especially mall owners in the United States of America (U.S.) may learn from Latin America about the fundamentals that build a lasting bond between the mall, retail tenants, consumers and the community through both good and bad times? Is it really an excuse to say the U.S. rise in inflation and or the increase in online sales are the only culprits for the decline of the U.S. shopping mall? Is there something more that mall owners can do to save it?
I know there is.
This article discusses the fundamentals, building blocks, of why Latin American shopping malls are at full tenant occupancy and full of people in spite of their challenges, and, what the mall means to the heart and daily life of people in Latin America.
I made these observations during my 2022 sabbatical in Brazil, Peru, Argentina, Chile and Paraguay. The combined size of this market is massive, nearly the size of the U.S., with a total population of 319.23 Million (Brazil – 214 Million; Argentina – 45.81 Million; Peru – 33 Million; Chile – 19.2 Million; Paraguay – 7.22 Million). Today in 2023, I continue my daily connection with the owners, retailers and brokers in these real estate markets.
Please keep in mind, each country is different and has its own challenges and risks and rewards. This article provides a general overview. Please feel free to contact me if you want to dive deeper into the situations in specific countries in Latin America.
During my sabbatical, my “Feet were on the Street,” as I visited approximately 70 shopping malls in five countries and conducted qualitative interviews with shopping mall owners, brokers for the “marks”(retail brands/tenants), managers, real estate attorneys, retail trade associations, investment groups, and real estate professors. Walking the mall with an owner, manager, or expert broker was imperative for me to fully understand the tenant mix, vacancy, high and low traffic time periods, how the shopping mall is used throughout the day, the demographics, physical layout and design of the mall. One must note how the physical space is used – where and what percentage of the mall is allocated to gastronomy, traditional retail, fast food, health, lifestyle, entertainment, education, transportation, and other uses, and, the location of the shopping mall relative to where people live, work and play.
In the Latin American retail real estate sector, owners of shopping malls are normally family offices. The family owner is on site every day, including weekends. The owner knows their tenants by name. The owner speaks directly with the “marcas” (brands/tenants) to bring them to the shopping center and the owner often does not use an outside broker, it has an internal team. The owner knows the customers and greets them, the customers know the owner.
This is in contrast to the U.S., where malls are often owned by REITs or Pension Funds and operated by their employees. These employees sit in offices located far away from the mall (maybe even in another state) as they work on spread sheets that set corporate goals for the mall to hit a return rate. They don’t go to the shopping center every day. They don’t build the connection with the tenants. They don’t know the community.
The owners of Latin American Shopping Centers are “the Retailers of Retailers” meaning they understand their success is tied to the success of their tenants (the “marcas” the retail brands) and the owners are very involved in the business of the retail brands in their centers.
The owners are actively on site at the mall, even in Brazil where there has been consolidation of the malls. Here, corporate owners such as Brookfield, among others, share an investment interest in several malls with the family owners. For example, when I visited RioSul mall in Rio De Janeiro, I met with both the representative of the family office and the Brookfield representative who are joint owners of RioSul and they were both on site at the mall and involved in the daily operations.
When I teach commercial leasing I discuss the codependent relationship between the parties to the Lease, the shopping center Owner, Tenant, and the “hidden” party to the Lease, the Lender. Although a Lender is not a party to the Lease in the U.S., the Lender has significant influence on the relationship between the Owner and the Tenant because of the Owner’s covenants to the Lender in its mortgage documents. Due to Owner legal obligations to the Lender and default provisions of the mortgage, during the COVID pandemic, many U.S. Owners could not modify tenant lease payments or terms without first obtaining Lender permission. In addition to being overwhelmed with requests during the COVID pandemic, corporate lenders are often bureaucratic, therefore these situations took time and strained the Owner/Tenant relationship. From the tenant point of view it seemed even as if the Owner was “out of touch” because it could not react to the situation in a timely manner.
In Latin America debt is not available to finance shopping malls for a variety of reasons, including unpredictable inflation (especially in Argentina and Venezuela) and currency fluctuations. The impact of this is that the owners finance shopping malls themselves.
Latin American owners take on more risk, therefore, they have their ear to the ground and are “in touch” with their tenants and customers to make deliberate decisions based on up-to-date information. As a result, Latin American shopping mall owners are nimbler and more flexible to make decisions because they do not need Lender permission. A corollary to this is that it is challenging to start in the retail industry because there is no debt available. Furthermore, in Latin America, the mall owner must pay for infrastructure and build, develop, and maintain the roads, water and sewer, traffic lights, and utilities that serve the mall and its customers. U.S. mall owners may take some of this public infrastructure for granted because their county or local municipality may already provide it (think paved roads, sewer, water) or provide some financial incentives.
In the U.S. we currently see many portfolios of shopping malls in some form of foreclosure, special servicing or bankruptcy. The lender and or special servicer is not always an expert at retail tenant operations. How can these malls survive and thrive?
For example, U.S. indoor malls are defaulting on their loans – Paris Based Unibal Rodamco-Westfield (UNIBAL) is selling its entire portfolio of 24 U.S. Malls – including some of the highest profile malls in U.S., including the Mall at the World Trade Center. Unibal purchased the portfolio from Westfield Corp in 2018 for $15.7 Billion and at the end of 2021 it was valued at $13.2 Billion.
As mentioned previously, the total population of the five countries I visited is nearly 319.23 Million (nearly the size of the U.S. population). Approximately 70% of their population (223.46 Million) is low to middle class, and, part of what is known as the “informal economy.” Members of the informal economy do not have access to banks, traditional methods of payment such as credit cards or Wi-Fi access at home. In these countries, members of the informal economy far out number members of the formal economy.
Latin American shopping malls largely target this segment of the population, in a format that invites them to believe they are (or may soon join) a superior, aspirational class. Who can argue with this when all classes and socio-economic levels mix side by side in the shopping mall and do not mix in other places in these countries.
A real estate consultant working throughout Latin America and Spain shared with me the business strategy, “It is better to have one million customers with one dollar than one customer with one million dollars.” In Latin America it is too risky to focus on luxury brands because the luxury buyer may easily choose to fly to Paris and buy the Louis Vuitton purse in person and have an experience, versus shopping locally. There is not enough luxury demand to sustain the retailers and shopping centers. The one million customers with one dollar will shop at the mall again and again as they have no other alternative.
Knowing the target population, some retailers and mall owners help customers find a way to make their purchase by offering their own type of credit cards (such as Falabella and its chains) or ways to pay via prepaid cell phone apps. A large majority of the people who are in the “informal economy” do have cell phones but do not have traditional bank accounts or access to credit.
As a political tactic to satisfy this large population segment, during times their work is interrupted by events such as COVID or social-political uprisings, some governments’ regimes are allowing citizens to tap into their pensions early and/or they are directly paying people. Instead of depositing the money in the bank, people go to the mall to shop because they are fearful the currency may be devalued sitting in their pocket and/or because they don’t have access to a bank account.
Latin American mall owners are aware of this and know, despite economic hardships, people will buy because the inflation epidemic scares them into thinking that they need to spend the dollar in their pocket today because tomorrow it may be worth half, or less.
Latin American shopping malls are located in the heart of the community surrounded by residences and density. People can and do walk to the mall every day or go via public transport, if available, with stops inside the Mall in some cases.
The culture of Latin America is to get together – people want to go meet – they want a punto de encuentro (a meeting point) to have a coffee, to be together – they don’t want to live far away in a house surrounded by a white picket fence, shopping remotely and having Amazon leave their purchases at the doorstep.
To be fair, online shopping in Latin America is not as effective or convenient as it is in the U.S. Packages do not arrive in a timely fashion, and it is not always as economical. Therefore, the shopping center provides a location where the lower and middle classes may aspire to be part of the more formal economy through purchasing goods and participating in unique experiences such as pop-up museums, art exhibits, zoos, and performances.
Conversely, in the U.S. during the 1940s, after World War II, people moved to the suburbs and away from downtown shopping areas that had been dominated by small family owned department stores. That gave way to regional malls and retail chains leading the way for developers to build sprawling open air shopping centers and big box stores.
A downtown Miami shopping center owner told me, “U.S. shopping malls used to sit out in the middle of a field and everyone had to park a car and to go shop – now people want malls in the center of a city with hotels and apartments surrounding it to create activity – there is a change in mentality, in the way people are looking at things.”
“Nobody’s hanging around after work in many urban areas because so few are even going to work in the first place” said CNBC anchor Brian Williams three months ago. Security Access firm Kastle Systems tracked office use in ten major U.S Metropolitan areas for the week of October 3 – October 7, 2022 and reports that office use averaged 47.4% of early 2020 levels.
Unfortunately in the U.S., increasingly we see violence and shootings take place in shopping malls. I asked a leading operator of malls in Chile, Peru and Colombia, “Given the social unrest in your countries and demonstrations in the street and against government buildings and even metro stations in Chile, why don’t we see that violence in your malls?” She replied with a smile, “people love the mall, the mall is their backyard.”
In these countries the majority of the population does not have a backyard and governments do not invest in social infrastructure like green spaces, libraries, parks and in some cases even roads and sidewalks. The mall owners do.
The people feel “proud” of the local mall because the mall provides them something they can’t find elsewhere – a safe, clean, beautiful place to meet equipped free Wi-Fi and to spend time with the family.
Another consultant explained it to me in simple terms, “the bathroom in the mall is, in most cases, much cleaner and more beautiful than the bathrooms in the homes of the customers.”
Jockey Plaza, the largest mall in Peru, understands this and caters to the people, with a slogan “You are a Citizen Here and You Have Rights.” I’ve seen the mall’s banners with slogans saying, “You have the Right to Safety” “You have the Right to Cleanliness” “You have the Right to Peace.” The mall enforces these rights.
Just this week, I asked the Jockey Plaza mall Operator, “how are the sales given the current political demonstrations in Peru?” and he responded, “curiously, sales increased.” This could be because people feel safer inside the mall than outside in the streets.
In Mall Plaza Oeste, Santiago, Chile’s largest shopping mall, I visited an onsite small zoo, a green space and park with a pirate-ship that is free for all to enter. The mall makes sure to include several uses that make a day at the mall productive for the whole family including, a “boulevard” of financial services of several different banks, an area to purchase cars of all various brands beside a gastronomic food court and new movie theater offering both a normal and luxury movie experience.
In the U.S. there is now a trend for “demalling,” in other words, reengineering the mall to have a variety of uses. The change is profound. In May 2021, ICSC, International Council of Shopping Centers (ICSC) the U.S. based global association for shopping malls with over 70,000 members changed its name to Innovating Commerce Serving Communities and now uses the term “Marketplace” instead of Shopping Center. On its website, ICSC explains, “The Marketplaces Industry is made up of the places and spaces where people buy, dine, work, play and gather and is fundamental and vital to communities and economies.”
Latin America still uses the word “Shopping” to refer to their malls although they really have primarily always been the marketplace experiences that U.S. owners are now trying to replicate. For example, in Mendoza, Argentina, Palmares Open Mall has an onsite medical clinic with over 150 doctors that sees 30,000 patients a day, as well as a university. A doctor from the onsite clinic attended to me when I got a cold during my tour of the mall. In Peru, I visited a full scale traditional church inside the Plaza Norte mall – it also has a car dealership, bus station and area where customers can take selfies in front of the “7 wonders of the world” without having to travel. Jockey Plaza has “Jockey Salud” an entire building attached to the mall that is a medical clinic.
As stated above, Shopping Malls in Latin America also bring experiences to their customers that act as a magnet to attract traffic. In Sao Paulo, Eldorado Shopping hosted “Mundo Pixr Eldorado” an immersive experience between Pixar Animation and Disney Brazil. I witnessed the long cue to enter full of crowds of people from all over Brazil who wanted to visit “Disney” but could not make the over eight-hour flight to Orlando.
As we toured Morumbi Shopping Mall in Brazil (that in addition to stores, restaurants etc. also has an ice skating rink) the operator told me he often hears from the U.S. that the “mall is dead” because of online sales. He says this is not his experience, that he sees physical and digital shopping experiences now “lie in bed together” explaining that they are not in competition – they need each other.
A multinational retail tenant with stores located throughout Latin American malls explained to me the blend of “Frigital” meaning that the customer can shop on line and pick up the purchase in the mall. A retail and mall operator with malls in Chile, Peru and Colombia explained that a customer can order online from any of its brands (Falabella (retail store), Sodimac (Home Goods) or Totus (supermarket) and pick up their purchase at any location via a designated locker or pick up area.
Online purchases are now part of the shopping experience but not to the extent as in the United States for several reasons, including logistics and infrastructure and the cost of fuel which increases the price of goods and the time frame for receiving online purchases and the imbedded cultural norm that people like to visit the shopping mall in their neighborhood.
A Mall owner told me that “Brazil used to look to the U.S. for Shopping Mall Trends – now U.S. Shopping Malls are more focused on shopping and not so much on family and wellness. That’s why Brazil is looking for new ideas for China and Japan – where they are more focused on innovation and atomization.”
Latin American malls owners are very aware of their tenant and use mix. They plan it carefully to include goods and services people need (malls in Brazil even have car rental agencies on site) as well as entertainment and gastronomy. They are on the look out to bring innovative uses to their shopping malls.
Shopping Mall Owners in Latin America also know that their clients want to be proud that that the mall reflects their values. There is an increasing focus on ESG – Environmental Social Governance.
For example, in Sao Paulo Brazil, I climbed up to the roof of Shopping Eldorado to visit its organic garden maintained by mall employees, using food court left overs as compost, its produce is shared among its nearly 400 mall employees. The roof top garden (with views of Sao Paulo skyscrapers) is innovative, sustainable, good for the environment, reduces the carbon emissions of the mall and the community is proud of it
Latin American Mall Owners’ focus on the largest segment of the population is democracy in action. In addition to selling goods, the mall provides services such as manicured outdoor green spaces, cleanliness, air conditioning, heat, security, Wi-Fi access and entertainment to everyone. At Larcomar in Peru, the mall even provides a breathtaking Pacific ocean view. This is in stark contrast to other parts of these societies. As noted in Section 5 of this article, the largest mall in Peru, Jockey Plaza, takes this so seriously that it uses the slogan “You are a Citizen Here.”
Conclusion:
People who live in Latin America and the people who live in the U.S. are different in the way they go about their lives although they are similar in terms of their love of Freedom and the satisfaction that comes with the power to decide what to spend their money on and how.
Shoppers in Latin America not only seek the best experiences, they are very spontaneous and, above all, value “sharing” them which is possibly the most important part of their pleasure in shopping. That vitality in the quest to share is where Latin American Malls shine and specialize. They know their customers perfectly because the owners of the Mall live with them daily, and do not allow the tenants to divert a millimeter from what customers love and expect.
Finally, it is very true that when Latin Americans travel to the U.S. they invade the malls with a voracious appetite for big brands that don’t have retail locations in their malls, but they never do it alone, always as a family, always as a way to feel united to the community, to share that pleasure together.
To conclude: Shoppers in the U.S. could be described as “Anglo Saxon” in their decisions, more rational and less intuitive, more formal and less spontaneous. Shoppers and shopping malls in Latin America show us that a large part of their lives is sharing, and, the mall reinforces democratic values, despite the day to day political situation of the country. Pope Francis tells them: “Happiness in this life.” And the shopping malls have interpreted it correctly.
Food for thought: the economy itself is not the factor that is hitting the shopping malls hard in the U.S. It is the new generations that are not attracted to the old model and want more than just consumption.
Read more about Suzanne Hollander’s sabbatical in this piece by the International Council of Shopping Centers.
ENDNOTES
Suzanne Hollander’s research was conducted in Spanish and Portuguese. See below translation references.
[1] In Spanish, shopping malls are often called “centros comerciales,” which directly translates to “commercial centers.” For the purpose of this article, ‘malls’ and ‘centers’ are interchangeable and both refer to the traditional United States concept of shopping malls.
[2] ‘Superintendiente’ is a title used in Latin American countries to describe CEO’s, directors, and administrators. For the purpose of this article, the direct translation of ‘superintendent’ is used to describe the shopping mall CEO.
Do you disagree with the author’s conclusion? Have a different opinion or point of view? Please share your thoughts with REI, or better yet prepare and submit a manuscript for publication by emailing the Real Estate Issues Executive Editor (or Board) on this article to rei@cre.org.
Written by: Professor Real Estate® Suzanne Hollander, Esq.
Reprinted from Real Estate Issues Volume 47, Number 4 – February 10, 2023 with permission of The Counselors of Real Estate® of the National Association of REALTORS®.
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Copyright 2023 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
]]>By Steve McLinden
Contributor, Commerce + Communities Today ICSC January 23, 2022
U.S. real estate law professor Suzanne Hollander completed a sabbatical visiting more than 70 shopping centers in Brazil, Peru, Argentina, Paraguay and Chile, and what she learned may enlighten U.S. retail real estate owners. At a time when innovative solutions to dire challenges are in great need, she’s writing Strategies to Fill your Marketplace During Challenging Times: Case Study Latin America, due out this year.
Hollander’s trip to the five countries, which have a combined population of 320 million, took her to visit mall owners and managers, tenant brokers, real estate attorneys, local real estate professors and retail trade associations. The associate teaching professor at Florida International University’s Tibor and Sheila Hollo School of Real Estate found that occupancy levels at many Latin American centers were already back to pre-pandemic levels, despite currency fluctuation, high inflation, political uncertainty, the return of socialism and ongoing COVID challenges. The centers accomplished this in part by strengthening their community orientations, something U.S. centers still can learn from, she said.
“One of the biggest lessons from my investigation is the need to creatively rethink mall experiences, property and land use,” said Hollander, who has built a unique career with one foot in real estate law and the other in academia. Her experience includes a post as the city of Miami director of real estate and asset management, for which she oversaw a $17.5 billion portfolio from marinas to malls to theaters to office towers, and years as legal adviser to a Swiss real estate family office.
The seeds for Hollander’s sabbatical were sown over six years ago, when she spoke at international real estate conferences in Colombia and Peru. Designed to tell Latin American countries what they could learn from U.S. centers, she soon realized the reverse was true: “The U.S. had much to learn from Latin America,” said Hollander, who’s been named to the U.S. State Department’s Fulbright Specialist Roster as a real estate expert.
Among her sabbatical findings: Nothing beats hands-on ownership. Most successful Latin American malls she studied have in-house, family teams recruiting tenants. “That’s especially critical in countries such as Argentina, where there are few international brands and retailers,” said Hollander. “One of the biggest lessons for the owner is to always be on-site to create a real connection to the community and the tenant. In Latin America, it’s in their DNA; they know tenants on a first-name name basis, and they’re very close to the mall experience, which helps them make nimble decisions.” Hollander often heard this truism: “The cow gets fat when the owner is around.” She also noted that Latin America owners demonstrated a far greater capacity to work closely with tenants during hard times like COVID.
She has found many Latin America innovations to be downright inspiring.
Many Latin America centers have distinct, innovative community features. In Santiago, Chile, the spacious Mallplaza Oeste has a free zoo in an on-site park that also features a play area with a lagoon and pirate ship. It also has a car dealership that flanks its food court and a boulevard singularly dedicated to financial services, Hollander said. “In Peru, a shopping center had an old-style church on-site, offering services.” Families who can’t afford to fly to Disney World in Orlando are flocking to the Eldorado pop-up Mundo Pixar, an immersive experience between Pixar and Disney Brazil. In Rio de Janeiro, malls were full, clean and air-conditioned and had multiple safe spaces with free Wi-Fi, a welcome respite from the city’s overheated and busy streets.
Most mall owners in Latin America have owned their properties for decades, she said. There’s no debt or mortgage lending or subsidies available for mall improvements as in the states, she said, so owners must personally invest in their surrounding infrastructure, including roads, electricity, private security and water and sewer. “It’s hard to imagine a U.S. mall without a mortgage,” Hollander said, “but a corollary of this is that Latin American owners don’t have to wait for lender approval to make decisions; they’re responsive in real time.”
While tourists are important, most Latin American centers cater first to their communities, focusing on the middle class, their largest consuming demographic, Hollander said. Typically, malls are located in dense urban areas, making neighborhood needs paramount. “Malls aren’t built in the middle of a field like in the U.S, so they focus mostly on experiences and family connections, not things,” she said. “Customers want a punto de encuentro, a meeting point, to have a coffee and be together.”
Gasoline in most Latin American countries is prohibitively expensive and logistics and roads are iffy, “so even if you order something online, you’re probably going to have problems getting it,” Hollander said. In response, centers in Latin America have created ways to blend online orders with pickups at designated locations or lockers. For example, at Chilean retailer/developer Falabella’s centers and stores, customers can buy online and pick up at any Falabella-affiliated store, such as Tottus supermarkets and Sodimac home improvement centers.
Other challenges and philosophies vary greatly by country. In Brazil, Chile and Peru, where riots, political unrest and the rise of socialism have become increasingly common and make headline news, she said. “The malls are democracy in action. Everyone, no matter their social or economic class, is welcome. This is not found in other places in these countries.” There’s an unwritten rule there that the mall is sacrosanct. “Even though it’s privately owned space, the mall is considered a respected public space, a safe haven,” Hollander said. Centers tend to reinforce this ethic. Peru’s Jockey Plaza, for example, has prominent banners saying: “You are a citizen here, and you have rights.” A counselor for Falabella in Chile told Hollander that locals consider malls “to be their backyards and want to protect and care for the mall.” A professor in Brazil told her malls “are like the beach to the people.”
During her trips to more than 20 Argentine malls in such cities as Buenos Aires, Rosario, Cordoba and Mendoza, Hollander witnessed an urgency among consumers to buy, driven by factors not faced in the U.S. “Currency fluctuates daily to unpredictable levels, so people spend the money they have today because they worry it will lose value sitting in their pockets,” she said. “If they don’t buy the shoes or the washing machine, it may cost 100 times more tomorrow.” Store signs typically say: “Ask for the price.”
Touring Mendoza’s Palmares Open Mall, Hollander began to feel intense symptoms from a severe cold. She told the owner she’d have to leave to seek care, but he’d have none of it. He brought in his own family doctor to examine her in the mall’s on-site medical clinic, which treats over 30,000 patients a month with more than 150 doctors, and they continued their tour. “Everything you need to live is there at that mall,” Hollander said, “They even have a university on-site.”
In Paraguay, public transportation is lacking, sidewalks are few and street security is a concern, said Hollander, who visited malls, warehouses and a factory with the family owners of those businesses. However, in contrast to Argentina, international retailers and businesses are coming to Paraguay, even with its relatively small population of 7 million, because the dollar is more prevalently used, taxes are low, the economy is open and the middle class is increasing, Hollander said.
Before her trip, Hollander had studied the impact that Peruvian and Brazilian shopping malls have in boosting local economies and jobs, even where consumers are paid only in cash; don’t have credit cards, bank accounts or Wi-Fi; and live in makeshift, untitled homes in neighborhoods with no health or building codes. More than 70% of Peruvians and about 40% of Brazilians live in this “informal economy,” Hollander said. “There are no parks, no green areas, no libraries, no internet, and streets are made of sand or dust,” she said. “For them, the mall is an oasis.” Because so many customers don’t have credit cards, “malls figure out ways to issue their own credit or ways to pay other than cash, including telephone apps,” she said. Falabella, in fact, is one of the largest issuers of credit cards in Chile and Peru.
U.S. centers can learn much from their counterparts in Latin America, Hollander said, but Latin America itself may be the next investment horizon for global funds if the countries continue to build democracy and transparency in real estate and property rights.
By Steve McLinden
Contributor, Commerce + Communities Today
Disclaimer: Professor Real Estate® written materials apply generally to real estate subjects and are not intended to apply to specific legal issues.
Shared from ICSC January 23, 2023 Article
Copyright 2023 ~ All rights reserved. ~ Professor Real Estate® Suzanne Hollander
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