Flotte’s Notes on

Mobile/Baldwin Real Estate

An Unofficial Encyclopaedia of Mobile & Baldwin Counties

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Mobile/Baldwin Real Estate

Alabama Real Estate

Mobile Real Estate

Baldwin Real Estate

Baldwin Developments

Real Estate Companies

General Real Estate

  

  

 

 

   

 

University of South Alabama Mitchell College of Business Center for Real Estate Studies

The Alabama Real Estate Research and Education Center (AREREC)

Alabama Traffic Counts

USA’s CRES Mobile Market and Baldwin Submarket Stats and Baldwin Coastal Stats

Mobile Real Estate Investor’s Group (Mobile-RIG)

 

Alabama Real Estate

·        The Alabama Association of Realtors  has 14,821 Realtor members

·        Alabama Real Estate Commission

·        Eminent Domain: After a case where the U.S. Supreme Court said the Connecticut city of New London could take property to spur private development, the Alabama Legislature passed a law sharply curtailing the eminent domain powers of Alabama cities and counties. A proposed state constitutional amendment could further tie Mobile's hands, if it passes the Legislature and gets ratified by voters.

·        Under the 2004 International Building Code, buildings must be able to withstand 140 mph winds. Before, the requirement was 120 mph winds.

·        Alabama doesn't require sellers to disclose to potential purchasers of problems with a house that could hurt its sales-worthiness or desirability, except for health or safety concerns.  Alabama Supreme Court rulings have upheld the "caveat emptor" rule. Alabama was one of the last states in the nation to approve a law spelling out tenants' rights in disputes with landlords. – PR 12/27/07

·        Caveat emptor (let the buyer beware), as spelled out by the Alabama courts, means that sellers and their agents in used real estate transactions, as opposed to new construction, have no duty to disclose defects in the property. Law does not require a seller’s disclosure statement. Most real estate purchase agreements in Alabama specify that the property is sold “AS IS.” – Egan, Lagniappe, 6/17/08

 

Environmental Regulation

·        Wetlands

·        Alabama Beach Mouse

 

GO-Zone

·        Congress approved the Gulf Opportunity Zone Act of 2005 to boost economic recovery from Hurricane Katrina in Alabama, Mississippi and Louisiana.

·        The federal government allows certain projects to qualify for tax-exempt bonds, meaning that bond buyers do not have to pay federal or Alabama state taxes on the yield earned from the bond.

o       In its simplest form, financing through a GO Zone Bond can be compared to the tax-exempt funding normally available only to governmental borrowers and not-for- profit corporations. Interest on GOZBs is exempt from federal and State of Alabama income taxes; therefore the interest rate is lower than through conventional financing, historically saving a borrower 1.50% to 2.00%. Businesses in the GO Zone could get a variable rate loan at about 4.85 percent, while the prime interest rate charged to banks is now about 7.5 percent

o       The intent of such programs is to entice development by making it cheaper for businesses and municipalities to borrow money.

o       The bonds would be tax-exempt if 1.) 95 percent or more of the net proceeds are used for "qualified project costs" in the Zone, 2.) Governor Riley would designate the bonds as qualified for the purposes stated in the bill, and 3.) the bonds are issued prior to January 1, 2011.

o       Eligible projects include nonresidential real property (including buildings and their structural components and fixed improvements), qualified residential rental projects (multi-family housing, which requires a 20% affordable housing component), qualified mortgage issue projects (single-family housing, which requires that certain income tests be met), and public utility property.

o       Eligible projects may include, but are not limited to: retail stores, warehouses, manufacturing facilities, industrial plants, office buildings, bank branches, hotels and motels, restaurants, physician office buildings, medical hospitals and clinics.

o       The money cannot be used for residential homes or condos, although some rental properties might apply. Other uses that are not allowed under the act include, golf courses, tanning salons, hot tub businesses, movable equipment and businesses in which alcohol is sold or gambling is allowed.  Items that could later be moved out of the area, such as light equipment, are not eligible.

o       Alabama can approve up to $2.1 billion in tax-exempt "Go Zone" bonds over the next five years.

o       Because bonds will have to be arranged and issued for the loans, offering warrants for less than about $2 million would not be practical. Local businesses that need less than $2 million, however, will also be included in the financing. Local chambers of commerce and the Baldwin County Economic Development Alliance will be developing pools of businesses that can join together on a bond issuance that would allow them to divide the funds.

o       The bonds would be attractive to investors because they would not be subject to alternative minimum tax.

·        Businesses are allowed to claim accelerated depreciation on new property investments.

o       People who restored or expanded commercial property for commercial use after Aug. 28, 2005, can claim a 50 percent depreciation. People who buy existing businesses cannot claim the purchase price, but if they spend money to repair or improve the building, those funds can be claimed under the depreciation act. The depreciation deduction would be exempt from AMT and applies to property placed in service prior to January 1, 2008, or January 1, 2009 for real property. Businesses or individuals that elect to claim the accelerated depreciation deduction under the Act will NOT be able to benefit from the tax-exempt financing outlined above.

·        The bill also doubles to $20,000 the deduction for reforesting for small timber owners, those owning less than 500 acres.  It also reduces their tax burden by spreading this year’s losses against previous tax filings.

·        Eligible counties in Alabama include Baldwin, Mobile, Washington, Choctaw, Clark, Greene, Hale, Marengo, Pickens and Sumter.  The zone also includes 50 counties in Mississippi and 20 parishes in Louisiana

Other incentives

·        Permitted under a 1999 state law, improvement districts, among other things, allow cities to extend their tax-exempt status to private developers as an incentive to build revenue-generating projects. Municipalities don't pay taxes, and in an improvement district that benefit is extended to landowners who pay for expensive infrastructure projects -- from installing sidewalks and parking lots to drainage, lighting and sewer work -- that might otherwise be funded by taxpayers.

·        More complex arrangements, called cooperative improvement districts, allow developers and municipalities to work out revenue-sharing deals and make it possible for developers to self-impose taxes on their projects -- an extra penny of sales tax, say, or an additional 2 percent levy on hotel rooms -- to help pay their bond debt

 

Alabama Tax Liens

·        Property-tax delinquent parcels are auctioned by the county tax collector at a tax sale.

·        Bidders may bid over the tax and cost to win the properties. Winning bidders are awarded a tax certificate.

·        Owners have to pay the tax and cost plus 12 percent interest on the bid amount to redeem the property.

·        The least attractive properties often attract no bids. The state Revenue Department assumes control of those leftovers, which are described as "sold to state" (a misnomer because no money changes hands). The parcels come off the local tax rolls, though 12 percent annual interest continues to pile up.

·        In Mobile, the state most commonly takes over small residential lots and decaying houses, often in troubled neighborhoods. Sometimes owners have died, and their children or grandchildren can't be bothered to pay taxes, in part because the property is worth so little.

·        After three years, the state can issue a tax deed, a somewhat stronger claim to the land. But even then, state courts have opened exceptions that could allow the old owner to return and reclaim land, even when the new owner has built a house or made other improvements. In general, the original owners can return and clear title at any time. It can take six years and two trips to court to clear title to the land.

·        In Alabama, title insurers may balk at covering properties that new users are trying to buy from the state. That makes it impossible to borrow money from a bank to buy such land or build a house. And thus sold-to-state property can be exceedingly difficult to get back into the hands of private owners. "Alabama apparently has a very lengthy, inefficient and ineffective property tax foreclosure system," said Frank Alexander, an Emory University professor and top expert on land banks.

·        The top academic study of Alabama's situation calls for legal reforms, but it's not clear if the Alabama Farmers Federation would be willing to loosen the reins on government's ability to take property. The federation, one of the state's top advocates of property rights, recently attempted to further restrict eminent domain powers.

·        Source: PR 11/20/07

 

 

 

 


Mobile Real Estate

 

·        Mobile Area Association of Realtors

·        In August 2006, a year after Katrina hit, prices stabilized at a new, higher price level. A house that sold at $100,000 now sold for $140,000, and a $150,000 house was selling for $200,000. Houses selling in the $120s per square foot is in the $150s now. The most dramatic price increases have come in the less expensive neighborhoods, rather than in high-priced developments – PR 8/27/06

·        Ben Tom Roberts, a Mobile Realtor whose seven-year stint on the board of the Federal Reserve Bank of New Orleans ended in 2006, said that he believes the local real estate market has moved past a Katrina-related price spike, but will land somewhat softly at about 10 percent higher that pre-hurricane prices.

·        What local builders used to consider large -- 3,000-square-foot homes -- has been replaced in the last several years with 3,500- to 8,000-square-foot homes. That bucks a national trend that shows homes are getting smaller

o       In Spring Hill people are paying $200,000 for a house and tearing it down to build a $500,000 or $700,000 house.

o       There are more than 20 homes under construction in Stillwater in the 4,000- to 5,000-square-foot range, and future subdivisions that will have homes at 10,000 square feet or more.  Custom home buyers are looking for the same amenities: at least four bedrooms, a home office, bonus room, media room and lately, an exercise room. – PR 4/29/07

·        Mobile County doesn't require multifamily developments to meet subdivision regulations. Mobile County doesn't require multifamily developments to meet any type of design standards that relate to site plans and lot layout. In general, the county requires those projects in unzoned areas outside of municipal police jurisdictions to meet its building codes and other basic requirements that don't relate to the site's design, unless the drainage impacts the county right-of-way.

·        Mobile appreciated at an average 6.6 percent for the past three years, except for the time after Hurricane Katrina in August 2005 when the appreciation rate hit 18 to 20 percent, according to Don Epley at CRES – Kathy Jumper, PR, 10/28/07

·        Mobile saw a 1.63% increase in home values in the first quarter of 2008. Over the last year, house prices are up more than 6.7 percent in Mobile County, making the city among the nation's top 10 metropolitan areas in terms of price appreciation, according to the Office of Federal Housing Enterprise Oversight – PR 5/23/08

   

Mobile Land Bank

·        The Mobile City Council adopted a plan to create a land bank to seize abandoned, tax-delinquent property, clear up ownership questions surrounding the land, and sell it. A City Council committee approved the plan, agreeing the council would re-examine operations in a year and decide if the council should create an advisory board.  – PR 11/20/07

·        The concept has been strongly pushed by City Councilman William Carroll, whose district includes several distressed neighborhoods plagued by abandonment.

·        Ideally, some parcels will be attractive to for-profit developers. Others could provide a cheap source of land for nonprofit housing groups, including Habitat for Humanity, DASH for the Gulf Coast, the MLK Avenue Redevelopment Corp., and the Volunteers of America. New homes built by those groups might help revitalize areas such as Plateau and the neighborhood between Martin Luther King Jr. Avenue and Three Mile Creek.

·        The biggest risk would be that the city takes over land it can’t sell. Mobile Mayor Sam Jones has vowed that the city will only seize parcels when there is a new user lined up. Wettermark said city officials plan to sign contracts with buyers before condemning land and said those contracts would require buyers to complete their plans by a specified time or give the land back to the city.

·        The other big risk is that legal fees could exceed the value of the property. Birmingham gave up on clearing title to properties after trying a group of 20. The state is willing to sell tax-delinquent parcels to governments for a small sum, and then the city would file suit in Mobile County Probate Court to condemn anybody else's right to the land.

 

Mobile Developments

Mobile Commercial Development

·        The commercial market in Mobile and Baldwin counties had a record $157 billion invested in commercial real estate in the first four months of 2007, up from $97 billion during the same time last year. Office building transactions totaled a record $95 billion in the first four months of 2007, according to NAR reports. The other commercial sectors were industrial, $11.9 billion, down 13 percent from 2006; retail, $27.7 billion, double the amount during the same months in 2006; and multifamily, $23.2 billion, down 25 percent from the same time last year. The newer retail sites are leasing for up to $25 per square foot, compared with an average $12 to $18 per square foot for existing retail space. Office rental rates have not increased like the retail sector, but much of that can be blamed on a lack of Class A office buildings, leasing agents said. Rates average $15 to $16 per square foot for newer or updated Class A office space, while Class B space averages $12 to $15 per square foot, according to leasing agents. Lease rates for the RSA Battle House Tower, Mobile's newest Class A space, start at $20 per square foot and rise to $24 per square foot for upper floors. The office market is sporting an 85 to 90 percent occupancy rate overall, but that is expected to change when two major tenants in the AmSouth Bank building downtown relocate to RSA's 35-story office tower by the end of the year – PR 6/17/07