By NEIL HARTNELL
Tribune Business Editor
The Bahamas Real Estate Association’s (BREA) president yesterday described his members as being “on Cloud Nine”, after the Government unveiled a process to ‘pre-approve’ first-time home buyers for the Stamp Duty exemption.
Franon Wilson told Tribune Business that the three policy steps unveiled by the Christie administration with regard to the first-time buyer Stamp Duty exemption meant the New Year “could not have started off better” for realtors as a result.
“The reality is it brings the clarity BREA members have been asking for,” Mr Wilson said. “It puts people trying to own a home in a position to do so, and to start the year off with this, I don’t think BREA members can be any happier.
“Especially given that a number of them went public in 2013 with this being their biggest concern. This couldn’t have been better, it really couldn’t. We are right now on Cloud Nine. This is huge.”
Tribune Business revealed last year that BREA and Mr Wilson had been pushing the Government to develop a ‘pre-approval’ process, whereby banks and other mortgage lending institutions would know in advance whether first-time borrower clients could qualify for a Stamp Duty exemption worth up to $50,000.
Such a process, they had argued, would remove a huge amount of uncertainty for all involved in the home buying process - vendor, purchaser, lender, realtor and attorney.
Mr Wilson said at the time that it would also remove the need for banks to ask first-time buyers to come up with extra money, or place funds in escrow, to cover the potential Stamp Duty payment should they not qualify for the exemption.
This had often prevented transactions from completing, as buyers were unable to come up with the extra funds.
And, apart from boosting the real estate market, Mr Wilson said the ‘pre-approval’ process would also benefit the banks and other commercial lenders, as the conveyancing documents would now be Stamped and recorded much quicker.
This will ensure their security for the mortgage loan is perfected that much faster, increasing their confidence to lend.
“The banks will be able to have their documents Stamped a lot faster,” Mr Wilson said. “Previously, before they were Stamped, the Stamp Exemption Unit at the Treasury would have to review them.
“Unscrupulous persons had a window where they could go and sell a property twice before it was recorded. Now, not only is this good for BREA and the public, but we are strengthening our financial system.”
The BREA president added that the Government’s three policy steps would “help to move real estate faster, and development happens when real estate moves”.
Work and business was created for the likes of contractors, construction workers, furniture stores, landscapers and utility providers, such as BEC, BTC and Cable Bahamas.
“The fact of the matter is that when someone moves into a house, real estate moves. That is a stimulus second to none in this country, with jobs created afterwards,” Mr Wilson said.
However, while providing more clarity for all parties involved in the first-time buyer process, the Government’s other two policy reforms carry a ‘double edged sword’ by seemingly reducing the dollar value of the available exemption.
The first stipulates that so-called ‘net purchases’ will only qualify for the full 10 per cent Stamp Duty exemption if the home/property’s combined appraised value is $200,000 or less.
‘Net purchases’ are transactions where the selling price is the total amount received by the vendor, with the buyer agreeing to pay all closing costs - legal fees, realtor’s commission and the 10 per cent Stamp Duty.
The Government appears to feel it is giving up too much revenue by providing the full 10 per cent exemption to such deals.
So, in future, the full 10 per cent exemption will only be granted for properties with an appraisal value of $200,000 or less.
However, for properties valued at between $200,000 and $250,000, the Government has agreed to grant the full 10 per cent exemption on the first $200,000, and exempt “one half” - 5 per cent - on the difference between the two figures.
The third and final policy, meanwhile, confirms the Stamp Duty exemption will only be granted for the purchaser’s portion - normally 5 per cent - on properties with an appraisal value greater than $200,000.
This again seems to be an attempt to reduce the amount of revenue foregone, and several sources yesterday suggested the $200,000 figure was a mistake and should be $250,000.
One realtor told Tribune Business of the Government’s policy pronouncements: “They’re just trying to cut back. It’s obviously been too much of a drain.”
Pointing out that the majority of home sales to Bahamians were in the $250,000 to $500,000 range, the realtor added: “It’s unfortunate, but it’s going to hurt sales. It’s just going to make it more difficult, I’m afraid.”
They also added that the Government’s policy statement did not address the “confusion” caused by the Treasury’s practice of adding the conveyancing value to the mortgage, which was being used to push first-time buyers over the $500,000 qualifying threshold.
And the realtor added: “A whole bunch of people had been stopped from getting the exemption because they owned property previously and lied on the affidavits.
“The Government did nothing about it. If they had prosecuted one or two people very quickly, that would have gone right out of the window.”