Article: In Florida, New Condos On The Block

The New York Times today featured an article about Florida condos being sold in auctions. Earlier this month, I mentioned an article that spoke of online auctions for Florida property; the NY Times instead talks about the more traditional type of auction.

With new condo developments struggling and prices falling fast, developers are often opting for this method of selling as a quick way of offloading large numbers of their apartments, in some cases even trying to sell all units available. Each condo has a minimum price set (which it must reach, otherwise it will not be sold) and bids are then taken on and above that price.

The article gives the example of a recent auction for 33 units at The Edge, a 307-unit development in West Palm Beach. Minimum bids for the various different apartments ranged from $95,000 to $225,000, and all attendees were required to bring a $5,000 cashier's cheque or money order. Those apartments that sold typically went for about 20% higher than their set minimum price.

Also mentioned is a previous auction for The Landmark in Palm Beach Gardens. In that instance, although the auction was well attended, ALL units failed to sell as not even one minimum bid was reached. Steve Good, of Sheldon Good & Company who put on the auction, said:

"The marketplace basically rejected the minimum bid. Prices have dropped so far so fast that in many cases, particularly where we're representing developers, the properties might not be worth more that the mortgages.

With the plummeting economy, there's a real open question in terms of what real estate is worth today."

Article: In Florida, New Condos on the Block (28th November 2008, The New York Times)

Articles on Foreclosures

Here's a few articles from US News (one from this month, two from earlier this year - but still highly relevant) with helpful hints and tips on looking for or buying foreclosed properties.

• The Top 6 Mistakes of Foreclosed-Home Buying
• 3 Key Ways to Buy Foreclosed Properties
• 5 Ways to Find Deals on Foreclosed Homes

The keys things that I picked out from these articles are that foreclosures properties shouldn't be considered short term investments. If purchased now, they will likely decrease in value in the immediate future, so are unsuitable for anyone looking to make a quick buck by "flipping" them. Furthermore, just because they're foreclosed homes doesn't mean that banks will be extra willing to accept low offers or do deals - they most likely won't.

When searching for foreclosed properties, the articles also advise to make contact with a local real estate agent. You'll firstly cut down on the amount of research you have to undertake in finding these properties, and secondly, an agent that has experience in dealing and selling foreclosures will be of enormous help to you.

Article: Florida Property Bargains For Brits

The (London) Times published a short article earlier this month on opportunities for British buyers in Florida. The primary focus of the article was new-build condos and houses in developments that, now built, are difficult to sell because of the downturn in the U.S. property market. Some such properties are now being sold on online auction websites for prices vastly under what they were valued at a year or so ago.

Nevertheless, the article also highlights some possible problems with buying in Florida. Notwithstanding the current slump there, issues include high-ish property taxes, and the concern that British owners may run into financial trouble at home, causing a knock-effect in the Sunshine State.

Article: Florida property bargains for Brits (7th November 2008, The Times)

Article: Real Estate Increasingly Onerous For Foreign Buyers

Here's a great and highly relevant article from The New York Times. Published a few days ago, it highlights the issues facing foreign buyers at the moment, in Florida in particular. (Florida is the state where most foreigners buy - of all property bought by foreign buyers in the U.S. in 2007, 26% occurred in Florida.)

A British couple from Birmingham, Gary and Denise Murphy, are currently encountering problems buying their dream Florida property in Orlando. The (un-named) U.S. bank from which they planned to obtain a mortgage first increased the interest rate from 4.9% to 7.9%, then increased the amount they wanted in downpayment from 25% to 50%. The Murphys also mention the huge amount of paperwork they would have had to complete to get the mortgage; no doubt an example of the lender imposing stricter checks on foreign buyers.

Another British buyer however, Brian Dingley of London, didn't face too much difficulty in buying two properties just outside Tampa. (Little is said about the actual buying process he faced, save for the fact that one of his properties is yet to be built.) He believes the housing market there has bottomed out, and now is an excellent time to buy.

In the same way the article shows some of the problems that foreign buyers may encounter, it also serves as a useful guide as to what to expect if looking to buy a property in Florida - and how to get around these issues.

Generally, raising finance is probably the most potentially troublesome aspect of buying a property. Buying with cash of course elimates much of the hassle...but not everyone has bank accounts swelling with spare money. Raising a downpayment of 30% to 50% may increase the odds of getting credit in the U.S., the article says. It also goes on to mention a German buyer, Stefan Werner, who bought in Fort Myers this year. Mr Werner was able to obtain a loan from a bank in Germany, bypassing any difficulties in dealing with American banks. If you obtain a loan from your home country, you're also much more likely to understand the banking processes and requirements of obtaining a loan - making the whole thing a little bit easier.

There are positives in purchasing a property in the U.S. The buying process may be the quicker and less convoluted than what you may have experienced back home. The New York Times quotes Gunter Haubrich, an agent in Boca Raton. He says that purchasing a property takes 45 to 60 days for most foreigners and that:

"the actual closing — the final signing of the contract and the disbursement of funds — can be done without any of the principals in the same room as faxes or PDF files can now be sent."

Which is certainly true. In actual fact, I was the owner of a Florida apartment 10 days after making an offer, and wasn't in Florida for any of that time! It was all done by emailing PDFs back and forth, plus a little help from Fedex. And of course my parents who were out there and viewed the property, and were able to pay the agent directly for things like an property inspection.

Back to the aforementioned Mr Werner:

"I didn't find the property-buying process in America difficult in the least. You just need to find a good broker who will look after your interests."

I agree with him 100%!

Article: Real Estate Increasingly Onerous for Foreign Buyers (6th November 2008, The New York Times)

Article: Savvy Buyers Know The Ins And Outs Of Flipping

Yesterday's Miami Herald featured an interesting article about those that are taking advantage of foreclosed properties.

Such foreclosed properties will likely be priced low; are being sold by a bank (who needs to sell the property, and is thus seen as a motivated seller); and can often bring other opportunities to potential buyers - such as allowing them to purchase particular properties or in areas that would normally be unavailable.

Buyers of these properties would normally only ever deal in cash, given the current difficulty in raising suitable credit. Furthermore, purchasing properties in cash may also negate the possibility of running into future financial difficulties.

Once a foreclosed property is bought, the new owners undertake renovations and then either sell the property on or - more likely - rent it out. In this way, people can buy a reasonably priced property and begin earning income from it whilst it appreciates in value - if not immediately, given the current housing market, in the long term at least.

Bob and Meg Massing of South Carolina are shown in the article as example of those undertaking the above. They only buy properties for cash and usually do most of the renovations to the properties themselves, thus keeping their costs low.

Randall Porter of Ohio is also featured in the article, dealing in very-low priced homes. (He talks of purchasing a property for $12,000.) Porter is also a good example because he takes full advantage of the Internet to the do his research. Whilst the number of foreclosed properties in his local area may be considerable, very few of them may be suitable for him to buy for one reason or another. When looking to buy a place, he whittles down the number of properties to only a handful, and then tracks these online to see any changes in price or status before comitting himself into making an offer.

So, readers, a foreclosed property might be the thing for you too.

Article: Savvy buyers know the ins and outs of flipping (9th November 2008, Miami Herald)