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)