Time to Buy a Home in Florida? Be Careful.

To Canadians, whose economy has remained strong compared to that of the U.S. during the past five years, the lure of cheap second homes and condos in Florida, Arizona, Texas, Nevada, even California has been strong and sustained.  And judging by all reliable forecasts, the cheap market will continue into the foreseeable future.

Does that mean this is a good time for you to buy? Should you wait until the market drops even more?

Are you afraid of missing the best deals? Will mortgage rates drop even lower?

Flip a coin on any of these questions and your decision is as good as the experts’.  Nobody predicted this real estate depression (and that’s what it is, no matter how politicians might spin it) would last as long as it has.

Are there bargains?  Yes.  But along with the opportunities there are also pitfalls.  The real estate professionals we are in touch with almost every day tell us you need to be careful entering this market.

We know of many Canadians who thought the market was at its lowest three or four years ago, who bought properties at what they considered “rock bottom” prices and with mortgages that seemed impossibly low, and who are now sitting on “underwater” properties—valued at less than they paid for them. They also bought into condos that are now half empty because their previous owners have given them up.

That’s not to say that by holding on to the properties for 10 or 20 years they won’t recoup their value—they probably will.  But that isn’t what they bought into and some are disgruntled that they took on debt they didn’t have to at a time in their lives when they wanted to be free of such encumbrances.

However, if you are looking for properties in the sunbelt, make sure you deal with a reliable broker who knows not only the properties he or she are selling, but also knows the various financing options to which you might have access.

The drop in mortgage rates has brought with it extremely tight lending guidelines, and some of the exerts we have listened to over the past few weeks say that banks are turning down nine out of 10 applications for financing, most of those turndowns to people who otherwise would have been considered good risks.

You will also need to be aware of the financing options and regulations for foreign part-time residents and investors, and the tax implications should you buy or should you later want to sell.  They are tricky and you need some expert help in being guided through the maze.  You will find, for instance, that many tax breaks that are available to Florida residents are not available to you.  Many Canadians think this unfair, but you must realize the tax breaks such as Homestead were put in place to help native Floridians hold on to their homes, and those tax breaks are financed by the taxes other Floridians pay.  They were not designed to help out foreign residents.

There are also tax implications you would need to deal with through the IRS should you want to rent your property or sell it.  The fact you pay taxes in Canada does not shield you from having to pay taxes to Uncle Sam too.  Uncle Sam may look like a pleasant old gent, but when it comes to taxes, he is merciless.

The days of finding a nice property and shaking hands on a good deal with the owner are long gone.

Settling on a price that you consider a “good deal,” is only the beginning of what could be a long trip, so be prepared and make sure you deal only with professionals who know the “foreign buyer’s” market.

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