As George Bernard Shaw said so well: “England and America are two countries separated by a common language.” This is especially true for UK residents buying villas and other investment properties in Florida, where surveys are referred to as “appraisals”, completions are called “closings” and no one is ever really sure what an “escrow” is. It’s important, therefore, that British property buyers in Florida not only understand both “languages” but that they also keep abreast of the very different buying and selling procedures that operate in both countries.It’s equally important that UK property investors secure the assistance of companies or individuals who are experts in the fields of trans-Atlantic real estate and US financial practice. Aided by this expertise, UK purchasers will minimise the risks they take and maximise the personal and financial returns on their investment, especially in this current unprecedented
“buyer’s market”.
Legal documentation
A major difference between the US and UK property buying and selling process is the volume of legal documentation required by the various US federal, state and local regulatory authorities. Although this can be rather daunting for UK buyers, this documentation does provide a high level of safety for both the buyer and the seller, particularly for UK investors who often complete the purchase by post from over 4,000 miles away.
Additionally, the almost universal use of a closing agent or title company (a licensed, independent third party who oversees the completion) simplifies the process and underwrites the Title policy, allowing many UK purchasers to complete the entire purchase and/or sale from the comfort of their home back in the UK. Consequently, it is now possible, under the right circumstances, for UK investors to find, evaluate, purchase and finance a Florida property without ever visiting the Sunshine State! Of course, on the whole it is not advisable to buy anything that you haven’t been able to view in person.
Internet property search
According to the National Association of Realtors (NAR ), 84 per cent per cent of homebuyers now use the internet as part of their purchasing process. This medium can dramatically increase the efficiency of a UK buyer’s search for a property by eliminating nonstarters with little effort and no expense.
It also aids the communications between the realtor and the buyer, with a simple click on the subject property and a request of ‘send me properties that look just like this one’.
In contrast to the UK, realtors in the US have physical access to all of the properties listed for sale so it’s a breeze to be able to view the ones you like in quick succession, and this eliminates the inconvenience of having to form relationships with a number of agents.
Online Florida property databases such as the Multiple Listing Service (MLS) help streamline the search process. It’s important to understand that although all US realtors are estate agents, not all US estate agents are realtors. If you work with a fully qualified and accredited realtor then you’re working with a professional agent who meets the licensing, academic and financial requirements of the NAR , and is someone who will have full access to the MLS.
What’s new this year?
The latest property news in Florida is the emergence of the “buyer’s market” and an overall reduction in property prices. After a number of very strong years where the seller of the property was pretty much in control of the transaction, excess inventory and the effects of the credit crunch have now given that advantage to the buyer.
For international buyers, a weak US currency, a wide range of property choice and location, motivated sellers, price reductions, and all in one of the most popular places in the world, are just too much to ignore. A recent buyer just ‘stole’ a 3,000 square foot, six-bedroom, four-bathroom, twostorey pool home for £125,000 – just 10 minutes from Disney World! After taking the deposit into account, the mortgage on this home works out at around £325 per month.
With state economist Hank Fishkind and currency experts Moneycorp predicting price recovery and a stronger dollar towards the final quarter of 2008, the window of opportunity for buyers may not be as long as expected. Inventory counts are probably the biggest factor but foreclosure prices, multi-millionpound UK hedge funds, online property auction outlets like that of Stirling Sotheby’s, a slow down in new home construction and a tremendous general worldwide awareness of the property bargains to be had in this climate will help to reduce levels and rebalance the market. Also, the number of new movers to the state remains high, at almost 900 a day.
Nancy Riley, 2007 President of the Florida Association of Realtors, reminds us that Florida has been one of the top 10 fastest growing states for seven decades in a row now, exceeding the US average by 100 percent since 1970.
A recent press release cited the following facts about the state’s growth:
- The U.S. Census Bureau projects that in 2010, Florida will surpass New York and become the nation’s third most populous state. By 2030, the Census Bureau projects that the state’s population will reach 28.6 million, an increase of 12.7 million since 2000.
- One reason for this growth is that the state’s highly diversified economy continues to attract jobs in tourism, technology, international trade and business services. That brings in individuals, couples and families in their 20s to 50s, primarily to Florida’s larger metropolitan areas.
- Florida traditionally captures a large share of the domestic retiree market, ranging from highly affluent entrepreneurs and executives to moderate-income couples seeking a warm-weather destination that has plenty of recreational opportunities.
- According to the Census Bureau, there are 76 million baby boomers born between 1946 and 1964. If only five percent decide to retire to Florida, that alone would add 3.8 million new residents.
- International buyers provide a third stream of migration into Florida, and they include many working-age professionals, retirees and affluent second-home buyers.
As Riley said, “The bottom line is that more than 900 people move to Florida every day and that provides a solid foundation for our state’s residential real estate market.”
Davenport and Kissimmee, the two most popular areas in Florida for British investors because of their proximity to Disney’s resorts, have strong residential bases so many realtors are seeing a change in the rental market, with a number of owners switching their homes to long-term tenants. It takes away some of the stresses from a ‘week to week’ scenario, saves on some of the licensing fees and the tenant pays most of the bills.
US interest in short-term lets is also starting to rise, though. Two major news stations in Orlando have recently aired stories on the rise in popularity among Americans for this style of vacation, and notes that the economics of eating in and spending a few days around the villa as the main reasons for this shift.
Mortgages
Other than nearly all lenders moving their maximum loan-to value from 75 per cent to 70 per cent, the biggest effect from the recent credit crunch is more in the length of time it takes to process mortgage applications as lenders require more supporting documentation. Stated income products (where income is not verified) are still available in certain market sectors but at higher deposit levels.