Hello Buyer/Investors

If you are thinking of buying property in vacation areas in Florida, particularly Orlando & Miami, BEWARE!! I'm advising mainly European, British & Irish buyers as they are the main vacation home buyers.

Agents commissions on these properties are horrendous. I've seen commisions starting from 7% and up to 10%. Therefore if you buy a $300,000 home, its possible that $30,000 of that will be commission. Standard commission in the U.S. is 3% each side of the deal. Therefore if you are selling a home you pay 3% to your agent (SELLERS AGENT) and 3% to the buyers agent. HOWEVER, if you are buying a new property there is only one side (BUYER) and it therefore should only be 3%. Therefore its possible that you could be overpaying on a $300,000 property by $21,000!

IS THIS ILLEGAL? The answer is NO. What happens is you approach an agent and he/she helps you find properties that you are interested in. He will tell you that he is a BUYERS agent and he is solely looking after your interests. He/she will say that the cost to you is zero, that the builder/developer pays his commission. This is true and here lies the problem. If a builder is paying him 10% commission and you are paying him zero, who do you think he is looking after? Himself and the builder of course, you will be shown the properties with the highest paying commissions.

HOW TO AVOID THIS RIP-OFF? When you are looking at properties ask the agent what is the commision on the property. If he talks around it and doesn't say ask him again. If he refuses to tell you......RUN.....and I mean literally, you are going to get ripped off. If you close on a property in Florida you will see the commission on the Closing Statement or HUD Statement anyway, so you will find out at some stage. They may also tell you that the property will cost the same, for example $300,000, whether you use them or not. This is also true, so bypassing the agent and going straight to the builder will not get you anywhere.

THE SOLUTION? Talk to different agents and ask them if they will work for 3%. If you cant find any, email me and I will put you in contact with reputable real estate agents. Then what happens is you purchase the property through the 3% agent for the same price, $300,000, BUT, he will credit you back the balance of the commission in closing costs, which could be up to 7% or $21,000 or you can ask your agent to negotiate upgrades on your property from the commssion.

I know so many people that have been ripped off by this scam on international investors into Florida. They prey on your lack of knowledge of how the real estate system works in the U.S. You think they are working for nothing, that the builder pays them. At the end of the day it comes out of your pocket.

Also beware of closing costs, most foreign investors end up paying their portion (BUYERS) and the sellers portion (SELLERS). This can be up to $15,000, on top of the sales price. Have your agent negotiate that you only pay the BUYERS portion and no more. Also, it will cost you probably another $1000 or so, but get a real estate attorney to read over all contracts and have the closing process go through them. It will be worth every penny.

AREAS: The main areas where this rip-off is going on are around Orlando and Davenport (area close to Disney) particularly and anywhere close to Disney. Also beware of condos etc. in Miami.

DEVELOPERS/PROPERTIES: Be very careful with an Irish developer (who shall remain unnamed but gets lots of publicity in Sunday Papers, Sunday Business Post etc.) that owns a US real estate agency not far from Disney World. You will not be shown one property with just 3% commission. This developer/estate agent also offers LEASEBACK PROPERTIES. This is where the developer signs a contract with the buyer to leaseback the property over maybe a two or three year period and will pay the buyer a monthly return. This is very attractive as it means the buyer does not have any rental or other worries for a couple of years. HOWEVER, in most cases the leaseback is included in the purchase price of the property therefore you are giving the developer the money so he can pay you back monthly over a two year period!

Please email me or post replies if you have any other queries. I've seen agents making $100,000+ per month on these excessive commissions. Dont let them STEAL your money.

Please forward this page or make a link and send it to EVERYONE you may know that bought or is thinking of buying in Florida.

Hi invest-star

Can you post the initials of the company you are reffering to as there are a lot of companys advertising property in Florida at the moment. Many thanks for the tip off and advice

Lopin

HERE ARE A COUPLE YOU WOULD WANT TO RESEARCH VERY CAREFULLY:

http://www.coldwellbankerteamrealty.com
http://www.anarumogroup.com/


Basically stay away from any companies offering vacation/investment properties around that area. Commissions are very high, downpayments are very high (20-25% once you have your money down your screwed) and property is way over priced. What happened in these areas was investors flooded the market buying off plan and hoping to sell before they ever closed on the property. Now a lot of investors are stuck with properties and no buyers. I believe the very same thing is happening in Bulgaria, Dubai and many other countries - its the last ones in that get caught. Also the only real buyers are Europeans, US citizens tend to buy in more resendential rather than vacation areas. No U.S citizen is going to pay 7-10% commission and 20% downpayments!! So if you buy you are ruling out selling to the majority which are Americans, which is not a good way to maximise an investment.

If you are considering purchasing, a quick way to scan companies: go to their website, pick a property and call the company. Ask them what the commission is and what the downpayment is. Don't get confused between the minimum required down payment for finance in the U.S (as a foreign investor) and the downpayment required by the contract for the builder/developer. If you are getting finance in the U.S. most banks need 20% down. All this means is that at closing they will only give you 80% finance. But if you purchase a property from a developer and one of the requirements of the contract is 20-25% down - RUN. They reason there is such a high downpayment is so that once you go to contract they have you locked and if you decide to pull out you'll lose a lot of money. Compare this with most resedential sales for U.S. Citizens - $1000 will open escrow and if you decide to pull out, that is the maximum you will lose and even that seldom happens. I know investors that pulled out and lost their 20% deposits rather than proceed on a property they believed was overvalued, hard to rent and will just cost them more money.

Invest star

to be fair nothing you mention is really a rip-off or ilegal in Florida, thats just the way they do business. It's advisable before anyone invests abroad they gain a clear and full understanding of both the market and the law/customs and practice surrounding the purchase of property in that juristiction.

It's worth pointing out that buying holiday villa/condos in Florida has never been a great investment. A combination of small capital appreciation (averaging 2-3% per annum. forget the 'boom' 2002 to 2005' all that frothy equity is disappearing faster than it came), when set against:-

High costs of purchasing
High costs of running/maint (aircon, pool, garden, bugs, repainting etc).
High costs of utilities/Insurance (elec, water, cable, phone, HOA fees, management fees,Insurance etc)
High Taxes (there are 5 affecting absentee owners)
High cost of selling

Means that many people with places in Florida, even those that bought befor the boom, often struggle to break even let alone make a profit.

No, there are plenty of real rip offs, to be avoided (especially the one where people steal your villa), but the things you highligh are just basic sales tactics that a little knowledge and due dilligence can avoide.

How did you gain this experiance, have you bought?

Lopin how is your villa on Lake Wilson Rd (cypress) coming on, is the developer being straight?

Pablo Silver or Lead?

Pablo Silver or Lead

Great to hear from you . Thaks for your advice regarding Florida forum i am getting lots of great ideas and advice from it. The villa looks like it will be completed sometime June/July. Met the Builders last week and everything seem ok.I agree with you the running costs are very high and im not sure if i wil keep the villa.Hopefully the property market will pick up later this year. Also the building company want to use the house as a showhouse for 12 months paying me $3k per month if this works out it looks the the best idea

Lopin

Lopin

thats great news being the show house will mean they do a great job and maintain it in top condition. $3k per month for 12 months is a
real bonus.

Pablo

If $30,000 commission on a $300,000 property is not a rip-off to you, then I dont know what is.

I have stated in my post that what they are doing is NOT ILLEGAL.

This is not typical of how property is sold in the U.S. or Orlando for that matter. **ONLY VACATION AREAS.**

I am not discussing whether its a great investment or not - just the technicalities of the process. Many of my wealthy friends have bought villas with straight cash not for the investment but for their families, it is a great place for vacation. Money is not an issue. Its the principal.

I disagree with your opinion that purchases in Florida have never been a great investment. I have purchased three condos, sold two that paid for the third one! Not bad for a couple years work. Over the next 25 years U.S. population is going to increase by over 90 million. 47% of that growth is going to occur in three states alone - FLORIDA, CALIFORNIA & TEXAS. By 2011 Florida will pass New York as the third most populous state in the U.S. These are not my opinions - facts from the Brookings Institute in Washington, a government think tank. There is a massive population movement happening in America from the North to the South. You may want to revise your opinion!!

Knowledge & due diligence - you'd be surprised how many people are not aware of whats going on. I'm just helping to inform people. If they already know, fine, if not I just saved them a bunch of money.

By the way you don't seem too happy I'm divulging this information, or you seem to be making little of it. WHY???????????

I have several properties in Florida but lucky for me, my girlfriend works in the real estate and mortgage business. THE INSIDE TRACK!! No commission, no fees.

By the way Pablo, judging by your analysis I'd say a lot more LEAD than SILVER!

I'D PREFER YOU JUST SAID THANK YOU FOR THE INFORMATION AND WENT ON YOUR WAY.

Invest Star

For the avoidance of doubt I ‘m a trained Real Estate agent who has 17 years experience of the Florida/UK markets as an owner/investor/agent and property manager.

I feel the gentleman doth protest too much! Read all your posts and decide whether you’re a bit too sensitive. I’d be hacked off if I’d been caught was still exposed to a market that is down between 10 and 44% with much further to go. Both the Florida Real Estate/Mortgage profession and the market will not see bottom until late 2008 at the very earliest. (the unwinding of the ARM/sub prime sector is going to hit Florida more than any other state).

The migration into Florida from the North of hundred of people every day is a myth the Realtor’s trot out to talk up the market.

The truth is……..the vast majority of migrants into Florida are poor white trash from the other poor southern states and the rust belt, supported by Cubans/Puerto Ricans/Dominican Republicans and Mexicans. They vast majority of these people have one thing in common they are effectively economic migrants with ‘no money to buy property’.

The second group, are white, pale face, liver spot speckled, golfing retiree’s, ‘El Gringo Yankee!’ They’re called Elma, Martha, and Wilmer. Their partners Doug, Bob and Hank sport baggy shorts with elasticised waists. Their loud short sleeve shirts are set off by high browed base ball hat, displaying various tribes, USS Enterprise, Cincinnati Bengal’s (is that a curry house) and Ram Dodge Trucks. They relocate from New York, Massachusetts, Illinois and other northern states. Where the winters chill can be hard on old bones. Having ‘snowbirded’ in Florida for a few winters they sell up, leave the north eastern cities and come to the Sunshine state to live the ‘Golden Girls’ life of active retirement.

I think you’ll find of the second group Florida has been loosing more (to places like Georgia and the Virginia) than it gains due to bad weather, high taxes and a deteriorating quality of life in the Sunshine State!

Pablo Silver or Lead?

Pablo

Don't worry about my interests Pablo, do you think I paid for a 3 Bedroom Condo by selling two others before closing on them by getting in at the end of a boom??? Don't think so! Do you think I bought 20 acres of land for $49,000 and is currently worth $8 million by getting in during a boom??? No afraid not, was ahead of 95% people on that one. My money is made down there but thanks for your concern.

I think it was Donald Trump once said .... "IF YOU WANT TO GET RICH, LOOK AT WHAT EVERYONE ELSE IS DOING, THEN DO THE OPPOSITE"

I agree to a certain extent about Georgia, but guess what ..... I've land there too!!!

As regards the owner/investor/AGENT in Florida I knew there was some reason for not liking the information I was providing. You didn't specify if you are still working in Florida? If so do you work in the areas I mentioned?? LOL!

I would be pretty surprised if you were not making money off the very people I'm trying to inform a little better. Well if your pissed I'm glad, I'm sure there are many more agents/developers like you! You'd be surprised how fast this type of information gets around. Most people have some type of property investment somewhere in the world so property is a hot topic. THE JOYS OF THE WEB!

I am sure you this: more people move from Florida to Georgia, S. Carolina and Tennesee thanthe other way around.
MOre people go to Arizona than to Florida. MOre and more retired people prefer Panama to Florida.
Florida has imense property taxes and is going to introduce local income taxes soon.

I lived 5 years in Miami but Florida is different from what it was 15 years ago.

Invest Star

you appear to have been in the market for a while and still to a greater or lesser degree invested.

What in your opinion caused the Florida property market (like for like, I'm not refering to adding value by developing) to diverge from its long term annual growth of 2-4% per annum in 2001. When for several years it went into double didgit growth and then rose even further in 2004/05?

Also what happened in the autumn of 2005 to halt this and put it in reverse?

And what is your prognosis for the market going forward into 2008/9 and why?


Pablo Silver or Lead?

Very intesting reading this. I spend a lot of time in FL and GA. I actually have a house in Atlanta (Buckhead) which has been a good investment over the last 4 years and the market is still rising slowly in Atlanta like it always has 3-5% a year. No bubble here in my mind. I do thing however think there is an oversupply in the less desirable outlying areas although stuff still seems to sell quick right now. Maybe becasue there is such a terrific job market something FL doesn't really have.

What I have noticed is lots of people now leaving FL and moving to GA, SC and TN becuase of lower recurring costs and also many just got fed up of not seeing the seasons. A couple of realtor friends are predicting Atlanta (intown) will still increase this year even though other areas are declining.

I also thought it was normal for a 6-7 comission cost with a 50 split between buyer and sellers agents. Even on new sub divisions builders have to pay sellers agents and normally buyers agents. I have never seen someone save even by having no buyers agent. Is this possible?

Also lets not underestimate the appeal of FL to many people. In my companies Atlanta office lots of people are still looking to buy second homes within a days drive by the coast and there is still a tremendous amount of new business moving to GA, TN and the Carolinas. Same also applies to GA, NC and TN mountain property.