Kelly Drum suggests Canadians

FINANCIAL POST
FP8 financialpost.com
U.S.PROPERTY
NATIONAL POST, FRIDAY, OCTOBER 28, 2011
BUYING SOUTH OF THE BORDER
Florida bound
BY PETER KENTNER
U.S. OPPORTUNITIES
C
anadian buyers continue to snap up
Florida real estate,
according to a recent
survey of foreign buyers produced by the National Association of Realtors on behalf of the
Florida Realtors association.
The survey tracked foreign buyers for a 12-month period from
mid-2010 to mid-2011.
“For that period, one in four
Florida homes was purchased
by a foreigner, and the largest
single country represented was
Canada,” says John Tuccillo,
chief economist for Florida
Realtors.
“Canadian sales represented
10% of all home sales in the
state during that period.”
Canadian buyers were looking for bargains, with the median price of homes purchased
at a little over US$151,00. More
than 90% of those deals were
completed strictly with cash.
Almost two-thirds of Canadian buyers targeted homes in
just five locations — Tampa-St.
Petersburg-Clearwater, MiamiFort Lauderdale-Miami Beach,
Orlando-Kissimmee, NaplesMarco Island, and Cape CoralFort Myers — all in the southern half of the state that was hit
particularly hard by the housing downturn. The price of a
typical South Florida condo has
fallen by 45% since 2005, Mr.
Tuccillo says.
“There’s still strong demand
at both ends of the price spectrum,” he says. “We’re seeing
a lot of activity on the part of
investors with a long-term view
in the lower half of the market.
The demand for higher-priced
properties has also held up reasonably well.”
Canadians represent about
30% of buyers in Naples, a
popular Gulf Coast destination.
“We’re smaller than Miami and
the beach is very accessible,”
says Tom Doyle, a realtor with
Sun Realty in Naples. “There’s
no retail area blocking off the
waterfront — you can’t get a
tattoo on Naples Beach.”
Mr. Doyle says Canadians
typically snap up two-bedroom condominiums built in
the late 1980s and early 1990s
near the beach at an average of
US$150,000.
Right on the beach, though,
“it’s a sellers market, with
homes going for up to $22-million,” Mr. Doyle says. “You could
get $8-million for a beachfront
shack, and buyers looking in
that range are relatively price
insensitive.”
Mr. Doyle says Naples housing prices are stabilizing as demand rises. “Our inventory is
half what it used to be and anything worthwhile gets snapped
up, most of it in cash transactions,” he says. “You can’t buy
anything at the price it sold for
last year.”
The Fort Lauderdale superluxury market is also rebounding, says Kelly Drum, partner in
that city’s family-owned Drum
Realty, in business since 1952.
“The market was a little flat,
but it’s coming back with prop-
Advice for buyers:
Do your homework
Great deals there
for market savvy,
experts say
BY PETER KENTER
BOB EIGHMIE / POSTMEDIA NEWS
Florida realtor Kelly Drum says high-end real estate market has begun to bounce back.
erties in the $4-million-to-$20million range in our listings,”
he says.
Mr. Drum notes that property owners in the Fort Lauderdale luxury market are under
little pressure to sell. “These
are typically people who have
an interest in simply putting
their money someplace else,”
says Mr. Drum.
“Properties that might have
attracted $15-million in 2006
and 2007 may only sell for $10million today, so the challenge
is getting the owners to list the
property to reflect the reality of
today’s markets.”
In June of 2010, Mr. Drum
sold a property to
a Toronto buyer
for $7,640,000.
“It was a spectacular property
with water on
three sides — like
its own private
island,” he says.
“The gentleman
purchased it just
for the land and
tore down a 15,000-square-foot
house to build a new 18,000sq.-ft home.”
According to U.S. real estate
information specialist Trulia,
the median price of all properties sold in the Fort Lauderdale
market was $160,000 during
the quarter ending in September. That’s up almost 12% over
the same time last year, but
down slightly since the previous three months.
Mr. Drum doesn’t deal in
distressed real estate but notes
that foreclosure sales are still
common in the lower-end market.
“If I was a Canadian buyer,
I’d come down with cash,” says
Mr. Drum. “A cash buyer competing with a mortgage contingency buyer could still walk
away with a property at a discount, even if that buyer was
willing to pay list. Cash commands very attractive deals in
this market.”
Although geographically
part of South
Florida, Key
West is a market all to itself.
Expect to invest
hours in travel
time from the
mainland,
either by car,
air or ferry.
“In Key West,
all real estate
is in the high end,” says Cory
Held, a realtor with Preferred
Properties/Coastal Realty in
Key West.
Stately luxury homes ranging to about $10-million grace
the community’s Old Town,
while renovated homes ranging from $500,000 to $2-million are found in New Town.
If I was a
Canadian buyer,
I’d come down
with cash
The community remains under
a rate of growth ordinance that
sees few new properties entering the market and limiting
supply.
“High-end properties used to
move much more quickly,” says
Mr. Held. “Now properties selling at $2-million may remain
on the market for a year or two
—bearing in mind that might
be a small house on a small
property in Key West.”
Two years ago, Mr. Held sold
a 5,400-sq.-ft home “that looked
like Tara” with pool, two guest
houses and beach access for
$1.76-million. It had previously
sold for $5.4 million.
By comparison, a similarly appointed 3,440-sq.-foot
home, with two guest houses,
four bedrooms, four and a half
baths, pool and library has
been offered at $2,999,999.
“I’m currently working with
a couple out of Toronto who
own a condo unit here and
they’re looking at buying something else,” says Ms. Held. “I’m
encouraging them to hold on to
it as an income property and to
buy an additional property. I’d
advise any Canadians entering this market to come with
a certification of funds and to
buy literally as high as you can
afford. Key West remains very
desirable and prices will definitely bounce back.”
Postmedia News
Savvy Canadian homebuyers purchasing real estate in
the weak U.S. market can find
excellent value, say real estate
experts, provided they perform due diligence.
“For Canadians, who represent the largest group of
foreign buyers in Florida, it’s
like a time machine, with real
estate prices back to 2001 levels,” says Cameron Roach,
author of Buy Florida, a guide
for Canadian buyers looking
south.
However, buyers need to
study the market instead of
jumping at low prices. “You
might get excited to find a
property selling at half its
peak value, but what if surrounding properties have fallen by 60%?” he says. “Do your
homework.”
Foreclosures and distressed
real estate may look appealing,
but Mr. Roach says that market
resembles the Wild West, often
imposing longer closing times
and more legal hassles. In distressed condominium buildings, buyers may find themselves on the hook for higher
maintenance fees if other units
fall into foreclosure.
Mr. Roach recommends
engaging a licensed Florida
buyer’s agent to perform fieldwork before buying.
“You may not care about local schools or crime statistics,
but if you ever sell that property, you’ll be glad you checked
out the area first,” he says.
Lesley Dolby is a real estate
broker with Dolby Properties
in the Orlando area. Canadian
clients are a specialty of hers.
“Anyone with a pulse can
find a property for sale,” she
says. “It’s really all about working with someone who knows
the area intimately. Too many
Canadians have attended
seminars that tell them about
$30,000 properties in Florida,
not having a clue that they’re
usually nowhere near desired areas and generally not
in good shape. To get decent
property in the Disney area
for vacation homes or shortterm rentals, you still have to
pay between $100,000 and
$200,000.”
Attractive mortgage rates
advertised to Americans are
not open to Canadians unless
handled through subsidiaries
of Canadian banks. And a surprise to novice buyers is Florida real estate transactions
are closed by title companies,
not lawyers. But it’s a myth
that Florida imposes onerous
property tax rates designed
to discourage Canadians from
buying up properties.
“There’s no discrimination
against Canadians,” says Ms.
Dolby. “Even Florida residents
who own a property that is not
their permanent residence pay
a higher property tax rate, and
an exemption is available to
anyone who lives permanently in that property, no matter
their citizenship.”
Misinformation also pervades the Arizona market,
says Rick Morielli, a Canadian
real estate broker with Can-ix
Realty, a Phoenix-based realtor geared to Canadian clients.
“Canadian buyers seem to
get old news and bad news,”
he says. “We get asked a lot
whether houses have had cement poured down toilets by
foreclosed owners. What is
true is that in Greater Phoenix,
real estate is moving briskly
... About 15% of buyers in the
last quarter were Canadian
and some of them are buying
properties here for the price of
a Vancouver parking spot.”
While it appears that average house prices in many
markets have bottomed out, a
shaky U.S. economic outlook
still has economists guessing whether regional housing
prices have farther to fall.
“Each month, the hype says
that the Florida market has
hit bottom and the time to buy
is now,” says Mr. Roach. “However, newly processed foreclosures are putting further
downward price pressure on
the market. If you’re not buying a primary home, taking
your time and remaining a bit
detached from the outcome is
probably a good thing.”
Postmedia News
PHOTO COURTESY RICK MORIELLI
Real estate agent Rick Morielli says many Canadians are
relying on out-of-date informaton on the Arizona market.