The Canadian dollar is virtually at par. And there’s that gloomy weather outside. That can only mean that Canadians are thinking Florida.
Experts say consumers should be even more careful than normal when purchasing down south. Buying a home in the United States just got a little riskier, after all 50 states launched an investigation into the mortgage industry this fall.
The U.S. government is looking at whether banks used possibly fraudulent paperwork to get homeowners out of foreclosed homes.
This has caused deals on foreclosed homes to stall in areas such as Arizona and Florida, where nearly half the deals done there are foreclosures.
Investigators are looking at whether banks used robotic signers to sign hundreds of affidavits a day without reviewing them properly.
“This will help foreclosed households stay in their homes rent-free for longer, but watch sales activity dry up in coming months since it was foreclosed sales that were really impacting the turnover in recent months” said economist David Rosenberg of Gluskin + Sheff & Associates.
The freeze isn’t expected to last for long. While there was a drop in foreclosure filings in October, a new wave of foreclosures is expected to hit the market once the regulators play catch up.
However, Brian Ellis, vice-president of Brampton based Florida Home Finders, says Canadians should always be wary of buying foreclosed properties.
“There is a lot of due diligence that you have to do, and this will spook the market even more,” said Ellis.
Philip McKernan, the Vancouver-based author of Fire Sale: How To Buy U.S. Foreclosures Now!, Says Canadian buyers have to do their due diligence before purchasing.
“In the U.S., you always have to be prepared to do a little more digging especially with a foreclosed property,” said McKernan.
Many of the best foreclosed properties are already purchased by large private equity corporations or hedge funds, said Ellis.
“Unless you have boots on the ground and you have time to sniff around, it’s tough to find that diamond in the rough,” said Ellis.
However, there are lots of other properties on the market that are “distressed priced” but not in foreclosure, he says.
Ellis’ company, for example, has an inventory of developers who are trying to sell empty units that were built during the boom.
You could get a one bedroom condo in Sarasota Florida that would have cost more than $200,000 during the peak for $59,000, he says. A one bedroom in Orlando is going for $66,000 compared with $150,000 at the peak.
Still, analysts say the market could fall even further over the next year, as more foreclosures come on the market. In the short run, inventory will be low as in States such as Nevada and Florida, foreclosures are as much as half the market.
Canadians are the largest foreign buyers of property in the U.S., representing 23 per cent of all sales according to the National Association of Realtors.
Henry Wolfond, CEO of Bayshore Capital, says unlike smaller investors, corporate and larger investors have not really been affected by the foreclosure documentation crunch.
“With the very large transactions there is normally a greater oversight and due diligence,” said Wolfond, who says his recent transactions have not been affected.
“But it has certainly affected people at the consumer level.”
Wolfond says some transactions are now taking longer than normal as the market has stalled.
“You see this in cases where the mortgage broker may not have got all the proper paperwork because they were rushing things through,” said Wolfond.
Wolfond says it doesn’t matter the size of the deal, but Canadians should be careful when they sign the dotted line.
“I think Canadians were all excited about the deals a year ago, and now they’re wondering if the bottom will ever come, things have spiralled downhill so badly, it’s just overwhelmingly bad down there,” said author McKernan.
And just because the house may go into a foreclosure auction, doesn’t mean the price is right, he said.
“There are lots of homes that don’t sell, and the bank takes them back and resells them later for a cheaper price. This is also the better route because unlike the foreclosure, you’re not getting something ‘as is’,” said McKernan.
McKernan recommends that buyers get a lawyer to review their transaction in the U.S.
Unlike Canada, many transactions are done with title insurance companies doing the paperwork without the benefit of a lawyer.
“I think Canadians are obsessed over taxes, so they hire an accountant first, but they forget that they could also use legal advice, especially to make sure you have a clean title, and to make sure that your deal will close,” McKernan said.
No comments:
Post a Comment