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Florida Is Not Headed For A Housing Crash

Florida is now America’s fast growing state. According to recent census data, the Sunshine State added over 400,000 additional people between July 2021 to July 2022. It was a growth of 1.9%, bringing the total population to 22,244,823. That makes it faster-growing than Texas, which has the second-largest population in the United States, trailing only California. Florida is a popular destination for retirees, second-home buyers, and investors which is driving up demand for housing.

Florida has consistently maintained one of the highest rates of job growth in the U.S., making it an appealing destination for those seeking employment opportunities and a vibrant lifestyle. This influx of residents contributes to the demand for housing in the state, stimulating the real estate market.

Key Market Indicators:

· For Sale Inventory: As of December 31, 2023, there are 133,691 properties listed for sale, showcasing a diverse range of options for potential buyers.

· New Listings: In the same period, 32,615 new listings have entered the market, providing fresh opportunities for those in pursuit of their dream homes.

· Median Sale to List Ratio: The median sale to list ratio, a key metric indicating market competitiveness, stands at 0.977 as of November 30, 2023.

· Percent of Sales Over List Price: Notably, 14.5% of sales in November 30, 2023, exceeded the list price, indicating a competitive environment.

· Percent of Sales Under List Price: On the other hand, 67.9% of sales during the same period were below the list price, providing insights into negotiation dynamics.

Florida’s strong population growth, diverse job market, tourist attractions, affordable property prices, tax benefits, and diversified economy all contribute to making it a hot spot for real estate investment.

Filed under: 2024 real estate, Blog, Boca Raton real estate, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Homebuyer Advice, International Home Buyers, International investors, Real Estate, Real Estate Investment, real estate news, Real estate trends, second home, South Florida Real Estate, vacation home by Kim Bregman
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Planning for 2023 As Mortgage Rates Rise

If you’ve been house-hunting in recent years, you’ve really been through it. Maybe you were waiting out the market, hoping the rocketing prices would start to flatten. Now, of course, they have — but between 2021 and 2022, mortgage rates have more than doubled, from less than 3 percent to more than 7 percent.

If you are renting and trying to save for a down-payment, the cost of your rental has likely increased as well.

Sellers who are sitting on low mortgage rates are not listing their homes for sale and supply shortages, cost of land, and cost of lending, along with higher labor and building costs have slowed down new construction.

All these factors contribute to a continued shortage of desirable inventory and home prices are staying propped up and not decreasing as one would expect.

Buyers need to adjust their expectations…Every buyer needs to do a gut check on how much house they can afford now. That might seem daunting, but higher mortgage rates don’t have to derail your dream of buying a home. In fact, historically, today’s rates are not considered particularly high.

Review your Budget: When you review your budget, keep in mind that newly built homes typically come with builder and manufacturer warranties and new energy-efficient appliances. Those advantages of a new home can lower your monthly housing costs. That’s especially true if you currently own an older home that needs repairs and has inefficient appliances.

Raise More Cash: Another option to buy a home with a higher rate is to spend more cash up-front. You can use cash to increase your down payment as a percentage of your loan amount, pay for builder upgrades in cash, or buy down your loan’s interest rate. You should work with your lender on the best use of your cash to achieve the lowest ongoing expenses to home ownership.

Evaluate Loan Options: A third strategy is to get a hybrid loan. This type of mortgage has a fixed rate that resets at the end of a specified period and is then fixed or adjustable for the remainder of the term. An example is a 7/1 hybrid adjustable-rate mortgage (ARM). This type of loan has a lower fixed rate for the first seven years. After that, the rate is adjusted annually (that’s the “1” part) for the remainder of the 30-year term.

Hybrid loans can be more affordable since the initial rate is usually lower. But there’s a risk: If you don’t refinance or sell your home before the rate resets, your payment could rise significantly for the rest of the term. If you can’t afford the higher payment, you could lose your home.

Rethink Your Needs and Wants: Buying a less costly home is another way to cope with higher rates. Less costly doesn’t have to mean a home you don’t like or that doesn’t fit your needs.

Reconsider Your Timing: Interest rates fluctuate, sometimes dramatically, over time. If you postpone buying a home, rates might be lower in the future, making the home you want more affordable. Or they could be higher, putting the home you want further out of reach. Experts are predicting the latter. The question for homebuyers is whether waiting and hoping makes sense. The answer is never as clear as a crystal ball.

Experts recently polled project average 30-year mortgage rates to fall between 5-9.31%in 2023. No one is expecting a move downward in the next 5 years. Several factors could lead to unexpected rate movements in the coming year.

Owning a home has certain benefits that renting doesn’t offer. Renting means no control over future [home price or interest rate] increases, no accumulation of equity through price appreciation, no tax deduction for property taxes and mortgage interest if you itemize your deductions, and no benefit for improvements you make to the property. Waiting to buy while you hope rates move lower means forgoing those benefits.

The lost opportunity of not buying due to a fear of higher rates far outweighs the benefits of homeownership. It’s best to take advantage of what the rates are today and build equity sooner rather than later.

Filed under: 2022 Real Estate, Blog, Boca Raton real estate, cash out refinance, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Home Financing, Homebuyer Advice, House Closings, International Home Buyers, International investors, Mortgage Information, peer to peer lending, private money lender, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Refinancing, Relocation, Retirement, second home, Self Directed IRA, Seller Financing, South Florida Real Estate by Kim Bregman
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Short-Term Rentals As Investments

Companies such as Airbnb and VRBO have brought the short-term rental market into the mainstream, making it easier than ever for investors to profit from real estate ownership.

Rather than getting tied into long-term leases, property owners can capitalize on local demand for temporary and vacation rental housing. In recent years, the industry has transformed from a side-gig for homeowners looking to make extra income into a booming industry in many markets across the country.

Although considered great investments, these types of properties require proper management and good knowledge of a local real estate market.

A short-term rental is a property that has a lease term of fewer than 12 months. It could be a single or multi-family home, a condominium, or a townhome. An owner typically buys this type of property with the intent of leasing. It is important to understand the leasing restriction of the community or municipality.

South Florida is an ideal location for a successful short term rental investment and more and more people are looking to real estate to diversify their investment and hedge against inflation.

A short-term property can be profitable under the right management. But don’t think that it will generate passive income without much effort. Before you invest your money, you must look at several components that determine whether your property will create a profit or not.

– Vacation destinations are considered the best for these types of properties, as they are often favored by tourists because of their competitive prices over expensive hotels and five-star resorts.

– Local laws and regulations set a stage up for the real estate market. For example, some cities, like Delray Beach and Boca Raton have strict policies when it comes to how many days your property can be occupied. These types of restrictions could limit your ability to generate a steady income.

If you want to buy a property in the area that is favorable toward short-term rentals, make sure to use a Realtor that is familiar with local laws and regulations governing the real estate market. Additionally, you should also find out what the rules are for a platform such as HomeAway, VRBO or Airbnb.

“Zoning can be an issue zoning and municipal ordinances will dictate which properties can and cannot be used as Short Term Rentals ( STR). This differs from one city to the next. Likewise, municipalities might dictate how many properties within certain boundaries can be used as STRs. For buyers, knowing what the zoning regulations are before purchasing a property is key.

Even if the property is turnkey, investing in the necessities to ready the property for rental could be a considerable. Furnishing, equipping, and securing a property property to make it safe and well-performing are additional costs that an investor needs to consider in their ROI analysis. The cash outlay can be significant in the beginning and may take a fair amount of time for the property to breakeven and start to generate a positive cash flow.

Owning and operating short-term rentals is considered a business by most local governments, and owners must comply with specific workplace regulations and business licensing rules established in their local communities. There are transient occupancy taxes that are also required to pay. Knowing local and government regulations is crucial to operating an STR.

Owners of STRs should not think they can outsmart the local governments. Cities and Counties are becoming much savvier on tracking Short Term Rentals using data mining, machine learning, and other technologies. Right now, governments can find out when, where, and for how long properties have been rented. As technology continues to expand, it’ll be important for buyers to make sure they are adhering to local guidelines; otherwise, their investment might cost them in fines and legal fees rather than make them money.

Since STRs are rental properties and therefore investments of a specific nature, the normal loan pre-approval likely won’t be enough. A lot of lenders will not finance for STRs or hotel properties.

When shopping for a mortgage it is important to make clear to the lender how the buyer intends to use the property, and merely stating that it will be used as an investment isn’t enough. Likewise, a regular homeowner’s insurance policy won’t cover an STR either. You will need to secure insurance specific to owning a rental property and it will be more expensive than a normal Homeowners Insurance Policy.

A short-term rental property is one of the best ways to generate a steady income from a few hundred dollars to a few thousand dollars a month. Although it’s often considered a form of passive income, running it requires real estate prowess, time and money investment, and excellent communication skills. However, with the right management and favorable market conditions, a real estate investment can become a successful enterprise and generate thousands of dollars per year.

Filed under: 2022 Real Estate, Blog, Boca Raton real estate, downtown boca raton, Exclusive Buyer Agency, Exclusive Buyer Agent, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Homebuyer Advice, Homeowners Insurance, International Home Buyers, International investors, Jupiter FL Gated Communities, Real Estate, Real Estate Investment, real estate news, Real estate trends, second home, short term rentals, South Florida Real Estate, vacation home by Kim Bregman
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Using Home Equity To Buy Another Property

Interest rates are rising and so it the equity in your current real estate holdings. There are alternatives to financing a second home or investment property other than a traditional mortgage. If you have a large amount of equity in your first home, you could obtain enough money through a Home Equity Loan to pay for most—if not all—of the cost of a second home.

Using a home equity loan (also called a second mortgage) to purchase another home can eliminate or reduce a homeowner’s out-of-pocket expenses. However, taking equity out of your home to buy another house comes with risks.

If you’re interested in using home equity to purchase a new home, the value of your house will need to be high enough to support the loan, and you’ll have to meet your lender’s requirements. Here’s how to get a second mortgage to buy another house.

1. Determine the amount you want to borrow. Before taking equity out of your home to buy another house, decide how much you want and need. Home equity loans limit how much you can borrow. In most cases, you can only access up to 85% of the equity in your home.

2. Prepare for the application process. Your approval for a home equity loan will depend on multiple factors. The value in your home will determine the maximum amount of equity available, and your financial information will determine how much of that equity you can borrow. In addition, your lender will look at your credit score, income, other outstanding debts and additional information.

3. Shop around for a home equity loan. When taking out a home equity loan for a second home, you can use any lender. The loan does not have to be with your current bank or mortgage company. So the best way to get a competitive interest rate is to shop around and get quotes from multiple lenders. As you compare, look at the interest rate, loan terms, fees and estimated closing costs. You can also negotiate with the lender on the rate or a particular term.

4. Apply to the loan with the best terms. Once you’ve determined the loan with the best terms, you’re ready to apply. You’ll submit the application and provide the requested information. Your lender will order an appraisal of the home or determine the value using another method.

5. Close on the loan. After you go through the underwriting process, your loan will be ready to close. Before finalizing the loan, make sure you understand the terms carefully. Also, know that the Three-Day Cancellation Rule allows you to cancel a home equity loan without penalty within three days of signing the loan documents.

Before you use a home equity loan for a second home, consider the pros and cons of taking equity out of your home to buy another house.

Pros:

· You’ll reserve your cash flow. Using home equity to buy a second home keeps cash in your pocket that you would otherwise use for the home purchase. This increased cash flow can result in a healthier emergency fund or go towards other investments.

· You’ll increase your borrowing power. Buying a house with equity will allow you to make a larger down payment or even cover the entire cost — making you the equivalent of a cash buyer.

· You’ll borrow at a lower interest rate than with other forms of borrowing. Home equity products typically have lower interest rates than unsecured loans, such as personal loans. Using home equity to purchase a new home will be less expensive than borrowing without putting up collateral.

· You’ll have better approval chances than with an additional mortgage. Home equity loans are less risky for lenders than mortgages on second homes because a borrower’s priority is typically with their primary residence. This may make it easier to get a home equity loan to buy another house than a new separate mortgage.

Cons:

· You’ll put your primary residence at risk. Using a home equity loan to buy a new house can jeopardize your primary home if you’re unable to handle the payments.

· You’ll have multiple loan payments. Taking equity out of your home to buy another house means you’ll potentially have three loans if you have a mortgage on both your primary residence and the second home in addition to the home equity loan.

· You’ll pay higher interest rates than on a mortgage. Home equity products have higher interest rates than mortgages, so you’ll be borrowing at a higher total cost.

· You’ll pay closing costs. When using equity to buy a new home, you’ll have to pay closing costs, which can range from 2% to 5% of the loan amount.

Other options for buying a house with equity

Using a home equity loan to buy another house is just one path borrowers can take. Here are a few additional options for using equity to buy a new home.

Cash-out refinance

A cash-out refinance is one way to buy another property using equity. A cash-out refinance accomplishes two goals. First, it refinances your existing mortgage at market rates, potentially lowering your interest rate. Secondly, it rewrites the loan balance for more than you currently owe, allowing you to walk away with a lump sum to use for the new home purchase. Taking equity out of a home to buy another with a cash-out refinance can be more advantageous than other options because you’ll have a single mortgage instead of two. However, interest rates on cash-out refinances are typically higher than standard refinances, so the actual interest rate will determine if this is a good move.

Home equity line of credit

A home equity line of credit (HELOC) is another option for using home equity to purchase a new home. HELOCs are similar to home equity loans, but instead of receiving the loan proceeds upfront, you have a line of credit that you access during the loan’s “draw period” and repay during the repayment period. This method of using equity to buy investment property can be helpful if you’re “house flipping” because it allows you to purchase the property, pay for renovations and repay the line of credit when the property sells. However, interest rates on HELOCs are typically variable, so there is some instability with this option.

Reverse mortgage

Homeowners 62 or older have an additional option of using equity to buy a second home — a Home Equity Conversion Mortgage (HECM). Commonly known as a reverse mortgage, a HECM allows borrowers to access home equity without making payments. Instead, the loan is repaid when you leave the home. Reverse mortgages provide a flexible way of using equity to buy another home, as borrowers can choose between receiving a lump sum or a line of credit. However, keep in mind that while you won’t make payments with a reverse mortgage, interest will accrue. This causes the loan balance to grow and can result in eating up all the home’s equity.

Alternate forms of financing for purchasing a second home include:

Private money lenders
Seller financing
Peer-to-peer lending
Hard Money Loans
Personal Loans

Filed under: Blog, Boca Raton real estate, cash out refinance, contracts, Down Sizing, Exclusive Buyer Agency, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, HELOC, home equity, Home Financing, Homebuyer Advice, House Closings, International Home Buyers, International investors, Mortgage Information, peer to peer lending, private money lender, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Refinancing, Retirement, Reverse Mortgage, second home, Self Directed IRA, Seller Financing, South Florida Real Estate, vacation home by Kim Bregman
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Caveat Emptor- Buyers Beware!

Caveat Emptor, “Let the buyer beware.” is a real estate principle that warns buyers to “beware” and do their due diligence. It is of paramount importance, for Florida real estate buyers, since the majority of real estate agents are transactional agents. When a purchase contract for property says the buyer is to take the property “as is,” the seller truly means “as is.” Under the doctrine of caveat emptor, property buyers are held responsible for inspecting the quality and condition of the land or building before the final execution of the purchase contract.

If the buyer does not exercise due diligence during the Inspection Contingency Period and fails to examine the property, then the seller is shielded from liability for any defects. Additionally, the burden of proof is on the buyer to show that the seller actively concealed a material defect.

Florida courts continue to adhere to caveat emptor, which was reaffirmed in the Florida Fourth District Court of Appeals decision for Florida Holding 4800, LLC v. Lauderhill Mall Investment.There are three exceptions to the caveat emptor doctrine in Florida, including (1) where the purchaser has been prevented from making an independent inspection of the property due to a trick or artifice, (2) where the purchaser does not have an equal opportunity to become apprised of the fact, and (3) where one of the parties attempts to disclose facts and fails to reveal the whole truth. Nonetheless, these exceptions are difficult to claim in court because the buyer has the burden of proving that the seller actively hid the material fact to sidestep any “as-is” language of a contract. Additionally, oral representations by the seller regarding the property’s condition are explicitly contradicted by any “as is” language in the written agreement. This notion rests on the buyer’s inherent ability to inspect the property and withdraw from the property agreement if the quality of the land or building does not meet their expectations.

There are two forms of representation available under a Broker license held by a real estate professional according to Florida law: the Single Agent and the Transaction Broker. These two relationships entitle the buyer or seller to different upheld duties by the real estate professional. Full disclosure applies exclusively to single agent brokers. Limited confidentiality is a transaction broker duty.

A Single Agent is defined by Florida Statutes Chapter 475, Part I as a broker who represents either the buyer or seller of real estate, but not in the same transaction. It is the highest form, providing the most confidence to the customer that the Realtor represents only the customer’s interest. In the case of an Exclusive Buyer Agent the buyer is their CLIENT and the single agent owes the buyer a fiduciary duty.

https://www.optimaproperties.com/buyer-representation/

The duties of a single agent that must be fully described and disclosed in writing to a buyer or seller in agreements for representation include the following:

Dealing honestly and fairly
Loyalty
Confidentiality
Obedience
Full disclosure
Accounting for all funds
Skill, care, and diligence in the transaction
Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing
Disclosing all known facts that materially affect the value of residential real property and are not readily observable

Disclosure of these duties must be made before or during entrance into a listing/representation agreement, or before the showing of property.

A transactional agent is defined as a real estate agent who provides limited representation to a buyer, a seller or both, in a real estate transaction, but does not represent either in a fiduciary capacity or as a single agent.

Section 475.278(1)(b), Florida Statutes, presumes that a licensee is operating as a transaction broker, unless the customer and broker establish a single agent or no brokerage relationship, in writing.

Most U.S. states now require a Sellers Disclosure Form, often called “disclosure notices,” “property disclosures,” or “property condition statements.” On these forms, sellers must advise the potential buyer of any material defect they’re aware of in the home — usually within a few days of finalizing the purchase agreement or sales contract. Filling out this form is NOT a legal requirement in Florida and many real estate transactional brokerages are taking the position that they are not going to provide a written disclosure from the Seller.

Before deciding to finalize a Contract for Sale the Buyer is provided with an Inspection Contingency Period. You are advised to include some of all the following in your due diligence.

· Conducting professional inspections of the building and its systems. This could include roof inspections, electrical inspections, HVAC inspections, WDO Inspections, and more.

· Reviewing the property’s records, including its past owners, title, deed, property survey, and other important documents. Make sure to look for past code violations, too.

· Having the property’s value professionally appraised. Your lender might require this anyway if you’re financing the property.

· Reviewing the property’s compliance with local zoning and land-use regulations.

· Having an environmental assessment conducted on the lot and the building. Are there hazardous materials in the building, like lead-based paints? You’ll also want to know if the property is in a flood zone.

· If you plan to renovate the property you’re buying, bringing in a contractor or consultant is also a smart move. You’ll want to assess the property’s condition as well as the potential repair costs and structural feasibility of the project.

As a home buyer in Florida, you should only seek out an Exclusive Buyer Agent. They owe you a fiduciary duty and are charged with full disclosure of all known facts regarding the property, community and hold your interest in strict confidence. They will work for you to get all the answers you need to make a valid and informed purchase decision.

Filed under: Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, home Inspections, Homebuyer Advice, House Closings, International Home Buyers, International investors, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, Relocation, Retirement, South Florida Real Estate, Title Insurance by Kim Bregman
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How To Win A Bidding War!

A bidding war is when at least two prospective buyers have made legitimate offers for a home that are similar and the Seller wants to select the best offer and terms for themselves. Bidding wars are common—in most of 2020, over half of home offers presented have faced competitive bids, according to Redfin’s study. Although historically low interest rates have sparked buying activity recently, some neighborhoods are always sought-after and attract multiple offers whenever a home comes up for sale. Exclusive Buyer Agents are experts in winning bidding wars and getting credits during the due diligence period.

Expect to be in a bidding war In a hot housing market, it’s often not enough to quickly make an offer on a house but to have the highest price and best terms.

Here are a dozen ways you can get an edge on the competition.

Offer to Pay in Cash

If you have the ability to offer an all-cash bid, you gain a distinct advantage because you eliminate the possibility of a mortgage falling through before closing. Buying with cash will make the process go quicker because you won’t need to go through the approval process with a lender, who would also request an appraisal. If you can’t cover the entire purchase price in cash, you could agree to a larger down payment on the house, which increases your approval odds and might make your bid more attractive.

Get Pre-Approved

Pre-approval is a step most buyers will take anyway, but it’s absolutely essential for anyone in a competitive bidding situation. Pre-qualification is not enough, as it doesn’t show that the lender conducted the same amount of due diligence—such as checking your earnings and doing a hard credit check—that a pre-approval would require.

Know Your Financial Limits

When you’re preparing for a bidding war, think of it like an auction—you need to know how much house you can afford before you actually bid. Once you know the maximum amount you’re willing to bid, you can include an escalation clause in your purchase offer to ensure you can instantly counteract any other bid. An escalation clause lets you increase your bid to avoid being outbid by another buyer up to a specified amount.

Provide More Earnest Money

Buyers typically provide 1% to 5% of the purchase price as earnest money—a form of a security deposit—in a purchase contract, which gives sellers the assurance that you will follow through with the purchase. If you bail out on the contract without citing a contingency, you will likely lose the earnest money. If you put down more than the typical earnest money amount, it will tell the seller that you’re determined to follow through to the closing.

Be open to making offers sight-unseen

Speed is key in a seller’s market as competitive as this one. If you’re interested in a home but live far away or just haven’t been able to tour it, you can still throw your hat in the ring. Video tours and 3D walk-throughs have made sight-unseen offers much more feasible. Almost two-thirds (63%) of people who bought a home last year made an offer on a property that they hadn’t seen in person.

Remove Some or All Contingencies

When you make an offer to purchase a house, you know the deal could fall through for numerous reasons, and you don’t want to lose your earnest money because of it. That’s why you include contingencies in the purchase contract; if the home inspection uncovers major problems or you can’t sell your current home in time to close on the new one, you can get out of the contract without penalty. Almost no offers contingent on the sale of a home will win a bidding war. Sell your home, rent and then start trying to get a home under contract. Simultaneous closings are so 1990’s.

If you can’t waive contingencies, sweeten them for the seller. Opt to expedite the contingency timeline.

Be Flexible on the Move-in Date

First-time home buyers and those who have already sold their previous home might be in a position to be flexible with the sellers on their move-in date. A seller might ask for more time if they have concerns about potential delays for a new home build. In this case, they could go through the closing and then rent the home back from you for a few weeks or a month. This flexibility could be as valuable—if not more valuable—than a higher bid on the house.

Start low, bid high

A lot of successful buyers today win by making an offer that exceeds the asking price…in fact it is expected. This also means that a lot of buyers end up exceeding their budgets. To prevent this, only search for homes that are listed 10-15% below what you can afford, so that you can make an over list price offer.

Offer to pay some of the seller’s costs

Home buyers can make their offers more competitive by offering to pay for expenses that are typically covered at least partially by the seller.

Write a Personal Note

Home sellers, especially ones who have lived in a home for a long period of time, can sometimes be swayed by a personal note that explains why you believe this is the home of your dreams. For example, you might know that the current owner raised a family in the home, and you can discuss how you hope to do the same. It might seem a bit over the top, but it’s certainly worth a try when not much separates your offer from others. And yes—sometimes it works. Avoid putting any personal information in the letter that may expose the Seller of real estate agents from violating Fair Housing laws.

Prepare to lose before you win

With more than half of offers facing competition these days, it’s more likely than not that you’ll get into a bidding war if you’re in the market for a home. It’s also wise to know when to walk away. It’s OK to put your search on hold if you reach the point where you’re not comfortable making the aggressive offers that are often necessary to win in today’s market. You don’t want to end up with buyer’s remorse, after all.

Use an experienced Exclusive Buyer Agent that has been successful with winning bidding wars and speak with their references. Be prepared to ask to be in a Back Up position if you lose the bid. The market is too competitive and offers move too fast for novices to be effective at winning bidding wars in a multiple offer situation.

Filed under: Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Home Financing, home Inspections, Homebuyer Advice, House Closings, International Home Buyers, International investors, Real Estate, Real Estate Investment, real estate news, Real estate trends, Relocation, South Florida Real Estate by Kim Bregman
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Pros and Cons of Escalation Clauses

An escalation clause is language inserted into a purchase offer for a home that’s intended to make sure a buyer is the highest bidder. It’s typically used when a buyer and their real estate agent strongly believe a house will receive multiple offers.

An escalation clause states that the buyer will pay a certain amount of money above the highest offer the seller receives. It generally includes a ceiling cap to make sure the buyer doesn’t agree to pay more money than they can afford.

An escalation clause can be a powerful technique when used correctly, but unfortunately it is seldom used as effectively as it could be. Such a clause increases, or escalates, a contract above its originally offered Sales or Contract Price when the Home Seller has received another Contract. The intent of the Clause is to crush competing contracts by automatically and incrementally increasing the buyer’s offer price by a pre-determined amount above other offer(s).

Typically, there are three distinct parts to any escalation clause that’s included in a real estate contract.

Proof of a bona fide offer: You can rest easy knowing that sellers can’t just use an escalation clause as an excuse to make you pay a higher sale price. When the contract asks for “proof of a bona fide offer,” it means that the listing agent must be able to prove that another offer came in with a purchase price higher than your original suggestion. Typically, the listing agent will send over a copy of the page from the other buyer’s purchase agreement that shows the higher price. However, any identifying information for the other buyer will be redacted.

An escalation amount: The escalation clause should also include an amount by which you’d like to outbid any higher offers.

A price cap: The price cap represents the maximum amount you’re willing to pay for the property, or how high you’re willing to allow your offer to go. If an offer is submitted that is higher than this amount, be aware that your offer may be taken out of the running.

Pros of Using an Escalation Clause

Including an escalation clause in your offer indicates to the sellers that you’re truly invested in buying the property. It shows that you’re willing to go above and beyond what’s required in order to become the home’s new owner.
Some buyers love the idea of negotiating; others don’t. If you fall into the latter group, including an escalation clause in your offer might be a smart idea. Since it gives the seller a solid idea of your positioning upfront, it cuts down on the back-and-forth that needs to happen between you and the sellers.
If the market conditions are highly competitive — a “Seller’s Market” — or the particular property is head and shouldersabove the rest, or both, you as a Home Buyer are likely going to find yourself competing for the home against other would-be homeowners.
Using an escalation clause will continually bump up the price you pay, but only if there are other offers that trigger it.

Cons of Using an Escalation Clause

If a buyer includes a maximum price in an escalation clause, the seller will immediately know the buyer’s top price thereby compromising the buyer’s bargaining position. By providing a price cap for your escalation clause, you’re essentially telling the sellers how much you are willing to pay for the home, and there’s nothing to stop them from simply presenting you with a counteroffer at that price.
An offer containing an escalation clause may not become enforceable until a specific price is entered into the contract and the buyer sees the price the seller has specified.
The seller may fabricate a fictitious offer in order to drive up the sales price for a buyer who uses an escalation clause.
Real estate brokers are prohibited from drafting escalation clauses, because doing so would constitute the unauthorized practice of law. Hiring an attorney is recommended but will increase the buyer’s costs.
If multiple buyers were to include escalation clauses in their offers, a bidding war may follow. If no buyer is willing to commit to a specific price, then no contract is ever formed and no property is sold.
Since the use of an escalation clause implies that a prospective buyer is willing to pay more than other buyers, it may motivate sellers to seek higher prices, a disadvantage to the buyer using the escalation clause.
While the use of escalation clauses may lead to higher sales prices, a benefit to the sellers, they could also discourage buyers who do not want to use escalation clauses.
A broker who discloses the price/terms of an offer without the buyer’s consent or otherwise gives one party an unfair advantage over another risks disciplinary action by the Commission. A seller’s best response in a multiple offer situation where one or more of the buyers is using an escalation clause will likely be to invite all buyers to make their highest and best offers. That way, each buyer is given an opportunity to buy the property at the price and terms he or she is willing to pay and the seller will receive the best offer from each buyer rather than an incremental offer from a buyer who wants to offer slightly more than a competing buyer.

Don’t make the mistake of thinking the Highest Contract Price will always win; other TERMS of a contract can often prove more valuable to the Sellers.

Having a knowledgeable Exclusive Buyers Agent is invaluable for situations like this and for understanding the risks and possible benefits of opening negotiations in this manner. The seller has the right not to respond to any offer, whether or not it contains an escalation clause.

Filed under: Blog, Boca Raton real estate, contracts, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, Homebuyer Advice, House Closings, International Home Buyers, International investors, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Real estate trends, South Florida Real Estate by Kim Bregman
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COVID-19 Real Estate Home Buying Process

COVID-19 Real Estate Home Buying Process

With the current COVID-19 pandemic, the federal government has labeled residential and commercial real estate as an essential business. Yet, COVID-19 has changed how real estate is conducted not only with how Realtors are showing properties but also how real estate transactions are closed.

One thing is certainly sure: being an “essential” business does not necessarily mean business as usual.

Pre-Closing

The New National Association of Realtors (NAR) guidelines follow and strictly adhere to all CDC safety guidelines. NAR supports and encourages that all brokerage firms order their agents to shelter in place and avoid all social interaction.

Such stay at home mandates and social distancing regulations have pushed real estate agents to become creative. Instead of having open houses, real estate agents are using virtual property showings, and Facebook live open houses. There are programs for customers to even design their home using digital tools, watching videos of the construction as their property is being built. Realtors are doing initial showings over video chat services like Face Time, Skype or Zoom.

Contract

Perhaps the real challenge COVID-19 poses to home buying is not necessarily shopping for the home—rather, it is closing on one.

Issues with contracts focusing on force majeure clauses, or clauses that provide for a delay or opportunity to get out of underlying obligations in the event of unforeseen or uncontrollable events have been an emerging issue during this pandemic.

The development of the COVID-19 Extension Addendum to Contract allows for time periods and dates to be extended as a result of the Corona-virus pandemic.

Closing

Once contract issues are overcome, the closing itself has evolved due to this crisis.

Make sure that you or the Seller only use an escrow and Title company that is capable of handling the closing. Specifically ask whether they use online or mobile notaries. Also determine if the local recorder’s office uses electronic recording and whether the title company is equipped to record the deed electronically.

Many documents in the closing process require a notary, and notarization is normally required to be done-in person. The Florida legislature and Governor signed into law effective January 1, 2020, a new law that allows for what is called remote online notarization (RON). This is a huge game-changer in the State of Florida, particularly in the area of real estate closings. No longer do parties all have to get together at a certain set time around the conference room and execute documents. Now, from the comfort of your own home, provided that you have your own laptop or smart phone, you can execute documents online and remotely and have those documents notarized. While the technology is new, it is not that new. It is the same technology that is used to validate your passport or driver’s license when you go through security at an airport. This validation technology is now being used for remote online notarization (RON).

If, for example, you are in another state and are closing on real estate located in Florida, or, perhaps, you are in a profession (such as being a doctor and on call) that makes it difficult to attend a closing, you can now remotely video into the closing and notarize your documents from the comfort wherever you might be. Documents are produced online for your review, and at the point that you are prepared to execute those documents, you can do so remotely. A notary is present at the time online, not physically with you, and that notary is then able to confirm and validate that you executed the documents without any duress or coercion.

There is a caveat, however, and that is that while remote online notarization, in theory, should work all over the world, it really is more of a domestic service for people within the United States. It is difficult for the technology, at this stage, to validate foreign credentials.

Appraisals and home inspections are other aspects of residential real estate closings are evolving during this pandemic. The Federal Housing Finance Agency is allowing alternative appraisal methods such as “drive by” appraisals where appraisers drive through the neighborhood and walk around a property without going into it. They are also doing “desktop” appraisals using public data to generate property values.

The loan process will likely take longer than in the past and I am encouraging my buyers to agree to no less than a 60 days closing if a loan is needed. You need to take this into consideration with your home buying timeline if you need to close on a property by a certain date.

Moving during a Pandemic

I recently published an entire BLOG article on this subject which you can read here along with other articles that you may find informative.

Filed under: Blog, Boca Raton real estate, coronavirus, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Home Financing, home Inspections, home safety, Homebuyer Advice, House Closings, International Home Buyers, International investors, Real Estate, Real Estate Closings, Real Estate Investment, real estate news, Relocation, South Florida Real Estate by Kim Bregman
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Tips for Buying a Fixer-Upper

Fixer-uppers have long had their fans. Some investors love the idea of making major repairs that increase a home’s value and then reselling the property for profit. Others want a low-priced starter home and don’t mind making gradual improvements over time.

Buyers must do their due diligence so that they understand their total investment in the property and the cash requirements; since most repairs cannot be financed. An Exclusive Buyer Agent’s goal is to help buyers avoid making expensive mistakes.

While repair issues, un-permitted work, or liens might not derail a sale on its own, they warrant a call to an expert who can assess the problem, offer solutions or give repair estimates.

Warning Signs Before Purchasing a Fixer-Upper:

Consider the amount of time and the amount of cash you have to address obvious deficiencies with the property.
Does the property smell damp? From mold to warping, moisture can cause considerable damage to homes, even making them uninhabitable. The first clue is that moisture smells. Besides damage to the house, moisture can adversely affect a homeowner or tenant’s health.
Stuck windows and doors. These can also be a sign of moisture or that a house is settling due to age or structural shifting. Both are problematic.
Sloping or sagging floors. Both indicate structural problems beyond just aging. Buyers should find out if framing, joists or sub-flooring need replacement.
Foundation problems. One small crack can be just the beginning of many cracks and can signal that a house could eventually crumble.
Inward grading, poor drainage and short downspouts. Improperly installed or clogged gutters and downspouts all may cause water to enter a house.
Bad roof. An old roof may leak but it’s not always the shingles or tiles that are the culprit. Sometimes, it’s what’s underneath – sheathing, trusses, beams and rafters. The sellers should disclose when the roof was installed.
Outdated wiring and fuses. Because homeowners rely on so much technology today, outdated wiring may, in worst cases, start a fire. Often, dated electric boxes make the home un-insurable.
Outdated plumbing. Toilets that don’t flush properly, sinks and showers that lack adequate pressure or have leaks, and water heaters that don’t provide enough hot water signal a need for attention. Not to mention the condition of the pipes from the home to the street.
Termite damage and wood rot. Buyers may spot blisters in wood flooring, hollow sections of wood, and even the bugs themselves. An exterminator can determine the extent of the damage and estimate repair costs.
High energy bills. This should alert buyers to the cost of cooling the home. Due diligence can tell them whether their Ac handlers, insulation, or doors and windows are inefficient and need to be sealed, repaired or replaced.
Historic home designation and zoning rules. Municipal guidelines may restrict buyers from making certain improvements to their home and property.

Filed under: Blog, Boca Raton real estate, Down Sizing, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Home Buyer Advice, Home Buyers, home Inspections, Home Maintenance, Homebuyer Advice, International Home Buyers, International investors, Real Estate, Real Estate Investment, real estate news, Real estate trends, Relocation, South Florida Real Estate, What Buyers Should Check When Buying an Older Home by Kim Bregman
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Tips for Condo Buyers

Buying a condo, short for condominium, can be a great way to dive into home ownership without worrying about much of the upkeep that comes with single-family homes and townhouses. Condo dwellers can also typically take advantage of shared amenities, plus having professional management to take care of building maintenance.

However, condos aren’t for everyone so it’s best to figure out what your lifestyle and budget needs are first.

Whether you are purchasing a vacation condo or making South Florida your permanent home, there are a few tips and tricks you should use to help make the condo buying decision easy and stress-free.

Here are just a few South Florida condo-buying tips to help you find your dream condo.

A condo is typically a shared piece of property with individual owners of each “unit” or condo. In most cases, condominiums offer services such as, but not limited to, fitness centers, tennis courts, and pools. Many people purchase condos due to less hands on maintenance and they enjoy lifestyle of living in a condominium community.

When buying a condominium, it is important you know that every condominium community is different. It’s crucial to know each community will have their own community rules, association fees, management company, and amenities.

Financial Strength

Take a close look at the health of the association just as closely as you do the unit itself. Associations should have reserve funds to maintain the parking lots, roofs, painting , pool and other maintenance items. If there are not enough funds to pay for the repairs, it would require a loan to the association which would be paid in monthly installments or a special assessment where all owners would have to pay their portion of the repair upfront. You should take this monthly condo association fee into consideration when planning to budget for your new home. If the association is not financially healthy, you will need to prepare to pay for unexpected expenses out of your own budget.

Building Style

The style of the building in which your condo is located in can impact your financial costs over time. Garden-style buildings have lower maintenance costs than towers. Multi-story buildings and towers have elevated costs associated with maintaining the elevator systems. The number of units and the size of the units within the association will also affect your maintenance dues. A larger number units divide the fees up between more people, lowering the cost than if you had a smaller amount of units .

Insurance

Depending on the exact location in South Florida, the cost of insurance varies. Research insurance costs and availability before signing the contract for your new condo. Beaches that are located on barrier islands offer additional challenges to obtain traditional all-perils insurance policies for both the association and the condo owner.

Beach Access/Condition

If you want to purchase a condo on the beach, you’ll need to consider the quality of the sand, the condition of the natural elements such as the dunes, and the width of the beach. Beach erosion is a common problem in Florida, especially after hurricanes and tropical storms hit. Take a deep dive into the history of the beach erosion and maintenance in the area you are looking to purchase your condo in. You certainly don’t want to purchase a condo on a beach that is eroding or isn’t properly maintained.

Mortgages and Financing

Financing a condo is not the same as financing a single-family residence. While it’s critical to get approved for a loan whether buying a condo or a house, obtaining financing can be trickier for a condo purchase, because many lenders don’t allow purchases of condos. Many condos are purchased with cash because of the regulations lenders and programs place. If you are looking to get an FHA loan, you’ll need to first make sure the condo community is on FHA’s approved list of communities. FHA typically requires that 80% of the units in the building are owner-occupied, so before you have your heart set on a property, double-check that it is on the approved list.

You can also obtain a private mortgage to purchase the condo, but this comes at a much higher price tag since many private lenders require a minimum of 20% down payment.Mortgages for condos may involve some additional steps. For condos, the condo association/complex must also be approved for a full loan approval to be issued, This may require additional paperwork, approval from the condo association, and even some additional costs paid before closing. You may need to make a bigger down payment or have extra cash in the bank since Lenders sometimes have extra requirements for condo buyers.

Association Fees

One of the largest expenses, in addition to your mortgage, will be your condo association dues. “Condo fees generally cover the maintenance of the common areas, utilities such as sewer and trash, security, building insurance, reserves and external building maintenance, In addition, whether the fees are paid monthly, quarterly, or annually, you will still be required to pay property taxes and need to carry homeowner’s insurance to cover your contents and your internal structure. Prospective condo purchasers should find out how much you will pay in monthly condo dues and what the fees cover within the community. Do these fees seem reasonable in return for the maintenance and amenities that are offered?

Rules and Regulations

Condo ownership comes with rules. It’s important that you understand what your unique responsibilities are to the overall community and what rules the condo association has in place. When you are buying a condo in Florida, you are required by law to receive a copy of the Declaration of the Condominium or condo docs as they are more commonly known – this is mandatory regardless of whether you are buying a resale condo, key-ready condo, or a per-construction condo. These condo docs are registered with the State and can be over 500 pages in length.

The condo docs will contain lots of specific information, including details about the developer, the formation of the Home Owners Association (HOA) and related fees, plans of the buildings, floor plans for each unit and the all important Rules and Regulations of the condominium.

Some Important information that you look for in the docs or ask for from the Condo Association:

What exactly are your ownership and voting rights within the association?
What percentage of the common expenses are you be liable for – many units offer different floor plans of various sizes, with each one making up a percentage
What restrictions are in place regarding the common elements and your unit?
Is there planning in place for further units to be constructed? Â If so, how many and when?
Does the developer have any options NOT to complete any of the facilities or amenities?
Is there a history of resident complaints at the condominium?
Is the Condominium Association currently involved in any form of litigation?
Does the Condominium Association have reserved funds set aside for maintenance projects and future capital expenditures?
What about pets – are there ANY restrictions?
Can you rent or sell your condo without restrictions?
Are there any restrictions regarding family and friends using, staying with, or occupying the unit?

Know About Special Assessments

A special assessment is a large fee that is charged to help pay for a significant project within the condo community, such as a structural repair. These special assessments can raise your association fees for a certain period of time or require a one time payment to the Association.

Whatever your preferences, carefully consider your current and future lifestyle needs, plus your financial situation. Consult with a real estate professional who specializes in selling condos to show you the ins and outs of condo living throughout your home search and protects your interests during the buying process.

Filed under: Boca Raton real estate, downtown boca raton, Exclusive Buyer Agency, Exclusive Buyer Agent, First Time Homebuyers, Florida Real Estate, Foreign Home Buyers, Home Buyer Advice, Home Buyers, Homebuyer Advice, International Home Buyers, International investors, Real Estate, Real Estate Investment, real estate news, South Florida Real Estate by Kim Bregman
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