Bottom fishing for Florida condominiums is over. Waiting on prices to drop was a 'yesterday' strategy. Buying fractional condo before the owner or lender starts getting multiple offers is 'today.'
So says a broker with 35 years experience and $3 billion in Florida condominium sales.
The just-passed Distressed Condominium Relief Act (DCRA) is expected to be signed into law within days. Developers and lenders will be asked to take much less risk.
Hello, "buy and hold" buyer. Good bye, "buy and resell". Well, not goodbye, but a serious slow down of same, as prices move up.
The days of buying 100 units that sold for $200,000 for $50,000 are about over, but the good news is that they may be available for $55,000, still ridiculously low prices, as lenders start moving prices up gradually, then faster as momentum picks up.
In the old days, investors could take their time. Today, thanks to the internet, not so much.
Thanks to 'offers at the speed of thought' to paraphrase Bill Gates book, the world will know within 24 hours that the DCRA has been signed into law. When that happens, investors will be moving fast to get the best properties available. Lenders will be rethinking their prices as well.
Who would have thought the condominium mess would be the first to be cleaned up?
To some investors, fractional condominiums represent a real 'buy' opportunity, especially those with good rental histories. They still should for a while, even if prices move up.
The DCRA represents the most dramatic change in condominium law in years. When investors start understanding the reduced risk, the will come. Look for stricter 'offer "protocol.
Be prepared to win, when you make an offer. Here are some recommendations by some lenders and commercial brokers:
- Provide a proof of funds letter, or be able to prove your company's experience via your website.
- Prove that your due diligence team is in place and can perform as agreed. Too many times this has been a stumbling block. Lenders have long memories.
- Use a contract, not a letter of intent (there are exceptions under some conditions). Letters of intent are sometimes used to tie up multiple properties to give the buyer time to negotiate the best deal. Use a contract.
- Try to find 'shadow' or privately held inventory off the internet.
- Be willing to look at 'distressed' offers, not just bank-owned ones.
- Offer to buy the note.
- Expect brokers and lenders to tighten financial qualifications. Florida is notorious for attracting unqualified shoppers with high sounding offers, or as they say, those with a big hat and no cattle.
- Expect to be asked to see your website.
- Don't treat your broker like your chamber of commercial representative. The fact is s/he may know of properties that are not listed on the internet anywhere. Send them a proof of funds letter and a non circumvent agreement and they will go to work for you.
- Start too late to complete your due diligence on time. In the coming market, you may not close.
- Submit a contract, not a letter of intent. Letters of intent are suspect. (Some exceptions)..
The fishing for fractured condominiums is still good, but the trophy assets will be harder to catch.
It may take a more experienced guide than ever to find them. Asking a Florida attorney to use their firm's lender contacts might be a good idea.