| Wednesday, August 15, 2007 |
| Great Agent Information for selling condos |
From Realty Times, excellent article.
What You Need To Know To Sell Condos
by Blanche Evans
If you're a Realtor who doesn't know much about the condos, now's the time to brush up on one of the housing market's perfect solutions for many homebuyers. Here's fresh information designed to blow away those myths and prejudices that are still hanging on about condos that you can use to improve your condo sales.
Condos aren't just small houses -- any more than children are tiny adults. While condos are a form of housing that rises and falls like any other, there are some distinct differences in how condos as a market should be viewed.
Condominiums are a type of home ownership in which homeowners own individual units of a building or property, such as an apartment within a high-rise, or a single-family townhome in a community. They also jointly own common parts of the property, such as the grounds, parking lot and the building itself, if the condo is in a building. Because of shared ownership and responsibility, condos are frequently managed by a property management company hired by the homeowners association. Homeowners pay dues, usually one to four times a year, to fund the upkeep of the building and grounds, and pay employees such as bellmen, porters, and guards. Dues include payment toward immediate expenses and escrows for future maintenance, such as roof replacement, so that owners can avoid expensive special assessments.
Condominiums are designed to provide multi-family housing in densely populated environments, such as cities and vacation spots where land is at a premium, but there are also other considerations -- changing attitudes among homebuyers as to what constitutes a good home.
People are choosing homes to suit their lifestyles. In seeking condos, homebuyers likely want low-maintenance beauty and peace of mind; access to amenities they perhaps couldn't afford on their own, such as pools, spas and clubrooms; stronger security, both manned and electronic; and a sense of community with other homeowners nearby to socialize with.
In the past, when home buyers were dominated by married couples with children, condos weren't the preferred product of choice for families, unless they were located in highly populated areas where families had no other choice in housing to own, or they were second homes or vacation homes where occupancy periods would be brief.
But what has many Realtors still skeptical about recommending them is the fact that speculators tend to favor them and rising rental rates threaten homeowners who find that banks won't loan money to homebuyers in buildings where there are too many rentals. Worse, when a housing market falls, condos tend to fall harder and faster in value than single-family homes, causing desperate owners to rent their units, thereby justifying lenders' and Realtors' worst fears that condos are a poor investment.
But things change. Condos set housing records for 10 years straight, before falling 10.4 percent in 2006 says the Commerce Department. That's nearly two percent more than the existing home market fell, which is a high percentage for approximately 12 to 13 percent of all housing transactions. The reason? Condos are simply more volatile, but that volatility can be turned to advantage by smart Realtors.
"When developers and converters dump huge stocks on the market at the same time that sales slow and investors pull out, naturally prices will fall -- but it's not an indicator of what the single family market will do," says Walt Molony, senior associate and spokesperson for the NAR.
Why? Homebuyer demographics are changing, no one's making any more land, and many homebuyers prefer multifamily home environments. That's why condominiums today are full of mythbusters. According to a recent study by the Mortgage Bankers Association, most condos are in single-family structures like townhomes, they're in the suburbs, not the city, and they're more than two thirds occupied by owners, not renters.
There's more. Consider the following:
In 2006, the number of married households fell below the 50 percent level to 48 percent, according to the U.S. Census, meaning more singles and non-traditional households are the majority of housing consumers.
Households are increasingly headed by singles. Young people are delaying marriage. The Census Bureau says that women today marry after age 26, while women in 1960 married at age 20. Half of marriages end in divorce.
Single women homebuyers make up nearly a quarter of the market, according to the National Association of Realtors, accounting for nearly 30 percent of total homeowner growth between 1994 and 2002, according to the Harvard Center for Joint Housing Studies in 2003.
Single females make up 42 percent of condo buyers. Single males make up 20 percent, while married couples constitute 30 percent of condo buyers.
The Tax Relief Act of 1997 has introduced unprecedented liquidity and mobility to the housing market, making it possible to own a home, occupy it for a minimum of two years, and move out in two years without taking a tax hit.
NAR's Profile of Home Buyers and Sellers 2006 says that condo buyers (median age: 43) are older than single-family home buyers (median age 41.) "The median age of condo buyers skews older because condos attract the bookends of the housing market -- first-time buyers, and empty-nesters (boomers) and retirees, who no longer need a large single family home but like lots of amenities in a simpler lifestyle," explains Molony.
Lenders have relaxed lending standards to allow younger and single homebuyers to buy homes by removing obstacles (such as differing credit standards for divorced women,) and creating a wide variety of adjustable or interest-only hybrids that don't penalize borrowers for short-term ownership. This has boosted the first-time homebuyer market as well as single female homebuyers.
Condominium buildings offer products not easily found in single-family homes, such as one-bedroom, one-bath configurations which appeal to singles and first-time homebuyers. "Among all condo buyers, the percentage of first-time buyers are highest among single-female households (59 compared to 48 percent among all condo buyers," says Molony.
One out of ten homeowners owns a second home, often a condominium in the city or a favorite vacation spot.
The tenure in condos is shorter (4 years in buildings with 5 or more units), while the median for detached single family homes is 6 years. Realtors who know this won't freak out when multiple units go up for sale in the same building.
All of the above suggest a strong market for condo sales, which is a good reason for Realtors to know as much as possible about them.
But no statistic speaks as loudly as this one to homebuyers growing preference for multifamily living:
"While the median price per square foot is highest for the condos ($169 compared to $118 for all homes purchased), median income of condo buyers is lower than the median income of all buyers ($59,100 vs. $71,800)," says Molony. "The price per square foot of condos is higher than single family homes because there is a concentration of condos in higher-cost housing markets. Within a given area, condos typically cost less than single-family homes -- with the exception of upscale units in urban cores."
Condos aren't always about buying something smaller that's cheaper. They're about choices.
Published: May 29, 2007Labels: condo sales, condos, condos for sale |
posted by Myrtle Beach Web Design @ 3:04 PM  
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| Tuesday, September 12, 2006 |
| The housing boom is over, but creative investors still make profits |
By Robyn A. Friedman
The Sun Sentinel
Special correspondent
Posted September 11 2006
Vicky Kaye is accustomed to making a double-digit annual return in the oceanfront real estate market. And unlike many other area real estate investors, she's still doing so.
"I do about two or three deals a year," said Kaye, a licensed massage therapist who lives in Pompano Beach.
Kaye is a private lender who provides short-term financing for other real estate investors. She's been investing that way for five years and making 12 to 14 percent interest on each deal, as well as the return of her principal in less than a year.
"It's collateralized, and there are no complications," she said of the transactions.
Over the past few years, South Florida's housing boom has spoiled real estate investors, many of whom unabashedly brag about the killing they made flipping preconstruction condominiums, rehabilitating foreclosed properties or buying apartment complexes to convert to condos. But now that the housing market has tanked -- the inventory of unsold homes skyrocketed and sales have screeched to a virtual halt -- investors are becoming creative, segueing into new types of deals and properties in an effort to wring out profits in a challenging market.
"The latter part of 2002 to the second quarter of 2004 was the period of time when everybody jumped on the bandwagon, and all those condo flips occurred," said Michael Y. Cannon, managing director of Integra Realty Resources South Florida in Miami. "That was when the market actually peaked."
Today, Cannon said that many people don't know where to put their money.
"They're starting to put their money back into savings accounts, CDs and treasury bills," he said. "Instead of a 2 percent return, they can now get 5.5 percent, and although that return is less than the promised return they'd get on real estate, they want safety."
Others say that moneymaking real estate opportunities still abound in South Florida.
"There are more opportunities now than there have been in years," said David Dweck, a real estate agent with Re/Max Professionals in Coral Springs and an active investor the past 14 years. "With the market shifting, sellers are becoming more realistic and motivated. A motivated seller can mean a buying opportunity for an investor."
Where are area investors putting their real estate dollars now?
Commercial properties. Cash flow is the name of the game. Since investors can't count on short-term appreciation and a quick sale, many are seeking an income stream.
Michael S. Weiner, a zoning attorney in Delray Beach, has been purchasing buildings since 1991. He owns several buildings on Atlantic Avenue in Delray Beach that have retail and office space. He targets properties with "intrinsic value" and always buys to hold long-term. Weiner only buys properties in Palm Beach County. He recently bought a medical office building and is considering a post office.
"Real estate's the most intensive investment you can possibly have," Weiner said. "You've got to watch it."
Foreclosures
Michael Perlmutter has been a full-time real estate investor for more than six years. He's referred to in the industry as a wholesaler -- someone who spots homes in foreclosure or preforeclosure and then resells them to one of the 3,000 investors in his database, typically at a profit of at least $15,000. The buyer then rehabs the property and resells it for an additional profit. Even with his well-oiled machine, Perlmutter has had to adapt his buying strategy.
"Eighty percent of the part-time weekend investors who dabbled in real estate have folded," he said. "Now, I've got to work harder." Still, Perlmutter said he gets five to seven calls a day from people in financial difficulty looking for someone to buy their houses. "There's never been a better time than right now because of the supply," he said.
Preconstruction condos (yes, preconstruction condos).
Gone are the campers, the speculators who lined up -- sometimes for days -- to snap up prime condo units at early prices. At least one local expert thinks a market still exists for some of these condos. Mark Zilbert, president of Zilbert Realty Group Inc. in Miami Beach, said that half the buyers who hold contracts on preconstruction condos -- most of them real estate speculators -- don't want to complete the purchases on their condos.
"They just want their deposit back to get out of it," he said. "So an opportunity lies for someone approaching a buyer who bought an apartment in 2003 or 2004 and offering them their contract price."
Zilbert said that the investor has to be prepared to settle on the unit and hold it for a year or so. After that, he says, they should be able to resell the condo at a profit. "They'll probably see a 50 to 60 percent return on their money, which is a far cry from the 200 to 300 percent we used to see," he said.
Invest in a vulture fund. Many people are putting aside money to plunge into the real estate market in an attempt to swoop up bargains when they think the market has hit bottom. One of these is Deerfield Beach real estate analyst Jack McCabe, who has formed McCabe Acquisitions LLC for such investments. McCabe said that accredited investors of high net worth, institutional investors and other entities can participate in his acquisition firm as nonmanaging members. A minimum investment of $5 million is required. He plans to acquire blocks of condos in multifamily developments -- or entire projects -- in many markets in the country, with a special emphasis on Florida. And he hopes to purchase these properties from anxious sellers at a discount. "My acquisition group will acquire at early 2004 prices from developers and builders, or debt value from lenders," he said. McCabe said he's prepared to hold these properties for up to 10 years.
Invest in your own property. Consider remodeling your own home but do it wisely. With the right remodeling project, you can increase your home's value. According to Remodeling magazine, the average price of a midrange bathroom remodel is $10,499. When you sell, however, you'll recoup 102.2 percent of the cost of that remodeling job. Kitchen and bath remodels, as well as siding replacements and home additions, yield the highest return on your investment. Add a sunroom, on the other hand, and you'll recoup just 74.5 percent of your cost.
Look into other regions. Although South Florida is experiencing a housing market slowdown, markets in other parts of Florida and the United States remain robust. Many investors are flocking to Orlando to purchase condos and vacation homes for investments. Some are investing in commercial properties in Ocala and Jacksonville. While other areas may offer opportunities not currently available here, experts warn investors to be careful.
"If you're a small investor, you should never invest in anything that you can't visit in one day," said Integra's Cannon. "Stick to the neighborhood that you know or else invest in a REIT (real estate investment trust) or mutual fund that invests in real estate. Use common sense."Labels: condo sales, myrtle beach condos, real estate, real estate marketing |
posted by Myrtle Beach Web Design @ 12:55 AM
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| Friday, May 20, 2005 |
| Banks offer letter of credit to finance 2nd homes |
Banks offer letter of credit to finance 2nd homes
Thursday, May 19, 2005By Kemba J. Dunham, The Wall Street Journal
Buy beachfront property! Almost no money down!
More investors prowling some of the hottest real-estate in the country have discovered an old-fashioned financing tool -- the letter of credit -- and are using it in a way that may be adding fuel to an already overheated housing market.
Regional banks active along the Gulf of Mexico, where thousands of luxury condominiums are planned, are offering letters of credit to high-end home buyers, who use them instead of a cash down payment to reserve condos before they are built.
A person who obtains a letter of credit is promising to make a future payment, or else the bank that wrote the letter of credit is on the hook. Some letters of credit are secured by the person's assets; some aren't. They have long been used by companies, often when there is a lag between striking and closing a transaction, such as in securities transactions or the import/export business.
Using a letter of credit to buy a home has been rare -- until now -- in beach communities in Florida, Alabama and Texas, where baby boomers are buying second homes. Estimates call for 20,000 condo units to be built in Florida and Alabama alone in the next two years, many at prices of $500,000 to $1 million. Some commercial lenders won't advance construction financing for condo developments until the builder "presells" at least 60 percent of the units, even though they may not be built for a couple of years.
For customers who don't want to tie up cash that long, the letter of credit is attractive. "You're not using any of your cash, and protecting your cash is one of the most important things to an investor," says Kathy Martinez, who has been investing in real estate for 25 years and currently owns eight condos and seven preconstruction units along the Gulf Coast.
In Alabama, buyers are allowed to use a letter of credit for as much as 20 percent of the down payment. In Florida, a buyer can get a letter of credit for half of a 20 percent down payment; the rest must be in cash.
How letters of credit get used to buy condos is fairly simple. Typically, a developer "presells" by letting a buyer reserve one or more units with a small cash payment. The buyer then has 30 to 60 days to get a letter of credit covering up to 20 percent of the purchase price. Once the developer gets the letter, the deal is binding, and the reservation becomes a sale. The buyer may then get back that initial cash payment.
Ms. Martinez recently received a letter of credit from Vision Bank in Gulf Shores, Ala., for 20 percent of the value of a $460,000 condo there. Like other investors, she hopes the property will appreciate by the time construction is complete, allowing her to sell for a profit -- without spending anything but the letter-of-credit fee charged by the bank. Such fees are in the 1 percent-to-3 percent range of the letter-of-credit value per year.
Helga James, a Gulf Shores mortgage broker, says "everyone makes out" with letters of credit: Banks get fees and customers, buyers get to invest their money elsewhere while waiting for construction, and developers are assured their money.
Some say letters of credit make it too easy for speculators. Economists estimate about 20 percent of residential property sales involve investors, not families or individuals who plan to live in the home. Such purchasing could be artificially lifting prices and demand and could destabilize a market should speculators start dumping homes, these economists fear.
"If these letters of credits are being given in markets that have a high share of investor purchasing, then it seems speculative, and it's something I'd pay attention to," says Doug Duncan, chief economist at the Mortgage Bankers Association in Washington.
The banks believe waterfront property is unlikely to lose value, and they see letters of credit as a way to attract high-end clients amid competition from the nation's biggest residential mortgage lenders, including Countrywide Financial Corp. and Wells Fargo & Co.
Offering the letter of credit "has been very profitable for us and has allowed us to build relationships" with wealthy clients, says Danny Sizemore, chairman and chief executive of Vision Bank. Mr. Sizemore says the bank manages its risk, requiring that customers have equity in an existing property, cash in a certificate of deposit or other assets.
SunSouth Community Bank in Destin, Fla., a division of the Bank of Bonifay, Bonifay, Fla., is issuing an increasing number of letters of credit. The most popular type, an unsecured letter, requires no collateral, but the customer has to have a good credit score, a stable job and income and between one half and two times the letter-of-credit amount in stocks, a CD or in a checking or savings account. Most applicants qualify, but because of strong demand, "we have reached our cap for unsecured credit," says Jayce Holley, a vice president at the bank.
J. Collier Merrill, a developer in Pensacola, Fla., says banks do a good job with letters of credit, and the market does the rest. "We do have a lot of investors on our rolls right now, but there are enough baby boomers out there who are going to want condos here for at least another 10 to 15 years, and they're going to buy from these investors," he says.Labels: condo sales, mortgages, oceanfront condos, real estate investment |
posted by Myrtle Beach Web Design @ 5:59 AM
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