Learn be­fore you leap

A place in the sun awaits those who re­search mar­ket and reg­u­la­tions

Calgary Herald New Condos - - Recreation & Investment Properties - SHE­LAGH MC­NALLY

When the U.S. real es­tate bub­ble burst, hous­ing prices plum­meted and fore­clo­sures surged. It’s still a buyer’s mar­ket, par­tic­u­larly in Ari­zona and Florida, and Cana­di­ans are tak­ing ad­van­tage of our strong dol­lar and shop­ping for real es­tate in these sun belt des­ti­na­tions.

A re­cent Leger Mar­ket­ing Sur­vey on be­half of BMO found that one in f ive Cana­di­ans would con­sider pur­chas­ing a home in the U.S.

“Cana­di­ans of all ages are buy­ing prop­erty down south. Some are at re­tire­ment age, but there is also the 30-to-40 crowd who are buy­ing these houses as in­vest­ment prop­er­ties,” says Matt Reid, founder of Canuck-Abroad. com, a web­site help­ing Cana­di­ans re­lo­cate out­side the coun­try.

But buy­ing your va­ca­tion get­away is more com­pli­cated than late-night TV com­mer­cials make it sound — it can be fraught with un­fore­seen and some­times ex­pen­sive prob­lems.

The key to a suc­cess­ful pur­chase is do­ing your home­work and un­der­stand­ing that real es­tate is a very dif­fer­ent busi­ness south of the bor­der.

“The No. 1 mis­take Cana­di­ans make when buy­ing a va­ca­tion prop­erty is not hav­ing the right group of pro­fes­sion­als who know the law for both sides of the bor­der,” says Diane Costain, founder of Buy The Sun, based in Phoenix.

“This in­dus­try is not as reg­u­lated as in Canada. Here, you can be­come a real­tor af­ter nine days of classes.

“Buy­ing a home in this for­eign coun­try is not diff icult, but it does take some re­search.”

Rhonda Scharf, an Ot­tawa-based mo­ti­va­tional speaker and owner of On the Right Track Train­ing, bought her va­ca­tion home in Fort My­ers, Fla., af­ter do­ing ex­ten­sive re­search.

She paid $104,000 for a three-yearold, four-bed­room bun­ga­low. The orig­i­nal sell­ing price was $350,000.

“There are no guar­an­tees,” Scharf says. “You may not get the home right up to the close day.

“Net­work­ing is im­por­tant. Talk to some­one who owns a va­ca­tion home. Get sup­port and do your home­work. We saw a lot of homes that had stopped be­ing loved. The own­ers knew the bank was com­ing so they stopped car­ing.”

Re­pos­sessed homes can be sold ei­ther as short sales, fore­clo­sures, or real-es­tate-owned (REO) prop­erty.

A short sale means the bank is ac­cept­ing a dis­counted sell­ing price, know­ing the pro­ceeds of the sale are go­ing to fall short of what is owed.

While there can be some tan­ta­liz­ing bar­gains, few short sales get ap­proved by the banks, and they are ex­tremely com­pli­cated to deal with.

Fore­clo­sure sales be­gin with a min­i­mum bid that is usu­ally more than the value of the prop­erty.

Since the prop­er­ties are sold “as is,” in­clud­ing any cur­rent tenants, fore- clo­sure auc­tions of­ten don’t re­sult in sales. When this hap­pens, the prop­erty re­verts back to the bank and be­comes an REO.

“With fore­closed homes, you don’t know whom you are deal­ing with,” Costain says.

“You hire one of the bid­ding com­pa­nies and give them $10,000 up front be­fore they will bid for you. You pay the bal­ance the next day. The bid com­pa­nies don’t need to be li­censed.

“There are so many good deals, there’s no need for a va­ca­tion home­buyer to take the chance of buy­ing fore­closed prop­er­ties.”

Fore­closed prop­er­ties are of­ten plagued with prob­lems: tenants refuse to leave, an­gry own­ers trash the place or thieves steal the con­tents or f ix­tures.

Some­times, the own­ers don’t know their prop­erty has been sold un­til the new owner shows up at the door. This hap­pened to Costain with one of her f irst prop­er­ties.

“The own­ers had no idea their house had been sold. The wo­man fell to the ground in shock, sob­bing. I let them live in the house free for six weeks and gave them $1,000.

“I de­cided not to in­vest in any more fore­closed prop­er­ties. I can do just as well with short sales and REOs with a lot less emo­tional tur­moil,” she says.

Reid has found that most Cana­di­ans are buy­ing REO prop­er­ties.

“REOs are easy to buy, since you pay cash up front and avoid get­ting a mort­gage. It’s a lot more diff icult for a Cana- dian to get a mort­gage in the States.

“You’re not a res­i­dent, you don’t have a U.S.A. credit rat­ing, so for the banks you don’t have an iden­tity,” Reid says.

“Some­times, REOs can be a bar­gain, some­times they are not. Re­search the home and any po­ten­tial prob­lems.

“Don’t go cheap ei­ther. Spend that few ex­tra thou­sand to hire a real es­tate pro­fes­sional who spe­cial­izes in these kinds of prop­er­ties. It’s easy to miss some­thing that may have con­se­quences later on.”

Ti­tle in­sur­ance is also manda­tory due to the robo-sign­ing scan­dal, where thou­sand of mort­gage doc­u­ments were pro­cessed quickly with ques­tion­able elec­tronic sig­na­tures. Former home­own­ers are chal­leng­ing the fore­clo­sures in court.

Ti­tle in­sur­ance pro­tects your in­vest­ment and cov­ers any costs or pay­outs awarded to former own­ers.

“It’s not the same as buy­ing a home in Canada, so don’t as­sume you are pro­tected,” Scharf says.

Be cau­tious, take your time and your in­vest­ment could pay off.

“We use our Florida prop­erty as a va­ca­tion home, but we also rent it out year-round. It’s been a great in­vest­ment.”

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