Try as they might, Gary and Denise Murphy of Birmingham, England, have not been able to purchase their dream home in Florida.
Brian and Vicky Dingley at their local pub, the Golden Dragoon, in Northampton.
First, the interest rate on a 30-year mortgage rose from 4.9 percent to 7.9 percent. Then, the required down payment was raised — from 25 percent to 50 percent.
Even after the seller dropped the price on the three-bedroom condo from $333,000 to $224,000, to prevent the sale from falling apart, the lender asked for what Gary Murphy, a self-employed businessman, thought was an inordinate amount of paperwork.
The couple says that, no matter what they do, they have not been able to get approval for a loan.
"It's always two steps forward and five steps back," said Mrs. Murphy. "It's just impossible to get a mortgage right now."
She said lenders obviously are wary about lending money in the current economic environment, especially to foreign buyers, which has thwarted their plans to buy their "dream" condo in Orlando, right behind the city's convention center.
"We really want this condo because it overlooks a lake and you can see the fireworks display from Sea World," Mrs. Murphy said. "We are extremely disappointed because we had hoped to use it as a vacation home and also to rent it out."
Over the past few years, the rapid decline of the dollar against major foreign currencies, including the British pound, has been instrumental in sparking interest among European buyers in the U.S. property market. And they have been buying investment properties and second homes, especially in Florida.
(A 2007 survey by the National Association of Realtors in the United States found that Florida led all states in foreign home buying, accounting for 26 percent of all international purchasers. California was next at 16 percent, followed by Texas at 10 percent.)
But the credit crunch has taken a toll this year and, unless a foreign buyer is flush with funds, the buying process has grown onerous.
Tania Russo, a real estate agent in Palm Beach, Florida, said that many lenders are charging as much as 2.5 percent of the loan amount, what the industry refers to as "points," to close a loan, making financing expensive.
"Most lenders are requiring any foreign buyer to put 50 percent down right now," she said. "That's why most buyers we're seeing are cash buyers, so financing is not needed."
Scott Wilson, a mortgage broker in West Palm Beach, said U.S. banks that make mortgage loans to foreigners tend to be smaller, private banks that have not overextended themselves in the same way as other banks. Yet loan-to-value limits for foreigners — the amount that institutions will lend in proportion of the value of the property — have dropped to 60 percent to 70 percent from their previous levels of 80 percent to 90 percent, he said.
The good news is that, as far as interest rates are concerned, "they have remained fairly steady, from the low 6 percents to the mid 7 percents," he said.
And not every buyer from overseas has had a bad experience.
Brian Dingley of London recently purchased two properties just outside Tampa, Florida — including one that has yet to be constructed. The entrepreneur plans to move permanently to Florida as soon as his investor visa is approved.
"The Tampa International Airport has direct flights to London and the population of Tampa is growing at 8 to 9 percent," he said. "I think we are reaching the bottom of the housing market so it's an excellent time to buy a property over there."
His only advice? Find a reputable builder. After checking out eight builders, Mr. Dingley said he finally decided to hire Mercedes Homes, a construction company based in Melbourne, Florida.
Hal Farber, a real estate agent in Boca Raton, Florida, said he had worked with an increasing number of European buyers this year despite their difficulties in securing mortgages. He said he recently helped German buyers to purchase a multimillion-dollar condo on Miami Beach — and the euro was worth $1.58 then. (It has been hovering around $1.29 in recent days.) "Already, today, the value of their investment has gone up as the euro has become slightly weaker," he said.
As for mortgages, he admitted that the U.S. lending market is extremely conservative at the moment. "Generally, though, foreign investors with a 30 percent to 50 percent down payment should be able to find financing," he said.
Gunter Haubrich, a real estate agent in Boca Raton, Florida, said it took 45 to 60 days for most foreigners to complete the purchase of a home in the United States. But the good news is that "the actual closing — the final signing of the contract and the disbursement of funds — can be done without any of the principals in the same room as faxes or PDF files can now be sent," he said.
Some agents say they are seeing increasing interest from buyers in a variety of countries, not just Britain.
Margaret Wojtowicz, an agent in Wellington, Florida, said she had worked with more buyers from Poland this year.
"Because of the value of the dollar, the prices are great for them," she said. "I've found that they want properties close to the beach and close to fine shopping areas."
One buyer from Germany, Stefan Werner, who purchased a home in Fort Myers, Florida, in mid-August, said he was able to sidestep U.S. mortgage challenges by financing his loan through his local bank in Germany.
"I didn't find the property-buying process in America difficult in the least," he said. "You just need to find a good broker who will look after your interests."
source: ny times
Fort Lauderdale Blog & Real Estate News
Rory Vanucchi
www.LasOlasLifestyles.com
RoryVanucchi@gmail.com
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