Miami- The new reality in Real estate financing
Working everyday with many International clients that are trying to understand the Miami Real Estate market , I have decided to write in order to address some of their main concerns.
I know that many people are interested by this market, so I hope this will help.
Keep in mind that I am speaking from my perspective, which is, a Real Estate broker working mainly in the niche markets of Miami Beach, South Beach, Brickell and Biscayne.
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Maybe more than any other area of our economy, the recession has completely changed the landscape when it comes to real estate and mortgages. The situation has changed, and changed dramatically, in just a few short years. Not only have home prices fallen significantly, the glut of foreclosed and bank-owned homes has turned the market on its head. Accordingly, real estate financing has changed, as well. Lenders are more cautious about giving out credit, and what worked back then doesn’t work now.
Here are some of the big ways in which today’s real estate financing reality is different than in the past:
• Down payments are growing. There was a time you could get a mortgage with just a few percent down on your home, and still get excellent terms. Today, you may need to contribute a significantly larger portion – usually more than 20 percent (and most of the time up to 50%). This means that folks need to save up longer to get their down payment, resulting in far fewer “real” buyers and mostly investors, becoming landlords while waiting for the prices to pick up.
• Contingencies are harder to get. Right now, there are plenty of cash buyers in the real estate market. What that means for you is that, if you need financing to buy a house or a condo, you might find sellers avoiding you. Sellers know that a bird in the hand is worth two in the bush, and are often in a position where they have to take a lesser offer just to avoid contingency.
• The financing process has slowed. Banks can take significantly longer today to release funds than they did in the past. This can wind up killing the deal altogether.
So, what does all of that mean for you? It means that the market is a lot murkier than it used to be. Still, there are things you can do to increase your chances of closing successfully, including:
• Pay cash. No, not everyone can pay cash for their real estate. If you’re in a position to do so, however, you can get the property quicker, and often for a lower purchase price.
• Line up financing early. Don’t wait until you have a property in mind before you seek financing. Get everything done that you can before you even start looking at potential purchases.
• Be willing to budge on non-financing contingencies. If you have some wiggle room on other contingencies, use it. You might have to sacrifice something else in order to convince a seller that you’ve got the right deal.
• Be ready for disappointment. Some deals are just going to fall through. Never put all of your eggs (or hopes) into one basket, and always have a backup plan.
The new reality makes financing more tricky, but not impossible.