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Orlando Real Estate Law Blog

Fall season creates advantages for homebuyers

Although Florida has mild weather all year, autumn still opens up opportunities for homebuyers. Most people seeking a new home do so in spring and summer, especially if they have children who need to start at a new school. As a result, the residential property market slows down in fall. People still in the market have less buyers to compete with. This often grants them greater negotiating power.

Sellers who did not succeed in moving a home during the busy season could respond favorably to lower offers. The chance to sell before winter sets in could also make them agreeable to other concessions, such as giving a buyer a credit toward upgrades or paying more of the closing costs. Similarly, builders with inventory still available at their housing developments might discount some of their homes.

Millennials and home ownership

Many millennials living in Florida and around the country are struggling to find ways to buy a home. While this generation may seem to be taking its time in becoming homeowners, it turns out that there are multiple factors making it difficult for them to afford real estate of their own.

Many experts have pointed out that real estate costs are on the increase. This makes it more difficult to both qualify for a mortgage as well as save up for a down payment. In fact, 21 percent of millennials who do buy a home are only able to put down the minimum payment required to qualify for a home loan. Some potential home buyers may be wary of putting down such a small amount.

Commercial properties poised for steady returns

Rising rents and low vacancy levels may position the commercial real estate sector to provide stable returns to investors in Florida and around the country according to NAI Global. The real estate brokerage firm mentioned that demand was strong in the second quarter and could remain strong for the rest of 2017. The net absorption rate nationally in the industrial sector rose to 71.8 million square feet while rents rose 1.6 percent in the second quarter.

Industrial vacancy rates were near 20-year lows at 5.1 percent while the office sector had a vacancy rate of 9.6 percent. In the office sector, rents were down slightly on a national level. However, this was because of decreases in rental values in Chicago and New York. The other 19 major markets used to calculate data all saw their average rental rates increase.

Due diligence in commercial real estate transactions

Thorough due diligence is crucial for commercial real estate buyers in Florida who wish to avoid costly mistakes, and taking care of the issues raised by these inquiries early in the transaction process can save both time and money. A due diligence period gives buyers the time they need to inspect properties and check out the claims made by sellers, and purchasers may back out of deals or negotiate more attractive terms when their efforts reveal building defects or uncover irregularities in financial documents.

Deposits generally become nonrefundable once the due diligence period has ended and any issues raised have been addressed. Parties eager to save time could allow due diligence to commence before a purchase agreement is signed provided that a letter of intent is in place, and they may choose to set strict time limits for some items while extending the deadlines of others. Many of the documents required to complete due diligence must be provided by sellers, and purchase agreements may stipulate that the due diligence time period begins only after such documents have been received by the buyers.

Helping service members buy a home

Buying a home is a milestone for both civilians and members of the military. Just like civilians who travel a lot for work, those who are stationed in Florida or elsewhere may need to take their job into account when timing their home purchase. This is because a person in the military may be ordered to another base or deployed with little or no warning.

It is also possible that the current assignment is a temporary one. Those who are going to be on their current base for less than two years may want to shy away from a home purchase as it tends to be a long-term commitment. If a member of the military does choose to buy a home, he or she should have a plan as to what would happen if new permanent change of station orders came in.

Many residential housing markets are overvalued

Floridians who wish to buy homes may be interested in learning that many properties in the country's biggest housing markets are considered to be overvalued. While demand is up for homes, the housing market has weakened because the rising prices have made it almost unaffordable to buy a home in many regions.

According to CoreLogic, 46 out of the top 50 housing markets in the U.S. were overvalued as of the end of July. Home prices in July of this year were also 6.7 percent higher than they were in July of 2016. Because of a low supply of houses that are available for sale, the prices are being driven up.

Realtor organization reports home sales numbers falling

The National Association of Realtors reported that the pending home sales index was .8 percent lower in July 2017. Year over year, the index fell 1.3 percent. The lower index numbers suggest that supply has lessened in the residential real estate market. In Florida and across the United States, 1.92 million homes were listed for sale in July 2017. This was a year-over-year drop of 9 percent.

Meanwhile, demand has remained strong thanks to low mortgage rates for 30-year loans and a healthy rate of employment nationally. According to Freddie Mac, mortgage rates averaged 3.82 percent in early September. The unemployment rate has been reported at 4.3 percent and the economy continues to expand. The disparity between demand and supply may explain rising home values.

Factors for older homebuyers to consider

Age should not be a concern for older individuals in Florida who are considering purchasing a home for the first time. The 2017 NAR Homebuying Report shows that individuals between the ages of 52 and 70 accounted for nearly 25 percent of first-time homebuyers. However, there are some issues they should consider before committing to a home.

Purchasing a home can be a good choice since being responsible for a mortgage can have a significant financial impact. Older homebuyers should know whether they would be able to afford the monthly payments if a spouse decides to retire or passes away suddenly. They will also have to think about the high likelihood that insurance, taxes and homeowners' association fees will rise.

The upside of passive real estate investment

Many Florida residents may invest in real estate by buying a second home. This is because they are familiar with the process of buying property and understand how it can appreciate in value over time. However, an individual may underestimate the challenge and risk in owning a single-family home for investment purposes. In many cases, it may be easier and more effective to passively invest in commercial real estate.

Putting money in commercial real estate may allow an individual to invest in groups that have a track record of making profits. By acting as a partner in a commercial real estate project, losses are limited. Furthermore, passive investing provides an individual with the opportunity to invest in any type of project anywhere in the country. Another benefit of passive investment in commercial real estate is that someone else manages the project and the cost of doing so.

Commercial real estate strong in first half of August

Florida investors are likely aware that August is normally the slowest month for commercial real estate leases and sales. However, August of this year is different as is the summer so far as a whole. Commercial real estate has seen a strong uptick in business with more activity around the country than during the spring and winter as well as the summer months of prior years.

According to Transwestern, businesses in the San Francisco Bay Area leased 2.4 million square feet during the last 90 days. By comparison, companies leased 700,000 square feet during the first quarter of the year. In New York, July leases and sales were up by 2.2 percent and by 10 percent over the leases and sales in July 2016.

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