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Orlando Real Estate Law Blog

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.

Federal Reserve stress testing focuses on commercial real estate

Commercial real estate in Florida sometimes offers investors good returns. However, lenders have raised their standards for financing property purchases. A report issued by the Federal Reserve System shared the results from a survey of loan officers, who have placed stricter qualifications on business property mortgages. The survey collected responses from officers at 98 banks operating in the United States.

Actions this year by the Federal Reserve have likely prompted this action. Recent stress testing of financial institutions conducted by the Fed looked specifically at commercial real estate and banks' ability to withstand financial turmoil. Policymakers have shown concern about the potential of rising prices for commercial real estate to exacerbate an economic downturn. As a result, some of the banks surveyed have increased their scrutiny of loan applications for construction and land development as well as apartment buildings.

What not to do when searching for a home to purchase

Many Florida residents are excited to find the homes that they would like to buy. When they are preparing to do so, there are multiple things that they should avoid doing so that they can get the homes that they want and save money on their transactions.

Buyers should talk to more than one mortgage lender, and they should also consider getting a buyer's real estate agent. A real estate agent can help the buyers to find the homes that fit them the best and help to lead them through the detailed process. Buyers should not just talk to one mortgage lender to get pre-approved. Instead, they should talk to several so that they can get several quotes for comparison.

How to get financed for a commercial property

A Florida resident who wants to borrow money for a commercial real estate project may believe that getting loan approval is a formality. However, the lender may not necessarily see it that way. If a person has tax issues, late payments or other credit blemishes, it may not be possible to approve a loan application. The only way to overcome these issues may be to have another person or entity guarantee the loan.

It may also be necessary for a borrower to have a high net worth or have a lot of liquid assets as collateral. Ideally, a lender wants to see that a commercial property has a history of generating revenue. Borrowers may believe that potential is all that matters when it comes time to ask for money to finance a new building or renovation project.

Record number of foreign buyers for residential real estate

Florida is one of the three states that is seeing the largest number of foreign real estate purchases. The other two are California and Texas. From April 2016 to March 2017, foreign purchase of real estate hit an all-time high, and half of those purchases were in the aforementioned three states. New Jersey and Arizona were also popular. Overall, more than 284,000 homes were purchased by foreign buyers.

The largest number of buyers were from China, and they spent around $31.7 billion. Canadians spent $19 billion followed by buyers from the United Kingdom and Mexico, who spent more than $9 billion each. In fifth place were Indian buyers at $7.8 billion. Since the dollar is currently strong against other currencies, the jump has come as a surprise. It is believed that despite the expense, real estate in the U.S. is seen as a stable investment. However, regulations from foreign governments and uncertain immigration and trade policies in the U.S. mean that there might still be a slowdown ahead.

Selling a home during foreclosure

Florida residents who are facing foreclosure may understandably feel nervous and afraid, but there are many options available that could slow or stop the process. One option involves selling a home.

Foreclosure typically starts after four missed payments and a notice of default. The process might last for about six months or a year but could be longer if negotiations occur between the homeowner and the lender. People can sell a home even after the foreclosure process has started, and this remains true until the bank takes possession of a house or it is sold at auction.

Commercial property protections against buyer's remorse

Seasoned real estate investors in Florida understand that studying the details of a property is as important as paying attention to macro-trends in the market. For those looking to enter the commercial real estate market, due diligence may seem like overkill at times, but intimate knowledge of a property is an important part of making a sound investment.

Whether for a commercial or industrial property purchase, would-be owners can protect themselves from buyer's regret and possible financial difficulties by ensuring a thorough physical inspection of the property. Depending on the square footage and type of facility, this may seem daunting at first. Inspections need to cover HVAC, elevators, electrical systems, plumbing, the roof, foundation and walls, and all other physical aspects of the property.

Tips for families seeking long-term residential property

Regardless of market conditions at the time, buying a home can lead to dissatisfaction without exercising due diligence. Dissatisfied home buyers can then lead to higher vacancy rates in a subdivision, push property values lower and put a damper on future land development in the area. One experienced home buyer shares residential real estate tactics that improve the chances of Florida residents getting into a home they love and can afford.

Buyers need to have a firm idea of their high and low prices in mind. Lifestyle and family size dictate to some degree the amount of square footage needed at the moment, but planning for the long-term is equally important. An barely affordable house for a two-income family may end up being too much in case one spouse loses a job. Likewise, an easily afforded residential property on one paycheck may not offer the desired space and amenities for a growing family or increasing incomes.

Bank regulations may be making CRE borrowing more difficult

A combination of market forces and more conservative lending practices are making it more difficult for commercial property developers in Florida and around the country to refinance their loans, according to some industry experts. Developers planning new projects generally take out construction loans that must be refinanced after five to seven years, but insiders say that fears about a looming commercial real estate asset bubble and strict new regulations introduced by laws like the Dodd-Frank Wall Street Reform and Consumer Protection Act have made banks less willing to lend.

According to industry sources, banks that would have routinely approved finance packages with loan-to-value ratios as high as 75 or 80 percent just a few months ago are now shying away from loans with LTVs of between 65 and 70 percent. Part of this reluctance can be put down to market concerns, but experts say that much of it is a reflection of the costs of complying with laws like Dodd-Frank and international agreements like the Third Basel Accord. The unwillingness to lend is particularly strong among community banks that may not be able to justify the investment required to meet these new standards.

Commercial property values are down

Consumers in Florida and around the country are doing more of their spending online, and many of the nation's biggest brick-and-mortar retailers are struggling to keep their doors open as a result. The commercial real estate market reflects the economy as a whole, and demand for warehouse space is strong while malls across the country are closing. A sluggish retail sector has not helped, and the Federal Reserve has taken action in recent months partly to curb real estate speculation.

The financial sector currently holds more than $3.8 trillion in commercial real estate loans, and more than half of this debt is held by the nation's banks. Reports suggest that American banks with less than $50 billion in assets are particularly vulnerable, and experts say that loans could become more difficult for developers to obtain as risks are balanced and portfolios trimmed.

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