3 Potentially Costly Mistakes When Buying a House Or Condo in Florida

There are several potential mistakes you could make when buying residential real estate in Florida and I’m going to cover three here that I feel are important to be aware of.

The first one is skipping the home inspection(s). It is your choice whether to do them or not but I always recommend having a home inspection done and a termite inspection.

Whether or not your purchase is an as-is sale (where the seller would not be doing any repairs for items that come up on an inspection) it is very important that you know if there are any current problems with the property and what potential future problems there might be. This is especially true with foreclosure properties.

This is especially important in Florida when buying a property.

1) There are termites here and if you are buying a wood frame house there could be hidden damage that can create significant trouble in the future. Even with concrete block houses, if the exterior is stucco and goes down too close to the ground, termites will be provided something to eat and a possible way to get up into the frame of your roof.

2) Your air conditioning system needs to work well and continue working properly because you will definitely need it in the summer months. It is important to know both the age of the system and whether it is functioning as it should.

3) The largest expense is normally the roof and in Florida the intense sun and strong, summer rains can shorten the life of a roof. You need to know how old the roof is and approximately how much longer it is likely to last as well as whether there are any current or recent leaks.

I had one client who found out on the inspection that the roof of the house they were buying had worn much faster than it should have and was going to need replacement even though it should have lasted another 3-5 years. We were able to negotiate with the seller on this and got the price dropped another $5000 because of this.

Another good example for why this important is a client who had a contract on a foreclosed property about a year and a half ago. It was a spacious house built about 16 years ago and was everything she wanted and at a better price than she expected. We could both tell that there was work she was going to have to do with it, but it still seemed like a pretty good deal. However, the home inspection showed us that she was probably making a mistake.

She would have needed to replace the roof, air conditioner, ducting and hot water heater in addition to what we already knew (appliances, repairing areas of wood flooring, pool screening). That was bad enough but then the inspector noticed that there was a gap between the crown molding and the ceilings at some of the walls at the back of the house. We could see that there was already caulking in the gap from a previous separation and that now even the caulking was gapping. The inspector’s opinion was that there was a soil settlement issue; possibly to the extent of being a sinkhole, and that it was something that was continuing to worsen over time (thus the new gapping in the caulking). Fortunately, my client’s contract was written so that she was able to cancel and get her deposit back due to the extent of the repairs needed.

If she had tried to save a few hundred dollars by not having a home inspection it could ended up costing her tens of thousands of dollars.

The second costly mistake comes from incorrect or incomplete information on what your future financial obligations for taxes and/or monthly association fees will be.

With both houses and condos you will have annual property taxes. The amount of taxes you will be paying may be much higher than what the current owner was paying due to Florida’s Homestead Exemption so you need to determine what your taxes will likely be.

A good example for this is a relative of mine that bought a newly built house in 2005. I warned him at the time that his taxes would go up the next year and that he should be prepared by putting aside additional money since the amount his bank would collect each month for taxes in his loan payment would fall short. Unfortunately he didn’t pay attention and then at the end of 2006 after that year’s tax bill came he noticed that his monthly loan payment had gone up about $200 and was quite upset and didn’t understand why. I looked at his statement and saw that the increase was strictly due to tax set-asides and went over it all with him again.

For condos and townhouses (and in some cases also houses) you may have a monthly maintenance or association fee to pay. If the association has a stable financial position and a good level of reserves, those fees should stay somewhat stable. However, if the association is not in a stable financial position or if they have not put aside adequate reserves you may end up in a position where you are being assessed thousands of dollars at some point in the future for a roof repair, replacement of windows, etc. (mostly happens with condos complexes).

To avoid this you should get a copy of the association’s most recent financial statement and review this during the time period allowed. You should also find out from the association what percentage of owners are behind on their dues. Condo communities that were built in Florida during the boom or were ‘condo conversions’ during the boom years are seeing a lot of foreclosures due to the number of sales that were to investors and due to the drop in values. If too many people are not paying their dues it can result in an increase in dues to the owners that are paying to cover the annual expenses. This is something that is seen more in areas like Miami but is also something I have seen in a few complexes in this area.

One local complex where buyers made the mistake of not verifying the association had adequate reserves were assessed tens of thousands of dollars when their roof, windows, railings and carports had to be replaced a few years back. That, on top of the decline in property values since 2006 ended up being very costly to those owners.

The 3rd costly mistake is trying to buy a property without having a good buyer’s representative (realtor) representing you. It is easy to have a deal go sour if either the buyer or seller gets upset about something and there is no “cushion” to temper that on its way to the other party. Some states like New York require that both buyer and seller have an attorney representing them for the majority of the process after a buyer chooses a property they want to put an offer in on. Florida does not, although you can have an attorney represent you if you choose. So when buying a property in Florida you can proceed with no one representing you but if you don’t know all the ins and outs of the process you are at risk of making mistakes that can lead to unnecessary costs, losing your deposit, losing the property you want to buy and other problems you could have easily avoided.

One example of this was a client of mine who was interested in buying a condo that had sold for over $900,000 in 2005 and was a short sale listed at $199,900 in a nice community with an incredible view of the water and beautiful upgrades. It wasn’t disclosed by the seller or their agent that the community had legal problems with the developer and that it was likely that all owners were going to be assessed at least $5000 in the near future. Fortunately I knew about this from another agent who had sold properties in that complex and informed my the potential buyer. Since that time the situation has only worsened and condo values have plummetted.

Also, if you do not have a competent buyer’s agent and the selling agent does not know what they are doing or is making mistakes and you are relying on them, you may end up with problems you wouldn’t have had otherwise. It can be stressful to buy real estate and you don’t need to compound the stress with problems you shouldn’t have to be dealing with and don’t necessarily know how to handle correctly. A competent buyer’s agent can help keep the stress level to a minimum and help you with those things that do come up which are stressful to help you get through them. Considering that in most cases you do not have to pay the buyer’s agent commission (it normallly comes out of the commission paid by the seller to their agent) you should take advantage of this type of help.

Copyright 2010 Ron Nedd