Avia Collinder, Sunday Gleaner Writer

Hot real-estate deals available in the United States, where a depressed market and the attendant foreclosures have caused prices to plunge, are drawing the attention of Jamaican investors.

But real-estate experts are cautioning Jamaicans to think, and check on the property, before they close a deal.

Oliver Langston, a Jamaican lawyer whose practice is based in Coral Gables, Florida, says that international clients have been expressing interest in never-before-seen deals, with houses being sold on courthouse steps for only what the bank is owed and much less than their value.

Stronger currency

Europeans with a currency much stronger than the United States dollar are especially interested, Langston said.

However, this lawyer and others in real estate note that Jamaicans with an interest in purchasing cheap homes as an investment should be cautious of the many pitfalls awaiting those unfamiliar with the challenges involved - no matter how much the deal causes them to salivate.

On December 12, the decision of the developer behind the newly built two-tower condo project, called 1060 Brickell Avenue in Miami, to put 60 per cent of its units up for sale in hopes of finding a bulk buyer made news coast to coast.

Langston says on Brickell Avenue - where some 40,000 condos were constructed in a 15-mile radius - other flats are also being sold by developers in blocks of 20 and 30 at a discount.

Others are offering purchasers in a certain price range the incentive of a Mini Cooper.

Property values in Florida have fallen by about a third in recent months, as jobs evaporate and mortgage payments go into arrears. Still, others are unable to afford their recalculated mortgages at prime rates.

At the base of the US financial meltdown were subprime or adjustable rate mortgages - home loans priced below market rates but due for adjustment later - that homeowners found they could not afford when the new rates kicked in.

"In the entire Broward community, what we are seeing is a 35 per cent devaluation in prices," Ralston Phillips, a real-estate associate of Keyes Real Estate in Coral Springs, told Sunday Business.

Houses in Coral Springs, which sold at US$550,000 last year, are being sold for US$350,000 to US$400,000, Phillips said.

"These are five-bedroom, three-bathroom, 28,000-square foot homes," he said. "One house in this bracket sold last year for US$510,000. One month ago, it went for US$345,000."

Noting that prices have fallen even further among homes which are foreclosed, and among some being sold for much less than value on the steps of local courthouses, the realtor said, however, that "foreclosures do not depict the best deals".

According to Phillips, buyers need to look at their cash flow, the condition of the property, and the applicable taxes before closing on a sale.

"In my understanding, the best deal is a good price combined with a property in good condition."

Foreclosure percentage

But as much as 90 per cent of foreclosures are not in good condition with missing appliances and other problems.

"It's best to get professional advice," says Phillips. "Sometimes some money can be spent to do repairs and you can resell, if you have cash. But, if you do not have the resources, the purchase might not be advisable."

There are enough opportunities to excite investors to act, including 'cheap' mansions being sold at a quarter of their value, according to Langston, but they should not do so incautiously.

"There are many deals to be had but buyers must seek the assistance of an attorney in title searches as they might be left holding the bag with a property against which tax liens and lawsuits are outstanding," the lawyer said.

The attorney also notes that although mortgage rates are low and getting lower - on Wednesday December 17, 30-year mortgages were being offered for five per cent - qualifying for these loans is very difficult.

"The era of no money down, no documentation is over," he said.

Langston stated that buyers who decide to renege on deals mid-stride, may also find themselves unable to recover hefty deposits.

Michelle Richards-Phillips, a Jamaican and a Bank of America mortgage official, says Jamaicans who want to invest can purchase a home anywhere in the US at the same interest rate and product as US citizens.

However, she notes, a minimum 30 per cent down payment is required.

The documentation required includes an income letter from an accountant or employer, an asset reference letter from the bank in the borrower's home country, and funds for closing must be transferred to the US prior to finalising the transaction, along with six months of reserve payments on the mortgage.

The purchaser will also need three credit-reference letters or statements, verification of mortgage when applicable and a copy of his or her passport or visa.

In some states, homeowners can end up staying at the property for almost a year. Almost every state provides for some period of redemption.

Even local real-estate agents are upbeat about the opportunities available in the US, but they, too preach investor caution.

"Buyers should expect no overnight profits," said Roy Willis of Victoria Mutual Property Services in Kingston.

Long-term profit

"You might have to go in it for the long haul. Things might get worse before they get better, but in the long term, a profit can be made."

Valerie Levy of Valerie Levy and Associates in Kingston cautions that those buying property as an investment, to derive rental income, that market, too, is underperforming.

"The prices are going down and it's a great time to buy, but there is a time factor to be considered. If you are expecting an immediate income, the truth is that the rental market is sluggish," said Levy.

"It will recover, but you might need to have cash to cover mortgage payments for one year after purchase, or live without an income for your investment for one year."

Still, real estate is a better bet now than the stock market, where in the United States trillions of dollars of wealth has evaporated, and some $300 billion in Jamaica.

"The investment is not a good idea for someone who will not have a surplus left after making the purchase," said Levy. "But for those with the cash, real estate is a better bet than the stock market."

avia.ustanny@gleanerjm.com