While Florida has a hot real estate market, new buyers moving to the Sunshine state should know some important things before signing any real estate contract.

This is because buying real estate in South Florida poses some particular concerns that require exceptional due diligence.

Here are some key things to consider:

Don’t Rely Too Much on Your Real Estate Agent  

I have bought houses in five states, and the worst agents I worked with were in Florida.  Many are part-timers who are poorly supervised by their brokers. Before the market got very hot, many retirees thought they could get a real estate license and sell a few houses a year.  In today’s market, many of these former part-timers are busy, but their bad habits and lack of professionalism persist.

The are many reasons for this: There are many types of properties in dense neighborhoods. Many gated communities and condos have a long list of association rules that agents don’t need to know unless you become a serious buyer.  Even then, they may not take the time to read all the rules;

Country Club Membership Issues

South Florida has hundreds of country clubs. The clubs vary in price, quality, levels of amenities, and organization.  Each has its own fees and hidden charges for mandatory memberships that only become visible if the agent asks on behalf of new buyers. Other clubs have optional memberships where the services (golf, tennis, food) are optional.

The problem is that the country club world is in transition Some homes and condos at clubs are listed at low prices that don’t readily show mandatory country club memberships.  If you see a great condo, house, or townhouse at a meager price, there is a reason for it.

The best bet is that it is in a country club with mandatory membership.  In many cases, listing agents do not make this mandatory membership requirement evident in the first few sentences of their listing.

In this real example, a two-bedroom, two-bath condo at the Hunter’s Run Country Club in Boynton Beach is selling for $1. Yes, you read that right.  What’s the catch?

In the listing, the agent says: “SELLER IS GIVING TO THE BUYERS $5000.00 TOWARDS THE MANDATORY EQUITY MEMBERSHIP OF $60,000. ANNUAL COUNTRY CLUB DUES AND FEES. 1ST FLOOR. 2/2DOWNSTAIRS WITH A DOUBLE GOLF COURSE EXPOSURE.”

It’s not clear why the agent put this in ALL CAPS, but even with the $5,000 allowance,  the $55,000 annual dues may be a bargain to someone. But even so, clubs that have mandatory memberships want them paid in full before you move in.  These club memberships often cannot be financed. 

Similar properties at other country clubs in south Florida often have the same situations. Some country clubs have annual memberships, some are lifetime, some are partially refundable after a few years, but these are details your agent probably will not know unless they are exceptionally familiar with the club. The membership details often are not available on the club’s website.

So, don’t be surprised when you see that the annual membership fees cost more than the property.  This essentially makes some country club real estate property a negative asset, an unusual financial model worthy of academic study.

As this article on this site found, one reason for give-away prices at country clubs is demographics.  Younger buyers, especially Millennials, don’t want the golf club membership overhead or do not want to commit the long hours to play the game. Others, don’t want to be restricted to the country club life. In short, some are just bad investments.

In any case, many of these clubs are now in a fundamental transformation stage of selling their golf courses to developers or donating them to city officials to become parks or municipal courses.  So, if you are looking for a country club development, it pays to investigate if there are future plans for the property.

The downside is that in one development, a homeowners association sold to developers. A few months later, some residents were surprised when they woke up to see earth-moving equipment plowing up their course for new houses.

Beware of Special Assessments

High rises in Florida are subject to a 40-year structural inspection by state building officials.  These recertification inspections look for structural damage due to heat, humidity, saltwater, hurricanes, wear-and-tear, and other causes. If you are looking at a unit in an older building, find out when it was built and when it is due to the 40-year inspection.

If that 40-year recertification date is close for a building that you are considering, be prepared to pay for some very expensive repairs.  In one Boca development near the intercoastal, unit owners were assessed about $30,000 per unit for repairs.  This became a bargaining issue for new buyers.  Some sellers wanted buyers to pay the entire $30,000 assessment; others would negotiate.  The bad part is that the assessment was not part of the listing price.  In some cases, buyers bidding on a $300,000 unit were surprised to find out that the actual cost at closing would be $330,000—quite a surprise.

Beware of Zero-Lot Lines

Two of the greatest oxymorons in the English language are “military intelligence” and “honest real estate developer.”  Since the Trump family moved to Florida, it has become the preferred residence for various marginal and white-collar criminals. Many of these people are now real estate developers.

As a result, watch out for developments that use every available inch of land as part of the building plan. The result is zero-lot-line houses and townhouses, which have their own special land-use rules and legal theory.  But in practice, it means that if you tour a home and see it is exceptionally close to the neighbor’s house, it is probably a zero-lot-line survey.  This means you share the corridor (usually about six to eight feet), and it has restrictions on the use of this strip of land.  The problem is that most realtors do not recognize this or cannot explain it to their clients.

Beware of Pending Litigation

Home-owners associations and management companies thrive in Florida.  But because these entities often handle millions in HOA fees, there is room for mismanagement and contentious disagreements, including lawsuits. 

Condos are especially rife for these disagreements, and they should affect your decision to buy a unit in a building. I was looking at one high-rise building in West Palm Beach and saw an impressive number of units for sale at the same time.  It turns out there was a significant dispute with the board and the management company, including charges by owners that common amenities were broken and not being repaired, accompanied by charges of mismanagement.

Don’t Forget Global Warming

Florida is a peninsula, so it has thousands of acres of waterfront property.  It is also a tropical climate and importantly, it is susceptible to all the changes that accompany global warming, including rising sea levels. Many Americans are oblivious to the impact of global warming, but if you are moving to Florida, you better be concerned about it, especially if you want oceanfront property.

Today, there is street flooding at high tide in major cities, such as Miami and St. Petersburg, often in pricey neighborhoods.  For inland buyers, global warming is making Florida summers increasingly warmer. According to the Environmental Protection Agency, “The Florida peninsula has warmed more than one degree (F) during the last century. The sea is rising about one inch every decade, and heavy rainstorms are becoming more severe.” Miami is spending millions trying to stem rising sea levels by building pumping stations, but the limestone crust allows the water to percolate to the surface. Will the flooding and heat get worse?  Probably. Flooding could even come to your neighborhood.

Moving to Expensive, Vertical Country Clubs

High-rise condos, especially those with a view, are very expensive along the water and in downtowns. The high-rises offer many amenities: deluxe gyms, spas, pools, Las Vegas-style lobbies, dog grooming. and meeting rooms.  But although many of these high-rises are trying to be vertical country clubs, there is a big difference when residents get down to ground level.  The big difference is that some high-rise residents in some neighborhoods find themselves walking at ground level past urban blight.  Vacant stores and restaurants are common in some areas, especially in downtown West Palm Beach. So, if you are looking for a high-rise, walk around the neighborhood before you buy.

Expensive Condos With Laundromats

It pays to have a sharp eye when looking for condos, especially in older buildings in Miami and up A1A to Lauderdale-by-the- Sea. While the photos show a beautiful condo, often with a water view, you may be surprised to find out that some older buildings do not have a washer and dryer in the unit.  You may pay $375,000 for a 1,000-square-foot unit with a view, but you will have to use a coin-operated laundromat down the hall. Not what you would expect, but caveat emptor.

Watch Those HOA Monthly Fees  

Due to Florida’s unusual history of real estate development, public services have often were handed off to real estate developers and management companies who charge for services that were once provided by public services.  This explains some of the built-in costs from monthly HOA fees.  The other primary sources are to pay for the management company’s staff, funding building reserves, paying for joint facility operating expenses, such as lawn, tree, pool, and operating plant maintenance.  For country clubs, the HOA pays for the golf course maintenance, which can run at least $20,000 a month.

In well-run communities, the benefits of high HOA fees are evident, but if you are paying them, make sure you will use the facilities (gym, pool, golf, restaurants) the HOA funds.

Pay more, for less. If you move from a large home and move into a condo or townhouse in South Florida, you may realize you are paying more for less per square foot of living space in certain properties close to the Intercoastal or the ocean. This is part of the perfect market here.  Buying a condo or townhouse will force many buyers to downsize to get an affordable, ready-to-move unit.

Investigate the Building’s History

The buildings are not haunted, but some buildings have their histories that dictate how the financing works, who your neighbors may be, and even the number of available parking spaces. In one instance, a buyer went to a high-rise building in Boynton Beach overlooking the Intercoastal. After looking at the unit, the listing agent said financing must be done at a specific bank, and units could be purchased for as little as 5% down.

It turned out that the building went into foreclosure in the 2008 recession, was taken over a few times, and had received HUD money.  All this dictated that a certain national bank handled the financing.  Plus, a few floors in the building were short-term rentals. The original developer also skimped on parking spaces, so that was another problem. All this became evident because the listing agent was exceptionally transparent, but she was an exception.

Remember, You Are Moving to a Southern, Confederate State

If you are moving from the North, remember that Florida was the third state to join the  Confederacy in 1861.  If you think that is part of the state’s long, dead history, think again. Florida still has some very Confederate ideas, and the Republican legislature has its own agenda.  Florida boasts of low taxes, but in exchange for low taxes, Florida also has some of the worst-funded school districts in the nation. Teacher salaries are notoriously low: Florida ranks 46th in the nation. City services may not meet your expectations, compared to what you were paying for in taxes up North. A 2016 study found that Florida “spends less overall on public services like health and education services, on a per capita basis, than any other state.” That’s pretty pathetic. The Florida legislature also is pushing its own agenda and has routinely violated voter referendums that passed with large majorities to decriminalize cannabis and give felons who have served their time the right to vote. Florida is a leader in voter suppression, and that helps explain why the legislature is Republican even though there are more registered Democrats in the state than Republicans. So when you see retirees in some of these large 50-and-over communities boasting about their low taxes, remember that it is hurting younger families and non-retirees who still use public services.

Move To Florida With Your Eyes Open

So if you plan on moving, be your own best advocate.  Be a skeptical, inquisitive buyer.  Unless you have an exceptional relationship with your agent, don’t expect them to ask or probe for answers regarding the property and all of its ancillary history.

The post 11 Things To Consider Before Buying Property in South Florida appeared first on The Progressive Investor.