Florida Rip-off

[Invest Star]

Hello Buyer/Investors

If you are thinking of buying property in vacation areas in Florida, particularly Orlando & Miami, BEWARE!! I'm advising mainly European, British & Irish buyers as they are the main vacation home buyers.
Agents commissions on these properties are horrendous. I've seen commisions starting from 7% and up to 10%. Therefore if you buy a $300,000home, its possible that $30,000 of that will be commission. Standard commission in the U.S. is 3% each side of the deal. Therefore if you are selling a home you pay 3% to your agent (SELLERS AGENT) and 3% to the buyers agent. HOWEVER, if you are buying a new property there is only one side (BUYER) and it therefore should only be 3%. Therefore its possible that you could be overpaying on a $300,000 property by $21,000!

IS THIS ILLEGAL? The answer is NO. What happens is you approach an agent and he/she helps you find properties that you are interested in. He will tell you that he is a BUYERS agent and he is solely looking after your interests. He/she will say that the cost to you is zero, that the builder/developer pays his commission. This is true and here lies the problem. If a builder is paying him 10% commission and you are paying him zero, who do you think he is looking after? Himself and the builder of course, you will be shown the properties with the highest paying commissions.

HOW TO AVOID THIS RIP-OFF? When you are looking at properties ask the agent what is the commision on the property. If he talks around it and doesn't say ask him again. If he refuses to tell you......RUN.....and I mean literally, you are going to get ripped off. If you close on a property in Florida you will see the commission on the Closing Statement or HUD Statement anyway, so you will find out at some stage. They may also tell you that the property will cost the same, for example $300,000, whether you use them or not. This is also true, so bypassing the agent and going straight to the builder will not get you anywhere.

THE SOLUTION? Talk to different agents and ask them if they will work for 3%. If you cant find any, email me and I will put you in contact with reputable real estate agents. Then what happens is you purchase the property through the 3% agent for the same price, $300,000, BUT, he will credit you back the balance of the commission in closing costs, which could be up to 7% or $21,000 or you can ask your agent to negotiate upgrades on your property from the commssion.

I know so many people that have been ripped off by this scam on international investors into Florida. They prey on your lack of knowledge of how the real estate system works in the U.S. You think they are working for nothing, that the builder pays them. At the end of the day it comes out of your pocket.

Also beware of closing costs, most foreign investors end up paying their portion (BUYERS) and the sellers portion (SELLERS). This can be up to $15,000, on top of the sales price. Have your agent negotiate that you only pay the BUYERS portion and no more. Also, it will cost you probably another $1000 or so, but get a real estate attorney to read over all contracts and have the closing process go through them. It will be worth every penny.

AREAS TO BE CAREFUL: The main areas where this rip-off is going on are around Orlando and Davenport area (area close to Disney) particularly and anywhere close to Disney. Also beware of condos etc. in Miami.
Please email me or post replies if you have any other queries. I've seen agents making $100,000+ per month on these excessive commissions. Dont let them STEAL your money.

[brian]

I don't have the experience to comment on the points directly raised above - but I think it does highlight a very key point and that people looking to invest in property abroad should absolutely do their homework first.

Simple things would be to visit the area, and research the location - it's amazing how easily a development can be set up in a bad area but charge premium rates.

It's also worth - as pointed out above - ensuring that you research the property selling and buying process in whatever country you invest in. Although fees are one area to be aware of, you should also be especially aware of any tax liabilities that may be incurred - either in the original country, or in terms of Capital Gains Tax in the UK where the money is being drawn.

2c.

[callmemonkey]

Commissions in Spain and other euro countries are often 10% for off-plan. The agent can get the full amount if its their own business or or around 20-30% if they are working for the agency so it's a pretty good earner especially when people were queueing up to hand over their money. Bottom line is always imagine that there is 10% included in the asking price and push for a good discount or walk away. If everyone does the same the 10% will soon start to come down.

[vicki2]

The reason people are being ripped off is because they go into a real estate search without doing enough research. Commissions rates in the U.S are variable but they are also negotiable on both the seller and the buyers sides.
Too many from the UK look with the notion that the percentage will be the same as in the UK which is incredibly low. Do some reading before you buy!

[tater03]

I would have to agree with you on this one Vicki2. I would never think about doing this without researching tons. To be honest I would probably get with someone that know more about it in the country that I am looking to buy property in if at all possible. Someone I could trust.

[simon1]

I would just like to add my thoughts on this subject as i am a real estate broker.Commissions in florida are no higher than anywhere else in the world, the average varies between 2%and 8%. i myself would never hide the money that i recieved form a sale, and would split it with anyone who bought
It is not the sales people who set commission rates but the developers who offer them, yes they can seem high .but please dont think that selling property is easy you do not have queues of eager clients waiting to throw reems of cash at you. Indeed you may go months without a sale.

Iknow this may seem a strange analogy but compare it with footballers every body would say that there wages are obscene but lets get real if you were offered it would you turn it down!!
The thoughts of the other contributers are the most pertinent with regards research all important!!but speaking personally if you want or are involved in property know why you are doing it, know what you want from it,and more importantly know how to get out of it. There are far to many people who see property as easy money , just because everybody else is doing it. it is these people that fall prey to the untrustworthy
Please do not think that we are all scam artists , we are not sales is not a dirty word or profession. A good sales person will make you money in the long run not rob you blind.thanks, simon

[brian]

Thanks for the comments, Simon, and welcome to Property Watch.

[vicki2]

Simon is right. A few bad apples here and there spoil the barrell for a lot of people though. It's an honest job and there are honest realtors!