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TESS VIGELAND: When it comes to those falling housing prices, Miami has taken one of the biggest hits according to the Case-Shiller index we just mentioned -- 30 percent drop from a year ago. And according to the Florida Association of Realtors, prices for condos have fallen as much as 10 percent faster than for single-family homes. For some investors and would-be-homebuyers, smells like opportunity. But you better do your homework first. Marketplace's Dan Grech reports from the Sunshine State.
Dan Grech: Steve Economou and his wife Janie were tired of winters in Boston. So they followed a path laid by generations of Northeastern retirees. They became snowbirds.
Steve Economou: I was interested in getting a place in Florida and I didn't want to be left out. Prices came down and I figured I might as well take advantage of it.
Economou, a retired government microbiologist, bet much of his life savings about a month ago on a winter home in Boca Raton. He paid $157,000 in cash for a two bedroom, two bath condo on a golf course. Economou says he didn't do much research into the condominium complex he bought into.
Economou: We just took a chance and we hope we're lucky.
Frank Thomas is Economou's realtor. He says the condo was recently remodeled and fully furnished.
Frank Thomas: We got him an excellent deal. So, our price was probably 40 percent of what it sold for in 2005.
Stories of fantastic deals like this abound in South Florida and other areas hardest hit by falling prices. But what's rarely discussed are the potential land mines when buying a condo as opposed to a single-family house. Condos can be harder and more expensive to finance. And when you buy into a condominium, you inherit its financial problems. Economou, like most buyers, didn't know about these potential land mines. But his realtor, Frank Thomas, did. Thomas says it took a lot of work to make sure there were no potential traps with this property.
Thomas: You don't find diamonds on the surface. You know, you dig through the rubble. You know what a diamond looks like when it's rough, and they don't always sparkle. You know what I mean? And so if you're experienced and you know the things to look for, and you dig correctly and you ask the right questions, those deals are out there.
Experts say the first questions you have to ask are about the financial health of a condominium complex. How many units are in foreclosure? How many homeowners are late in paying their dues? Jack McCabe heads a real estate research company. He says when you purchase a condo, you don't just own your own unit. You also own a piece of the golf course, the swimming pool, the leaky roof, the rusty plumbing and the 24-hour security guard at your front gate.
Jack McCabe: Condominiums you're totally reliant on all you neighbors around you to be paying their bills, to be paying their mortgage, to be paying their homeowners association dues, so everything is well maintained.
When your neighbors stop paying their dues, you could be on the hook for tens of thousands in special assessments just to keep the sprinklers running. Ilyce Glink is author of "100 Questions Every First-Time Home Buyer Should Ask." She says if a condo board is cagey about its finances, walk away.
Ilyce Glink: Any condo board that refuses to disclose information about the delinquencies, the condo reserves, the board minutes and the budget, is not a condo I would want to buy in.
Glink says as you ask these questions, you should have an experienced realtor by your side.
Glink: So when you're searching for an agent, look for somebody with market expertise, who's been in the business 10 or 15 years, and who can really help you understand what true value is for the neighborhood you're looking in.
Buying in a depressed market can also mean hidden costs. Like huge first-year tax bills. Realtor Doug DeWitt says this has become a big problem in some luxury condo buildings in Miami.
Doug DeWitt: There were units selling as high as $800,000. And some of these were staged transactions that involved mortgage fraud. Now those same units are up for sale, you know, as low as $150,000, $200,000. But the assessed value within the county tax assessor's office still reflects that fraudulent, hyper-inflated value of $800,000.
That can mean paying thousands of dollars in extra real estate taxes. But perhaps the biggest challenge to buying a condo these days is financing. Jack McCabe says banks keep blacklists of condo buildings they won't touch. Even government lenders have become hyper-conservative.
McCabe: The FHA, Fannie Mae and Freddie Mac now have come up with additional restrictions on granting loans in condominium buildings. Now, for markets like Florida, Las Vegas, Tucson, Phoenix, California, Chicago, that rules out almost all the condominium buildings.
Condo sales once out-paced those of single-family houses. But because of tight credit on condos, that trend has reversed. At the current pace, it would take nine months to clear the nation's supply of single-family houses -- and nearly twice as long to sell off all of the condos. McCabe says if you're looking to buy a condo, be prepared to pay in cash.
In Miami, I'm Dan Grech for Marketplace Money.