A bargain hunter by nature, I get excited when I find a pair of shoes on sale for half price.

You can imagine my euphoria, then, when I came across a waterfront condo in Florida for 50 per cent less than it sold for just a couple years ago.

"It was such a good deal, I had to call you right from the unit to tell you that you need to put in an offer right away," said my real estate agent, Joline Rivard of Coldwell Banker's Fort Lauderdale office.

After months of looking - and coming close to buying twice - we put in an offer the next day. Centrally located between Miami and Palm Beach, the 1,200-sq.-ft., two-bedroom, two-bathroom canal-front condo had sweeping water views and was right across the street from the beach.

Photo courtesy of Joline Rivard
Canadians looking to buy bargain-priced property in the U.S., like this waterfront condo in Florida, need to proceed with caution.

Selling for US$410,000 in 2006, we couldn't believe our luck when our offer of US$200,000 was accepted by the bank on the recently foreclosed property. Fearful of things that appear too good to be true, we thoroughly checked out both the condo and its management in the week it took to clear conditions.

Recent sales in the building were at least $25,000 higher than our purchase price and by all accounts, the building had a good reputation. Our real estate agent checked out the condo association - the group responsible for building maintenance and condo fees - and no major repairs or assessments were pending.

We had already learned, thanks to Rivard, how important these questions are. Even if the condo is great, the location is great, and the price is great, it may not be a great deal if you're hit with a huge assessment.

Many buildings on the Florida coast are in need of costly repairs; others have had so many foreclosures in the last year that the remaining tenants are now having to cough up the missing maintenance fees.

The fees, which range from about US$300 per month to more than US$800 for some highrises, quickly add up when 20 per cent - and in some cases 50 per cent - of a building has been foreclosed.

One condo we had planned to make an offer on was already more than a million dollars in the hole for the year - in April.

"If a building's already in that much trouble that soon, it's not a sign of a well-managed building," says Rivard, who advised against that purchase. "You don't want to buy someone else's problem."

As it turned out, we didn't buy anything at all. Two days before our closing and the same day I was to get on an airplane to fly to Florida to complete the purchase last month, I was told to stop the wire transfer and unpack my suitcase.

"I was surprised, but not shocked," Rivard admits. "Everything had gone smoothly until right before closing, so I thought we were OK. But I'm not shocked it fell through, because it happens all the time. With all this mortgage mess, banks are getting tighter and tighter and no one wants to be left holding the bag."

So what was the problem? Weeks after losing our little piece of paradise, we still don't know. And we're also not sure how, despite a lawyer searching the title and a lengthy 60-day closing period, this potential problem - which was enough to cause the bank to back out of the mortgage - only came up at the last minute.

"It could be nothing or it could be a $300-million lawsuit - we just don't know," says Rivard.

"All they will tell us is that there are three (equal opportunity) complaints against the condo association. It could be a possible discrimination issue or just a disgruntled employee with a beef. We don't even know if it's one person who has filed three complaints or three different people with an issue, which would obviously be more of a concern."

The American mortgage crisis, triggered in part by unscrupulous lending to unsuitable and ill-prepared borrowers, has hammered the U.S. economy and sent the housing market into a freefall.

According to U.S.-based real estate data company RealtyTrac, home foreclosure filings during the second quarter of 2008 were reported on 739,714 properties, a jump of 121 per cent from a year earlier.

With so much uncertainty, the only thing that's clear is that it's buyer beware for bargain hunters looking to take advantage of rock-bottom real estate prices and a still-strong Canadian dollar.

"I bet I get a call every day from a client looking to buy a U.S. property and it's really important that they do their homework and know what they're getting into," says tax and real estate expert Gerard Roddis, of Meyers Norris Penny in Vancouver.

"The main thing that we're hearing from our clients is that credit is getting much more difficult to obtain - things are definitely getting tighter with all the issues down there."

Indeed, the credit crunch means Canadians have far fewer options - and even more hoops to jump through - when it comes to getting a mortgage in the U.S.

"The secondary market for mortgages has really collapsed - we used to be able to hold loans in-house for foreign nationals and now we can't," says mortgage broker Eddie Romo of Sunbelt Lending in Fort Lauderdale.

"Now there are just a couple institutions that will do these mortgages (for foreign nationals) and they're really tightening things up and requiring a lot more, so it's becoming much harder."

Getting approval for our modest $130,000 mortgage - foreign buyers must now put 35 per cent down - was practically a full-time job. I'm sure we provided more documentation to the bank than would have been required just to apply for U.S. citizenship and be rid of "foreign-national" status once and for all.

And be prepared to pay more for your trouble - with fewer options, interest rates are higher for non-residents; typically about seven per cent. Since Canadian banks don't offer mortgages for U.S. properties, the best option - if you don't have the cash on hand - is often a secure line of credit.

With rates as low as prime (currently 4.75 per cent) at institutions such as President's Choice Financial, an equity take-out can fund a cash purchase and help buyers avoid not only the U.S. mortgage hassle, but also fluctuating exchange rates that could make a good deal today an expensive buy tomorrow.

"The only reason to take out a U.S. mortgage would be for the tax benefit of a non-recourse mortgage," Roddis says.

"Some pretty significant changes to U.S. tax law are coming into play after 2010, so U.S. estate tax is more of a concern to Canadians now than in the past. We're advising clients on how to purchase properties with that in mind."

It's just another pothole to watch out for on the rocky road to U.S. property ownership. Buyers also need to keep an eye open for shady deals and questionable dealings - like the $1,300 "processing fee" our mortgage broker tried to charge us.

When I questioned it, the broker said she could drop it to $700. Sensing something was up, I called our real estate agent who, after confirming banks paid brokers, got the fee removed.

"It just floors me - the stuff that's going on, it's just not right," Rivard says. "It's a big problem now because a lot of the good mortgage brokers I know aren't doing it anymore because there's just not enough business."

Potential pitfalls aside, experts still say a bargain property can be worth the effort. "The opportunities are there and the bottom is close, so it makes sense to buy now if you can get the right property at the right price," Roddis says.

While my property turned out to be wrong, I'm lucky the gamble didn't cost me too much - our flights were refundable and we're getting our deposit back. Even so, I think I'll stick to shoe sales ...

(Tess van Straaten can be reached at tess@businessedge.ca)