The Ugly Scar That Is Slow To Fade In Florida
The St Petersburg Times reports from Florida. “What happens when big spenders with disposable income neither spend nor dispose? The area’s high-end real estate market is finding out. Sales of million-dollar-plus homes in Hillsborough and Pinellas counties plunged 42 percent from 2006 to 2008, from 554 to 321. This year, million-dollar transactions are even harder to find. Some luxury builders who specialize in the million-dollar-plus market report peak-to-valley sales declines of 80 percent. Upscale builder Mark Maconi declared bankruptcy, and some of its competitors are adjusting to leaner times.”
“‘The meat of our market is in the million-dollar price range — or was,’ said Charley Hannah of Tampa’s Hannah Bartoletta Homes.”
“A particularly stubborn segment are super premium Taj Mahal homes. Examples include the 25,000-square-foot mansion in Avila built by ex-corporate raider Paul Bilzerian and the $19 million bachelor pad near Tarpon Springs owned by former NBA basketball player Matt Geiger. Both have languished. ‘Derek Jeter paid $7 million for the lot alone. No one’s ever going to buy that house,’ said Ed Gunning, a Realtor who sells luxury homes ‘Why would you buy someone else’s house for $25 million? You’d build your own house. Those are monuments to yourself.’”
“Another problem is appraisals. With so few sales against which to compare prices, banks are going with the lowest, to the chagrin of sellers and Realtors.”
“Hannah has weathered another phenomenon: wealthy buyers who want the shirt off his back, and maybe the skin underneath for good measure. Hannah faced the wrath of disappointed buyers when he listed a former $2 million model home in MiraBay, a Key West-style saltwater community in Apollo Beach. Hannah chopped the price to $1.2 million, but the house hunter offered $700,000. That didn’t even cover Hannah’s land and construction costs.”
“‘I can appreciate them being savvy buyers, but at some point reasonable is reasonable,’ the builder said. ‘The anger has caught me off guard. They’ll call you names and fault your morality. I’ve been called stupid and crazy for not taking the deal.’”
From TC Palm. “Famed attorney Willie Gary was among thousands of Martin County land owners who failed to pay their property taxes on time. ‘Right now, we’re just kind of sitting on the dollars,’ Gary said about his $239,196 in unpaid taxes on five properties he owns with his wife Gloria. ‘I’m going to pay my taxes, but strategy wise, and specifically with the economy being the way it is, the money that you do have, you’ve just got to hold onto it right now.’”
“Gary and several well-known developers helped Martin County set a new record for delinquent tax bills this year with 4,718 properties in arrears as of the April 1 deadline, county records show. That’s an increase of nearly 13 percent from last year and an 83 percent increase from 2005.”
“‘At the end of the day, obviously, I’ve been back here practicing law for 35 years, so obviously I’ve been paying taxes,’ Gary said. ‘I think it’s an obligation that nobody should be able to shuck. They’ll be getting a check soon. It’s just going to be on my time, rather than on their time.’”
The Sun Sentinel. “New rules to safeguard the integrity of home appraisals are complicating the deals they’re supposed to protect. Real estate agents, mortgage brokers and buyers, as well as homeowners who want to refinance their loans, are feeling the effects of rules designed to prevent inflationary appraisals that helped fuel the housing boom.”
“Chuck Luciano of Keller Williams Realty recently represented a client who agreed to sell a five-bedroom Boca Raton home for $1.085 million. An appraiser from Miami estimated the value at $1.025 million. ‘The seller didn’t want to drop the price, and the buyer said, ‘Why should I pay more than the bank says it’s worth?’ Luciano said. ‘I lost the deal.’”
“Another common complaint: appraisers value properties on the low end to appease lenders, which are scrutinizing appraisals now after suffering large loan losses in recent years. Bill Burton, of Boca Raton, was trying to refinance into a loan with a 4.75 percent interest rate. Burton has a high credit score and lives in an upscale development. But his Deerfield Beach mortgage broker said the bank turned him down after insisting that the appraiser include in his report two sales from a less-desirable community nearby.”
“‘I can’t fathom not being approved,’ Burton said. ‘It’s a disgrace.’”
“But appraisers and the management companies blame the flood of foreclosures and short sales for skewing the value estimates downward. Mortgage brokers and real estate agents are upset because they’ve lost control of appraisals, said Dan Morden, an appraiser in Broward and Palm Beach counties. ‘That’s a bitter pill for them,’ Morden said.”
“The livelihood of real estate agents and mortgage brokers depends on sales, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter. Changes that appear to stand in the way of that are sure to draw criticism. Regardless, more conservative appraisals likely are here to stay, he said. ‘It’s a political reality,’ he said.”
The News Journal. “Florida was one of eight states that set unemployment records for May, with jobless claims reaching 10.2 percent, according to figures released Friday by the Florida Agency for Workforce Innovation. Flagler County posted the highest jobless rate in the state at 14.4 percent, up from 8.7 percent a year ago. Volusia County reported 10.8 percent unemployment, compared to 5.9 percent last year. And at least one expert says the bad news is not over.”
“‘Florida’s labor market will be the ugly scar that is slow to fade and serves as a reminder of the economic trauma we have endured,’ said economist Sean Snaith, at the University of Central Florida in Orlando. ‘We’re going to experience double-digit pain not just for a few months, but through the middle of 2011.’”
The New York Times. “Earlier this month, the sign outside of Martha Connie Salas’s former real estate agency on Suffolk Avenue here was changed. Down came the banner for Easy Realty..up went the marquee for Casa Latino, heralding the storefront agency’s reinvention, under different ownership, as part of a two-year-old international real estate franchise that has its home base in Florida and gears itself toward the Hispanic market.”
‘Robb Heering, Casa Latino’s CEO…said he started the chain two years ago in Connecticut but moved the headquarters to Florida for a larger potential clientele. If you ‘want to achieve the American dream,’ he explained, ‘you need to understand the reality of the housing market today. We are not waiting for the storm to pass. We are teaching people to dance in the rain.’”
The News Press. “A spacious pool home, direct Gulf of Mexico access or an address in a ritzy, established community. Prized attributes such as these can now be considered by home shoppers in the $125,000 price range — roughly $100,000 to $150,000. That was rarely the case during the frenzied times of 2005, when the median price of existing single-family homes in Lee County reached a record high of $322,300.”
“Waterfront locations may not be likely in North Fort Myers, but canal-side houses certainly are, said Deanna Rogers, broker in North Fort Myers. he cited a homSe in Riverbend, a development located off Bayshore Road, as an example. Built in the 1980s, the three-bedroom, two-bathroom house with a pool sold for $115,000 in March. In 2005, ‘it would have sold easily for $250,000, $280,000,’ she added.”
“For $139,900, someone can by a lushly landscaped, four-bedroom home with a backyard spa located near the Fort Myers Country Club. ‘It has a wonderful, tropical backyard, similar to the Edison backyard,’ said the listing agent, Bari Fischer in Fort Myers. ‘It’s a great location because you’re near the golf course and you’re near McGregor,’ she added. ‘Lots of palms and mature vegetation. basically, it’s a 2002 value. That’s sort of where we are price-wise right now.’”
The Daily Business Review. “The time may soon come when Phillip Biber faces ‘a moral dilemma’ that will help shape the economic future of South Florida. Biber, a real estate investor and appraiser, owns a Pompano Beach condo with a mortgage balance of about $225,000. The condo, purchased for $280,000 in 2005, is now worth less than $175,000, Biber said.”
“Should he continue to pay the mortgage and association fees on a property that is worth at least $50,000 less than he owes or should he cut his losses and walk away from his obligations? He is current on his mortgage but wonders how much longer he will be able to afford the payments. His tenant left and without the rental income, he is having to pony up nearly $1,600 a month.”
“‘I committed that I was going to pay this mortgage, so I do,’ Biber said. ‘But if it comes to paying my light bill versus paying on my third or fourth property, guess what’s going to go before I throw all the cash into the wind?’”
“Those who do walk could fuel a disastrous third wave of foreclosures that would ripple through the South Florida economy. The first wave came in 2007 and involved investors who bought properties hoping to make profits by quickly reselling. When the market soured, lenders seize the properties.
The second wave, in 2008, involved owners who couldn’t pay adjustable mortgages after their interest rates reset to unaffordable levels.”
“When Kenneth Tencer’s tenant lost his job in the car business a few months ago, Tencer lowered the rent on his Aventura condo and let his tenant pay it in installments. The renter still couldn’t afford the $1,300 a month lease and moved out in April. Tencer is paying nearly $2,000 a month to carry his empty condo. For now, Tencer can manage the expenses.”
“Tencer, vice president of lending for Best Beach Lending, is seeing the crisis from two perspectives.
Many of the people that walk into his Miami office want to sell investment properties that are worth less than their debt. Many are considering walking away from those properties, he said.”
“‘They tell me they need to make a decision: ‘Am I going to eat, am I going to pay medical insurance for my family or am I going to pay a mortgage on a property that I don’t even occupy,’ he said.”
The Miami Herald. “Rosa Mendoza’s upstairs neighbor quit making his condo association payments almost a year ago. He bought another home and let his unit slide into foreclosure. What irks Mendoza — no, infuriates her — is that, as the foreclosure process drags on, the neighbor continues using the Miami Beach condo as a weekend getaway, even keeping his sailboat tied to the dock.”
”’What I would love to do is untie that boat of his and let it float away,’ Mendoza said. ‘I would never do it, but I fantasize about it.”’
“The frustration is fed by a legal system that affords considerable protections to delinquent owners — too many protections, in the eyes of some of those who are current with their payments. And so, some associations are meting out their own punishment. Public humiliation is in vogue. At least two condominiums — The Collins in Miami Beach and Island Place in North Bay Village — and probably far more, post lists bearing the names of owners who are behind on fees.”
”’I don’t see it as a bad practice, myself,’ said Jenny Huertas, a resident of The Collins who hopes it will keep her assessments from going up. ‘I guess it’s a way to embarrass them and get their attention that they need to take action.”’
“After appealing to nonpayers’ sense of fairness failed, Eduard Sotolongo, a board member at Island Shores condo, said he started aggressively calling the towing service to haul away their cars when parked in guest spots or other unauthorized spaces. About 16 of 81 units are in foreclosure at the North Miami Beach condo.”
“Towing the car of one offending resident, however, resulted in a threat on his life, Sotolongo said. ‘You feel like buying a shotgun because it feels like the Wild West.”’
“For residents of the Mirassou Condo in Northwest Miami-Dade, where 124 of 310 units are in foreclosure, financial problems reached a crisis in April, when the county water and sewer department cut off water to the complex because it owed more than $100,000. ‘People were screaming. Children were crying. It was pandemonium. People were yelling, ‘We want water! We want water!’ said Katherine Rivera, who bought a unit there last year.”
“She had no idea the condo association was so far behind. The water was restored after the association scraped together several thousand dollars and agreed to a final repayment plan. If they fall behind again, that’s it, Rivera said. ‘If they shut down the water, within 72 hours we could be out on the street,’ Rivera said. ‘People that live here have had to work their entire lives to save up for a home to call their own. If at any point we are considered uninhabitable, those people are left in the street.”’
“For nonpaying condo owners like Rudy Martin, the guilt can be pretty intense. Martin, who quit paying the fees on his Deerfield Beach condo more than a year ago, avoids his neighbors or endures ‘chilly stares.’ He had hoped loan modification would take care of his financial problems, and he felt compelled to explain himself when he ran into neighbors: ‘I felt like I had to talk to them and justify it, so they didn’t think I was scumbagging them.’”
The Palm Beach Post. “Remember Kendra Todd? She’s the hard-working, telegenic Boynton Beach real estate agent who won the third season of Donald Trump’s TV show, The Apprentice.”
“Now she hosts an HGTV cable show entitled, ‘My House is Worth What?’ The show helps homeowners figure out their home’s market value. But homebuyer Diane Harris probably wished Todd had a different show - perhaps one entitled, ‘My Closing Costs Are Worth What?’”
“Harris said Todd used her Apprentice success ‘to lull unsuspecting victims into her scheme to defraud,’ according to a Palm Beach County Circuit Court lawsuit filed against Todd by Harris earlier this month.”
“Harris, a California resident, says she was drawn to Todd after Todd’s blockbuster 2005 victory in The Apprentice. In January 2007, Harris heard Todd speak at a real estate investors’ club in California. At the meeting, Todd made a pitch for Obra Homes of McAllen, Texas, the complaint alleges. (in 2005, Obra was named the 87th largest home builder in the country. Today, Obra is defunct.)”
“In her lawsuit, Harris claims Todd called the Obra purchase ‘a fantastic investment opportunity” and that only a few lots still were available for sale. Swayed, Harris said she gave Todd a $7,500 deposit for the purchase of a $88,820 home, the lawsuit says. Things went south soon after that. ”
“Leslie Jose Zigel, Todd’s Miami attorney…said the lawsuit was filed simply because Harris’ investment did not turn out as she had hoped. Zigel said Harris has no one to blame but herself for her money woes. ‘This investor attended an investor conference because she was interested in real estate investing,’ Zigel said. ‘She then flew to the development, viewed the home herself and made her own independent decision to purchase an investment property.’”
“Despite the housing market bust, Todd continues to promote her book, Risk & Grow Rich. She also makes frequent television appearances, including on cable shows Fox News and CNN. For instance, in February 2008, she appeared on a CNN segment entitled, ‘Markets Set to Bounce Back.’”
