FORECLOSURE FANTASY
2/2/2009 1:57:10 PM by Sallie Marvil & John Fakler
The word foreclosure has become a “four-letter” word in today’s society. Certainly to those currently experiencing a mortgage foreclosure on their property, whereby the bank holding the mortgage repossess the property and then resells it at below market rates.
On the other hand, the word fantasy connotes something positive and desirable. It can be an exotic trip, an intimate desire, the perfect mate or job opportunity or in this case a dream property.
You combine these two words and you have the makings of our new Foreclosure Fantasy feature section, highlighting waterfront homes and yacht properties in the South Florida market that were once way out of your reach but have suddenly become potentially affordable (or at least conceivable to some).
According to The Wall Street Journal, foreclosure rates have reached staggering highs. “More than 2.3 million American homeowners faced foreclosure proceedings last year, an 81% increase from 2007, with the worst yet to come as consumers grapple with layoffs, shrinking investment portfolios and falling home prices.” With drastically falling home prices in many areas of the country, many homeowners now owe more than their properties are worth in current market standards and can’t find buyers or refinance into loans that are more affordable. This problem equates to 1 out of 54 U.S. homes that are currently in the foreclosure process.
The upside to buyers is that foreclosed properties may offer a reduction of 20% to as much as 75% of the home’s current assessed market value, creating a unique opportunity for those that have the liquidity to invest.
Florida enjoys the less than enviable distinction as one of the four states with the highest foreclosure rates, a list which includes Nevada, Arizona and California. These four states together account for nearly half of the national foreclosure total and the result is a drastic decline in home prices overa
And since our focus is on South Florida, the news becomes even grimmer when you focus on the region which ranks second in the nation in foreclosures and in 2008 alone experienced a 128% increase in foreclosures, with defaults filed against a total 75,730 properties, according to a new report from Condo Vultures. Broward County tops the regional list with 43% of the defaults, followed by Palm Beach with 32% and Miami-Dade with 25% of the total.
Quite a few waterfront properties, namely Brickell condos, are driving the high local foreclosure numbers. There are unheard of deals to be found at several well-known and recently developed high-end Brickell condos including The Jade at Brickell Bay, where a condo unit which normally lists at $1 million can be picked up on foreclosure for as little as $450k, a significant reduction to say the least.
Looming foreclosures are an epidemic challenging all socioeconomic levels. It’s not just the average “Joe’s” that are facing foreclosure. The list of celebrities and A-listers facing foreclosures keeps growing by the day. Topping the list with the largest debt is Michael Jackson, whose $21 million loan is in foreclosure for his Neverland Ranch which will never realize its full market potential. Other much publicized foreclosures include Ed McMahon’s place in Beverly Hills, Evander Holyfield’s 54,000 square-foot home in suburban Atlanta, and hitting closer to home, widow Veronica Hearst’s 52-room Villa Venezia in Palm Beach.
In our own backyard, is music producer Scott Storch’s home on Palm Island in Miami Beach, known as Villa Ferrari. This 18,000 square foot estate was purchased just over two years ago for $10.5 million and now has a mortgage lien on the property. Storch also had his Ferrari and motorcycle repossessed and his luxury yacht is nex
In the boating world, many yachts are being foreclosed by lenders who extended generous terms to once promising clients. The whole foreclosure arena is just starting to heat up on the floating vessels. According to James Perry, an attorney specializing in the marine industry, the range of boats from 45 to 50 feet that are in arrears with regard to payments is growing by double digits. “I would safely say that these sizes (40-50 feet) are experiencing a lot of stress in the lender world.” It seems that the larger yachts are not anywhere near the problem areas that these mid-size yachts are in,” Perry went on to say.
The leverage that many took on to buy second and third homes also happened with the yacht categories. Simply put, many people overextended their abilities to buy assets. During the times when credit was readily available, entrepreneurs, record producers and business types from all walks of life took on more credit risk than this down market can absorb. As a result, palatial estates, both tethered to the ground or simply floating on water all across America and elsewhere, are looking for new owners.
Never has there been a better time to buy assets. Today a 50 foot yacht that was sold for nearly $1M in 2007 is selling for $350k. There are so many deals out there that for the right investor, it could be a once in a life-time opportunity. Clearly, many new ventures are being formed. Distressed assets will always find buyers. However, in past steep declines you could always point to an industry or region in the world that was benefiting from a downturn. Today, even the oil producers are cutting back. It looks like this down-ward spiral has caught everybody off guard. That is unless you are in the pawn shop business, where loaning money comes with interest rates that start at 20% and chances are very good the lender (pawn s
There are a host of new web sites, auctions and realtors capitalizing on the foreclosure market. One good source of information is CondoVultures.com, which publishes a list of the deep discounts of the week, broken down by the South Florida tri-county area and also lists opportunities in the other top foreclosure markets, including Las Vegas and Los Angeles. The important thing is to do your homework, shop around for deals and make sure you carefully inspect prospective properties to assess damages and repairs since they are sold “as is” and have often suffered months of neglect.
These days will pass for sure. In the meantime, the opportunity to make sound investments may never be better. Whether the idea is to buy a waterfront condo in South Beach and sit on it for a few years or buy that 50 foot yacht you want to sail around the world, the time may be right to jump in head first.
So keep fantasizing and look out for future editions of our Foreclosure Fantasy section highlighting unique investment opportunities.
South Florida Foreclosures Top 75,000 In 2008, Opportunistic Buyers Enter Market
South Florida’s four-year long real estate boom came to an abrupt end in early 2006, and now the most painful part of the cleanup – the foreclosure process - to stabilize the housing market is under way.
Foreclosures reached epidemic proportions in 2008 in Miami-Dade, Broward, and Palm Beach counties with 75,730 condominium units, townhouses, and single-family homes worth $19.4 billion entering the repossession process. An additional 33,000 residences worth $8.2 billion were pushed into foreclosure in 2007, according to the Bal Harbour, Fla.-based consultancy Condo Vultures® LLC.
This tsunami of more than 100,000 foreclosures worth $27.6 billion in the tri-county region in the past two years
“With prices dropping to levels below the replacement cost, buyers – especially foreign nationals who fear a rapidly strengthening U.S. dollar - are increasingly growing confident that the time to buy is near,” said Peter Zalewski, a principal with Condo Vultures®. “All-cash buyers with aggressive pricing strategies are quietly scooping up properties at deep discounts from struggling developers, cashstrapped speculators, and overwhelmed lenders.
“The pressure for all-cash buyers to purchase is accelerating as the chances increase that credit will be restored to the housing market in 2009.”
In terms of discount, coastal South Florida property prices are down an average of -40 percent of their historical high with the average residence decreased by nearly -$260,000, according to a recent Vultures Database™ Report from Condo Vultures® LLC.
The Vultures Database™ is comprised of properties east of Interstate 95/US-1 in South Florida from Cutler Bay to West Palm.
Properties are added to the Vultures Database™ when the asking price has dropped by 10% and/or $100,000.
Highly desirable cities have not been immune to the plummeting prices, according to the latest Vultures Database™ Report through Dec. 31, 2008.
In Miami-Dade County, prices are down by an average of -35 percent in Miami Beach and Coconut Grove, -33 percent in Bal Harbour and Coral Gables, and –31 percent in Fisher Island.
In Broward County, prices have dropped by an average of -40 percent in Hollywood, -38 percent in Hallandale Beach and Pompano Beach, and -37 percent in Fort Lauderdale.
In Palm Beach County, prices have fallen by -42 percent in West Palm Beach, Delray Beach, and Boynton Beach, and by -40 percent in Boca Raton.
The typical South Florida condo, townhouse, and single-family home lingers on the mark
The foreclosure process in South Florida takes about six to nine months to complete and costs a lender about $40,000 to $80,000 in unpaid debt service, damage, and attorney fees. The foreclosure process does not usually begin until a borrower has not paid their debt service on a mortgage for at least 90 days.
In 2007, Miami-Dade County led the region in foreclosure actions as speculators decided to forgo their money-losing investments rather than continue to fund what many considered to be unsalvageable product.
In 2008, the opposite occurred as the number of foreclosures in Broward (32,700 actions) and Palm Beach (24,449 actions) counties outpaced the volume of notices of default in Miami-Dade (18,581 actions).
With the surge in foreclosure actions, Broward and Palm Beach counties are now home to all five of the top condominium and townhouses projects with the greatest number of foreclosure actions in a single complex.
The first Miami-Dade project to make the list of the highest concentration of foreclosure complexes comes in at the No. 6 ranking.
Just as Miami-Dade led the region in foreclosure actions in 2007, the county that is home to Miami Beach, Bal Harbour, Fisher Island, and Coral Gables, was the South Florida leader in the number of bankowned properties, which are also called Real Estate Owned (REO), in 2008, according to Condo Vultures research.
Of the 26,240 properties repossessed in 2008, more than 12,000 residences were in Miami-Dade County alone. There were slightly more than 10,000 repossessions in Broward, and 4,100 REOs in Palm Beach, according to the data.
On a year-over-year basis, the number of repos
“Think of the foreclosure process like making sausage,” Zalewski said. “A property goes into the court system as a mortgage in default with a bunch of liens filed against it, and comes out as an REO with clean title that is suddenly marketable at a dramatically discounted price.
“It isn’t pretty going in, but the finished product is desirable to many.” Peter Zalewski is a principal in the consultancy Condo Vultures® LLC and the broker/owner of Condo Vultures® Realty LLC, a licensed Florida real estate brokerage based in Bal Harbour, Fla. Peter can be reached at peter@condovultures.com. For more information, please visit CondoVultures.com or phone 800.750.0517.
South Florida’s Top 10 Foreclosures By Judgement Value Per County
Condo Vultures®, LLC compiled these rankings based on data from the Circuit Courts of Miami-Dade, Broward, and Palm Beach counties. For more information, please contact Condo Vultures®, LLC at 800-750-0517 or visit www.CondoVultures.com
Miami-Dade County
Rank Foreclosure Assessed Address/City
Judgement Amount Value
1 $5,450,000 &nbs
2 $4,999,900 $5,032,360 466 N. Bay Road, Miami Beach
3 $4,885,487 $5,604,183 220 Leu Cadenra Dr., Coral Gables
4 $4,321,381 $1,582,580 1800 Sunset Harbor Dr., TS-3, Miami
5 $3,985,645 $4,661,049 153 S. Olano Prado, Coral Gables
6 $3,640,838 $3,366,362 550 N. Island, Golden Beach
7 $3,575,000 $3,846,472 3570 S. Mooring Way, Miami
8 $3,225,000 $2,291,400 5143 Fisher Island Dr., Miami Beach
9 $3,153,677 $2,844,483&
10 $2,997,416 $3,441,470 194 S. Island, Golden Beach
Broward County
Rank Foreclosure Assessed Address/City
Judgement Amount Value
1 $10,162,489 $7,811,120 900 S. North Lake Dr, Hollywood
2 $8,236,457 $5,457,240 3025 Meadow Lane, Weston
3 $5,365,236 $5,909,400 2708 Sea Island Dr., Ft. Lauderdale
4 $4,200,000 $3,293,860 1 Harborage Island Dr., Ft. Lauderdale
5 &n
6 $3,100,673 $3,655,000 4010 NE 31st Ave., Lighthouse Point
7 $2,985,731 $3,178,450 10 Compass Road, Ft. Lauderdale
8 $2,842,100 $2,933,000 169 Fiesta Way, Ft. Lauderdale
9 $2,607,449 $2,916,300 3317 NE 30th Ave., Lighthouse Point
10 $2,387,765 $3,790,610 3070 NE 40th Ct., Ft. Lauderdale
Palm Beach County
Rank Foreclosure Assessed Address/City
1 $12,496,354 $14,287,443 450 E. Coconut Palm Road, Boca Raton
2 $6,935,634 $7,665,270 700 Sanctuary Dr., Boca Raton
3 $6,396,567 $7,074,207 3621 S. Ocean Blvd., Highland Beach
4 $5,669,662 $5,748,131 2 Via Los Incas, Palm Beach
5 $4,427,713 $2,847,928 1000 Royal Palm Way, Boca Raton
6 $3,532,456 $1,221,537 390 E. Palmetto Park Road, Boca Raton
7 $3,500,000 $1,820,357 269 Pe
8 $3,235,540 $1,994,123 112 Caribbean Ave., Palm Beach
9 $3,047,574 $2,503, 633 583 NE Spanish Trail, Boca Raton
10 $2,643,381 $1,705,555 127 Park Ln., Hypoluxo
Source: Condo Vultures® LLC Foreclosure Database™