A few months ago, I thought about writing this post but I never got around to it. The Wall Street Journal was sitting at my office this afternoon and an article caught my attention: “Mortgage Turmoil Hits Renters As Buildings Go Into Foreclosure”.
The reason why I thought about writing this post a few months ago is because I met someone who faced the very predicament that the Wall Street Journal article discusses. I met a guy who was looking to buy a condo. At the time, he was renting a condo at The Club at Brickell Bay and his lease was going to end within six months. A few weeks after he contacted me, he was notified that the condo was in the foreclosure process. He wasn’t notified, however, as to how much time he had until he needed to vacate. The thought that “today may be the day” entered his mind each day that he rode up the elevator to his apartment.
In the past, I’ve had some clients who offered to pay 12 month’s worth of rent upfront in order to negotiate a better price. I no longer advise this because of the possibility that the landlord will face financial difficulties and go into foreclosure. Renters are required to produce a credit report and background check when becoming a tenant in a condo building. Nowadays, it doesn’t seem so outlandish to me to ask for a credit check from the landlord. I’m not saying that you’ll actually get one but doesn’t it make sense to at least ask for one?
Bayfront Brickell Condo Foreclosure to Sell Below $200 Per Squar Foot?
I’ve been keeping a close eye on a 4 bedroom/4 bath split-level bank-owned condo at Atlantis on Brickell for quite some time. It has 2,628 square feet of interior living space and is located on the third floor. The price has continually been reduced throughout the months that I’ve kept an eye on it, but it now looks appealing. The list price on this unit is $559,900, or $213 per square foot, at the present time.
Below you will see the price changes since it was listed on May 16, 2007:
05/16/2007 – $799,900
06/13/2007 – $759,900
07/16/2007 – $719,900
08/03/2007 – $679,900
08/28/2007 – $644,900
09/25/2007 – $559,900
Unfortunately, the pictures that accompanied the listing are no longer available. I haven’t personally viewed this property yet, but the pictures that were previously available made it apparent that the unit definitely needed some TLC. A few people in my office did visit the unit about six weeks ago and did confirm that the unit does need much work. On the high end, a $170,820, or $65 per square foot, build-out project should make this unit into an A+ residence. A $500,000, or $190 per square foot, offer should seal the deal on this condo given the continual decrease in price every month. I’m sure that Deutsche Bank is growing tired of keeping this property on their books month after month.
A 3/3 with 2,171 square feet of interior space on the same floor at Atlantis on Brickell, which needs some work of its own, is currently listed on the MLS for $750,000, or $345 per square foot. Invest $65 per square foot to fully renovate the unit, with an overall price per square foot of $255, and you should do well.
Neo Vertika 2 Bedroom + Den on the 29th Floor – $303,000
Two Mondays ago I reported that a 2 bedroom + den loft at Neo Vertika went up for auction. The auction had a dismal turnout and the highest bid was quickly rejected by the bank.
Since that time I have submitted two offers to the bank. The bank has recently stated that they would accept an offer of $303,000 if the closing can happen by September 20, 2007. They want absolutely no contingencies, such as financing or inspections. The unit has never been lived in and comes “decorator-ready”.
The loft faces south and has views of the bay and overlooks the swimming pool. The unit is on the 29th and 30th floors and has 1,255 square feet of interior space as well as a large balcony off the main floor. It has 20-foot ceilings and comes with the upgraded stainless-steel appliance package.
The lowest that a 2 bedroom at Neo Vertika of this size has sold for in 2007 is $400,000. If you, or anyone you know, would like to make an offer then please contact me. A pre-approval letter must accompany the offer.
Governmental Intervention in the Housing Market
Yesterday, President Bush discussed his plan to aid homeowners at risk of losing their homes. Most of the plan focused on assisting borrowers to refinance their adjustable-rate loans to more conventional loans provided by the Federal Housing Authority.
I took a look at his recommendations and of particular interest to me was his proposal to temporarily suspend the tax liability that is owed by homeowners when performing a short-sale. As of now, the IRS has the right to tax the loan amount that is forgiven by the lender. It is considered a forgiveness of debt.
Short-sales have become very popular, as of late, because home prices have dropped in recent years and adjustable-rate mortgages have begun to reset. It has become more common for the value of a home to be less than what is owed to the bank. For example, let’s say that you purchased a 2 bedroom condo in 2005 for $500,000 and financed 90 percent of the purchase price. Two years later the value of your home has dropped and you have fallen two months behind on your payments. In the past, when homeowners were in this situation they would tap into the equity on their home by refinancing to take cash out. This is no longer an option, however, to most, because home prices have fallen. Oftentimes, two possibilities exist: lose your home through foreclosure or sell your home through a short-sale.
In the example above, let’s say that the price of your 2 bedroom condo has fallen to $400,000. You owe the bank roughly $450,000. You’ve talked to some knowledgeable acquaintances and they’ve advised you to do a short-sale. Basically, a short-sale means that the bank is willing to accept a pay-off amount that is short of what is owed to them. You contact a local real estate agent to list your property and within a few weeks an offer of $380,000 is submitted.
What is important to note is that two parties need to accept the offer: the seller and the bank. The reason why the seller has to sign off on the offer is because the IRS has the right to tax them on the amount of the loan that is forgiven. In this case, a tax on the $70,000 forgiveness of debt will be due the following April.
The bank also has to approve the offer because they are the ones who are accepting the shortfall in the original amount owed. The banks will ask the homeowner to have an appraisal performed at their expense. Banks are not stupid. They realize that the market has declined but they aren’t going to accept just any offer.
Recently, I’ve come across a few short-sales in the MLS that just don’t make any sense. For example, there’s a 2 bedroom/2 bath listed for $295,000 at Vue at Brickell. There’s also a 1 bedroom/1 bath listed for $217,000 at The Club at Brickell Bay. I’ve written about both buildings in the past and how prices in each building are inflated due to the mortgage fraud that has occurred. However, these prices are a step in the wrong direction and are unjustified. The 2 bedroom at Vue at Brickell is the best priced unit in the entire building, including the 1 bedroom units. The 1 bedroom condo at The Club at Brickell Bay is better priced than even the studios.
Listings like these are a waste of time for everyone involved in the transaction: the seller, the buyer, the bank and the two real estate agents. Just because it is a short-sale doesn’t mean that you can list a property at a price that will get you an offer within a week. As of right now, it is also doing a great disservice to the seller who will have a large tax bill come next April should the offer get accepted by the lender.
As I mentioned earlier, however, President Bush has proposed to temporarily suspend the tax that is owed to the IRS on the amount that is forgiven when a distressed homeowner performs a short-sale. If this becomes a reality it will alleviate a lot of problems for distressed property owners. Short-sales will become more common.
It wouldn’t surprise me, however, if we start seeing mortgage fraud occur in reverse. Appraisals will start coming in very low to justify the offers that are submitted to the banks. It’ll be a nightmare for banks. Accredited local appraisers need to be in place for these banks to be able to cleanly wash themselves from the mortgage mess at hand.
Short-Sales – Short of Spectacular
Everyone has heard that short-sale and foreclosure listings have increased dramatically in the past 12 months. I’ve found that, as of late, two to four new short-sale listings will appear in the MLS for each neighborhood in Miami per week.
I’m a huge fan of foreclosures but not such a big fan of short-sales, as of right now. I think in about six months things may change, however. I’ve found that the big banks just aren’t ready to play ball yet. Maybe they are just too optimistic about the state of the real estate market. Within the past two months I presented two offers on short-sale condos that were about 15 percent under the lowest comparable sold sale in the building. Both were rejected and the banks countered with figures that were very close to what they were owed. In both cases, what they were owed was much more than what had recently sold in those two buildings.
Banks need to realize that lending practices were lousy, at best, in recent years, and that what is owed to them is a pipe dream. Prices have already come down 20-30 percent from the height of the market here in Miami and Miami Beach. Many project that prices will come down even more. Yesterday, someone emailed me that “Your first loss is often your best loss”. I feel that more banks need to think along these lines. The banks ready to play ball now will be much better off than those holding out for greener pastures. As the saying goes, “Greedy pigs get slaughtered”.
From my experience, however, it does seem that the smaller banks do understand the state of the market and are more willing to negotiate terms. Perhaps, it is not their understanding but rather their eagerness to stay afloat. I think in the next six months, as pressure is added by stockholders, big banks will be much more favorable in their attitude towards short-sales.
Neo Vertika Auction – Going, Going…Not Gone?
A few weeks ago I mentioned that a 2 bedroom + den/2 bath unit at Neo Vertika would be auctioned on August 20, 2007. I attended the auction this morning.
A single family home in Palmetto Bay was auctioned first and about 5-6 people participated in that auction. There were probably about 35-45 people in the room but most were spectators. The highest bid for the Palmetto Bay house was $476,000. After that auction was over, the room pretty much cleared out.
Only 2 people participated in the Neo Vertika auction. It seemed as though they were unfamiliar with Neo Vertika but participated for a few rounds simply because no one else was bidding. I think it was a bad idea to have the auction in Palmetto Bay. The highest bid came in at $135,000.
Before everyone gets excited, let me tell you that it is almost certain that the bank will reject that bid. I spoke with the auctioneer afterwards and he told me that it is very, very likely that it will get rejected. He said that the bank is looking for something in the $300K’s.
The unit at Neo Vertika is a 2 bedroom + den/2 bath with 1,255 square feet of interior space and a balcony that spans the length of the unit. It has 20-foot ceilings with floor-to-ceiling windows. The unit is on the 29th and 30th floors, faces south with views of Biscayne Bay and comes “decorator-ready”. Neo Vertika was completed in August of last year.
It isn’t too late to grab this 2 bedroom condo at Neo Vertika. Give me a call if you’re interested in acquiring it.
Miami-Dade Foreclosure Filings Since 2002
A friend of mine passed along the following statistics that were disclosed by Miami-Dade County. I found the statistics to be quite compelling and felt that my readers might find these numbers to be of interest as well. It is worthy to note that these numbers indicate that we are on pace to surpass the highs in foreclosure filings in 2002. That isn’t a bit surprising given the state of the real estate market.
These numbers only represent a mid-half report for 2007. As a sizable amount of adjustable-rate mortgages are scheduled to reset in the following three months, I’m sure that we’ll surpass previous year foreclosure filings. Foreclosures usually take about 6 months, so I’m expecting that foreclosure filings will peak in 2008.
2002
14,567
2003
11,605
2004
9,606
2005
7,829
2006
9,826
2007
January:
1,404
February:
1,563
March:
1,759
April:
1,749
May:
1,984
June:
2,060
Year-to-date:
10,519
Two Brickell Condos up for Auction This Month
Two Brickell condos will hit the auction block later this month. The first is a 2 bedroom + den/2 bath loft residing on the 29th and 30th floors at Neo Vertika. The loft has 1,255 square feet of interior space on tw0-levels with 20-foot ceilings. Neo Vertika is located along the Miami River, west of Brickell Avenue at 690 SW 1 Ct. Neo Vertika is a recent addition to Miami. Closings began in August of 2006.
The loft will go up for auction at 11:30am on August 20, 2007 with an opening bid of $125,000. The July Brickell Condo Index revealed that the average price per square foot of units sold at Neo Vertika over the past six months was $375.53.
The second condo up for auction is a 2 bedroom/2 bath at Villa Regina. The condo has 1,895 square feet of interior space, three separate balconies and offers partial bay views from a low floor. Villa Regina had a recent special assessment to update the lobby, hallways, marina and landscaping. Villa Regina is located at the southern end of Brickell Avenue at 1581 Brickell Avenue.
The condo at Villa Regina will go up for auction at 4:45pm on August 21, 2007 with an opening bid of $100,000. According to the July Brickell Condo Index, condos sold over the previous six months at Villa Regina had an average price per square foot of $316.62.
Don’t miss out on either of these exciting auctions. Contact me today for more information!
There’s a 2 bedroom/2 bathroom condo foreclosure at Courvoisier Courts in Brickell Key that is listed for $449,900. The condo has 1,288 square feet of living space. It also comes with two assigned parking spaces.
I took a look at the unit tonight for an interested client. It is in tip-top condition. The living room has large tiled floors and the bedrooms have brand new carpeting.
The bank’s judgment against the previous owner was for $444,748.00. The condo was foreclosed on June 28, 2007.
The lowest that a 2/2 has sold for at Courvoisier Courts in the past six months is $475,000. That was for an 05 line on the 17th floor. There were also two other 2/2 units that closed within that time frame. Those closed for $540,000 and $555,000. An 06 line unit on the 24th floor sold for $555,000 on June 28, 2007.
The unit doesn’t have a water view though since it is only on the fifth floor. It is an 06 line. The other 06 lines have a partial water view at best though since they face northeast and have obstructed views by other developments. The balcony was pretty large and deeper than most units I’ve seen at Courvoisier Courts.
Brickell Key is one of the most exclusive neighborhoods in Miami. I think getting this condo for $419,000, or $325 per square foot is a solid buy. The July Brickell Key Condo Index revealed that the average price per square foot of condos listed at Courvoisier Courts was $482.45. The average price per square foot of condos sold in the past six months at Courvoisier Courts was $415.01. Most units at Courvoisier Courts come with carpeting throughout, as they were delivered when the building was converted into condos. As mentioned before, this unit has tiled floors in the living room and carpeting in the bedrooms.
Courvoisier Courts was built in 1997. Courvoisier Courts offers fantastic amenities which include: full-service concierge, 24-hour security, fully equipped business center, bi-level fitness center, racquetball/squash courts, bayside swimming pool and sundeck, club room with billiards table, theater room, and valet parking. Courvoisier Courts has a total of 272 condo units in the building.
This is a great opportunity to own a 2 bedroom at Courvoisier Courts for over 20% less than what 2 bedrooms have sold for at Courvoisier Courts in the past six months.
Short-Sale at One Miami – 1 Bedroom/1Bath for $275K !!!
There’s a 1 bedroom/1 bath short-sale at One Miami that was reduced $44,900 today. It is now listed at $275,000 and has 846 square feet of living space. That’s a great deal! The unit is now listed at $325 per square foot. The Brickell condo index for July revealed that the average price per square foot of units sold at One Miami over the last six months is $453.66. There have been 8 one bedroom/one bath units that have closed at One Miami in the past six months. They have sold in the range of $349,000 to $430,000. Like I said, this is a great deal! Prices for one bedroom units at One Miami have come in significantly in recent months but this short-sale unit is the best priced of them all.
The unit comes with one assigned parking space and one complimentary valet space. Amenities at One Miami include: two swimming pools and hot tub, two clubs rooms, two fitness centers, business center, 24-hour security/concierge and valet parking. The maintenance fee is $389 per month. High-speed Internet, basic cable TV, water, sewer and garbage are included in the maintenance fee as well.
Take a look at the MLS listing for more information.
