Beautiful 5 Bedroom Condo at Villa Regina with 4,100 Square Feet – $1,499,900
Five-bedroom condos in Brickell are very rare. In fact, at this time, there are only two other condos in Brickell that are listed on the MLS with that many bedrooms. Just last week, I listed the best priced 5 bedroom condo in Brickell in a building called Villa Regina. The new listing is attractively priced at $1,499,900. The next best priced 5 bedroom residence is listed for over $1M more.
If size, quality, and location are what you need, then look no further. The 5 bedroom listing at Villa Regina spans 4,100 square feet (380.9 square meters), has a total of 15 rooms, 5 full bathrooms, comes with 3 parking spaces, has 4 terraces with gorgeous bay and city views and has been tastefully remodeled. The kitchen has new granite countertops and stainless steel appliances with custom cabinetry. The air conditioning system was also replaced 3 months ago and the condo has impact resistance windows and shutters.
The amenities at Villa Regina include: 24-hour full-service concierge and security, swimming pool, fitness center, his and her spas, barbecue area and 4 grand party rooms. Villa Regina is located directly on Biscayne Bay and is one of the few condo buildings in Brickell with its own private marina.
Contact me today if you’d like to take a look at this 5 bedroom condo at Villa Regina.
The Sail on Brickell Penthouse 2 Bedroom/2 Bath Foreclosure – $299,900
I urge everyone to read my post in September. It will provide much insight as to how prevalent the mortgage fraud was back then in Miami. I actually reread my post and I was like “Damn! That was a great post”. Back then I didn’t have many readers. My readership was made up of just around one hundred people.
Currently, there are two 2 bedroom/2 bath short-sales at The Sail on Brickell listed for $599,000. Both short-sales are the condos that I discussed in my July and September posts that had recently closed. This makes it apparent to me that the buyers never had the intention to hold these condos but rather defraud our U.S. banking system. Our banking system in this country has enough problems. I’m very upset about my findings. Very!
Here are the two condos that were sold at The Sail on Brickell in July and September:
Unit 2504 was listed at $670,000 and sold for $670,000
Unit 2204 was listed at $670,000 and sold for $670,000
Both were sold by the same broker. <<<<<<<<<<<<<
Where is the mortgage fraud task force when you need them?
Were the Banks Complicit in the Mortgage Fraud?
Shares of Washington Mutual tumbled a little over 17 percent today as a result of a probe initiated by New York Attorney General Andrew Cuomo. Subpoenas were issued today by Cuomo to Fannie Mae and Freddie Mac, two large government-sponsored mortgage investors, to investigate mortgages that they purchased from Washington Mutual. Cuomo alleged that Washington Mutual pressured a major real estate company to inflate home appraisals. The New York Attorney General stated, “Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender’s interest. Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals.”
This puts a whole new spin on the mortgage fraud fiasco. Everyone has been saying for months that banks were unaware that they were being defrauded. The wool was pulled over their heads, so to speak. This may not have been the case after all. In fact, they may have been pulling the wool over someone else’s head and running them into a wall. Ouch!
If these allegations turn out to be true then Washington Mutual will be in a world of pain. Fannie Mae and Freddie Mac will no longer buy their mortgage loans which will leave Washington Mutual with no other choice but to leave these loans on their books. Not a good scenario.
Miami-Dade County Implements Mortgage Fraud Task Force
Miami-Dade County implemented a Mortgage Fraud Task Force division to combat the high number of mortgage fraud cases in Miami-Dade County. The Mortgage Fraud Task Force website reveals that the division will be comprised of the following five committees:
Law Enforcement Committee – responsible for the detection, investigation, apprehension and prosecution of the mortgage fraud subjects and enterprises.
Legislative Committee – responsible for enhancing current laws, and creating new laws and ordinances.
Regulatory Committee – responsible for enhancing and enforcing regulations of all parties involved in the mortgage transaction.
Business Partnership Committee – responsible for creating and transmitting effective business practices to enhance cooperation with law enforcement and between different professions involved in the mortgage transaction.
Education Committee – responsible for creating public awareness through printed literature, newspaper articles and television reports.
It’s about time something like this was enacted. Maybe now I won’t need to worry about finding new fraudulent transactions in the MLS anymore when compiling my monthly indices, in particular the Brickell Condo Index. Hopefully, this action will put a stop to this type of activity.
Some arrests have been made recently. Take a look at Case #1 and Case #2 to view a nice illustration of how the fraudulent activity took place.
crack crack…That’s the sound of the whip on the hind side of those who partook in fraudulent mortgage activity. These people participated in inflating the real estate bubble well beyond the point of insanity. It’ll be nice once mortgage fraud becomes less commonplace. Now, we’ll finally be able to get an accurate picture of the market.
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.
Securing a Loan Gets Tougher
The Wall Street Journal, this past week, published an article entitled “Securing a Loan Gets Tougher as Lenders Tighten Standards”. The opening two paragraphs are as follows:
Mortgage lenders are beginning to scrutinize borrowers more closely, causing some loan applicants, even those with good credit, to face higher costs and more hassles.
As the number of delinquent mortgages climbs, lenders have tightened their standards for issuing loans, including such well-publicized moves as raising minimum credit scores and cutting back on 100% financing and low-documentation loans. Now, some lenders are probing more intently would-be borrowers’ finances. They are taking a tougher look at how much the property a borrower wants to buy is worth. They are peering further into clients’ pasts for credit problems and requiring more in-depth reviews of borrowers who say they are self-employed. Some lenders are taking a harder stance when it comes to whose credit score a couple can use when applying for a mortgage, rather than simply allowing them to use the higher of the two scores.
A few days ago, I had a conversation, via email, on this very topic with a friend of mine who is a mortgage broker in Miami. One of my earlier blogs entitled “Vue at Brickell – Overpriced or Insanely Overpriced?” was what initiated this conversation. A few of his comments are below:
So you know, most lenders will not do anymore loans in Brickell, especially on investor stuff. All of the new buildings will have problems in the next few years. There was just so much fraud there.
My Opinion: 99% of lenders these days will only lend on the last MLS price, not the appraisal like they did in these cases. Also in Brickell they will do appraisal reviews and BPO’s to be sure on any borrower with less than stellar credit and a 20% down-payment. The cash back deals are still occurring, and the fraud line is getting blurred. So you know the current state of things, if the borrower is being approved by the lender on the MLS price, and they are not falsifying any of the loan criteria that makes them “approved” by the lender for the transaction then there is no fraud. Even if the seller decides to give some cash back to the borrower -typically structured to a third party company (aka the borrower), this is technically not illegal, because the cash back did not affect the underwriters decisions and the borrower was truly qualified and the price was justified by the MLS (market) and the appraisal. So what is occurring is sellers are giving cash to the borrower after the sale, which legally they are allowed to do. Gray area of the law -Yes, and this is occurring rampantly today. There are hundreds of investor buyers – maybe they learn from some info-mercial somewhere about this – I don’t know- but I am called every month from new clients with these “legal” deals. In my opinion the Developers are in the fray on this type of deal with leasebacks, mortgages ad to pay your bills for up to 2 years and cash back at closings this “legal” way. What you will find is this type of thing is “propping up” the market in the short term and creating false market conditions due to buyers paying more in expectation of a large cash back to financially carry the property – or receiving their “profits” on the front end and leaving town or the country. My forecast, is that the lenders will begin to audit buyers and especially the 1 payment default foreclosures for this type of dealing and press the state of Florida to amend laws and prevent this type of dealing. Today its a loophole, I foresee in a year after the scams take their toll, this will also be an issue in the news and another result in excessive foreclosures.
This is very bad news for investors who bought preconstruction condominiums in some of these buildings that are due for completion in the next two years. Many have feared that a large percentage of these investors will be unable to close on their condo units due to the financial burden of having an extra mortgage. Now, if banks are unwilling to underwrite investment loans, there becomes a fear that people will be unable to close because financing will be unobtainable. People will have no choice but to walk away from their deposits, which in most cases amounts to 10%-20% of the purchase price. Developers will have no choice but to offer significant incentives or slash their prices on the remaining condo units in their inventory that were unable to close. Either action will likely bring down prices in surrounding buildings and have a negative impact on the entire real estate market of that neighborhood.
Vue at Brickell – Overpriced or Insanely Overpriced?
I’d have to go with the latter on this one. A look at the current inventory of condo units for sale at the Vue at Brickell will show that the average price per square foot that these units are currently listed for is over $550. $550 per square foot! That’s for a non-waterfront condo unit, with partial bay views at best, in a building that is, by most standards, NOT a luxury high-rise building. In fact, Vue at Brickell was formerly known as Summit Brickell View when it was a rental building. The acquisition of the Summit Brickell View was made in December 2004 and conversion of the 323 units to condos began quickly thereafter. Grant it, the Summit Brickell View had recently been completed when the acquisition was made, and almost 70% of the units had never been occupied. Either way, it had, and in most cases still has, the features of a rental building. The majority of the units currently for sale still have the ceramic tile and carpeting throughout just the way they were sold when the units were sold as condos. The pictures below will show you a typical unit at Vue at Brickell.
Keep in mind that this is a typical unit at Vue at Brickell. I realize that some units have upgraded flooring and appliances, but the majority of units listed at Vue at Brickell look like this. Some units are even listed at over $700 per square foot! Those better come with marble floors, a Sub-Zero refrigerator, a Miele dishwasher, and a butler and maid! But they don’t even come close. In fact, two of those listings priced at over $700 per square foot come with ceramic tile and carpeting throughout, just as they were when the building was known as Summit Brickell View. One of those listings says “motivated sellers”. Motivated? Maybe they’re motivated to WAIT. Even the three bank-owned listings in this building are overpriced, ranging from $436 to $510 per square foot.
So what made this building so insanely overpriced? Did everyone get together and smoke the wacky tobacky without me or is something more afoul going on here? A look at closed sales for 2007 in the building reveal that mortgage fraud may have been the culprit. Three of the eight closed sales in 2007 sold for prices much higher than the asking price. Here they are below:
List price: $549,995
Sales price: $720,000
List price: $619,000
Sales price: $770,000
List price: $647,000
Sales price: $830,000
These types of cash-back deals have been the focus of a recent mortgage fraud investigation throughout the country. A cash-back scam occurs when a buyer offers to pay a significant amount more than the asking price, with the difference returned to them at closing. Most banks like to keep the cash-back amount to no more than 3% of the purchase price, and almost all lenders have a ceiling of 6%. In most cases, the seller and the listing agent are not aware that anything wrong is occuring and are just happy to have finally sold the property. Lenders, on the otherhand, are unaware of these large cash-back payments because the details of the arrangement are concealed within an addendum that does not get submitted to the bank along with the rest of the sales contract. Unscrupulous appraisers are often used to justify the inflated value of the property and the bank lends based on the purchase price stated on the contract after review of the appraisal.
It is no secret that Florida is well known for the mortgage fraud that has been running rampant throughout the state. In fact, according to a report released by the Mortgage Bankers Association, Florida led the nation in mortgage fraud in 2006. Hopefully, the mortgage fraud investigation throughout the state, and the rest of the country, will put an end to this nonsense so property values can return to an equilibrium state as dictated by the law of supply and demand.
If my assumptions are correct, and previous condo owners at the Vue at Brickell did fall prey to this sort of cash-back scam, then prices there will come in for a crash landing. There’s another building in Brickell that I feel may have a similar fate but I’ll leave that for an upcoming blog entry.
