Shanghai’s Real Estate Exuberance mimicks Miami’s Boom

Miami’s incredible real estate boom and subsequent bust during the past decade has many similarities with China’s current hyper-development.

Developers are touting the same old “lifestyle” story and a buying frenzy has taken over Shanghai. Just as buyers camped out for days to purchase condos at the Mirador in South Beach, so to are long waiting lists the norm in Shanghai’s new developments.

According to a recent article published in the New York Times “prices in Shanghai have risen more than 150 percent since 2003, pushing the price of a typical 1,100 square foot apartment up to $200,000.” This is painfully similar to Miami’s boom to bust in the past decade.

Real estate prices in Miami have been artificially inflated several times in our history. It was not that long ago that we experienced a massive boom during the years of that the “Cocaine Cowboys” in the 1980’s. As black market cash needed to be washed, new buildings sprouted up on Brickell Avenue and Miami Beach like mushrooms. The end result was that we had a glut of condominiums in the late eighties that would take several years to be absorbed and prices subsequently tanked.

The next wave that began just a few years ago labeled Miami as “Crane City.” Our skyline was literally dotted with construction cranes, and at one point, there were over fifty of them in downtown Miami alone. Developers touted living the “downtown Miami lifestyle.” Domestic and international buyers rushed in and bankers offered easy money to just about anyone. Developers hosted several introductory and opening parties to the public, champagne flowed, models danced on tables, real estate agents were dizzy with commissions, and everyone bought into the illusion of getting rich while living the new Miami lifestyle.

The problem was that no-one was paying attention to the local demographics and facts. Our “developer friendly” local government, which is the understatement of the decade, allowed developers to take over the city. The average annual income of a family in Miami is ridiculously low compared to the cost of living. For the average resident, annual incomes barely cover maintenance fees and real estate taxes to live in a one bedroom condo. Just as speculators bought into the illusion that real estate prices in five to seven years would be even higher in Miami, they are now repeating the same pattern in Shanghai.

The average income of a Shanghai resident is less than $5,000 per year. The average income of a Miami resident is less than $30,000 per year. You do the math.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

Miami Real Estate – January 2010

Miami Real Estate Market Summary – January 2010

For the month of January 2010 versus December 2009, the total number of closed sales decreased to 233 in January 2010 from 384 in December 2009, which represents a decrease of 40 percent. The drop in closed sales is somewhat typical for this time of the year, in particular, with the banks looking to clean up their balance sheets before year end.

In the Miami Beach condominium market, we witnessed a positive turn in the tide in the less than $500,000 price range. The total number of distressed properties for sale, including bank owned foreclosures and short sales, continues to diminish and currently represents 28 percent of properties for sale. Additionally, the number of distressed properties that sold in January 2010 represented 39 percent of the total closed sales. These improving numbers are significantly less than in other areas of Miami and indicate that the condo market is stabilizing at the lower end in Miami Beach.

Conversely, in the downtown Miami / Brickell area, the number of distressed sales accounted for 60 percent of total sales in January 2010. This high percentage of distressed properties is consistent with the past years performance in the Brickell district and downtown Miami area. Unfortunately, due to such an extensive supply of new condominiums as well as a large number of foreclosures, this area will continue feel downward pressure on property values.

The luxury condo segment remains void of any significant number of short sales or bank owned foreclosures. However, there was a significant number of new listings of luxury condominiums in Miami Beach placed on the market in January 2010, in particular at the Murano Grande, Icon Miami Beach, Il Villagio and Continuum North [23 out of 27 new listings are developer units].

It is also important to note that the number of condos closing with financing is increasing. In the Brickell area, for example, almost 40 percent of new purchases were acquired with conventional financing in January. This trend is likely to increase as Fannie Mae recently provided “special approval designation” for several downtown Miami condominium projects, including Cite, Isola, Latitude on the River, NEO Vertika, and the Club at Brickell Bay.

January 2010 Featured Closed Sales:

6662 Windsor Lane, Miami Beach

This luxury single family residence is situated on La Gorce Island, a private island community in the mid Miami Beach area. This enormous home with almost 7,000 square feet of living area, four bedroom and five bathrooms, was listed for $2.99 million and sold for $2,665,000 to a cash buyer. The seller, Windsor Lane LLC, purchased the vacant lot in 1999 for $550,000 and developed the property in 2003. Based on recent comparable sales in this Miami Beach neighborhood, the buyers acquired the property at an attractive price of only $383 per square foot.

829 Medina Ave, Coral Gables

A 1,724 square foot home with three bedrooms and two bathroom that was originally built in 1947. Fully renovated with Brazilian cherry wood floors, new kitchen and appliances and several other upgrades, this property traded twice in the past three months. It was acquired at public auction for $214,000 in November 2009 and then immediately flipped by the investor to a cash buyer for $385,000 in January 2010. Prior to the purchase at auction, the former owner attempted to sell the property as a short sale for several months. Purchasing this fully renovated Coral Gables home at auction for $124 per square foot and then reselling the property within 90 days is a prime example of the opportunities in our market.

Are you looking for a Miami or Miami Beach property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

* The data used to generate this chart/data is gathered from the Southeast Florida Multiple Listing Service (“MLS”) and the Miami Dade Clerk of the Courts. The data in the MLS is deemed reliable but not guaranteed. This data is for January 2010 for single family homes, unless otherwise indicated as condominiums/town homes. The prices are the actual sales prices of all single family or condos/town homes that closed during the month of January 2010 and are published in the MLS as of the date of this post.

South Beach’s Neighborhoods

South Beach, an area no larger than three square miles, consists of several residential neighborhoods each with their own distinct style, charm, history and green space. The Flamingo Park area or Historic District, for example, consists mostly of boutique art deco buildings that were developed in the 1930’s and 1940’s. Whereas, the South of Fifth neighborhood, features most of the upscale, luxury condo projects in South Beach.

It is important to recognize is that the tourist areas of South Beach are generally separate from the residential neighborhoods. Additionally, the primary four residential areas, as indicated on the map, have several differences ranging from architecture, property size, and price, to the mix of permanent versus part time residents.

The four main residential neighborhoods of South Beach are best described as follows:

Cultural Arts District

The Collins Park neighborhood of South Beach, now referred to as “CANDO” or the Cultural Arts Neighborhood District Overlay, is an often neglected residential and arts district. This entire neighborhood, which includes the Miami City Ballet, Miami Beach Public Library, New World Symphony and Bass Musuem of Art, has undergone a complete transformation.

This area includes some of our finest examples of Miami Art Deco with historic buildings such as the Governor Hotel, designed by Henry Hohauser in 1937, and the former Princeton Hotel, which now houses the New World Symphony, which was designed by Siskelwicz in 1939.

Several of South Beaches hippest condo hotels and new residential developments are home to this district, including the new W Hotel South Beach and Residences, the Setai Hotel and Residences, Parc Place Residences and ArteCity Miami Beach, an upscale residential village with 202 condos, townhouses and junior suites.

Flamingo Park District

The Historic or Flamingo Park District of South Beach is bordered to the south by Fifth Street, to the north by the Miami Beach Convention Center, to the east by the beach, and to the west by Alton Road. This approximately one square mile district contains over 1,200 historic designated buildings that are either Art Deco or Spanish / Mediterranean.

The central attractions in this area include Flamingo Park, Espanola Way and Lincoln Road Mall. In general, properties located within close walking distance to the Lincoln Road Mall are higher in demand, and therefore, demand a premium in price or rent. Additionally, one has to recognize the implications of owning a condominium in an art deco or historic building.

Historic properties are protected, and as such, property owners or developers are severely restricted in making any changes to the external facade and other design features, such as terrazzo floors. Therefore, one has to keep in mind that while owning a historic property adds value as they cannot be duplicated, replaced or demolished, ownership does come with certain inherent redevelopment constraints and costs.

South of Fifth Neighborhood

As with many of Miami’s old neighborhoods, the South of Fifth “SoFi” neighborhood in Miami Beach enjoyed its heydays in the 1950’s. Miami Beach had a reputation as the “American Riviera” with its beaches, hotels, tropical weather, mobsters and star power. However, the area was ethnically divided with SoFi as home to a thriving, mostly Jewish community, while the areas to the north and even some hotels had little tolerance for diversity.

Then in the 1980’s an investor from Germany, Thomas Kramer, descended on South Beach and in a short time purchased over 11 acres of oceanfront property in the South of Fifth neighborhood. Over the following twenty years Kramer, along with Jorge Perez of the Related Group, developed some of the most successful luxury condo projects in Miami Beach. These luxury developments included the Apogee, Icon South Beach, Murano at Portofino, Murano Grande, Portofino Tower, Continuum North, Continuum South, and the Yacht Club at Portofino.

In recent years the South of Fifth neighborhood developed the reputation as the most exclusive area to own and live in South Beach. Even during this challenging real estate market, it is not uncommon for luxury condominiums to trade at prices over $1,200 per square foot, or over $110 per square meter.

West Avenue Area

The West Avenue area comprises of several mid to high rise condominium buildings that face Biscayne Bay and downtown Miami. Although this area was partially developed during the early years of development in South Beach, the majority of the buildings were developed from the 1960’s onwards.

In general, full time residents reside in the West Avenue area, and this is also a very successful area for investment properties. There are several condo projects located on West Avenue, including the Mirador, Waverly, Bentley Bay, Floridian and Flamingo, that are favored by renters in the South Beach market.

West Avenue is easily accessed from downtown Miami via I-395 or the Venetian Causeway. It is also close to several supermarkets, stores and restaurants, as well as within walking distance of the Lincoln Road Mall and Flamingo Park.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

Florida Condo Rules, Regulations & Rights

Depending on the location and who manages a condominium project, most condominium associations have different rules and regulations. However, they also have rules in common set by the State of Florida, including, but not limited to the following:

Condo associations are required to -

• Hold a mandatory annual meeting of which all unit owners must be given adequate prior notice.
• Be self-managed or hire professional management.
• Make official records of the association available for the unit owner within five (5) working days after receiving a written request.
• Mail or deliver a copy of the proposed annual budget to each unit owner.

Condo associations may restrict -

• Parking and types of vehicles used on the premises.
• Leasing / renting or subleasing of your unit.
• The types of window coverings, pets and number of people living in the unit.
• Ownership of the common areas in the condo,which may be based on square footage or on equal ownership shares.

Unit owners have the right to -

• Automatically become association members with ownership of your condo.
• Access to the official records of the association.
• Peaceably assemble on the property.
• Use common areas without having to pay a fee.

If you are moving to a new condo building -

• Get involved in the process of forming the condo’s first association.
• Developers have a lot of influence in this process and in the first set of rules, regulations and bylaws as they create the initial association and its board of directors.
• You should always read the Declaration of Condominium (or consult an attorney) and all other condo related documents.

When buying a condo, one should get familiar with the condo docs of the building that you are planning to make your home or investment property. Most condominiums have specific rules on whether or not the owners can lease their units, as well as restrictions on pets and parking. You should review the association’s operating budget and most recent year end financial statements to make sure they are financially sound. Pay attention to any planned special assessments, the election of board members, subleasing and any restrictions on remodeling your unit.

For additional information on condominiums, review the Condo Governance Form as provided by the State of Florida.

To learn more about Florida’s condo rules and regulations, or for specific questions, information, issues or problems with your condo and association contact:

STATE OF FLORIDA OMBUDSMAN’S OFFICE

(954) 202-3234 OR ombudsman@dbpr.state.fl.us

www.MyFlorida.com/dbpr OR (800) 226-9101

Miami Year in Review 2009

Home Flippers Return

This year marked the return of property investors flipping foreclosures in anticipation of quick profits. Due to the volume of foreclosure cases making their way through the courts and banks, it was an opportune time to take advantage of the disorganized lending institutions and court system.

The year started out with the presence of a few established investment groups, which grew exponentially as investors on the fence jumped in. Although the banks set unrealistic reserve prices and few properties traded at the Miami Dade public auctions, there were many successful short-term trades executed with returns of 30 to 40 percent.

One particular sale at the Miami Dade public auction epitomized this chaotic market. A large estate in Coral Gables with an estimated market value of $4.0 million was being auctioned off by the Clerk of the Court. The summary judgment against the owner was over $5.0 million, while the lender’s representative at the auction set the reserve at $2.3 million. Two individuals stepped up and registered to bid. The first offered $90,000 and the lender’s representative countered at $100,000. Then, the second investor raised the bid to $110,000, and the lender’s representative stopped bidding. The Clerk confirmed the bid three times and subsequently closed the sale at a price of $110,000.

Lenders Sell Discounted Notes – Developers Seek Bankruptcy

This was the year that local, national and international lenders unloaded multiple distressed notes and condo projects to investors. According to the Condo Vultures Bulk Deals Database, during the past 18 months bulk buyers acquired more than 2,200 new or renovated units consisting of approximately 2.7 million square feet.

There were several high profile condo projects that traded hands during the year, which included the sale of the Caribbean Miami Beach to New York based Melohn Properties, and the purchase of a $261 million note for 244 units in the luxury 900 Biscayne Bay by a Cayman Island entity. In October 2009, Starwood Capital Group also became a major player in the South Florida condo market with their purchase of Corus Bank.

Corus’s portfolio included about $1.0 billion in loans secured by condominium projects in South Florida. What is evident is that investors are confident enough that if we are not already at bottom in the condo market, that we are close enough to find it attractive to purchase these assets at 30 to 50 percent less than replacement cost.

During the year several lenders allowed developers to sell condos at prices for less than what is owed on the construction loan. However, in August, Cabi Downtown Developers, the builders of the 849-unit Everglades on the Bay in Downtown Miami, filed for Chapter 11 Bankruptcy protection. Although certain lenders may decrease the debt owned by allowing the sale of individual units to take place, it does nothing to significantly reduce their exposure in a deteriorating condo market, which is most like the case with Everglades on the Bay.

Looming Shadow Inventory Grows

According to data released by First American CoreLogic, there were 1.7 million bank REOs and homes facing imminent foreclosure that had not yet hit the market at the end of the 3^rd quarter 2009. This is consistent with the Miami market where we experienced an approximate 10 percent increase in the number of mortgage foreclosures over the 56,656 foreclosures that were filed in 2008.

If you consider the sales of distressed properties in Miami last year alone, you will note that our shadow inventory is massive as tens of thousands of distressed properties need to be released on the market.

Unfortunately, at the current sales pace in Miami, it could take up to three years to work through of this looming shadow inventory of distressed properties. If you combine this with the 24,500 existing residential properties plus an estimated 10,000 new condos visibly on the market, it represents a backlog of more than five years.

Enthusiastic Investors Return

This year we experienced a surge in second home and investment property buyers of Miami real estate. In part because of a weak U.S. Dollar, which is 20 percent lower against the Euro since March 2009 alone, in part because of low interest rates, in part because prices have collapsed, and in part due to large investors scraping up bulk condominium deals in fractured condo projects.

With prices of Downtown Miami condos dropping to the $200 to $250 per square foot range, international investors leaped back in the market as all cash buyers. Due to a lack of financing available in the majority of condo projects, buyers that required financing were practically shut out of the market.

Another factor that propelled the market was the investor appetite for bank owned properties, which created an unprecedented level of competition. At the beginning of the year, Fannie Mae could barely give away the property. Then by mid-year, you had to be prepared enter the ultimate fighter foreclosure ring with fifty competitors.

Jingle Mail – Strategic Defaults Increase

According to several recent studies and data published by the Mortgage Bankers Association, the percentage of home owners that are strategically defaulting on their mortgages is rapidly increasing. Although I do not possess any factual data collected on strategic defaults of home owners in South Florida, I can speak from my experience on the street.

What we consistently hear from people is that due to their (i) under-employment, unemployment and/or declining income situation, (ii) underwater properties, and (iii) “everyone” is doing it attitude, that the percentage of home owners that are choosing not to pay their monthly mortgage is much higher than reported in these studies.

Unlike some states where the lender has recourse to a borrower’s non-related mortgaged assets, in the state of Florida, a mortgage is secured only by the property. If one chooses to default, you only have to surrender the property.

Has Miami Hit Bottom?

Although median sales prices continued to erode throughout 2009, the sales of existing homes and condos significantly increased by 50 percent over the previous year. While we appear to have hit a plateau with the median sale price of bank REO properties in the past few months, the median sale price of short sale properties continues to decrease [see chart below].

With such a low median sales price of bank owned properties, it is clear that the majority of the bank REO sales this past year have been in the affordable lower priced segment. As such, the next shoe to drop will most likely be within the luxury market segment. This is further supported by the fact that the luxury segment has also received minimal government intervention.

The Gravy Train – Government Subsidization

The U.S. Government threw the housing market, homeowners and the financial industry, several life lines throughout the year. Direct efforts to prop up the ailing housing market included the First Time Homebuyer Tax Credit and Home Affordable Modification Program. Additional efforts included historical low interest rates, unlimited capital support for Fannie Mae and Freddie Mac, and the Federal Reserve’s purchase of nearly $1.5 trillion of mortgage-related assets.

It has become clear that the U.S. Government policy of direct intervention in the housing market is the main factor that influences the current and future direction of the real estate market. Therefore, as long as this market remains on taxpayer and Government life support, real market forces like foreclosures will play only a secondary role. Additionally, due to the upcoming November elections this year, the involvement of the government in the real estate market is likely to continue.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

* The data used to generate this chart/data is gathered from the Multiple Listing Service (“MLS”) and the Miami Dade Clerk of the Courts. The data in the MLS is deemed reliable but not guaranteed. The sales prices are the actual median sales prices of all single family, condos or townhomes that closed during 2009 and are published in the MLS as of the date of this post.

Miami Real Estate – November 2009

Summary – November 2009

For the month of October 2009 versus October 2008, the total number of closed sales increased over 100 percent, which is consistent with the upward trend in sales volume this year. However, the number of closed sales for November 2009 versus October 2009 remained flat. Another noticeable trend is that demand has remained somewhat constant these past few months, while at the same time, the inventory of properties for sale continues to shrink. If this trend continues it may result in less downward pressure on home prices, which would allow for the market to stabilize in the coming months.

In the city of Miami Beach there are significant sales price differences depending on location. With several sales in the $50 to $60 per square foot ["PSF"] range, the prices of condominiums in the north Miami Beach area [71 Street north to 84th Street] remain severely depressed. Whereas, the sale price of condos in good locations within the South Beach market, indicate a floor on pricing in the range of $250 to $350 PSF. This month, the Floridian condominium project located at 650 West Avenue in Miami Beach, had a record number of five distressed closed sales. Closed sale prices ranged from a low of $214 PSF  [unit 1806] to a high of $407 PSF [unit 2603].

In downtown Miami, or Brickell District, the average asking and closed sale price was significantly higher than the prior month. This was partially due to the sale of several luxury condominiums in the Jade on Brickell, Epic and Santa Maria, in addition to, a pent-up demand for affordable condos. The demand for condos in the downtown Miami area remains very high, which is supported by the fact that the average days on the market for the closed sales this month was only 61 days, a very healthy number.

There were also a few condo projects where the majority of the sales where located, including The Madison Downtown, Quantum on the Bay, One Miami, and the Club at Brickell Bay. While the sale of foreclosure units in The Madison have been hovering at a closed sale price of $100 PSF, there were also several sales with financing in the range of $160 to $170 PSF, which represents a significant premium for financing.

The majority of the transactions within the condo segment continues to be mostly to all cash buyers, with only select purchasers obtaining conventional, foreign national or FHA financing. However, in the single family home segment, the vast majority of transactions are to primary residence purchasers that are successfully obtaining financing at very attractive rates. As existing home owners are adjusting to market prices, there were few distressed sales of single family homes in the areas of Miami Beach, Coconut Grove and Coral Gables.

November’s Featured Sales:

450 Alton Rd, Unit 1806, Miami Beach

The sale of this 1,452 square foot, two bedroom, two bathroom, luxury condo in the Icon South Beach at price of $500,000, or $344 PSF, represents a significant price decrease in this “iconic” building. The former owner paid a price of $1.3 million for this property back in 2006. At that time, the buyer obtained 100% financing from American Brokers Conduit in the form of a $1.0 million first and $300,000 second mortgage. This was a short sale and the lender took a significant loss to approve the sale.

4949 Pine Tree Drive, Miami Beach

This magnificent estate was the former home of S.S. Kresge, the original founder of K-Mart. This 11,638 square foot home sits on a huge 2 acres corner lot in a prime Miami Beach location and features over 670 square of water frontage. The estate also features a clay tennis court, Venetian swimming pool, four car garage and guest house. According to public records, the home was sold to William H Dean, the current CEO of M.C. Dean Inc.,  for an all cash price of $8.0 million, or $687 PSF.

Are you looking for a Miami or Miami Beach property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

* The data used to generate this chart/data is gathered from the Multiple Listing Service (“MLS”) and the Miami Dade Clerk of the Courts. The data in the MLS is deemed reliable but not guaranteed. This data is for November 2009 for single family homes, unless otherwise indicated as condominiums/town homes. The prices are the actual sales prices of all single family or condos/town homes that closed during the month of November 2009 and are published in the MLS as of the date of this post.

Miami Real Estate – October 2009

Summary - October 2009

During the month of October 2009, the Miami real estate market experienced  a decrease in the median sales price for single family homes from $173,000 to $167,500, and the median sales price for condominiums and townhouses also decreased from $135,000 to $130,000.

The number of closed sales that are distressed properties continues to shrink on a month-to-month basis. However, we experienced a dramatic month-over-month increase in the number of short sales that closed. In the Miami Beach sub-market, for example, the percentage of distressed sales dropped to 39 percent, of which, the number of short sales practically equaled the number of foreclosure sales. This was also the case in the downtown Brickell area.

In the luxury condominium market, financing continues to be a major issue with very few deals closing with financing. In Miami Beach, 25 out of the 29 closed sales of luxury condos were all cash transactions. Only four deals closed with conventional financing. These units were located in the Mosaic, Murano Grande, Blue Diamond and Canyon Ranch condo projects.

With few distressed properties available, real estate in the Coral Gables and Coconut Grove areas continues to show some resiliency. The same should be noted for the Miami Beach condo market versus that of the downtown Brickell market. What is encouraging is that the number of non-distressed transactions continues to increase as sellers are forced to adjust to the distressed prices in the market.

October’s Featured Sales:

101 20th Street #THB, Miami Beach – The Setai

This unique residence in The Setai is one of the most extraordinary condominium residences in Miami Beach. With 20 foot floor-to-ceiling windows, a 500 square foot terrace, Balinese garden, and incredible ocean views, this unit sold for an impressive $1,141 per square foot. According to public records, the buyer, R Scott Handel out of Washington DC, paid $2,625,000 in an all cash transaction.

1330 West Ave #709, Miami Beach -  The Waverly

This two bedroom, two bathroom unit on the seventh floor in the Waverly at South Beach sold in a short sale transaction for $186 per square foot, or a price of $210,000. The former owner paid a price of $850,000, or $754 per square foot, in February 2007. The previous purchase was financed by subprime mortgage lender, Novastar, that provided the buyer with a mortgage in the amount of $807,500 at 95 percent loan-to-value.

Are you looking for a Miami or Miami Beach property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

* The data used to generate this chart/data is gathered from the Multiple Listing Service (“MLS”) and the Miami Dade Clerk of the Courts. The data in the MLS is deemed reliable but not guaranteed. This data is for October 2009 for single family homes, unless otherwise indicated as condominiums/town homes. The prices are the actual sales prices of all single family or condos/town homes that closed during the month of October 2009 and are published in the MLS as of the date of this post.

Perform a Condo Stress Test

During the past year, Miami’s real estate market has been all about distressed sales. As such, when considering investing in a Miami condo, performing a stress test to determine the financial health of the condominium association should be a critical part of your evaluation.

Why?  You need to determine if the condo association has sufficient capital buffers to withstand the impact of an economic environment that is more challenging than expected. It also important to point out that in general the most attractive condo deals are typically located in the most financially strapped buildings.

There is no simple mathematical equation or “health index” that can be applied. However, utilizing the following Condo Stress Test as a base guideline will help you make a more informed decision.

The Condo Stress Test:

Question 1 – What is the ratio of owner occupied units to investment properties?

Guideline – If the number of investment properties and/or second home owners is greater than fifty percent (50%), the higher the risk of further defaults, budget shortfalls, maintenance fee increases, or necessary assessments.

Question 2 – What percentage of unit owners are delinquent on their monthly maintenance fees?

Guideline – If twenty percent (20%) or more of the current owners are behind on their maintenance fees, then you could be in for a special assessment to make up for revenue shortfalls, a dramatic cut in the buildings services, and possible maintenance deferral issues.

Question 3 – How many units are currently distressed, including those in pre-foreclosure, foreclosure or already in bank owned status?

Guideline – If more than ten percent (10%) of the overall units are distressed, be prepared for more pain and potential increases in maintenance fees and/or new assessments. Today’s market is based on distressed pricing, so as each property goes to auction or is sold by a bank, you face the potential for additional value erosion.

Question 4 – When was the most recent 10 year or 40 year engineering inspection completed?

Guideline – If the building recently passed a major inspection, and there are to be NO assessments to cure any issues, then you are in good shape. However, if the building is due for either inspection, be prepared that the association may have to use its reserves or assess the current owners to cover any areas that have to be brought up to new building code.

Question 5 – Does the condo association have any reserves?

Guideline – If the association has no reserves then this can expose you to several potential issues, including, paying the monthly expenses, maintaining adequate insurance coverage,  unforeseen increase in expenses, necessary improvements, revenue shortfalls etc. Associations walk a very fine line between paying their monthly expenses and maintenance fee revenues.

Question 6 – Has the building cut back on any services or is the property in poor condition?

Guideline – As condominium projects lose revenue and expenses remain constant or increase, they may cut back on the building services, such as security or concierge services. As such, when you interview with the condo association ask for detailed information on any recent renovations, deferred maintenance or upcoming assessments.

Question 7 – Ask current owners or renters if they are experiencing any problems or issues residing in the building?

Guideline -When you are getting close to making an offer on a property, visit the building on your own time and talk to current owners and renters. You will find out very quickly what is going on and the major issues, if any, that people are dealing with on a day-to-day basis. Also, when walking the property pay attention to any notices posted in the building or look for a community billboard where all the recent board minutes, budget and pertinent information should be posted.

Question 8 – Has the condo association made any recent changes to the bylaws or rules?

Guideline -In today’s market it is common practice to find an owner collecting rent and NOT paying their monthly maintenance fees. Some condo associations have adopted a new rule that requires tenants to pay their rent to the association, and then the association will pay any overage to the owner.

Remember, there are certain protections under Florida Law that are in place to protect you, the consumer, when purchasing an existing or new construction condominium.  You are entitled to receive a current of the declaration of condominium, articles of incorporation, bylaws and rules of the association, and the most recent year end financial information.

If for any reason you are not comfortable with the condominium rules, bylaws or financial situation, you have the right to void your contract within a certain number of days, which is three (3) days for an existing condominium or fifteen (15) days with new construction condominiums.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

Foreclosure “Trick or Treat”

In Miami, as in other cities with such a large number of foreclosures, there is much to be aware of when purchasing a bank owned or foreclosure property. Yes, buying a foreclosure is not for the feint of heart, so here is a general guide to common foreclosure tricks and treats -

Foreclosure Tricks:

• The purchase price it too good to be true – The bank may have priced it below market to create competition and buyers will artificially bid up the price, and/or the property may require significant repairs or renovations.
• The seller or bank offers to pay for your owner’s title insurance policy if you work with their assigned title agent – This may save you a couple of thousand dollars, but you still have the right to hire your own title agent that will consider your rights, concerns and needs.
• You call to inquire about a property and are informed that it is a ”multiple” offer scenario - Do not let this dissuade you from submitting an offer, all offers must be presented to the seller.
• I will get a better deal if I work with the listing agent – This is a shortsighted approach as most listing agents are acting as mere transaction coordinators and have no duties to you as a buyer. Find your own real estate practitioner to represent your interests.

Foreclosure Treats:

• The initial asking price of a foreclosure is significantly above market value - Don’t make the common mistake of waiting for the price to become attractive. Submit an initial offer to the seller and they may counter-offer you.
• In general, those properties that receive the least amount of interest have issues  and require the biggest discounts – If you are willing to complete major repairs or improve a property, you may be in a good position to negotiate a significant discount to the original asking price.
• There is a considerable amount of fallout, so monitor any property that you wish to purchase, even if it goes under contract -  There are many purchasers out there just looking and making blind offers. It is not uncommon for a property to have two or three contracts in place before it actually closes, in particular when looking at properties over $200,000.
• Cash is King - Sellers prefer cash offers and are more aggressive when negotiating the purchase price if your contract is not subject to financing or an appraisal.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

Distressed Pricing

During the real estate boom from early 2002 through late 2007, the concept of “distressed” pricing was foreign to homeowners and real estate practitioners alike. The question today is not whether distressed real estate should be included when considering comparable sales, but to what extent? 

There are several schools of thought in today’s distressed real estate environment. I consider the following to be relevant when pricing to either buy or sell in today’s market.

The first is the principle of substitution. If you have the ability to purchase a discounted short sale or foreclosed property, why would you pay retail? So long as there remains a pipeline of distressed homes in the market, the “new” market will continue to be the distressed properties.

The second school of thought is the lack of financing for the average buyer. Many think that once financing becomes more readily available, that the market will stabilize and pricing will return to normal.

Unfortunately, one has to also consider the creation of jobs and the positive affect that this will have on consumer confidence and spending. Therefore, once the unemployment rate begins to move downward and the credit situation improves, we will see a return to normal pricing.

So is distressed pricing here to stay in Miami? In the short term, yes, especially if you need to sell. However, in the long term, jobs will be created, the shadow inventory of distressed properties will disappear, and we will return to normal pricing.

Are you looking for a Miami or Miami Beach investment property at a deep discount? Are you looking for a discounted short sale or bank owned property? Ross Milroy of Miami Angel Properties, LLC may be reached at 305-673-5300 or info@miamiangelproperties.com.

Copyright © Miami Angel Properties, LLC

Next Page »