The continuing foreclosure flood is creating severe financial problems for condominium associations across Florida, and members are complaining that banks and mortgage companies are doing nothing to help.

Rich DiBello is the sales and rental director for Villagio Condominiums in Sarasota. Condo associations are facing financial difficulties, and many say lenders aren't doing enough to help.

In fact, condo owners say that many lenders are delaying foreclosures to avoid paying association dues. That is requiring associations to slash costs and cut amenities, and forcing owners to fork over more cash to keep complexes humming.

In something of a Catch-22, the financial problems at condo complexes also are prompting banks to tighten restrictions on lending.

Banks will not lend in complexes that have not set aside 10 percent of their budgets for reserves. They will not lend when more than 50 percent of the units are rented. They also will not lend where a few owners control too many of the units or where too many owners are in default on their mortgages and dues.

Those restrictions only make the crisis worse by driving condo values down and prompting more people to bail on their units, said Perry Corneau, a Sarasota real estate agent who specializes in condos.

“Banks are doing the exact opposite of what they should be doing,” Corneau said. “Instead of loosening lending restrictions, they are tightening them. Instead of paying dues to pay for the upkeep of their collateral, they are doing the opposite.”

A recent study conducted by Becker & Poliakoff, a Fort Lauderdale-based law firm specializing in homeowners organizations, shows rising pessimism among condo residents. More owners think that foreclosures will get worse in 2010, and that more assessments and further budget cuts will be needed.

But in the midst of the gloom, some condo owners and associations are fighting back. They are taking legal action to force banks to pay dues, and are attempting to alter legislation that will make banks act more swiftly in the future.

“The bank lobby has more money and are fighting us tooth and nail,” said David Muller, an attorney with Becker & Poliakoff in Sarasota. “But we represent real live people who actually vote.”

For their part, bankers say they are sympathetic to the plight of condo owners, but say that forces beyond their control are dictating their actions.

Regulators are requiring them to be more conservative in making loans, and the court system is so clogged with foreclosures that banks cannot take title to properties any faster.

“We understand the frustration on the part of people who have to pay more,” said Anthony DeMarco, the Florida Bankers Association executive vice president for government relations. “But banks are losing money, too. We lose money every time we foreclose.”

Condo blues

Not every condo complex in Southwest Florida is suffering from the crisis to the same degree.

The majority — as many as 75 percent — are older, more stable complexes that did not experience a direct blast from the boom-and-bust cycle.

The ones hit hardest were those that came out of the ground from 2004 to 2007, or were converted from apartments during the same period.

These complexes experienced heavy speculative buying during the boom and are now facing the most foreclosures.

Some, like Watercrest in Lakewood Ranch, have been able to resell foreclosed units in an orderly fashion and have maintained adequate reserves.

But most of the new or converted condos are reeling from a drop in dues collections. And where fraud occurred, those problems have been compounded.

Both the Condominiums at Waterside in Charlotte County and the Bermuda on Osprey complex in Sarasota were the targets of groups of speculators who bought large blocks of units and then defaulted on mortgages shortly after.

At Waterside, 74 percent of the buyers in the 42-unit complex walked away from their mortgages, leaving just six owners to cover $8,000 in monthly expenses and a $16,000 annual insurance bill.

Despite raising monthly dues from $350 to $500 and imposing an $1,800-per-person special assessment, the six owners have not been unable to make ends meet and have relied on the kindness of vendors and others that do business with the complex to tide them over.

Meanwhile, the two banks that foreclosed on 27 of the units in the complex — Citibank and JPMorgan Chase — only began to help after the Herald-Tribune wrote stories about their inaction, Waterside owners say.

“Now Chase has cleaned up mold in four of their units and has promised to provide $10,000 to help pay for insurance,” said Steven Haber, who owns one of the units in the complex. “Citi has not done anything yet, but at least they are returning phone calls.”

Other complexes in the region may not be in as deep a predicament as Waterside, but many were hit by speculation fueled in part by the actions of banks and mortgage companies.

At Villagio, a 320-unit complex in Sarasota, buyers were offered special deals from Countrywide Mortgage, allowing them to buy units with little or no money down, said Rich DiBello, an investor who owns two condos in the complex.

With no skin in the game, more than 40 buyers walked away from their obligations when the market plunged. As a result, the condo association ran short of money, but by cutting costs it has managed to avoid raising dues or charging special assessments.

“We renegotiated all our contracts with vendors, everyone from the pool service to the landscaping company,” DiBello said. “Instead of paying someone from outside to do something, we tried to do it ourselves.”

As at other complexes across the state, banks have been slow to foreclose on units at Villagio.

Under state law, banks only need pay six months in back condo association dues or 1 percent of their original mortgage — whichever is lower — when they foreclose. That means banks can avoid tens of thousands of dollars in costs, DiBello said.

The more they postpone foreclosure, the more costs that banks can avoid.

“Units are often empty for one or two years, but the bank only has to repay six months,” DiBello said. “We have to eat the rest and that really stinks.”

“Banks are driving good complexes into the ground, and the ones who are getting hurt are people with low to moderate income,” he said. “The little guy is getting shellacked on the whole deal.”

DiBello said the values at Villagio also have suffered because banks will not lend to buyers because of the high number of rental units and foreclosures.

“Eighty to 90 percent of potential buyers cannot buy in here because of the restrictions,” DiBello said.

But DiBello said his association is actively pursuing banks and delinquent owners to get them to pay their bills. The association also is offering to help delinquent owners rent our their units so they can pay their dues.

Wendy Bamford, the vice president of the Admirals Walk Condominium Association, said her Sarasota complex is taking similar steps.

Since 2007, nearly one third of condo buyers have defaulted on mortgages in the 249-unit complex, causing a $200,000 shortfall. But the association has not had to raise dues or levy special assessments because its bylaws permit it to to collect dues directly from renters if owners are delinquent.

In addition, Admiral’s Walk prohibits bank representatives from entering the premises until the institution take ownership. “They try to change the locks on the doors, but we don’t let them in unless they show us a certificate of title,” Bamford said.

The legal route

Though using lawyers to chase banks and delinquent owners is expensive, attorney say an increasing number of associations are moving in that direction.

One new strategy is to file a lien against a delinquent owner and take title to the property, said Dan Lobeck, whose Sarasota firm represents 500 condo associations in the region. The association can then prepare to deed the property to the bank. If the bank does not respond within a certain time frame, the association will simply treat the bank as the new owner and charge it dues on an ongoing basis.

Another tactic is to force banks to expedite foreclosures by asking judges to speed the process along, Lobeck said.

But Becker & Poliakoff believes the real answer to the problem is legislative.

“Banks have no incentive to move forward on foreclosures,” said Muller, an attorney in the firm’s Sarasota office. “They don’t want to take title before they absolutely have to, because — God forbid — they get hit with a $50,000 extra assessment.”

The way to stop that, Muller said, is to force banks to pay a year of back dues when they foreclose instead of just six months, and to allow associations to collect rent from properties when banks delay foreclosure.

DeMarco, the Florida Bankers Association executive, said giving associations the right to collect dues directly from renters is a good idea. But he is opposed to forcing banks to pay more than they currently pay.

If the law is changed, it could increase lending costs for future borrowers, DeMarco said.

In the meantime, the crisis is not likely to go away until banks start lending again. But all the problems at condo complexes are scaring them off, said Corneau, the Sarasota condo specialist.

Even the strongest complexes have been impacted.

Corneau recently had a client who wanted to buy a town house in The Landings, a well-established community in Sarasota that did not experience high levels of speculation during the boom. Despite the fact that his buyer had an 800 credit score, the bank declined to make the loan because The Landings had not set aside 10 percent of its budgets for reserves.

Corneau and his client tried to renegotiate and put more money down, but the bank had already identified a problem and would not proceed.

“The banks are being so arbitrary that it is affecting values,” Corneau said. “The only ones who can buy units are cash buyers and they always want discounts.”

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RISMEDIA, December 11, 2009—Trulia, Inc., a real estate search site, has announced that 22% of homes currently on the market in the United States as of December 1, 2009 have experienced at least one price cut, the lowest level since Trulia started tracking price reductions in April 2009. The total amount slashed from home prices also dropped from $28.1 billion in November to $24.7 billion in December, representing a 12% decrease. The average discount for price-reduced homes slightly increased to 11% off of the original listing price compared to 10% in the previous four months. The number of listings on Trulia also decreased by 9% from the previous month.

South Reports Least Amount of Homes Reduced
The South has the lowest levels of price reductions, with 19% of current listings experiencing at least one price cut, a 21% decrease from the previous month. Kentucky, Louisiana, Arkansas Oklahoma and Mississippi are all seeing less than 15% of listings with price reductions. (Regions according to the U.S. Census Bureau)

-South – 19% of listings with price reductions
-West – 20% of listings with price reductions
-Midwest – 22% of listings with price reductions
-Northeast – 25% of listings with price reductions

“We saw some of the highest levels of reductions last month, as home owners raced to sell their homes in advance of the November 30 expiration of the tax credit,” said Pete Flint. “We are now seeing fewer reductions at the low end of the market as those sellers are increasingly in sync with market prices. With the expansion of the tax credit to repeat home buyers and extension to April 30, we expect to see an increase in price reductions at the higher end of the market in the first quarter of 2010.”

For the first time since Trulia started tracking price reductions in April 2009, one major U.S. city has reached 40% of listings with price reductions- Minneapolis. This is the second straight month that Minneapolis has held the top spot for highest percentage of price reductions.

Cities experiencing significant increases in percentage of listings with price reductions from June 2009 to December 2009 include:
-Kansas City, MO – 40% increase in price reductions
-Omaha, NE – 39% increase in price reductions
-Houston, TX – 32% increase in price reductions
-Minneapolis, MN – 29% increase in price reductions
-Arlington, VA – 28% increase in price reductions

Cities showing signs the highest percentage of declines for listings with price reductions from June 2009 to December 2009 include:
-Las Vegas, NV – 30% decrease in price reductions
-San Jose, CA – 30% decrease in price reductions
-Long Beach, CA – 25% decrease in price reductions
-Honolulu, HI – 23% decrease in price reductions
-Albuquerque, NM – 22% decrease in price reductions

Luxury Market Still Hardest Hit
Luxury homes (those listed at two million dollars and above) continue to bear the brunt of discounts being offered with an average of 14% being slashed from the original asking price compared to 10% for homes listed under $2 million. Additionally, luxury homes represent less than 2% of all current listings on Trulia, but are responsible for 26% of the $24.7 billion in home price reductions.

For more information, visit http://www.trulia.com.

NAR Survey Shows First-Time Home Buyers Set Record in Past Year

Source, National Association of Realtors®

First-time home buyers reached the highest market share on record during the past year, according to the latest consumer survey of home buyers and sellers. The study was released here today at the 2009 REALTORS® Conference & Expo.

The 2009 National Association of Realtors® Profile of Home Buyers and Sellers is the latest in a series of large national NAR surveys evaluating demographics, preferences, marketing and experiences of recent home buyers and sellers. Among national surveys, NAR’s Profile of Home Buyers and Sellers is unprecedented in size and scope.

Paul Bishop, NAR vice president of research, said several factors have been at play. “Tax incentives, record high affordability conditions and a pent-up demand brought a record share of first-time home buyers into the market,” he said. “These buyers are critical to housing and a general economic recovery because the market always heals from the bottom up – they absorb inventory, free existing owners to make a trade and stimulate related goods and services.”

For more information, contact:
Walter Molony 202/383-1177 wmolony@realtors.org

The number of first-time home buyers rose to 47 percent of all home sales from 41 percent of transactions in last year’s study, and was the highest on record dating back to 1981. The previous high was 44 percent in 1991. “It’s interesting to note the last cyclical peak of first-time home buyers was during the last noteworthy economic downturn, with first-time buyers starting the chain reaction that led the nation out of recession,” Bishop said.

The profile shows the median age of first-time buyers was 30 and the median income was $61,600. The typical first-time buyer purchased a home costing $156,000, down from $165,000 in the 2008 study, and plans to stay in that home for 10 years.

Fifty-five percent of entry level buyers reported they financed their purchase with an FHA loan, while another 8 percent used the VA loan program.

First-time buyers who made a downpayment used a variety of sources: 61 percent used savings and 22 percent received a gift from a friend or relative, typically from their parents. Six percent received a loan from a relative or friend, 6 percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds. Ninety-six percent chose a fixed-rate mortgage.

First-time buyers often make financial sacrifices to purchase a home: 39 percent cut spending on luxury items, 38 percent cut back on entertainment and 30 percent cut spending on clothes.

Only 12 percent said financing their first home was more difficult than expected, but 13 percent of successful buyers said they had experienced a purchase agreement that was canceled, terminated or fell through; and 8 percent had been rejected by a lender. “This raises the question of how many potential buyers were unsuccessful because of problems with appraisals or loan qualifications,” Bishop said. “The market would be even stronger without these problems.”

NAR 2009 President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said NAR pushed hard to extend and expand the home buyer tax credit though the middle of 2010. “Some people were taking a housing recovery for granted, but we must acknowledge the abnormal situation from toxic loans that will keep foreclosures coming into the market over the coming year,” he said. “To help stem foreclosures we must first stabilize home prices, and the expansion of tax incentives should absorb enough inventory to restore balance. As the leading advocate for homeownership, NAR commends Congress for extending and expanding the tax credit because placing financially qualified buyers into affordable homes is the soundest way to heal our economy as fast as possible.”

Buyers searched a median of 12 weeks and viewed 12 homes. Among buyers who used an agent, 63 percent selected a buyer’s representative. Eighty-seven percent consider their home a good investment, and more than half see it as a better investment than stocks. Twelve percent of buyers own two homes, while another three percent own three or more homes.

The typical repeat buyer was 48 years old, earned $88,100, purchased a home costing $224,500 and plans to stay in that home for 12 years.

The median downpayment of all home buyers was 8 percent, and the number purchasing with no money down fell from 23 percent in 2008 to 15 percent in the current survey; 8 percent of buyers paid all cash for their home.

The median age of home sellers was 46 and their income was $91,100. Typical sellers had been in their home for seven years, up from six years in the 2008 survey, moved a median distance of 19 miles, and their home was on the market for 10 weeks. Nearly half traded up in size, 30 percent bought a comparable home and 22 percent traded down.

Eighty-five percent of sellers used a real estate professional, and 64 percent of sellers chose their agent based on a referral or had used the same agent in the past. Eighty-one percent of sellers are likely to use the same agent again or recommend to others.

Forty-two percent of sellers offered incentives to attract buyers, such as home warranties or assistance with closing costs. The typical home sold for 95 percent of the listing price, with a median increase over the seller’s original purchase price of $36,000. “Even with price declines in recent years, the typical home seller saw their equity increase 27 percent,” McMillan said.

Of sellers working with real estate agents, the study found that 80 percent used full-service brokerage, in which agents provide a range of services that include managing most of the process of selling a home from listing to closing. Nine percent of sellers chose limited services, which may include discount brokerage, and 11 percent used minimal service, such as simply listing a property on a multiple listing service.

To read the entire article, click here.

By Tom Bayles, Tuesday, November 10, 2009

Stan Humpfries, Zillow.com Chief Economist

Tax Credit Extension

President Obama signed H.R. 3548 Friday morning, enacting into law an extension, and adjustment, of the $8,000 tax credit for first-time buyers. Among other things, the extension adds money for certain move-up buyers; creates one deadline for signing a contract and a later deadline for closing; changes income requirements; and limits a purchased home’s cost to $800,000.

“Extending the homebuyer tax credit and expanding it to reach more homebuyers is the right thing to do,” says 2009 Florida Realtors® President Cynthia Shelton. “It is critical to maintaining the positive momentum we’ve been experiencing in the housing market and in the overall economy. Florida Realtors applaud congressional leaders for taking action to extend the homebuyer tax credit into 2010, which will help Florida families realize their dream of homeownership, improve our communities and strengthen our economy.”

Adds John Sebree, Florida Realtors vice president of public policy, “Florida residents enjoy two additional advantages. The Florida Homebuyer Opportunity Program (FHOP), created by the Florida Legislature earlier this year, still has approximately $28 million that first-time homebuyers can access and use toward their downpayment. And move-up buyers now have the ability to ‘port’ their current property tax savings to a new home.”

To view the entire article, click here.

Monday Morning Mojo: Will Smith’s Wisdom on Life

“Funny, I would not think of Will Smith as being an inspiring leader, would you?  When you watch him on the TV or the movie screen he just appears to be this talented actor who got lucky.  Wow, after I watched this, I have a totally new appreciation for him and who he is.

Grab a cup of coffee and watch this 10 minute video as Will Smith shares his wisdom on life. Then after that on a scale of 1 to 10 rate yourself on the list of things he discusses below. Are you doing them? Do you believe them? Are you willing to die for them? Then start with the ones you ranked yourself lowest on and get to work on changing it.”

-Tom Tognoli, Intero Real Estate Services

To view the YouTube link, click here.

For more information see Sunday’s Sarasota Herald-Tribune article, “Two Minute Warning” or click here to read it now: The Two-Minute Warning

Click image to view full size in printable form.

Home sales post double-digit increase

Sales, which were still up 3.4 percent from a year earlier, had been expected to rise to an annual pace of 5.35 million, according to economists surveyed by Thomson Reuters. – Sarasota Herald Tribune

To read the entire article, Click Here.

Analysts say it will take more than 10 years to recapture peak home prices

By John Spence, MarketWatch

BOSTON (MarketWatch) — Moody’s Investors Service threw cold water on optimistic projections of a V-shaped recovery in the battered U.S. housing market, predicting it could take more than 10 years to get back to boom-level prices.

“For many reasons, the rebound will be disproportionately small compared to the decline,” Moody’s said this week in its latest outlook on the residential market. “It will take more than a decade to completely recover from the 40% peak-to-trough decline in national home prices.”

The housing market is in the third year of the current downturn, one of the worst corrections in U.S. history as a result of the economic recession and the mortgage industry nearly grinding to a halt during the credit crunch.

“The bursting of the housing bubble precipitated a crisis in financial markets the likes of which have not been seen since the Great Depression and plummeted the nation into recession,” Moody’s said.

To view the entire article, click here.