At that pace, the number of bank-owned properties in South Florida is skyrocketing, increasing by 134 percent to 7,100 properties in the third quarter and by 190 percent to 18,960 homes for the year, according to the report by the Bal Harbour, Fla.-based consultancy.
A year ago in 2007, lenders took back 3,035 properties in the third quarter and 6,545 properties in the first nine months of the year, according to Condo Vultures®.
“Our best guess is that in 2008 lenders have had to absorb about $750 million in expenses - legal fees, repairs, unpaid debt service – related to repossessing the nearly 19,000 bank-owned properties in South Florida,” said Peter Zalewski, a principal with Condo Vultures® LLC which produced the report. “This expense does not even factor in the write offs that many banks are deciding to stomach in hopes of quickly unloading these bank-owned properties to discount buyers.”
The foreclosure process in South Florida generally takes between six and eight months to complete, and typically costs a lender about $40,000 to $80,000 to repossess a property.
The timing and costs of the foreclosure process can vary depending upon the level of resistance of the owner/borrower and the extent of the repairs that must be performed on the home to make it rentable or saleable.
It is unclear what impact the upcoming presidential election or the $700 billion Troubled Assets Relief Program (TARP) will have on the foreclosure process in Florida for banks and owners/borrowers.
Once a property is repossessed by the lender, the troubled asset is immediately shifted by the bank into a special category classification called Real Estate Owned (REO) whereby the financial institution acknowledges that it must now act as the owner and landlord.
As the owner and landlord, a bank is responsible for all facets of the property, ranging from overseeing the rental or sales process to resolving tenant complaints, paying the maintenance fees and special assessments to writing a check for the property taxes.
“Banks are in the business of lending, not owning, managing, and maintaining homes scattered around a vast region or state,” Zalewski said. “This is why so many lenders look to dump bank-owned properties shortly after taking possession at the end of the foreclosure process.”
To understand the discounting, consider that the typical bank-owned property in the Vultures Database™, which monitors coastal properties east of Interstate 95 in Miami-Dade, Broward, and Palm Beach counties, has been reduced in price by -52 percent or about -$242,900.
On a geographical basis, Miami-Dade County accounts for 46 percent of the bank-owned properties repossessed in the tricounty South Florida region in 2008. Broward County represents 39 percent of the total REO inventory for 2008, and Palm Beach County the remaining 15 percent, according to the report.
Miami-Dade County had 8,656 bank-owned properties in the first nine months of this year, up 188 percent compared to the 3,009 REO properties during the same period in 2007, according to the report.
Broward County ranked second with 7,370 bank-owned properties through the first nine months of 2008, compared to 2,339 foreclosed properties in 2007. Palm Beach County was third in the tricounty region with 2,934 REO properties in 2008 compared to 1,197 properties in 2007, according to the report.
“Miami-Dade County experienced a spike in foreclosure actions in 2007 that eventually became bank-owned properties in 2008,” Zalewski said. “Given the current surge in foreclosure actions in Broward and Palm Beach counties right now, we would expect the number of bank-owned properties to spike in these two counties in 2009.”
Lenders have been busy filing foreclosure actions in South Florida in the first three quarters of the year, according to a recent report from Condo Vultures®.
Between January and September, lenders filed 55,737 actions valued at more than $14.2 billion on properties in Miami-Dade, Broward, and Palm Beach counties. Condominiums and townhouses account for 16,553, or 30 percent, of the actions filed, totaling $3.4 billion, according to the recent report.
In what may be a surprise to some, Broward County, not Miami-Dade County, has the highest concentration of total foreclosure actions with 24,733, or 42.2 percent, of the actions filed, totaling $5.99 billion, according to the recent report.
Palm Beach County is second with 17,065, or 29.3 percent, of the actions filed, which totals nearly $4.2 billion. Miami-Dade County, which many industry watchers consider the epicenter of the Florida housing crash, has 13,939 actions – some 28.5 percent - filed, with a value of $4 billion, according to the report.
On the condominium and townhouse front, opportunistic buyers are finding that the most foreclosure actions are in complexes scattered throughout Broward and Palm Beach counties.
Broward County is now home to 41.2 percent of the foreclosure actions for condominium and townhouse product. Broward has had foreclosure actions filed against 7,558 condominiums and townhouses worth $1.4 billion.
Palm Beach County has had 4,042 foreclosure actions filed against condos and townhouses worth $724 million. Miami-Dade County has had 4,953 foreclosure actions filed against condos and townhouses, totaling $1.2 billion, according to the report.
Peter Zalewski is a principal with the consulting company Condo Vultures® LLC and a licensed real estate broker with Condo Vultures® Realty LLC. Peter can be reached at 305-865-5629 or by email at peter@condovultures.com. Be sure to check out Peter’s blog at CondoDump.com. Don't forget to sign up for our weekly Market Intelligence Report. Looking for a property at a deep discount? You are encouraged to take a peek at the Vultures Database™ .
Copyright © 2008, Condo Vultures® LLC
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