Condo Meltdown

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Ruling could open door for buyers to recoup deposits

Miami attorney Alexander Lian may have come up with an innovative strategy to help people recover pre-construction deposits they gave condo developers during the housing boom.

Lawsuits have blossomed since the real estate market collapsed in 2007 as would-be condo buyers go after developers to recover their deposits — often as much as 20 percent of the purchase price. The results of those suits have been mixed, with some rulings favoring developers and others favoring buyers.

Lian argued that developer Swire Pacific Holdings and title company Lawyers Title Insurance failed to create two separate escrow accounts when his client deposited $232,000, or 20 percent of the $1.16 million purchase price, in 2004 to reserve a unit at the then-proposed Asia on Brickell Key.

Lian, with Lian & Associates in Miami, cited Florida Statute 718.202, which says a developer must set up a pair of escrow accounts if the deposit exceeds 10 percent of the purchase price. If that doesn’t happen, the buyer has the right to rescind the contract and recover the deposit.

U.S. District Judge Cecilia Altonaga agreed with Lian in a 45-page opinion issued March 30.

‘TECHNICAL’ VIOLATION

When developers receive a 20 percent deposit, they are to put half of the money into a protected account and the other half into an account the developer can access to pay for construction, she said in her ruling.

Swire failed to split Double AA International Investment Group’s deposit between two accounts, Lian said. In early 2009, Double AA demanded that the contract be canceled. Swire and the title company ignored the request, Lian said.

Altonaga rejected the Swire and Lawyers Title defense that the “violation was a technical one that should excuse them from liability,” according to the judge’s ruling.

Swire and the title company argued that it is common practice for escrow agents to create one account and “then use bookkeeping entries to say what money belongs where,” Lian said.

Gary Saul, a Greenberg Traurig lawyer in Miami who represented Swire, said his client declined to comment.

Lawyers Title declined to comment, said Fort Lauderdale lawyer Philip Kantor, who represented the company. Kantor is with Quintairos Prieto Wood & Boyer.

‘POWERFUL’ STRATEGY

This strategy “is very powerful,” Lian said. “It allows the buyer to rescind the entire contract and get all the money back plus interest.“

No money was missing from the escrow account, according to the lawsuit.

Swire and Lawyers Title have until the end of the month to turn over $232,000 to Double AA or to appeal the ruling to the 11th U.S. Circuit.

Since the ruling, lawyers specializing in deposit recovery have rushed to amend their pending lawsuits to add this claim, said Fort Lauderdale attorney Joseph Altschul. He has already amended more than 10 cases.

Altonaga’s ruling applies only to cases where the buyers sued to cancel the purchase contract before backing out of the deal and being declared in default by the developer, Altschul said.

POSSIBLE APPEAL

If Altonaga’s ruling is appealed and upheld, numerous developers will have to return millions of dollars in deposits, even after they had already spent some of the money for construction of their buildings.

Two sources who declined to be identified said Swire plans to appeal the ruling. Some experts predict the company will be successful.

“I feel very strongly that it was a misinterpretation of the statute by the court and it will be overturned on appeal,” said Tony DiTocco, a former developer and now a real estate consultant for builders marketing new condos.

DiTocco, president of DiTocco Consulting in Fort Lauderdale, interprets the law the same way Swire and Lawyers Title did: One account is sufficient if separate records are maintained. DiTocco is not involved with the case.

“There is no purpose to be served” by keeping two accounts, he added.

Hollywood attorney Gary Phillips, who represents condo developers including Miami’s Tibor Hollo, said Altonaga was correct in her ruling, but the law doesn’t make sense.

“The judge is technically right, and most developers I know do have two escrow accounts,” Phillips said. “But I think it is a shame.”

LIMITED IMPACT?

If Swire and the title company lose the appeal, Altonaga’s ruling will gain the force of law and be a significant boost for buyers seeking to get out of condo deals.

For now, however, her 45-page opinion isn’t binding on other judges who may see similar cases, Altschul said.

“Right now, it is certainly what we would call persuasive authority but it is not binding authority,” he said.

“It is not very often that you find a written opinion that goes through such detailed analysis,” Altschul said of the lengthy ruling. “It will be very difficult for a federal appeals court to overturn her conclusion on the merits.”

Altschul, who represents several people seeking to recover condo deposits, is reviewing their developers’ escrow agreements to see if Lian’s strategy can be used.

He said many of the agreements he has looked at don’t require two escrow accounts.

“But that doesn’t mean that maybe they didn’t do it right,” Altschul said.

If Altonaga’s ruling is appealed and upheld, numerous developers will have to return millions of dollars in deposits, even when they had already spent the portion that was allowed to go toward construction of their buildings.

Phillips expects to see a flood of deposit recovery cases tackling this issue.

“I am sure will be see a flurry of discovery now requesting documentation on where the escrow monies were held and in what accounts,” he said. “Luckily my clients … all use separate escrow accounts.”

Source: http://www.dailybusinessreview.com/news.html?news_id=61867

Paola Iuspa-Abbott can be reached at (305) 347-6657.

REDC Auctions 65 Condos in Miami Area

In an announcement Tuesday, Real Estate Disposition, LLC (REDC), a real estate auction company based in Irvine, California, said it sold 100 percent of the San Lorenzo condominiums it auctioned in the Little Havana area of Miami this last weekend.
In just two-and-a-half hours, the company auctioned a total of 65 condos at 110 percent of reserves and 88 percent of retail before a crowd of 375 potential buyers. REDC had marketed and originally planned to auction 62 homes at San Lorenzo, but three additional condos were added by the seller the morning of the auction. The final numbers show that REDC had no trouble selling these last-minute additions.

“We’re obviously very pleased with the results from the auction,” said Jeff Frieden, CEO of REDC. “Our clients were able to sell their entire inventory at the auction to the large group of homebuyers and investors.”

According to Frieden, buyers and sellers alike were very pleased with the entire auction process. While the majority of the condos were bought by on-site bidders, 25 percent of the homes sold to online bidders, which Frieden says is becoming an increasingly-popular option.

REDC is currently in the midst of 125 auctions in 70 days. In addition to the San Lorenzo auction, the company conducted several other live and online auctions over the weekend with total sales exceeding $48 million.

Since 2007, REDC has sold more than $6.5 billion in real estate assets at its auctions. The company says its success is based on the aggregation of real estate assets that are marketed and sold in large event-style auctions across the country and in online auctions through its Web site.

Source: http://www.dsnews.com/articles/redc-auctions-65-condos-in-miami-area-2010-04-13

By: Brittany Dunn

Florida gets $418 million for distressed homeowners

Florida was awarded $418 million of federal stimulus spending on Friday to help homeowners who are unemployed or who owe more on their mortgages than their homes are worth.

Treasury officials disclosed the funding for Florida and four other states hit hardest by unemployment and the housing foreclosure crisis.

Homeowners in South Florida are eagerly awaiting details of this program, which was announced by President Obama last month.

The awards come from a $1.5-billion Innovation Fund for the Hardest Hit Housing Markets.

Florida will get $418 million, California $700 million, Michigan $155 million, Arizona $125 million and Nevada $103 million.

The Florida Housing Finance Corporation, which will handle the program in the Sunshine State, must submit a plan to Treasury by April 16 to say how it intends to help the unemployed and “underwater” homeowners. The plan must be approved by federal officials.

That’s when consumers will get a better idea of who will qualify, what form the aid will take and how to apply for it.

Treasury officials also released guidelines telling state agencies how they might use their allotments. Options include:

--Modifying mortgages or giving lenders an incentive to forgive a portion of loans to make payments affordable.

--Paying down part of a mortgage to make it possible to modify the rest of it.

--Making it easier to complete “short sales,” in which homes are sold for less than the mortgage.

--Allowing owners to give up their deeds to avoid foreclosure.

--Aiding unemployed borrowers to help them avoid foreclosure.

--Giving incentives to lenders to reduce or modify second liens on mortgages.

The program must be limited to those who owe no more than $729,750. State agencies may choose to target low- and moderate-income borrowers.

More specific information will come from the Florida Housing Finance Corp., a state-funded agency, which promises to provide updates for consumers on its website: FloridaHousing.org.

Source: http://weblogs.sun-sentinel.com/news/politics/dcblog/2010/03/florida_gets_418_million_for_d_1.html

South Florida pending home sales on the rise

Pending home sales in South Florida increased in February amid a glut of cheap homes and condos. National sales slipped due to weather woes.

Pending home sales in Miami-Dade and Broward counties were up in February, as low prices and a tax credit for first-time home buyers appeared to drive sales.

In Miami-Dade, the number of people who agreed to purchase a home in February was up 9 percent versus January at 9,164 homes and condos. Compared to year-ago levels, the number of pending home sales was up 61 percent, the Realtor Association of Greater Miami and the Beaches reported Thursday.

In Broward County, pending home sales increased 4.7 percent versus January to 7,791 homes. Compared to last year, pending sales in Broward were up 62 percent.

Pending sales are recorded when a contract has been signed but the transaction has yet to close.

Most pending sales close in one or two months, making the data a good barometer of future sales.

One factor that may be driving the figure is the growing number of condominiums and townhomes priced under $250,000.

According to Condo Vultures, a Bal Harbour-based consultancy, 53 percent of all townhomes and condos for resale in Miami-Dade are priced under $250,000. For Broward that figure is 65 percent; and in Palm Beach County the number is 51 percent.

``Residential real estate prices have tumbled significantly since the peak of the market in the fourth quarter of 2005,'' Peter Zalewski, a principal at Condo Vultures, said in a press release.

``The challenge for many buyers is the under-$250,000 properties are increasingly located west of Interstate 95 in the suburban areas of South Florida.

``Prices east of Interstate 95 in the coastal areas have continuously crept up as buyers have associated the proximity of water with quality,'' he said.

National figures for pending home sales, which run one month behind the local data, fell sharply in January, a sign that demand for housing is sinking this winter as stormy weather slams Eastern states.

Record snowstorms in January and February had many Americans shoveling sidewalks and driveways instead of combing through listings for open houses. Partly as a result, an index that tracks sales agreement showed a 7.6 percent drop from December to a seasonally adjusted January reading of 90.4, the National Association of Realtors said Thursday.

It was the lowest reading since last April and a disappointment to economists, who had expected it would rise to 97.6.

The weakness, however, was not confined to the wintry Northeast. The biggest month-to-month drop was in the West, where sales fell 13 percent. Sales fell almost 9 percent in the Northeast and Midwest and 2 percent in the South.

The weather isn't the only culprit, wrote Jennifer Lee, an economist with BMO Capital Markets. ``The impact of government incentives . . . appears to be running out of steam, which is, frankly, a scary thought,'' she wrote.

Source: http://www.miamiherald.com/2010/03/05/1513489/pending-home-sales-on-the-rise.html

BY JIM WYSS
jwyss@MiamiHerald.com

Florida's population pops back up

Last year Florida's population declined by 57,000 residents, the first such drop in residency in the state since the troops went back up north after World War II. Pundits predicted that Florida’s powerful growth engine had, like many of its citizens, gone into retirement. Time Magazine dubbed Florida, “the sunset state.”

But, after living through a season of sub-zero temperatures, approximately 40% of that number, about 23,000 people, realized that there is a very good reason that Florida is nicknamed, “the sunshine state,” and they filed back in.

Florida’s previous annual average population growth averaged about 300,000 people per year since the late 1940s. During the housing boom from 2003-2006, numbers of those moving in surged to almost 400,000 per year. Compared to these historic migrational highs, the 23,000 new arrivals are a drop in the population bucket. Nonetheless, that relatively small influx shows that Florida still retains its allure for those seeking residence in a year-round climate of comfort.

The Bureau of Economic and Business Research suggests that gains in Florida’s population are not likely to reach their former, high averages until 2014 -2015. This may be an indicator that the decline in Florida’s economy is slowing. However, the slower growth rate also indicates that Florida’s economic growth can no longer rely solely on the impetus provided by an influx of new residents.

According to Sean Smith, Director of the Institute for Economic Competitiveness (IEC), this surprising pop in population is likely to produce a multiplier effect. Historically, areas that have attracted rapid growth will attract businesses and job seekers.

However, no matter how attractive its climate, Florida is not likely to experience larger leaps in population growth until two significant events occur: first, the state must find a way to generate more jobs; second, the nation’s real estate malaise must improve to the point where retirees in the other 49 states can sell their homes so they can move to Florida. According to the IEC, and to Warren Buffet’s recent statements, that is not expected to occur until next year.

Despite this year’s rate of marginal growth, Florida’s population is expected to reach 25 million people by 2035, which is an increase of 25% over its current figure of approximately 20 million residents.

During the last decade, according to the U. S. Census Bureau ,Florida’s Flagler County, gained the distinction of being the fastest growing county in the county based on percentage of population growth. Unfortunately, along with that growth rate, the county is now faced with the dubious honor of having an unemployment rate of 16.9%, far higher than the 11.7% for the rest of Florida. Nonetheless, Flagler’s growth rate is predicted at 109% over the next 30 years, surpassed only by Sumter County’s population expectation of 111% growth.

Perhaps more startling than the predictions of population growth are these thoughts about condominiums from the consulting company, Metrostudy. This firm tells the Palm Beach Post that the population growth that sweeps into Florida by the middle of this decade will not only fill the current glut of vacant condos in South Florida, but will create in a new wave of condo building before 2020.

Source: http://www.huliq.com/1/91818/floridas-population-pops-back

Written by Marc Jablon. Marc is a real estate analyst based in Florida and is with Realty Associates.
marcjablon@yahoo.com / 561-213-6139
www.MarcJablonHomes.com

Miami-Dade ruling shows banks may be fined for delays in condo foreclosure sales

Can Florida banks be held financially accountable for purposely delaying condo bank foreclosure sales? A new South Florida circuit court ruling says yes.

Amid a growing clamor for Florida banks to bear more of the financial burden caused by widespread condo foreclosures, the Miami-Dade Circuit Court case settled last week shows an example of associations turning more often to courts for relief from revenue losses tied to the state's condo crisis. And it could pave the way for other South Florida condo associations faced with stalled foreclosures caused by lenders.

The King Cole Condominium Association in Miami Beach filed a motion against Deutch Bank National Trust Company, alleging it purposely stalled the foreclosure sale of a particular unit.

The unit owner has been behind in association payments for about three years, court documents show, and the unit was in foreclosure limbo for two of those years, in large part because of bank problems or inaction.

Why would a financial institution want to slow condo foreclosure sales?

To avoid paying its share of association fees as required by law, say critics such as David Cohen, the president of the King Cole, a community of 285 condos.

"It's not exclusively the bank delays that caused our situation," Cohen said. "Sometimes it is court delays, and sometimes the delays are caused by unit owners. But this ruling could help us with delays caused purposely by banks."

Miami-Dade Circuit Court Judge William Thomas sanctioned Deutch Bank for not sending a representative to a foreclosure sale as required by an earlier court judgment, a move that automatically cancels a sale date, and for not publishing a public notice in a local newspaper in time for another foreclosure sale date, again causing the sale cancellation.

Although Deutch did not offer explanations in court for the delays, its attorney argued that Florida courts are not allowed to force banks to pay condo association fees. Another recent ruling by the 3rd District Court of Appeals in Florida held that a bank could not be ordered to pay monthly maintenance fees before obtaining title to a unit.

Thomas' ruling, however, sanctioned Deutch for improper conduct related to the foreclosure case. The bank was ordered to pay about $7,300 in sanctions to the association and $2,000 to cover its legal fees.

"Thomas' order is not a precedent," meaning that other judges don't have to follow it, said community association attorney Jed Frankel, who represented the King Cole association. "But sanctions like those imposed in this case can be a useful tool to judges facing similar purposeful delays by banks."

Legal experts say such rulings often serve as guidelines for cases that follow.

As a part of the condo crisis, some banks delay foreclosures to avoid having to pay their shares of association assessments as required by law, Frankel said.

Florida limits a bank's responsibility to a mandated cap, the amount that a bank owes an association when it takes title of a condo via foreclosure.

For condo associations, the cap is six months of past-due assessments or 1 percent of the mortgage amount, whichever amount is less.

For a condo unit with regular monthly assessments of $200, a bank could owe as much as $1,200 of past-due assessments to be due within 30 days of the bank taking title of the unit.

For homeowner associations, the cap is 12 months of past-due assessments or 1 percent of the mortgage amount, whichever is less.


Source: http://www.sun-sentinel.com/business/realestate/condos/fl-bank-sanction-vasquez-0303-20100302,0,3399447.column

Daniel Vasquez can be reached at condocolumn@SunSentinel.com or 954-356-4219 or 561-243-6686. His condo column appears every Wednesday in the Business section and at SunSentinel.com/condos. Check out Daniel's Condos & HOAs blog for news, information and tips related to life in community associations at sunsentinel.com/condoblog You also can read his consumer column every Monday in Your Money and at SunSentinel.com/vasquez

Fannie Mae Asks U.S. Treasury for $15 Billion More in Aid

Fannie Mae, the mortgage finance giant, reported a 2009 annual loss of $74.4 billion as the U.S. commercial and residential mortgage market continues to lag the rest of the economy in emerging from crisis.

The Washington, D.C.-based company was put under federal conservatorship with its sister company Freddie Mac in 2008 after the firm suffered deep losses due to crisis in the real estate market.

Last Friday, Fannie Mae asked the U.S. Treasury for $15.3 billion in additional funding.

Fannie Mae disclosed total non-performing loans, or loans that are in default, of $216.5 billion as of Dec. 31, 2009, up from $119 billion at the end of 2008. The losses suffered in the latest quarter were mostly caused by such loans in default.

"We expect to have a net worth deficit in future periods, and therefore will be required to obtain additional funding from Treasury," Fannie Mae told Reuters.

In a statement, the company reiterated its mission in sustainable home-ownership for Americans. "We continue to work closely with our industry partners and the government to reach every borrower we can and to address rising foreclosures," Fannie Mae CEO Mike Williams said in a statement. "Our overriding objective is keeping people in their homes whenever possible."

Source: http://www.theepochtimes.com/n2/content/view/30504/