Nervous Investors Bail On Deposits, Condos
As dozens of condo towers conceived during the Florida real estate boom near completion, investors who snatched up units early in hopes of flipping for a fast profit are increasingly trying to break contracts.
Even if and when that means walking away from fat deposits.
“Motivated” sellers are flooding online forums like Craigslist with ads for condo units still months or years from being finished, according to the Lakeland Ledger.
And lawyers have been inundated with calls from Florida mortgage applicants now anxiously hoping to avoid closing on units they bought during the speculative craze of 2004 and 2005.
“I get two or three of these calls a day,” said James Ryan, a lawyer in Boca Raton who has 40 clients looking to get out of condo contracts.
One, Ryan said, abandoned a $340,000 deposit rather than close on a $1.6 million unit that lost its appeal as the market faltered.
The numbers suggest that it will only get worse from here. In Miami-Dade County alone, 8,000 new condo units will be completed this year and nearly 12,000 more in 2008.
But demand has dropped markedly, and people who thought they could “flip” condos - buying, then selling for a steep profit before construction is done - are parting with that fantasy.
After years of stunning price increases - 25 percent in Palm Beach County and the Boca Raton area, for example, from March 2005-March 2006 - condo prices have started dropping.
Condominiums in West Palm Beach and Boca Raton sold for a median price of $211,800 in March, down from $224,600 a year earlier, according to the Florida Association of Realtors.
In Fort Lauderdale, the median price in March was $195,500, down from $202,600 the previous year.
Many buyers want out now - not an easy prospect unless they are willing to forfeit the 10-20 percent down payment they gave up, from $15,000 for an inexpensive studio unit to hundreds of thousand for a waterfront penthouse.
“I see buyers unleashing all means to try to get out of contracts,” said Gary Saul, a lawyer in Miami for developers, adding that in some projects, 20 percent of buyers want their money back.
Jack McCabe, a consultant who tracks the South Florida housing market, said: “Between the Latin American influence and the out-of-state buyers who have a love affair with Miami because of its ambience, they flocked to it and pushed it to the point where about 70 percent of all sales were to investors.”
Real estate analysts say that Florida home mortgage activity peaked late in 2005, and would-be flippers stopped buying in 2006.
People who bought condo units prior to 2005 might still make some money or at least break even if they sell soon, the analysts say, but those who bought at the height of the mania stand to lose a bundle.
SOURCE: Lakeland Ledger
