Allan Kleer

In Miami-Dade County, pending home sales decreased by 2.21 percent in December compared to the previous month, from 8,288 to 8,105 according to the Realtor Association of Greater Miami and the Beaches (RAMB) and Southeast Florida Multiple Listing Service. This slight decrease can be attributed to the holiday season, which traditionally results in fewer home sales. Since March 2009, when our local real estate board began tracking local pending sales, pending home sales have increased 43 percent as buyers have taken advantage of record-setting affordability conditions, the first-time home buyer tax credit, and a wide selection of properties to choose from. Closed sales have increased each of the last 16 months, a clear sign of the strengthening market and indicative of stabilization.

Pending sales of condominiums in Miami-Dade County also experienced a negligible decrease in December, dropping half of a percent from 4,414 to 4,394. Pending sales of single-family homes dropped 4.21 percent in December from the previous month, from 3,874 to 3,711.

We believe that the Miami Beach real estate market has experienced a dramatic recovery over the last year and a half, posting record closed and pending sales increases coupled with strong declines in housing inventory. Market opportunities resulting from record affordability, low interest rates, and a second wave of short sales and foreclosures will also fuel increased sales this year. Additionally the always-strong international buyer market segment will remain a major force in the South Florida marketplace.”

An illustrative example of a recent Miami Beach (Palm Island) Closed Sale:




This was the best opportunity on the Miami Beach market to purchase a home on a guard-gated island community. Surrounded by lush landscaping, this two-story residence is located on prestigious Palm Island, just minutes from downtown Miami, South Beach and world-renowned Ocean Drive. Features include high ceilings, 4 upstairs bedrooms, and an air-conditioned 2-car garage. Pristine conditions.

My opinion as to why it sold in just 66 days on market: Amazing island community location, spacious floorplan and updated home, price reduced to sell.

Sold Price: $890,000
Original Price: $1,495,000 (3/2007)
Bedrooms: 4
Bathrooms: 3
House S.F.: 2,786 ($319/SF)
Land S.F.: 6,000 ($148/SF)
Sold Date: December, 2009
Discount from Original Asking Price: 40%

Recently, in the newsmedia there has been a lot of talk about the increase in sales of homes nationwide which also led to the bump in stock market in the runup to the Thanksgiving Holiday. I'd like to take this opportunity to put a bit of local perspective on this latest sales trend:

75% of the houses sold between August through October in Miami-Dade County were priced under $300,000 and 23% of these sales were for homes listed under $100,000.

Price trends at the lower end of the market have been positive, however moving into the higher price ranges, those are areas that we are still seeing weakness. Typically, when the supply of homes for sale stands at a year or more, prices tend to fall. With a six- to nine-month supply, prices remain flat. When the supply drops below six months, sales activity begins to spur price appreciation, as it has for recent home sold and priced under $100,000.

Below is sampling of the supply of houses listed for sale in Miami-Dade in October, according to the MLS:

• Under $100,000: four-month supply
• Under $300,000: eight-month supply
• $300,000 to $1 million: 21-month supply
• Over $1 million: four-year supply

Miami Beach's luxury housing market falls into the upper end category, however, the supply is much more restricted due to the natural barrier (island community) limiting further supply. Also, virtually no new construction is currently taking place, so we're experiencing a decline in inventory levels for Miami Beach's 33139 and 33140 zip codes:

• $300,000 to $500,000: less than six month supply
• $500,000 to $1 million: 14 month supply
• $1 million to $2 million: 18 month supply
• Over $2 million: 23 month supply

The conclusion from the above referenced data - there is no room in the Miami Beach housing market for overpriced listings. The strongest demand is for turnkey (completely remodeled) homes, where the new owners do not have to make an additional investment into the property.

* Data Sources: MLS & Miami-Dade Public Records

The Obama administration has finally decided to crack down on loan servicers and mortgage companies that are failing to do enough to help borrowers at risk of foreclosure. Measures announced this week include sanctions and fines on those lenders and mortgage companies failing to ease the burden on the borrowers and these measures will be taken by the Treasury Department. According to a random survey of approximately 50 of our investors who purchased property in Miami Beach after 2004, we have roughly estimated that only 25% of eligible borrowers who purchased premier waterfront properties in Miami Beach have been able to permanently modify their loans.

As part of the various Homeowner Relief Programs being advocated by policy makers in Congress, The Treasury Department, and The Obama Administration, over 35,000 homeowners received letters during the summer of 2009 from the Federal Regulators--offering them a new, more affordable mortgage payment. However, the real problem seems to be the bureaucratic bottleneck, disorganization, and lack of accountability on the part of loan servicers and banks. In the past two weeks alone, I have had four separate clients tell me that their loan modifications have either been denied due to lost files, incomplete paperwork (because a form changed from time of application), and general lack of responsiveness and policy confusion from lenders.

The Federal Deposit Insurance Corporation (FDIC) is offering many delinquent borrowers significant concessions on past due mortgages--in many cases lowering interest rates to as low as 3%, extending loan amortizations schedules from 30 to 40 years, waiving traditional qualification requirements, and keeping payments under 38% of a borrower's gross income. Many Miami Beach homeowners who currently find themselves "underwater", which is defined as owing more than the property is worth in today's market, are anxious to participate in the loan modification programs.

Our sampling of Fortune International's clients includes those that purchased a waterfront property as their primary residence on Sunset Island IV, Palm Island, Biscayne Island, and in Miami Beach condo buildings including The Murano at Portofino, The Portofino Tower, The Bentley Bay and The Continuum South Tower. Approximately 65% of those surveyed indicated a willingness to stay in their homes, as long as they were successful in lowering their monthly mortgage payments and bringing their cost of owning closer to the cost of renting a comparable property in Miami Beach (whether it be a condo or single family home).

I've been asked so many times over the past several months if there are any advantages to succesfully accomplishing a "Short" sale versus just letting the Foreclosure process run its course. So I've decided to write this post highlighting the major differences between a Short Sale and a Foreclosure, and how will it will probably affect a seller/property owner?

This is an all too common question being asked today for property owners in Greater Miami and Miami Beach, be it an owner of a Miami Beach single family home or condo. In my experience, most owners or property investors who purchased after 2003, and whose total housing expenses exceed 31% of gross income are dealing with this issue. To keep things as simple and brief as possible, I am not going to go into the details of these transactions; rather I'm going to give my way of explaining these terms when someone asks me this very question. At Fortune International, we have an experienced and dedicated team of agents, lawyers, and paralegals, and administrative assistants that have had success negotiating zero deficiency judgements for short sales worth millions of dollars. It's not an easy process, and requires dedicated and persistent follow up with lenders, lawyers, bank negotiators, condo associations, and various other debt holders.

- A short sale is when a homeowner is trying to sell for less than the amount owed on the loan, this type of transaction requires bank approval and there are certain guidelines and pre-requisites a bank will ask for prior to s short sale approval.
- A foreclosure is when the lender takes over the property. A court ordered sale is required prior to the foreclosure and at this sale if no buyer comes forward who is willing to pay the minimum bid for the property, then the lender takes possession and the property is foreclosed on.

The following breakdown is courtesy of Oliver Ruiz, General Manager of Fortune International and President of the Miami Board of Realtors:

Fannie Mae Mortgage Eligibility (Primary Residence):

• homeowner who loses a home to foreclosure is ineligible for a Fannie Mae backed mortgage for a period of 5 years.
• A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after 2 years

• An Investor who allows a property to go to foreclosure is ineligible for a Fannie Mae backed investment mortgage for a period of 7 years
• An investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after 2 years.

• On any future loan application, a prospective borrower will have to answer YES to question C in Section VII of the standard 1003 that asks “Have you had property foreclosed upon or given title or deed in lieu thereof of the last 7 years?” This will affect future rates.
• There is no similar declaration or question regarding a short sale.

• Score may be lowered anywhere from 250 to over 300 points due to a foreclosure. Typically will affect score for over 3 years.
• Only late payments on mortgage will be reported as paid or negotiated. This will lower the score as little as 50 points, if all other payments are being made. A short sale’s affect can be 12 to 18 months on an individual credit score.

• Foreclosure will remain as a public record on a person’s credit history for 10 years or more.
• Short sale is not reported on a credit history. There is no specific reporting item for “short sale.”

• Foreclosure is the most challenging issue against a security clearance outside of a conviction of a serious misdemeanor or felony. If a client has a foreclosure and is a police officer, in the military, in the CIS, Security, or any other position that requires a security clearance will be revoked and position could be terminated.
• Short Sale, on its own, does not challenge most security clearances.

• Employers have the right and are actively checking the credit regularly of all employees who are in sensitive positions. A foreclosure, in some cases, can be grounds for immediate reassignment or termination.
• Short Sale is not reported on a credit report and is, therefore, not a challenge to employment.

• Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases, will challenge employment.
• Short sale is not reported on a credit report and is therefore not a challenge to employment.

• In 100% of foreclosures (except in those states where there is no deficiency), the bank has the right to pursue a deficiency judgment.
• In some successful short sales, it is possible to convince the lender to give up the right pursue deficiency judgment against the homeowner.

• In a foreclosure, the home will have to go through an REO process if it does not sell at auction. In most cases, this will result in a lower sales price and longer time to sell in a declining market. This will result in higher possible deficiency judgment
• In a properly managed short sale, the home is sold at a price that should be close to market value and, in almost all cases, will be better than an Foreclosure sale resulting in a lower deficiency.

A few of the properties that we have successfully completed "short" sales:

South Beach single family homes (especially waterfront luxury properties) that are truly good deals continue to be in short supply. I'd like to take this opportunity to highlight two recently sold homes in the island communities off South Beach which are indicative of a price bottoming trend:

Di Lido Island Turnkey Endless Water Views

Tropical paradise for that was on the market for sale for just 12 days at the final asking price of $2.9 Million. Master bedroom is surrounded by water and sunlight which opens to pool/deck. Wide bay views at the north tip of Venetian Islands. The oversized living room, completely updated, is very comfortable and sunny.Courtyard/ circular driveway decorated by trimmed landscaping and wrought iron sliding gate. Fabulous private pool overlooking the open bay, dock and other boat equipment.

Key "Market Bottom" indicators:

“For Sale” Price: $2,950,000 (12 days on the market at this reduced price point)
Original List Price : $4,700,000 (July, 2008)
Previous Price Reduction: $3,450,000 (January, 2009)
Bedrooms: 4
Bathrooms: 3
House S.F.: 3,734
Land S.F.: 13,408
Closed Price per S.F.(Land): $194
Closed Price per S.F.(House): $698
Previous Sold Date: 2004 ($3,150,000)
Closed Price: $2,610,000 (Sept 2, 2009)
Discount from Latest Asking Price: 11.5%

Rivo Alto Island Waterfront Charm- Completely Remodeled

Over 100 linear feet on Biscayne Bay, on the preferred southern side of the Venetian Islands. This Mediterranean delight greets with a beautiful courtyard setting reminiscent of a European Villa. Gracious living areas and authentic touches throughout. Upstairs are 3 bedrooms with Water Views in main home. The sale also included a separate two story adjacent guest house.

Key "Market Bottom" indicators:

“For Sale” Price: $2,590,000 (19 days on the market at this ACCURATE price point)
Bedrooms: 4
Bathrooms: 4
House S.F.: 3,894
Land S.F.: 13,382
Closed Price per S.F.(Land): $175
Closed Price per S.F.(House): $740
Previous Sold Date: 1998 ($950,000)
Closed Price: $2,350,000 (Sept 1, 2009)
Discount from Latest Asking Price: 9.2%

Biscayne Island- Incredible Land "Steal"

DOUBLE LOT ON BISCAYNE ISLAND THIS HOME NEEDED TO BE UPDATED. BISCAYNE ISLAND IS ONE OF THE VENETIAN ISLANDS LOCATED ON THE MIAMI SIDE. LOCATED AT THE END OF THE STREET IN A PRIVATE CUL DE SAC SURROUNDED BY MILLION DOLLAR HOMES. THIS ONE SOLD FOR WELL BELOW LAND APPRAISED VALUE. LOCATED JUST MINUTES FROM THE NEW PERFORMING ARTS CENTER, BEACHES, LINCOLN ROAD, OCEAN DRIVE, THE AIRPORT, DOWNTOWN, ENTERTAINMENT, SHOPPING AND MORE.

Key "Market Bottom" indicators:

“For Sale” Price: $700,000 (207 days on the market at this price point)
Original List Price : $1,500,000 (July, 2007)
Bedrooms: 3
Bathrooms: 2
House S.F.: 1,888
Land S.F.: 14,760
Closed Price per S.F.(Land): $38
Closed Price per S.F.(House): $301
Closed Price: $570,000 (July 24, 2009)
Discount from Latest Asking Price: 18.5%

What we're seeing (again) is that Miami Beach waterfront and non-waterfront single family homes that are priced RIGHT have multiple offers and sell relatively quickly.

If you’re a potential buyer interested in purchasing, NOW is the time to pull the trigger if you qualify for a mortgage (count on putting 30% cash down of appraised value) or have the cash to invest in remodeling a home. My advice is that under no circumstances should buyers be seeking to potentially “flip” or plan on making a profit on their property for AT LEAST five years.