Overbuilding Putting Miami Condos into Repo House Listings

The overbuilding of condo complexes in downtown Miami has been putting many condo units into repo house listings, based on an analysis of condo projects in the city.

Since 2003, almost 23,000 newly-developed condominium units have been added to the Miami condo market, far beyond what the city’s population of 400,000 can use. As of June 30, approximately 9,400 condo units have remained unsold, still included in real estate listings and in repo house listings.

Because of the oversupply of condos and the supply of low-priced single-family homes in repo house listings, condo developers were unable to sell their condo units, leaving them with no funds to pay their construction loans and ultimately forcing them to face foreclosures.

According to Jack McCabe, CEO of McCabe Research and Consulting, there are many condo complexes in the city where approximately one-third of total condo units are in repo house listings.

To remedy the foreclosure situation and to prevent the total collapse of their businesses and investments, some condo developers have been negotiating uncontested foreclosure with their lenders.

In an uncontested foreclosure, condo developers avoid a costly and long litigation and they retain whatever assets they have offered as collateral for the construction loan. Additionally, they are able to retain the right to manage the condo businesses for sizeable fees.

The Related Group has negotiated such a deal with a consortium of banks led by Bank of Nova Scotia. It surrendered the ownership of its CityPlace condo project in West Palm Beach, where it has sold only 39 units out of 420 units. It paid a certain amount to cancel its loan of $119 million, and then was given the right to keep on managing the project.

Related Group is also working out similar deals to manage its maturing construction loans for other condo projects in South Florida, including the Icon Brickell condo complex, where only 31 out of 1,646 units were sold.

Miami lawyer Thomas Lehman related that he has been negotiating friendly foreclosures for many condo projects. He said lenders have finally realized they cannot sell their construction loans and have decided that managing the foreclosed projects is the better option.

The oversupply of condos also pushed down condo prices sharply, enticing out-of-state investors to buy condos in bulk from repo house listings. The oversupply also prompted some developers to offer rent-to-own programs in which rental payments are accumulated to comprise the down payment for condo units.

Related Posts:

• Condos Make up Huge Portion of Miami Repo Homes for Sale
• Florida Condos Could Soon Appear in Foreclosed Home Search
• Fort Lauderdale Repo Homes Put City on Free-Fall List
• Fort Lauderdale Bank Mowed by Foreclosure Properties Auction
• South Florida Projects to Become Foreclosure Properties