The condo market has taken a huge hit here in Florida. During the boom rush here in Florida developers were buying up every square inch of prime intracoastal and waterfront properties and luxury condo projects would sprout up accompanied by bidding wars and super sales. 
The developers and builders who were not so connected as to get prime space would then start buying up existing apartment complexes all over the place with no regard or conscious thought of how these units would fair in a down market.
These condo conversions have become some of the worst investments of all time besides those who ended up owning swamp land years ago instead of the pretty picturesque countrysides painted in the brochures.
We had one lady call us who bought 4 of these units. She paid over $350,000 for each of these junky 2 bedroom apartment/condos in West Palm Beach that were converted yet still look like apartments. Just knowing the locations of these different buildings will tell us all we need to know. We know the market so well here that when a condo owner calls and we get the idea of the geographic location- we know what the value has plummeted to.
In reality, if you are going to buy a condo, you want it to be waterfront, oceanfront, intracoastal frontage, golf course frontage or some other highly sought after specific like CityPlace, an urban style living area where it is posh to be a part of that scene. It is all about the location. Wellington Florida is also an area where even though condo prices went down, they are still selling for decent prices with the interest being from the equestrian people who just want a small place during horse season and want to pay cash for their horse caregivers, vets, grooms, etc.
Other than that, the banks are not even going through with the foreclosures because they don't even want those conversions back. Some of the places around Palm Beach county are in such disrepair and neglected because no one is paying HOA fees so the HOA has no money to repair anything. There are places where the sellers call us to tell us they are afraid to go into their communities where loitering has become the norm along with urinating in their swimming pools.
Back to the investor who called us- she wanted to know if she could short sale those condos- that she paid over 10 times what they are worth today! You can't give away those condos for 30K. The banks don't even want them. We asked someone we know at Chase what are they going to do? They are dealing with this in Arizona with the hotel/condos also. Chase told us they won't foreclose, the people call them and ask them what to do, the bank tells them to just leave the keys on the table. It is not even worth their time, money and energy to even foreclose on some of these units in these kinds of complexes. Of course, we were not able to help this homeowner. Our attorney told her the best thing she could do was file bankruptcy.
We asked Chase if they thought of any remedy to this type of condo problem and they said that really, the only hope they have is for some investor to come along and want to buy the entire building. But they don't have much hope for that because an investor would want to rent out the units and most by-laws say you can't rent for the first year. Then he would also have to change the Condo docs which is a very expensive and extensive chore that most investors do not want to undertake.
That is the story on those condo conversions but even the luxury condo market in Florida took a big beating. Beautiful buildings sit unfinished with gorgeous waterviews. There is no money to finish some of the projects.
Which leads us to the next situation with condos for sale in Florida.
Fannie Mae and Freddie Mac now own about 90% of all the mortgage debt in this country. Conventional loans are almost all are backed by either Fannie or Freddie. They had to impose guidelines for lending on condos. Most of our condo listings are bought by buyers who pay cash for their condos. We also get a lot of Canadians buying condos here because they can leave them here and know they will be taken care of.
- If too many of the owners of the condos are behind in their HOA fees; you can not get an FHA or a Conventional loan in that particular condo building.
- If there are too many vacant units you can not get a Conventional or FHA loan in that condo development.
- And if the condo building is not completed past a certain phase, you also can not get a loan.
The state will have to come in and take over the HOA if they can not pay their insurance bills and major repairs.
So here comes Fannie to the partial rescue! ( tongue in cheek).
Fannie Mae has approved a "Special Designation For Florida Condos". This only applies to certain condos that meet certain criteria established by Fannie Mae and is only for condo projects in the state of Florida. Lenders are not allowed to submit condo projects for consideration but they may be able to get approvals on the condos that Fannie has placed on its' list of approved condo projects. Prior to a lender doing a loan for a buyer in a condo project they must first make sure that condo is on the Special Designation list.
Does that sound like a new subprime product?
Let's look at a few facts you may not be aware of:
According to Fortune Magazine and Fannie and Freddie's investor analysis:
- In 2006 Fannie Mae and Freddie Mac owned about 40% of all the mortgage debt.
- In 2008 they owned 50% of all the mortgage debt.
- In the latter part of 2009- they now own about 90% of all mortgage debt. Private investors are just about gone.
- Fannie Mae in 2009 had losses of 58 BILLION dollars.
- Freddie Mac in 2009 had losses of 14 BILLION dollars.
- That is a combined loss of $72 BILLION dollars.
- The U.S. Treasury has given them 112 Billion dollars in aid so far and just signed a blank check to hand over to Fannie and Freddie.
- Fannie and Freddie are rewarding their CEOs and others for their big losses to the tune of about $6 million dollars to each employee in this category.
- In 2007 the height of their stock was in August at $70 a share.
- In 2009 their stock only rose slightly above two dollars ($2.) a share twice!
While NAR may applaud such dealings with their main focus being on selling property I would like to propose that the end does not always justify the means especially when the burden will fall upon each and every one of us and our children and their children to pay these losses all back.
I can deal with cash buyers all day long. But there is nothing in it for Fannie and Freddie when buyers choose to use cash
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Copyright © 2010 By Katerina Gasset, All Rights Reserved.*Florida Condos For Sale- The Good- The Bad- And The Ugly- With Some Help From Fannie ( Their New Friend)*
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