Foreclosure actions have been filed against the owners of 43 units in the Flamingo South Beach condominium conversion project in the first three months of 2011 by the complex's association, according to a new report from CondoVultures.com.
The project's condominium association is seeking nearly $760,000 in past-due monthly maintenance fees used to operate the trendy South Beach condo project fronting Biscayne Bay, according to an analysis of the Condo Vultures® Foreclosure Database™.
The surge in foreclosure filings at the Flamingo South Beach comes at a time when South Florida lis pendens actions - the first step in the repossession process - are down by two-thirds on a year-over-year basis to about 6,800 filings in the first quarter of 2011, according to the report.
"At the peak of the market, the Flamingo South Beach condominium was one of the most popular projects for investors," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. "Buyers were willing to pay a premium for the units in the refurbished 1960s structure as rental rates in the complex were some of the highest in South Beach. The condo market has since changed with an increasing number of renters heading across the causeway to the new condos in Greater Downtown Miami."
Located at 1500 Bay Road on the west side of Miami Beach, the Flamingo South Beach condominium units that are in foreclosure with the association have a combined "value" of more than $4.6 million, according to Miami-Dade County records.
After filing nine foreclosure actions seeking repayment of about $30,000 in January 2011, the project's condominium association filed 34 more foreclosure actions on March 29 seeking repayment of about $729,500 in past-due fees, according to the report.
In the four previous years, the assocation has filed nearly 70 actions between 2007 and 2010, according to Miami-Dade County records.
Besides the condominium association seeking repayment of past-due fees, lenders have initiated nearly 200 foreclosure actions in the project since 2007, according to Miami-Dade County records.
As of April 4, there are 35 units at the Flamingo South Beach on the resale market with an average asking price of $382,350 per condo. An additional 13 units are rent at an average asking price of $4,050 per month, according to an analysis by the licensed Florida buyer brokerage Condo Vultures® Realty LLC.
In the last 12 months, buyers have purchased 45 condo resales at the Flamingo South Beach at an average price of nearly $185,500 per unit. Renters have leased an additional 24 units at an average price of $2,800 per month, according to the analysis based on Florida Realtors association data.
The Flamingo South Beach condominium association's sudden aggressive pursuit of past-due maintenance fees using the foreclosure process comes at a time when filings are down throughout South Florida.
The year 2011 represents the fewest number of foreclosure filings initiated in a first-quarter period since 2007 when slightly more than 1,400 actions were filed in Miami-Dade, Broward, and Palm Beach counties.
In subsequent first quarters, lenders and condo associations filed about 17,800 actions in 2008, an additional 23,800 actions in 2009, and 20,000 actions in 2010 in South Florida.
A key reason for the sudden decrease in foreclosure filings in South Florida is tied more so to the legal process rather than borrowers suddenly paying their mortgages.
Administrative irregularities in the foreclosure process that surfaced in late September 2010 created a "foreclosure freeze" that forced lenders to file 61 percent fewer notices of default in the tricounty South Florida region of Broward, Miami-Dade, and Palm Beach counties between October and December 2010 compared to the same three-month period in 2009, according to the report.
The aftereffects of the foreclosure freeze appear to be continuing to impact the South Florida market in 2011.
It is unclear whether the number of foreclosure filings will continue to decrease in 2011 as Massachusetts' highest court recently ruled that two of the nation's largest residential lenders - Wells Fargo and US Bancorp - "failed to prove they owned the mortgages when they foreclosed on homes," according to the New York Times.
In early March 2011, HSBC announced it was suspending foreclosure actions in Florida and across the country as a result of administrative irregularities, according to the Palm Beach Post.
No one knows what this ruling will do to investor confidence given concerns that the purchase of a bank-owned property could lead to title issues in the future, industry watchers said.
Even before the concerns about the legality of thousands of bank repossessions surfaced in the second half of 2010, lenders had already started to slow their foreclosure efforts due to the rising costs and difficulty involved with repossessing properties from borrowers in default.
Prior to the real estate crash, lenders generally expected the foreclosure process to take about six months to complete at a cost of about $40,000 in loss of debt service, unpaid taxes, damage, court fees, and attorney costs.
With more than 271,000 notices of default filed against borrowers and owners between January 2007 and March 2011, the South Florida court system was overwhelmed with foreclosure actions.
In South Florida today, lenders now plan for an 18-month repossession process with a cost of about $100,000 per property, industry watchers said.
In the end, bank-owned properties offered on the open market generate a lower average price than properties that are sold as shortsales. In 2010, the average shortsale price was $173,700 per residence compared to an average of $110,900 for a bank-owned property.
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