A gloomier view of the Florida real estate market
By Michael Braga, Herald-Tribune
Monday, October 21, 2013
The following commentary was sent to the Herald Tribune by Sean Galaris, the president of LM Funding in Tampa:
A day doesn’t go by that we don’t hear about a rosy future for Florida’s real estate market. Foreclosures are slowing down. Prices are going up. And, sales are being made.
Sounds good, doesn’t it? But a closer look at the real estate industry gives us pause to re-consider the market and look beyond the numbers to some extremely disturbing trends. The bottom line is that if things continue on the current path, it’s not inconceivable to believe that we’re heading for another collapse similar to the one we experienced back in 2008.
The opinions we’ll be posing are not those of an alarmist, but rather those of students of real estate looking at current scenarios and how they bode for the future.
In today’s market, it is extremely difficult for individual investors to secure bank financing. As a result, those seeking to make a quick kill in the real estate market are tapping their savings and retirement funds to purchase units with the goal of flipping at significant profits. Sound familiar? The only difference is that today, these amateur investors aren’t losing the bank’s money. They are losing their own. Once they make the purchase, many are finding that they can’t afford the taxes, insurance, and fees. They frequently end up walking away – without their savings, without the ability to sell at a profit – and leaving associations in deeper financial stress.
As in the past, investors are causing problems in the market. Hedge funds and private investor groups are starting to gobble up units with cash, simply because end users – those who will actually live in the units – can’t secure financing. The incentive for these acquisitions is that banks are more than willing to accept the low-ball offers and will gladly pay the statutory minimums due to the associations based on the Safe Harbor Law. This law stipulates that banks are responsible for 12 months or 1 percent of past due assessments, which ever is lower. The banks are also happy to shed the burden of taxes and insurance on the foreclosed units.
purchase of units by investors and the regulations regarding rentals. Boards should also encourage legislators challenge the powerful banking lobby and move for timely foreclosures.
It takes this type of vigilance as well as the ability to view current news with a bit of skepticism.
Sean Galaris is President of LM Funding, LLC, a Tampa-based specialty financial services company that manages the receivables of more than 400 condominium associations in Florida.