40 Cents on the Dollar

[2bohemians]

›Lennar Sells 11,000 Homes for 40 Cents on Dollar (http://www2.tbo.com/content/2008/jan/11/bz-lennar-sells-11000-homes-for-40-cents-on-dollar/?news-money) [Bloomberg News]
"If you're a vulture, Florida has more carrion. This stuff is lying on the ground. It's lost life. Some of the stuff in Phoenix is still breathing. Perhaps not for long," said Marcel Arsenault.

[sowalgayboi]

This is nothing new, the vultures have been circling for months. A few have swooped down and picked off some limping cows here and there already.

[SHELLY]

Speaking of 40-cents on the dollar, here's an excerpt from an excellent article about auctions that are apparently the "new black" in Real Estate:

"Procedures and pitfalls

To register to bid, prospective buyers are required to provide on the day of the auction a cashier’s check often payable to themselves for the amount of the buyer’s premium. That figure is included in a bidder’s packet available days before an auction. Unsuccessful bidders get their cashier’s check back; checks of successful bidders go toward the purchase.

Successful bidders must deposit 10 percent of the final sales price at the auction and close within 30 days to 45 days. The contracts are not contingent on obtaining financing. If buyers fail to get a mortgage, they lose their deposit.

“You need to pre-qualify yourself before going to an auction,” Higgenbotham said.

Every auction house has its own rules that are available to buyers well before the auction. Some auctioneers even hold workshops to educate potential buyers.

Even experienced investors can be seemingly tripped up by the complex technical procedures. For example, Platinum developer Maysville claimed investor Badrutt failed to make his cashier’s check payable to a developer’s real estate trust, as required by an auction agreement, according to the law suit.

Instead, Badrutt made it payable to the auction house, Fisher Auction, said Coral Gables attorney Robert Post, who represents Badrutt in his fight to buy the two units at Platinum. On the day of the auction, Fisher endorsed the cashier’s check over to the developer’s trust, but three days later, the developer rejected Badrutt’s contracts.

Badrutt is suing Maysville to force the developer to close the deal. Badrutt bid $352,000 for a three-bedroom unit with about 2,250 square feet and $324,500 for a two-bedroom unit with nearly 1,760 square feet for. Both bids are substantially below the original asking price.

Post claimed Maysville is backing off the contracts because the developer realized both bids were low and Maysville president Redondo was overcome by “seller’s remorse.”

Redondo said Badrutt failed to follow the auction rules and Redondo didn’t want to close the sales. Redondo hoped to auction 20 condos for between $350,000 and $550,000 on Sept. 20.

But the bids came in the low $300,000s and below. He sold five of the eight units he advertised as absolute auctions, meaning they were to be sold regardless of how much was offered. Badrutt’s bids were for two of those eight units.

Redondo rejected the bids for the remaining 12 units.

The five successful bidders at Platinum paid from $192 to $271 per square foot, well under the $347 to $512 per square foot price sought by condo owners trying to resell their units.

“It didn’t turn out to be what we expected,” Redondo said. “We were hoping to get better prices.”

Redondo says this was his first auction and probably his last. He plans to rent the unsold units until the market turns around. He’s also no longer interested in building Platinum’s second tower on a parcel permitted for 320 units. Instead, he put the 2.7-acre site on Biscayne Bay up for sale with a price of $39.9 million.

Auctioneer Troy Fowler, president of Miami-based Realty & Auction Group, said he was surprised to hear about the Badrutt- Maysville lawsuit. He and three other seasoned auctioneers interviewed for this story said they have never heard of a lawsuit resulting from a failed auction.

“It is really hard for [a lawsuit] to happen,” Fowler said. “There is a very clear set of terms in the bidders’ packet.”

Doing the research

The challenges of buying houses and condos at auction go beyond understanding the terms of an auction. It includes researching the condominium complex and the individual unit to be bid on, said Miami real estate attorney John Sumberg, managing partner at Bilzin Sumberg Baena Price & Axelrod in Miami.

In a down market, there are many variables that need to be taken into account before raising the bidding card, experts warn. A bidder needs to research the percentage of foreclosed units in a building and the number of homeowners who are behind on their maintenance fees. A high number of foreclosures or delinquent dues can impact the bidder’s financing of the deal, Sumberg said. Lenders may require larger down payments or increase the interest rate of a loan if they perceive a building as risky, attorney Tatelbaum said.

“This is the first time in the last 40 years when you have condo associations go bust,” Tatelbaum said, referring to association unable to pay their bills because a large number of vacant or foreclosed units and delinquent monthly dues. ....................."

http://www.dailybusinessreview.com/news.html?news_id=46471

[seaside2]

No wonder auctions are so popular!!!!



NOT!!!:yikes: