Lenders have utilized the foreclosure process to repossess more than 156,000 properties in the tricounty South Florida region since the real estate crash began in 2007, according to a new report from CondoVultures.com.

The repossessions represent about half of the nearly 300,000 foreclosure actions filed in Miami-Dade, Broward, and Palm Beach counties during the same five-year period dating back to the end of the South Florida real estate boom in 2006, according to an analysis of the CondoVultures.com Foreclosure Database™.

"Our best estimate is that less than half of the South Florida properties repossessed by lenders have been resold to buyers," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures® LLC. "Our estimate is based on the premise that lenders are more likely than not to use real estate professionals to resell bank-owned properties to improve the chances of obtaining the highest and best prices possible from buyers. Based on this premise, our research shows that more than 65,000 bank-owned properties have resold in South Florida since 2007.  

"Going forward, we anticipate the number of bank-owned properties formally listed on the resale market to continue at a steady rate for the foreseeable future." 

As of Jan. 10, 2012, there are nearly 1,600 bank-owned properties listed on the resale market in South Florida, according to an analysis by the licensed Florida real estate brokerage CVR Realty™.

In 2011, buyers acquired nearly 20,700 bank-owned properties in Miami-Dade, Broward, and Palm Beach counties, according to the analysis based on Florida Realtors association data.

Compare this to 2011 when lenders repossessed more than 34,900 properties in Miami-Dade, Broward, and Palm Beach counties after taking title through foreclosure to more than 54,400 properties a year earlier in 2010, according to Clerk of the Court records from Miami-Dade, Broward, and Palm Beach counties.

Previously, lenders repossessed more than 30,400 properties in 2009 and nearly 26,250 properties in 2008. In the first year of the South Florida real estate crash in 2007,  lenders took title to nearly 10,100 properties in the tricounty region of that year, according to the report.

The 36 percent drop on a year-over-year basis in bank repossessions of South Florida properties in 2011 compared to a year earlier is rooted in part to the issues related to the "foreclosure freeze" that surfaced in the fourth quarter of 2010.  

Administrative irregularities in the repossession process have prompted many lenders to slow the number of defaults being initiated against borrowers beginning in September 2010 and continuing throughout 2011.

The process slowed even more after the Massachusetts' highest court ruled in the first quarter of 2011 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.

Following dozens of investigations into the robosigner controversy, 50 state attorneys general began negotiating a settlement with several of the nation's largest lenders to determine how impacted borrowers would be dealt with by the banks going forward and establish a penalty amount - reportedly $20 billion - to partially offset the cost of the process, according to the New York Times.

The negotiations ultimately stalled in the summer of 2011, clearing the way for Massachusetts Attorney General Martha Coakley to file suit against several large banks including Bank of America, Citibank, and Wells Fargo for "engaging in unfair and deceptive foreclosure practices" on Dec. 1, 2011.

The suit intends to "hold multiple banks accountable for their rampant violations...and associated unfair and deceptive conduct amidst the foreclosure crisis that has gripped Massachusetts and the nation since 2007," according to Coakley's complaint.

It is unclear what the uncertainty has done to investor confidence given concerns that purchasing bank-owned properties 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 nearly 299,000 notices of default filed against borrowers between 2007 and 2011, the South Florida court system was overwhelmed with foreclosure actions.

In South Florida today, lenders now plan for a 700-day 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 2011, the average transaction price for a South Florida condo or townhouse shortsale was $113,100 compared to $92,50 for a bank-owned condo or townhouses, according to Florida Realtors association data.

The strategy shift by the lenders has led to a 12 percent spike in condo and townhouse shortsales, reaching more than 11,350 transactions in 2011. In previous years, condo and townhouse shortsales totaled 10,100 in 2010 and 5,550 in 2009, according to a CondoVultures.com report.

Condo and townhouses transactions that were never listed on the Multiple Listing Service are not included in this report. 

It is important to note there are various stages to a residential real estate transaction in South Florida.

A transaction begins when a property is made available for sale and ends when a title is conveyed from one party to another party as a result of the recording of a deed with the local government.

As part of the process, a property typically goes under contract and into a due diligence phase by which a deal can be canceled. 

Condo Vultures® LLC is a real estate consultancy and marketing company based at 1005 Kane Concourse, Suite 205, Bal Harbour, Florida, 33154. You can reach Condo Vultures® LLC at 800-750-0517.
© Copyright 2012. Condo Vultures® LLC. All Rights Reserved.