South Florida foreclosure spike costs banks
Banks are picking up more and more homes in Broward, Palm Beach and Miami-Dade counties, according to a third-quarter report from Bal Harbour-based research firm Condo Vultures, and the costs are starting to add up.
The number of homes repossessed by lenders in the tri-county region was up 134 percent to 7,100 properties in the third quarter, compared to last year. At its current pace, the number of such real estate owned (REO) houses is expected to reach 18,960 in 2008, up 190 percent compared to 2007.
In addition to the problems faced by homeowners during this spike in foreclosures, many banks are suffering financially from their sudden launch into the role of landlord. Lenders, many with little previous real estate experience, are shouldering the increasing responsibilities and costs of handling leasing, paying property taxes and maintenance fees, and resolving tenant complaints at properties they take from borrowers in default.
The foreclosure process takes around six to eight months in South Florida, and typically costs the lender about $40,000 to $80,000 per home, including legal fees, repairs and unpaid debt services. Condo Vultures partner Peter Zalewski predicts that lenders in the region will eat about $750 million in costs related to the homes they repossess in 2008.
In the first nine months of 2008, Miami-Dade County had 8,656 bank-owned properties, representing a 188 percent increase from last year. Broward had a huge increase to 7,370 over that period, up from just 2,339 in all of 2007. Palm Beach County had 2,934 REO properties in the first three quarters of the year, up from 1,197 properties in 2007. TRD