The buyer had found the perfect new home — a short-sale, one-bedroom Hollywood condo overlooking the ocean on the market for $139,000. It was, to his mind, the bright side of the market crash.
Then Maji Pace Ramos, a realtor, and her client did a walk-through and some research. The place had so much mold it would have “became a Petri dish in a week,” Ramos said. Once the power was turned off, along with the air conditioning, the waterfront condo became the perfect environment for mold. Also, more than 30 percent of the units in the building were in default, jeopardizing the financial solvency of the condo association.
While many buyers start out seeking the best deal among foreclosures and short sales, they soon discover that some of these properties require at least $30,000 in repair work. “Everyone is just looking for a good deal. That is before they know what conditions these properties are in,” said Pace Ramos, a realtor with Coldwell Banker.
In single-family homes, the appliances and faucets are often missing. Departing buyers, or more often thieves, have stripping a house down to an art. Sometimes wiring is torn out of the walls, kitchen cabinets are ripped down and air conditioning compressor units are missing.
Pace Ramos tries to steer most buyers to other homes that sell for slighter more than “foreclosure prices” but come with the kitchen cabinets. Financing is harder to find for houses without cabinets and replete with reeking, moldy walls.
Meanwhile, cash investors, which make up more than half of active buyers, are targeting the homes that Pace Ramos avoids. “They are looking for a dog of a property,” said Peter Zalewski, founder of Bal Harbour-based real estate consultancy Condo Vultures. “As long as it has all the mechanics, they don’t care what the interior looks like. They love it, actually. Because it lowers the purchase price and they know what it takes to repair. They have crews ready, and labor costs are so low right now.”
Repair costs do not scare some individual buyers. Some are willing to sink some money into a property if they think the price is right — whether that means finishing a condo in a newer building or buying new appliances for a three-bedroom home.
“People are willing to do some work, but they don’t want to redo the whole place,” said Marci Trautenberg, a realtor with EWM Real Estate in Miami. Federal money available for fixing up homes in disrepair could help many buyers afford to purchase a home that needs some repairs.
As long as there are condos and houses on the market that require little or no work, those will see a lot of activity. “If a buyer has to put a lot of cash into a property, it is better to look for one that is not a foreclosure or short sale. The seller if they are motivated to sell has to compete with the prices of the foreclosures.”