Sarasota Condo Market Showed Sign of Down Turn Just Before the Bust

Over the years, there are parts in Sarasota that are really doing well in terms of its market. It turns out, however, that part of the Sarasota developer’s success can be attributed to market-distorting rebates and enticing mortgages that his sales team offered to buyers as incentives in late 2006 and early 2007. Which gives us the hot topic on whether the rebates, which ran as high as $35,000, distorted the market, analysts and appraisers say, because sales prices were recorded at $235,000 and banks lent money against that value, while buyers were only paying $200,000 to $215,000 for their units. In short the rebates created artificially high sales prices that drove up tax rates for owners of similar properties in the region and created problems for lenders down the road.

In late February and early March 2007, a Sarasota real estate agent, bought nine Vintage Grand units and immediately resold them to a Tampa investor at much higher prices, enabling the Tampa investor to get loans that exceeded original purchase prices by nearly $90,000. The Investor held the units, which are behind Westfield Sarasota Square Mall, for a year in the hope that real estate prices would rise. But when prices moved in the opposite direction, he filed for Chapter 7 bankruptcy protection, leaving his two lenders (SunTrust and Fifth Third Bank) with properties that are now worth at least 37 percent less than what they lent.

In a report there are only 19 units changed hands in the five months from May to September 2006, compared with 122 units during the previous five months. The result of the incentives was that the company’s sales team not only sold 80 units from October 2006 through March 2007, but the average sales price of the units rose 16 percent to $198,897 during the incentive period, compared with $171,192 during prior months. And that was at a time when real estate prices were falling, not rising. It is an obvious sign of struggling.

Going back to the Tampa Investor, who filed for bankruptcy protection in April, said he bought his nine units thinking the real estate market would turn and he would be able to sell the units for more than he paid in a short period of time. But obviously he was wrong. The investor’s Sarasota real estate agent bought the nine units for $1.91 million from Feb. 26 to March 13 last year and sold them to the investor for $2.22 million on the same days they were purchased. Well it was a fast transaction that could’ve get something but the Sarasota condo real estate surely having hard struggles that time and from there it was evident the market is in a downward spiral.

Jron Magcale
http://realestatepr.org

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