INSIDE THE DEAL: Foreclosure Response Team Steers $1.15M Sale of Distressed Property

3 min read

By Keat Foong, Executive Editor Ft. Lauderdale, Fla.—Here is one example of a distressed sale, of which the ultimate result may be newly constructed homes selling at $250,000 instead of $550,000. The 1.5-acre property consisted of nine assembled multiple family lots in the Poinciana Park neighborhood of Fort Lauderdale. The sites contain single family homes, […]

By Keat Foong, Executive Editor Ft. Lauderdale, Fla.—Here is one example of a distressed sale, of which the ultimate result may be newly constructed homes selling at $250,000 instead of $550,000. The 1.5-acre property consisted of nine assembled multiple family lots in the Poinciana Park neighborhood of Fort Lauderdale. The sites contain single family homes, duplexes and triplexes. The properties were purchased for a total of  $4.7 million in 2006. Originally, the developer’s intention was to redevelop the site: to demolish the existing buildings and build 33 new townhomes selling for $550,000 per unit. “The developer wanted to eventually assemble a 10-acre site and make it into a gas light district,” says Scott Coloney, president of the Foreclosure Response Team. “It was going to be quite nice.” When the market collapsed, the developer could not make the townhome presales, while having monthly debt payments of $30,000 on the acquisition loan and only $13,000 in rental income, said Coloney. Meanwhile, the property’s value was less than what was owed on it. Coloney, a managing member with the original development company, formed The Foreclosure Response team in 2008 to provide loss mitigation services and expedite the sale of properties facing foreclosure, with a specialization in short sale transactions. In such distressed situations, developers can modify the loan, go into foreclosure, or obtain a short sale, said Coloney. Banks know that if they go into foreclosure, they may lower the property’s value (with it sitting vacant on the market for months), get less for the sale of the property, and/or drive the borrower to bankruptcy and have a meaningless judgment, said Coloney. A short sale, on the other hand, said Coloney, can provide more money to the bank than a sale after foreclosure, help the borrower get back to its feet, and help the community with possibly more affordably priced homes down the road. The listing was originally placed at an asking price of $1.9 million. When there were no takers, it was lowered to $1.8 million, then $1.7million and eventually $1.3 million, said Coloney. Marcello Carducci, a foreign investor who has been buying property in the market, purchased the property for $1.5 million in cash, said Coloney.  “The zoning on the group of properties sold at short sale was multifamily 25 units to the acre. The prices set in this closing will make this parcel one of the most sought-after, affordable multifamily development sites in recent history,” said Francesco Mutti, of the brokerage Mutti Realty. At the density allowed by zoning, the land cost for the purchase is $30,000 per door, compared to $120,000 per door for the original developer, said Coloney. The buyer intends to maintain the property as rentals for a few years before selling the townhomes possibly for $250,000 per unit, says Coloney. “The short sale of the property has provided the opportunity for affordable development[…]” said Mutti. The original outstanding loan with Fifth Third Bank was $3 million. As a result of the short sale, the bank waived the deficiency judgment against the seller for a $2 million loss. “Because the buyer was able to purchase the Poinciana Park at such a reasonable price, new construction units can be sold much more affordably, making the acquisition extremely beneficial to the bank, seller, buyer and community,” stated Mutti.

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