Florida condo market gets relief

Among available condos along Aqui Esta in Punta Gorda is a top-floor luxury unit in this building. BARBARA BOXLEITNER/ FLORIDA WEEKLY People looking to buy condominiums in Florida will see more relaxed regulations than they have during recent years.

Freddie Mac last week indicated it would waive lending rules originally intended to help the state’s distressed condo market, marked by foreclosures, plummeting prices and high inventory.

But instead of aiding recovery, the rules governing mortgages in struggling communities made it difficult for people to get financing and insurance. So condo purchasers were those who were able to pay cash, area Realtors said.

Sales of condo units at Colony at Sabal Trace in North Port resumed in January 2009. Fifty-one of 188 total units remained when the real estate market crashed, said Nancy Okun, real estate broker and consultant with Charlotte Preferred Realty Services Inc. Now, just three units remain available.

She said the buyers were mostly from the Northeast and from Canada, and they weren’t investors. “These are second homes,” she said. “Ninety-nine percent of these buyers were cash buyers.”

The eligibility guidelines Freddie Mac, Fannie Mae and the Federal Housing Administration had devised prevented borrowers from obtaining favorable loans to buy condos if certain criteria existed. For example, Freddie Mac would not guarantee mortgages in developments that did not have 70 percent or more occupancy of its units. It would not finance for units in projects where more than 15 percent of owners had not paid their association fees.

The regulations were intended to maintain the quality of the buildings and grounds. Stipulating a certain occupancy percentage, for example, was seen as a way to uphold the property value. However, developers, buyers and condo associations viewed them as impeding condo sales.

“The banks haven’t wanted to lend,” Ms. Okun said. “If too many condos in one development were either a short sale or foreclosure, the banks got real shy. They see it as a risk.”

Lenders had concerns about whether the value of the condo development will stay, Realtors said, given the problems with keeping units occupied.

Earlier this year, Fannie Mae indicated it would start reviewing Florida condo projects that didn’t qualify for its loans. Projects determined to be stable will receive special approval, at which point lenders may offer mortgages to buyers and sell those loans to Fannie Mae.

“We’re now starting to see some light at the end of the tunnel,” said Gary Poliakoff, J.D., founding principal of the Becker and Poliakoff, P.A., law firm and author of “New Neighborhoods: The Consumers Guide To Condominium, Co-Op and HOA Living.” “The pendulum had swung too far following the crash of the economy.”

“The problem is lenders weren’t lending because they had nowhere to offset their mortgages,” he said. “Lenders wouldn’t even review or consider the loans because no one was buying them. The guidelines had actually derailed the lending effort.”

Mr. Poliakoff is recognized internationally as an authority on common interest ownership housing. He has been a consultant to state legislatures and the White House in drafting housing legislation about common interest ownership. He teaches condominium law and practice as an adjunct at Nova Southeastern University.

“The last couple of years, a number of developers went under and a number of banks took over projects,” he said, adding that the excess of unoccupied condo units resulted in reduced cash flow to condo associations. Amenities were never completed in newer developments, and services such as complex maintenance were curtailed.

Ms. Okun said diminishing association funds haven’t hurt the county condo communities as much as they have in areas such as Fort Myers. “They have been some developments, they just don’t know what to do,” she said.

She said if a development has 100 units and only 20 are sold or have people paying association dues, “the places look absolutely horrendous.”

A number of developments past the road construction west on Aqui Esta Drive in Punta Gorda, have condos for sale. A multi-level building, with blue accents and arches, has an upperfloor luxury unit overlooking a canal, a three-bedroom and two-bathroom unit built in 2007. The condo has current upgrades, and the community has amenities in place. The building and grounds have been maintained. Nearby Schooner Cove, with its multi-colored pastel scheme, also has units for sale. It, too, has curb appeal.

The changes in guidelines should do much to help a condo market in need of a boost. “Both federally and Bank of America, they’re now going to start reducing the principal on the mortgages and freeze the interest rates to give homeowners a better shot at surviving the economic downturn,” Mr. Poliakoff said.

Opportunities should open for certain people. “It should make it easier for the first-time buyer so they don’t have to come in with 20 percent down,” Ms. Okun said. “The first-time buyers are actually going to get a little lending hand.”

A home buyer tax credit that expires April 30 also should spur some people to make a move.

Meantime, the new guidelines mean local authorities will have a greater presence in the recovery of the condo market because they are informed about developments and their recent history, Mr. Poliakoff suggested. “We’re going to rely on the local lenders to do the scrutinizing, if they feel the buyer credit worthy and community viable,” he said.

Inventory remains high, and condo prices are half of what they were at peak, Mr. Poliakoff said. Ms. Okun said Colony at Sabal Trace units were originally priced from $179,000 to $264,000 yet have been selling for $79,900 to $103,000.

Realtors said newer condos, ones that have never been occupied, are available at affordable prices.

Mr. Poliakoff thinks retirees from other states will continue to buy in Charlotte County, particularly Punta Gorda, which he described as “a beautiful coastal community.”

“This is the time to buy,” said Mr. Poliakoff, who is considering opening an office in the county. ¦