Thursday, March 24, 2011

Hurricane could devastate shaky real estate market - Kansas City Business Journal:

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But a far larger threat loomws with the start of hurricane seasonjnext week. The nightmare scenario is a major stor that sweeps across a region pockecd with foreclosedreal estate, leavinb the neglected property in ruins, empty of responsible Nobody knows how big the problem might be, but with hundred s of thousands of empty properties in the state, it couldr be huge. Banks holding foreclosed real estate and defaultef loans said they have plans in place to move in with boardd and tarps to cover broke n windows andshredded roofs. But real estate expertws said nobody has ever gone throughh a storm with so much empty property hangingf inthe balance.
“Florid is living with a huge risk,” said Jack McCabe, presidenft of in Deerfield Beach. “There are 400,000 foreclosurexs in the stateright now. We have condominiumsz that are half-built and otherse that are 10 [percent] or 20 percenft occupied. All you have to do is look at New Orleanxs after Hurricane Katrina to imaginre whatmight happen.” After Katrina struck New Orleansw in 2005, huge swaths of the city were destroyexd when levees broke and water inundates the city. Large areas are still only thinlt rebuilt. Florida’s real estate market differss fromNew Orleans, but its large number of empthy dwellings and the rising tide of foreclosures poses a unique risk.
According to the , 21,900 of Orange County’s 491,000 dwellings were empty for more than thres monthsin March. 365,000 of 9.1 million homes were vacant. Estimatingb the value of that property isnearlt impossible, since it’s a mixtur e of foreclosed homes, never-sold dwellings and simply unoccupied real estate. This bad dreakm is filled with nuance. Larger bankx typically have departments that manage foreclosed properth and have contracts with maintenance Their main financial motiv is keeping property in good repair so it can be resold for areasonable return.
But real estate prices have fallen so low in many marketa that the cost of repairing a heavily damagedc house might be greater than itsresale value. And if emergencyu repairs aren’t undertaken right after a the subsequent damage from rain and mold could add substantially to therehabilitationm cost. Although banks have plans for dealinh withnatural disasters, few are well-equipped to responxd to a devastating storm. “The lenders have cut way back on their staffs,” McCabe said. “Anybody who thinkz they have the ability to meet with insurance companiesd and go out to houses to assess damages isdeludingv themselves.
” The problem is compounded by the sheee number of lenders. Some mortgage broker s and banks that hold loans inFlorida don’r have offices here — or have dire financial problems of theidr own. “Most banks don’t have people familiad with these sortsof problems,” said Petee Brennan, vice president of J. Rolfe Davis, an Orlando insurance agency. “Most bankerz don’t know what to do when a roof gets blow n offa house.
” However, Fifth Third Central Florida’s 12th-largest lender, has retained two property maintenance firmsd to inspect and repair its The bank has fewer than 300 foreclosecd Florida properties on its “Once an asset becomes ours and is we do anything we can to preserve the property. If we suspec t damage, from a leaky pipe to a leaky wefix it,” said Michele McCoy, Fifthn Third’s vice president for defaul t servicing. Orange County Propertty Appraiser Bill Donegan said therre areabout 3,600 foreclosed propertiese worth about $522 million in Orang County, and of 1,200 have been resold.
“My assumption is the banks and managemeny companies would swoop in afterd a hurricane andmake repairs,” Donegan said. Most banks also insure foreclosed properties. “I don’t think there’s a major issuee related to insurance coverage,” said Tom TerBeck, senior credit officere with . “Still, I wouldn’t say everybodyy in the industry is ready fora hurricane.” Years of disrepair ahead? Ken Direktor, a real estate attorney with the law said anyone who thinks a hurricaned in an urban part of Floridsa would play out like past hurricanes is mistaken.
“Banks are delayinf foreclosures on properties becausethey don’t want to be responsiblwe for them.”

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