Article Courtesy of The South Florida Business Journal
By Brian Bandell
Published February 1, 2017
More sellers of recently constructed condos in Miami-Dade
County have been listing their properties at a loss, and they’ve
increasingly closed at significant discounts, according to a report by
The Miami-based real estate finance company led by attorney Andrew Stearns
used MLS listings and property to track the county’s new condo market. Sales
of existing units have declined for 13 consecutive months, although prices
have modestly increased, according to the Miami Association of Realtors.
Many industry experts are worried about how the new condo inventory will
impact the market, especially as international sales have slowed.
Looking at condo towers of at least 80 units in Miami-Dade completed since
2012, there were 13 units that sold at a loss compared to their previous
purchase price, including the standard 6 percent commission taken out, from
November 2016 through January 2017, according to StatFunding. The biggest
lost was a unit in Faena House in Miami Beach, which was acquired for $16.5
million and sold for $12.5 million, followed by a condo in Brickell House
acquired for $590,900 and sold for $490,000.
Stearns said he included 6 percent commissions in the calculation because
that is standard for MLS listings. He did not include other common costs for
condo flippers, such as developer fees of 1.5 to 1.75 percent, pre-funding
of the condo association, monthly association fees and furnishing expenses.
“Since May, we have seen the losses accelerate and the listing for loss
accelerate,” Stearns said. “So it appears we have have passed that point
where the pre-construction condo market has turned … Hopefully, it’s only a
small percentage of buyers who want or need to sell.”
In its November 2016 report, StatFunding found the number of new condos
listed for sale at a loss on MLS increased 500 percent since May to 70
units. By the January report, nine of those units had sold at a loss.
Only 8 percent of units in new 20 buildings tracked by StatFunding were
listed on MLS at a loss in the November report, but certain buildings had a
high number of so-called “underwater listings,” including Millecento with
12, Nine Mary Brickell Village with 10 and Icon Bay with nine. However, 43
percent of the closed those 20 buildings traded at a loss.
The report noted that over 10,000 condos are slated to be completed in
Miami-Dade over the next 24 months. Most of those buyers put down 50 percent
deposits, although this usually occurs in stages with 10 percent due at the
Stearns said certain developers have agreed to sell pre-construction units
to bulk buyers at a discount.
“The biggest risk for individual buyers is prospective is bulk sale
transactions happening today at condos under construction,” Stearns said.
“For the buyer who paid full price, they will be very disappointed to find
out that certain purchasers bought at a significant discount to their price,
which will probably impact the resale price of their unit."
StatFunding’s January report also found sold developers holding onto a
significant amount of un-sold inventory in completed buildings. Projects
such as Brickell City Centre Rise, Crimson, Centro and Bond had dozens of
unsold units months after the initial wave of closings.
That means the developers must pay their carrying costs until buyers are
found. Stearns said developers’ strategy with this unsold inventory could
have a big impact on the market.