Condo values worry Willowbrook owners

Article Courtesy of The Bradenton Herald


Published August 14, 2012


EAST MANATEE -- Upon entering the Willowbrook condominium community in East Manatee on Town Center Parkway, one can't help but notice large blue tarps covering balconies facing the gated entrance.


The bright, neon-green warning notifications on doorways, which were hung by Manatee County inspectors to warn people of safety concerns, are so visible in one neighborhood, it almost looks festive.


If there are condos in the community on the market, it's a hard sell for even the most experienced real estate agent.


"To surrounding properties, it doesn't do anything because it's an isolated event," said Dan Fairchild, a private property appraiser with over 12 years' experience in Manatee. "To the community, it's severe. It would be like going into a home with Chinese drywall. You'll see a similar effect of what they should be worth and what they will be selling at.


"Residents have expressed concerns regarding the value of their homes, which were built by KB Home, a California-based company. Though not all homes in the 270-unit community are plagued with sinking floors, separating window frames and other construction defects, residents could be seeing a decreased market value for their homes.


Residents paid between $125,000 to 170,000 for the homes.


"It's too soon for us to make a determination," said Charles Hackney, Manatee's property appraiser. "It's the same situation as to how we handled Chinese drywall. Obviously, there's a diminished value and we'll find out how to handle it."


Real estate appraisal is the value of a property based on location, condition, comparable homes and any upgrades done on the property.


"They won't be able to obtain its highest market value because it's a known problem," Fairchild said. "The builder has already been hurt from that.


"This isn't the first challenge against KB Home. In 2009, Seattle-based law firm Hagens Berman Sobol Shapiro filed a class-action lawsuit against KB Home on behalf of a central Florida homeowner, alleging KB Home, Countrywide Financial and LandSafe Appraisal Services conspired to rig housing prices in Florida, as well as North Carolina and South Carolina, by controlling the independent appraisal process and inflating home prices. The suit claims all home prices for 19,000 KB Homes built in the southeast between 2006 and 2008, at which time some condos were being built in Willowbrook, were inflated by a total of $600 million.


The law firm filed similar suits against KB Home for clients in California, Arizona, Colorado, Nevada and Texas. In 2005, KB Home agreed to pay a $2 million civil penalty issued by the Federal Trade Commission, which determined KB Home violated terms of a 1979 consent order and 1991 consent decree relating to binding arbitration clauses. KB Home entered a modified decree with the FTC, but that order has since expired.


A spokesman for the FTC declined to confirm or deny whether the FTC is currently investigating KB Home. In addition to the FTC, a spokeswoman for the Florida Department of Business and Professional Regulation declined to confirm or deny whether the state is investigating KB Home.


A spokesman for the office of the State Attorney General said letters from Willowbrook homeowners regarding KB Home have been received and are being processed and reviewed.


Several residents with construction issues have asked KB Home to buy back their homes. In the past week, the county has ruled 20 of 27 balconies inspected unsafe and the number may grow this week. The balconies are the property of the Willowbrook Association, which is currently negotiating a claim with KB Home.


Once the unsafe structure notice is posted, the responsible party has 30 days to respond before the county takes steps to reduce the unsafe conditions by closing access to the decks. Last week, however, a majority of residents refused to allow a subcontracting company to perform repairs, assuming they would be negligible.


"Even if they fix them, there would be a value problem," Fairchild said.


KB Home netted $302.9 million in total revenue this past quarter, according to the U.S. Securities and Exchange Commission, an increase from $271.7 million in total revenue posted in the same quarter in 2011. Recently, JPMorgan, Golden Sachs and MKM Partners, all equity research analytical firms, upgraded New York Stock Exchange shares of KB Home.


Meanwhile, Willowbrook homeowners continue to worry.


"The market value before any of this hit the media was shot anyway," said Dan Koehler, who bought his condo in Willowbrook three years ago. "Anyone who rolls into here and sees the tarps, they're not going to buy. The homes are just crap. I don't think anyone will buy them after this."