Angry as usual, Sam* called to say that he needed to sell his home immediately for as much money as possible. In 2005, most realtors were confident of that financial inevitability. Sam wanted over $460,000 for his newer 1600 square foot frame home on ten acres in a remote rural location, however. Read -- A BIG ASK -- even then.

His ex-wife was to receive half the proceeds from the sale of the home per Florida law, leaving Sam with a similar amount if we were successful. Good realtors were very capable of making miracles happen for their sellers in 2005. This home was to jump rather quickly to the top of the ever-expanding Realtor's unpublished list:

How Did This Property EVER Sell for THAT PRICE?

 

Seeking a respite from the hustle and bustle of Miami, a middle aged couple accompanied by their South Florida mortgage broker, called with no appointment one Saturday afternoon. Within hours, an offer of $425,000 with 100% financing was submitted for consideration; it was happily accepted and signed at his kitchen table by the overjoyed Sam shortly thereafter.

Were the REALTORS excited as well?  Not too much that day.

Why, you might ask:  What was wrong with this picture?

1) The couple was unfamiliar with our area, so did not know that a home of this calibre was unlikely to appraise at this level -- there were no comparable properties or sales at near that price point within the past six months.

2) The couple was betting that their current coastal home would sell quickly for over $700,000. From the proceeds, they would pay off this mortgage and live happily ever after, or at least until the money ran out.

3) The couple was using a South Florida mortgage broker. We read : "OH NO, this will never close on time, if at all"as the listing agents.

As co-listers, both my office mate and I were extremely nervous over the next two weeks.  We never expected the following scenario to unfold:

Their mortgage broker was able to find a Miami appraiser to value the property at $465,000! As listing agents, we never saw the actual appraisal, but assumed something was "fudged" to make this work. Perhaps the other comps used were waterfront properties, say perhaps on nearby Lake Istokpoga, the fifth largest lake in Florida. This home sat on two very small ponds...

Ethically, we were concerned for the long term. We had to believe at the time that all would be OK for the buyers, as the market seemed to have no ceiling. Also, the buyers would be fine after selling their Miami home in that currently HOT MARKET. Afterall, they were retiring to the lower standard of living in our county.

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The problem is that this story has no more happy endings:

The sellers were unable to sell their coastal home. After nearly two years, they were unable to keep up the payments on both homes. The new purchase went into foreclosure in 2007.

At just about the same time, Sam decided to return to his homeland after finding his new life outside of Florida to be less than satisfying. My office mate thought that perhaps Sam might be interested to repurchase the home he had worked for three years to build with his own two hands and the help of his friends. For Sam, his pre-divorce American Dream Home.

 By 2007, however, taxes had tripled on the home and homeowner's insurance for a frame home in the country (hurricane risk) was well over $2,000 for this relatively small home.  Even at the new list price of $309,900, Sam would have had to be earning well over $80,000 to qualify for the payments with taxes and insurance held in escrow (with little downpayment). 

Sam's trade would have allowed him to earn that much if new construction work was available. The economy conspired against Sam's re-purchase -- he opted to rent.

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Eventually, another couple was able to qualify to purchase the home for $285,000 at the end of 2007. Taxes $3,500 Insurance: Likely: $1,600 +

There is a terrible situation shaping up for them as well.

2008 Market Value: ~ $235,000          Current Taxable Value $212,000

In the end, Sam was blessed not to qualify to rebuy his dream home. The current owners are now at a minimum $50,000 in the hole after buying a foreclosure. No Realtor would have believed that $285,000 was not a great price  for this home in 2007. None of us really believed we were still on this terrible downward spiral. 

Home values have plummeted an additional 10 to 20 percent over the third quarter of 2008. Tax notices for 2008 received in August indicate home owners will receive less than  2.5% (average) decrease in taxes assessed.

Local government is not responding to the housing crisis. Keeping the taxes at artificially inflated highs is guaranteeing that our local real estate market cannot possibly recover in 2009.

Why are homeowners forced by local government's greed (or at best lack of economic understanding) to wait until at least 2010 to be taxed at reasonable levels with regard to value? When will the local citizenry be able to regain the right to earn a decent living since the housing sector is the lifeblood of this community?

Factoid :  Home Depot and Lowes are two of the top ten employers in this county along with the two hospitals.

Yes, our local economy is driven by its dependence on homes sales and new construction just as surely as we will continue to be "addicted to oil" consumption at equally inflated prices. We have little industry and over 55% of our homeowners are permanent and seasonal retirees. The rest of the citizenry make our living providing goods and services to ourselves and these retirees (many living on low fixed incomes).

Observing our situation here in sunny Central Florida, it does not take a genius to predict that we will continue to find ourselves in dire economic straits well throughout 2009...without leadership, the trend will continue.

*Sam is a fictional name.