The New York Times
September 19, 2004
As Florida Recovers From Storms, The 'Vultures' Circle For Bargains
By Robert Johnson
KEN DEANER, a financial consultant in New York City, had his heart set on buying a second home in Miami a few weeks before Hurricanes Charley, Frances and Ivan hit. But now that real estate romance is over.
"Right now I'm not buying in Florida," Mr. Deaner said.
The hurricanes tracked through Florida and left the home market a muddy mess. Many home shoppers have been scared off and they have plenty of company: most property insurers suspended the writing of new policies when Charley and Frances hit, and as Ivan neared. That has delayed closings, and made potential buyers even more anxious. Slowing sales even further, some mortgage lenders have put pending sales contracts on hold until the houses and condominiums they have agreed to finance can be reappraised to take possible storm damage into account.
Real estate agents unrelentingly profess optimism that what was decidedly a sellers' market will return in a few months. After all, they reason, inventories around the state are low. Here in Orlando, for example, there are about 8,000 homes for sale, down 27 percent from a year ago. Yet that isn't enough to calm the storm-shaken nerves of some when it's time to sign on the dotted line.
"Everyone involved with a home sale tends to go into a panic mode when a hurricane comes," said Ana Sobrino, a mortgage broker in Miami.
There's plenty to worry about. Hundreds of damaged homes are being pulled off the market. "If it's missing roof shingles, I tell them to put new ones on and list it again for more money while other inventory is still being repaired," said Beverly Rothstein, an independent broker in the Palm Beach area.
That's good advice, to fix a home and sell before the competition can pretty up again, except that roofers and other repair specialists are swamped. "We're hearing it will take three to six months to get a roof fixed in some areas," said Reeta Casey, a Re/Max agent in Orlando.
Meanwhile, the vultures, as Ms. Casey calls them, are flocking. They are the cash-wielding investors on the prowl for damaged property. Preying on the potentially fragile psyche of owners, they're making low-ball offers of cash. "They phone and say: `Hi, how are you? Would you like to sell your house today?,' " said Dr. Christopher Scott, an emergency room physician in Orlando who owns a house for sale in Fort Myers listed at $189,000. "Then they offer you 60 percent of what it's worth." His house didn't suffer much damage from Hurricane Charley, which hit Fort Myers hard, but some nearby homes did.
"I'm not really in a distressed situation with that property, or I'd be tempted to accept an offer like that," Dr. Scott said. He says the predatory buyers illustrate the flip side of price gouging.
Many such distress shoppers are investors, looking for property to buy and fix quickly, then resell when the market picks up. "My investors' ears have gone up since the hurricanes, they want to find deals," said Kevin Tomlinson, an agent with Esslinger Wooten Maxwell Realtors in Miami Beach. His clients are so eager to buy damaged condos that last week he drove more than 200 miles north to the Vero Beach area in the search.
But all that motoring around didn't yield many potential wind-damaged bargains, he said. "There are some missing roof shingles and a lot of trees down, but I didn't see anything nearly as bad as in South Florida after Hurricane Andrew in 1992," he said.
Ms. Casey's Re/Max office in Orlando attempts to screen those who call asking to be taken immediately on tours of hard-hit areas. "You can usually tell who they are," she said. "They want to see several homes immediately, and they don't seem to care where they are as long as they're bargains." That's often a tip-off that the customer will simply jot down addresses of damaged homes the broker shows, find the owners through property records and make offers so low that they aren't fair, she added.
Still, with insurers and lenders nervous, there aren't many regular real estate shoppers around to give the distress shoppers much competition. "We had one contract for an $850,000 home that fell through the day before Charley hit; the buyers decided they weren't moving to Florida after all and went back to New Jersey," said Hudson McMurtrie, owner of a 70-agent Re/Max office in Orlando near the Universal Studios theme park. Some buyers may have second thoughts anyway, he said, but having a hurricane bearing down on you right before closing is the worst-case scenario.
Even when the hurricanes are past, it is not easy to show houses in the ravaged areas. Brokers may be able to persuade buyers to tour a house, but then it might flunk the sniff test. That's because mold and mildew are rampant because of leaky roofing, windows and doors. "The smell is a constant reminder to people that water came into this house because of a hurricane," said Cindy Rosenbloom, one of Mr. McMurtrie's agents.
Another drawback for home sellers: many who boarded up windows to protect them from storms are still afraid to uncover them for fear of yet another hurricane. Trying to cope, Sherry McMurtrie, Mr. McMurtrie's daughter and an agent at his firm, showed a boarded-up house to a potential buyer last week. "I found myself in the middle of the day with clients in this dark living room and saying, `Now normally there's a lot of wonderful natural light here,' " she said. "Those buyers are still thinking about that house, probably trying to imagine what the living room looks like with the windows unboarded."
Other shoppers must visualize what many houses look like without stacks of tree limbs and other debris several feet high and wide at the edge of the front yards, a scene common across Central Florida.
This felled-tree phenomenon has hit many of the pricey older established neighborhoods hardest because they have, or had, the huge mossy oaks and other shade trees that can be such a comfort to homeowners during Florida's blazing hot summers. But now a visit to these areas often reveals trees poking down through a roof here and there, or resting on cars that were left outside in driveways during the storms. Escaping the worst of such scenes are the newer subdivisions, often built on former cow pastures or citrus groves, that are heavily landscaped close to the ground but haven't much of a natural skyline except for a few stubborn and relatively stubby palms.
"First we lose a lot of vegetation and then what's left of it won't go away," said David Cramer, another Re/Max broker in Orlando. Municipal trash haulers are too overwhelmed to remove much of the dead brush, and by some estimates the rotting piles may be around for the rest of 2004. Not only does all this detract from the appearance of homes, but buyers may want to avoid the wildlife being attracted to mini-nature preserves heaped at the curb.
Rats, snakes and spiders are moving into the refuse. "Yech," said Jody Dempsey, a Re/Max agent in Orlando. "Many of the critters have been driven out of their usual habitat by the storms. You want to walk way around the stuff when you show a house."
An estimated 50,000 Australian pine trees were felled by Hurricanes Charley and Frances on Sanibel and Captiva Islands, according to Steve Greenstein, executive director of the Sanibel-Captiva Islands Chamber of Commerce. "Just the stump of a big pine can fill almost an entire dump truck," he said. "One tree, one truckload, so you can see how much we have to get rid of."
The mounds of erstwhile greenery are unsightly, though impermanent. Still, they contribute to a national image of Florida property damage that real estate agents insist is portrayed as worse than it really is. "It seems like television showed the same ripped-up trailer from every possible angle," said Michael Saunders, owner of a 150-agent firm in Sarasota that carries her name. She said one potential buyer recently asked, "Do you sell anything besides mobile homes?"
Actually, Ms. Saunders's staff lists and shows exclusively site-built homes. But even in the case of concrete-block houses, she said, some buyers want post-hurricane re-inspections of homes before they will go through with the purchase. Nonetheless, she said, her firm sold a home on the beach of the Gulf of Mexico priced at just under $6 million a few days after Hurricane Frances passed. The beach is still there and the homes on it have proved they can survive, she said.
Maybe, but Mr. Deaner, the financial consultant from New York who is now too wary of the winds to buy a Florida home, said he may shop in Arizona. "We'll still take vacations to Florida, but not during the June-to-December hurricane season," he said. "We just don't want to be committed there year-round."
Ms. Dempsey, however, said the hurricane damage and danger are exaggerated in the minds of out-of-state buyers. "We get plain old thunderstorms sometimes that are as bad as Hurricane Frances," she said.
That may not be a strong selling pitch.