The Miami Herald
July 28, 2005
The Flap About Condo Flipping
Experts question whether the person behind Condoflip.com is an industry innovator or one more speculator in Miami's condo frenzy
By Matthew Haggman
Three years ago Mark Zilbert didn't yet have his real estate broker's license. But now the former Internet executive is at the center of a controversial new outgrowth of South Florida's condominium boom: condoflip.com
With thousands of investors speculating on still-to-be-built condos, Zilbert asserts his fledgling website is necessary if all the flippers holding contracts on pre-construction units are to find end-user buyers. Zilbert plans to enable buyers to view condo features and then make offers, weigh counter offers and ultimately complete contracts online.
Yet some contend condoflip.com isn't an antidote to a market downturn but an emblem of the gold rush, get-rich-quick mentality that may undermine Miami's building boom. The name condoflip alone, say critics, could draw unsophisticated buyers who shouldn't be investing in units. Their presence may fuel more speculation -- akin to stock daytrading -- instead of attracting primary or second home buyers.
''I think it is horrendous. I think it promotes speculation,'' Jorge Perez, chairman of The Related Group of Florida in Miami, among the nation's biggest condo developers, said of the website.
''Zilbert is an opportunist who has gotten notoriety,'' added Philip J. Spiegelman, president of Aventura-based brokerage International Sales Group, which is affiliated with a competing condo website, www.uscondex.com. "Encouraging overspeculation or feeding on that flavor of the day is shortsighted and I don't believe it will service the clientele Mr. Zilbert so loudly portends to be looking after.''
The swaggering 41-year-old entrepreneur contends he isn't promoting flipping but responding to market realities. ''Whether we like it or not, Miami is about to face its largest pre-construction resale effort in history,'' he argues. "The whole reason for condoflip is that there is so much activity ahead of us and we don't have the infrastructure, the technology to make it smooth and well oiled.''
A VALID SERVICE
Dismissing traditional resale methods as antiquated, he unveiled condoflip.com in June, brashly declaring it ``could become the most significant advancement in real estate technology since the Multiple Listing Service.''
Some real estate professionals think Zilbert could provide a valid service. ''It's sad the market has come to the point where it is so overwhelmingly speculative you would have something like this,'' said Miami real estate analyst Lewis M. Goodkin. ``But there is a need for it. A lot of these people who knowingly sell to a very high percentage of speculators have no program in place to get speculators out of units.''
Zilbert moved to South Florida in 1999 at the peak of the tech boom as an executive at Cambridge Technology Partners. By 2001, the Montreal native was laid off in a downsizing. He worked at a local tech company, but soon got laid off again. ''They tossed me out on the street and I thought `What do I do?''' he says.
So he gravitated to the next boom. In November 2002 he got his broker's license and joined Esslinger-Wooten-Maxwell Realtors. Instead of mailing postcards, he used a website and e-mail blasts to lure buyers. By the end of 2004 he ranked among EWM's top ten brokers in Miami-Dade sales.
''This guy came out of the web world and was able to beat everyone to the punch, because he took his knowledge and applied it to our industry,'' said Alicia Cervera Lamadrid, president of Related Cervera Realty Services in Miami, which sells units on behalf of developers like Miami-based Related Group of Florida.
Zilbert is now trying to line up listings in Miami, Fort Lauderdale and along Florida's west coast, which he plans to begin selling on condoflip.com in October when the site is fully active. He envisions hiring 50 brokers, with agents available around the clock to field inquiries from prospective buyers.
Zilbert has applied for a patent for his website technology and hopes eventually to franchise or license condoflip.com across the country.
But he's already got competition. Last month, an investor group including Coconut Grove-based developer Michael Swerdlow launched uscondex.com. That website, which is already selling units, offers both pre-construction units and condos that buyers have closed on and live in.
''We are not trying to tap into pre-construction but (to) be a long-term marketplace,'' said U.S. Condo Exchange CEO Richard Swerdlow, who is Michael's son.
Zilbert, by contrast, is focusing on pre-construction and the buying and selling that occurs between the time an investor puts a deposit on a pre-construction condo unit until the tower is built and the buyer must close.
After a certain percentage of pre-construction units are sold, developers often allow buyers to resell their contracts. Such units often trade hands two and three times at richer prices prior to closing, spawning worries of a speculative bubble. Condoflip.com aims to streamline the flip process by listing pre-construction units and allowing buyers to make an offer, negotiate and even purchase a contract online. Commissions would be a standard 6 percent, with Zilbert getting the listing agent's share.
''I did 85 pre-construction transfers last year,'' said Zilbert, who plans to start listing units online in October. ``They were very time consuming. My goal is that I can wake up each morning and have sold like 12 units.''
But to succeed, Zilbert must persuade developers and their sales teams to cooperate. The reason: Sales contracts typically prohibit pre-construction buyers from selling without permission from the developer. If a buyer violates ''paragraph 22'' -- so named because of its location in sales contracts -- he risks forfeiting his condo unit and 20 percent deposit.
''Mark has invested a lot of money on this, but if the Related Group comes down on him, he is out of business,'' said Miami Beach-based EWM broker Kevin Tomlinson.
Several developers contacted said they aren't interested in allowing pre-construction buyers to flip units online before closing. ''Our business model is totally different,'' said Bruce Weiner, president of Turnberry Associates, a major developer.
But Zilbert said others are considering it and plans to announce arrangements with developers in September.
DETERMINED TO STAY
Alicia Cervera Lamadrid, an important player because she sells and re-sells many preconstruction condos, didn't rule out the idea of listing pre-construction units with condoflip.com. ''I think Mark, like anyone on the cutting edge, has some hurdles to overcome,'' she said.
Zilbert said he is not going away. "I will drag brokers and developers into this kicking and screaming. I am not approaching this as a cocky person, but they will have to deal with me.''