If the unprecedented number of real estate foreclosures didn’t hurt South Florida, the upcoming hurricane season likely will. A large Category 4 or 5 storm could wreak more than structural havoc on empty buildings; some believe the financial damage and related insurance, repair, and demolition costs could send Florida’s economy into an even deeper state of distress.
Thousands of foreclosed condo properties currently sit abandoned in South Florida. Experts say these properties will be more susceptible to financial and property damage if the banks don’t protect them. The National Hurricane Center reports 2005’s Hurricane Wilma caused the region $16.8 billion in damages, which is why real estate experts such as Jack McCabe say it’s in Florida’s best interest to safeguard these properties.
“If we get hit by another hurricane such as Wilma, it will not only be devastating, it will be catastrophic to the real estate market and Florida. We don’t have the money to repair the damages another hurricane could cause. The repair costs alone could throw Florida’s economy in the same category as California,” says the real estate analyst and CEO of Deerfield, Fla.-based McCabe Research and Consulting.
Since property insurance rates are expected to increase about 10 percent to 15 percent this year, this means banks may be left with more of the repair bill. McCabe estimates a single abandoned condo property can face at least $35 million in property damages. “Just imagine the repair bill the area will have if these abandoned buildings plus other properties are hit,” he says.
On average, most Florida residents do not learn the category of a hurricane until a week before it hits. McCabe says that is not enough time to prepare these properties and put minds at ease. Should the banks decide to safeguard these properties, they would have to hire listing agents who would then have to hire property preservation companies. “Seven days to board up thousands of abandoned properties? I don’t think so. Some banks will shell out the money to protect their propertiesp; others won’t. It may just be easier to bulldoze the building,” he says.
Peter Zalewski, CEO of Bal Habour, Fla.-based Condo Vultures Realty, says people who live near these abandoned condo properties may have to fend for themselves. “It’s really like a game of Russian roulette. We don’t really know what can happen. It would behoove residents to take matters into their own hands. They may have to clean up the leftover construction debris or board up as much windows as they can because the banks can’t deal with all those listings,” he says.
However, Robert Klein, CEO of Valley View, Ohio-based property preservation company Safeguard Properties says his company is prepared to handle whatever outcome. “We [are working] with the industry investors to establish procedures and address potential disasters and disaster aftermath, [as well as] take steps to address damage that may have occurred,” he says. Safeguard represents hundreds of mortgage servicers and lenders across the country.
There is an upside to the situation, Zalewski asserts. He says a hurricane could jumpstart the removal of excess inventory in South Florida. “A hurricane means huge discounts [of up to] 50 percent for buyers. It’s detrimental to sellers, but advantageous to buyers,” Zalewski says.
McCabe, however, believes that outcome is only a temporary fix. “It could create some job opportunities as far as demolition goes. But how long will that last?”
Only time will tell. Until then, South Florida will have to continue to play a guessing game.