The story of the New Jersey firefighter whose family is the sole occupant of a high rise apartment tower in Fort Myers, Florida has been making the rounds. The oddity of it is generating a bemused buzz, with Google News identifying 507 articles on it.
No one seems to be looking past the headlines to question how this actually was allowed to happen. A cursory review of events reveals that some combination of fraud and incompetency had to occur in order for events to have transpired as reported.
While the visual of a 32 story apartment with but one light on may make for good TV, it reveals many of the same issues that underlie the entire housing collapse: Some form of Appraisal Fraud, Corruption, and significant incompetency of the lender.
First, the story:
“Victor Vangelakos and his family never have to worry about noisy neighbors in their luxury condo on the Caloosahatchee River.
There are no neighbors.
Vangelakos, 45, his wife, Cathy, and their three children are the only residents in the 32-story Oasis I condo on the east edge of downtown Fort Myers. The Weehawken, N.J., firefighter bought the condo from The Related Group, based in Miami, for $430,000 and closed on it in November. He planned to make it a vacation getaway and eventually his full-time residence when he retires in four years — but prices have fallen hard since the real estate bubble burst in early 2006.
Only a handful of those who put down deposits on the tower’s units actually closed on the deal. Those who did have swapped their Oasis I units for condos in Oasis II next door.”
This transaction appears to have closed late in 2008 — 3 years into the Housing collapse. Reports have the original purchase being made in 2005, (I assume that is pre-construction).
Did the lender (JP Morgan Chase) do their job? Did the Appraisal and Title firms actually perform their duties? If so, then how did this mortgage ever get approved? How did this transaction close?
• Flawed Appraisal: How on earth did this property appraise for $433K ? There is a glut of Condos on the market in South Florida. And in case you forgot, Florida is the number 2 state in the nation for Foreclosures. (Trulia reported 35,000 local foreclosures).
Who was this Appraiser, and what the hell did they do other than rubber stamp the purchase price? At best, its neglient/incompetant discharge of duty. It looks to me more like the typical appraisal fraud we have seen over the years.
• JP Morgan Chase Due Diligence: Did the lender do any kind of due diligence? Even a cursory review would have shown the property was essentially unsold. How could they reach a determination of the property value at $433K? As the photo above shows, this was not the top floor penthouse that might be worth $1 million dollars if the building sells out.
How did they approve this purchase price without considering a) current market conditions and b) number of units sold in building? c) the reality that all other buyers had been moved to the second tower?
• Failure to Perform: The Developer obviously has failed to perform as contracted for in the purchase agreement.
As a side note, we cannot help but comment on the Big Lie — the statement from the spokesman from the Developer of the complex. Betsy Lu McCoy, vice president and associate corporate counsel for Related, stated: “We did not foresee, nor did anyone else foresee, the collapse of the real estate business and the concurrent collapse of the lending industry.” That is simply a false statement, one that is easily disproven.
My advice to the Vangelakos: Find a bright young attorney looking to make his bones on this case, one who will take it on for free (or low cost). Sue the Appraiser, the Title Closer, sue JP Morgan Chase, and of course, sue the Developer.
This mortgage never should have been approved for a lone apartment in a tower, and the transaction never should have closed. There is obvious Fraud somewhere here — now go publicize it.
Hat tip William!
Lone tenants in Fla. high-rise seek exit from deal
USA Today/The Fort Myers News-Press,
Fla. highrise has 32 stories, but just 1 tenant
Associated Press, Aug 1, 2009
The Related Group – Redefining Cities And Skylines