Welcome to REO SOLUTIONS with Jack Studnicky…

Countless millions of dollars are at risk as Miami Developers and their lenders sort out which side of the balance sheet they will end up. There will be winners and losers as both try to sort out some very complex ifs and hows. This long-anticipated revitalization of Miami depends, for example, on “how” the remaining 9,000 empty condos are liquidated.

This is the next big opportunity if you are on the selling side of the problem. Dozens of new WORKOUT firms are being formed to take advantage of what these opportunist see as a windfall as Vultures begin to circle these wounded buildings.

If you´re a developer or banker, you aren´t quite as exuberant as you assess the potential battle ahead.
Developers and banks are confronted with losing mega millions and neither is willing to do so without a fight. It is an incredibly tough time for everybody. The stress, tension and hostility, between people who were once allies is overwhelming and only the coolest heads will prevail.

Let´s review the situation: For starters, the legal maneuvering required to keep a sane balance between developers and lender is an unusual talent. If a “fight” breaks out, the standoff makes big losers out of both camps. If “fire sales” start, the only winners are the vultures. Everybody else gets caught in the tailspin of the depreciating real estate values that are already below replacement costs. The developers and banks end up holding an empty bag full of debt and a soured relationship.

The bankers call me Jack Magic, not because I make REO magically disappear but because of the higher sales prices we dedicate ourselves to achieve on the  sales floor. This takes experience, insight and the connections to navigate the turbulent world of REO workouts. I did my first bank workout in 1975 for what was then Chase Manhattan Bank. The town was Ocean City, Md. It was a beach retreat for the D.C. and Baltimore elites. The beach was lined with 25 luxury buildings representing 3,000 empty condos and a couple  of “see through” buildings to add to the visual signs of distress.

There had been a whopping 11 sales made on the entire beach between 1972 and 1975. Nothing — absolutely nothing — was  selling. Finally, Chase Trust came in on a friendly foreclosure basis to save the developer and the building. Chase gave me, an inexperienced workout agent all the tools I needed to “give away” the real state. That was a big mistake as I started a fire sale and stoked the flames that roared up the beach like an inferno.  Back then nobody knew the negative impact of a “fire sale” and it destroyed the market by establishing a very low pricing benchmark. It took 15 years for the values in Ocean City to return to normal.

Unfortunately, the bank had waited too long to take a reasonable asset “hit” and come to the rescue of the developers sooner.  Accordingly, millions of dollars evaporated that could have been saved had the banks acted sooner in protecting the asset. In retrospect and 50 “workouts” later I´ve learned some great lessons and we don´t give real estate away anymore.

In the early 80´s the government stepped in and formed the RTC, Resolution Trust Corporation. Over the next decade most of the real estate from defunct Savings & Loans was finally absorbed. Happily, the government isn´t stepping in this time and the services of an experienced WORKOUT EXPERT is a decision that should be placed at the top of the WORKOUT list…