Another Conservatory Lot and a Ginn-Developed Hammock Beach Condo Sold at December Tax Deed Sale
Several properties scheduled to be sold were either redeemed or rescheduled, leaving only two Ginn developed properties on yesterday’s sale schedule.
Palm Coast, FL – December 9, 2009 – For the second time in two months, property in Ginn-developed communities were sold at a Flagler County tax deed sale. A lot in The Conservatory and a furnished Hammock Beach Club one-bedroom condo were sold at yesterday’s sale. In each case, there was more than one bidder; forcing the final selling price above the minimum opening bid.
The minimum opening bid is equal to the accumulated back taxes, interest, penalties, and administrative costs. The starting bid for the Conservatory lot was $17,039.53. One hundred dollars at a time, bidders arrived at the final price of $20,100. The lot at 403 Bourganville Drive overlooks a lake and the ninth hole of the Tom Watson-designed golf course. It sold in 2005 for $439,900.
Since a Conservatory lot sold at the October tax deed sale, several sellers (including banks) dropped their prices. A fairly active market has since developed for Conservatory lots, but selling prices are in the high teens and low twenties. These lots sold out quickly during a Ginn real estate sales launch where 337 lots were sold for prices ranging from $329,900 to $529,900. The launch generated approximately $142 million in sales revenue.
The minimum bid for the Hammock Beach one-bedroom condo was $21,194.44. Spirited bidding finally stopped at $65,900, the final selling price. This 678 square foot eighth floor unit was purchased originally in 2004 for $399,000. It was resold in 2005 for $525,000. MLS currently lists seventeen one-bedroom units for prices between $124,000 and $495,000. None have sold in the past two years suggesting re-pricing is in order.
The lenders were not present at either the October or December sales, apparently deciding to let the properties go. The lender receives any sale proceeds exceeding the minimum bid (after government liens are payed).
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Ugh
So as it relates to Conservatory being sold for the tax amount does that now mean that the original borrower will get a 1099 from the bank for roughly $400,000 in phantom gains?
If this was a case of a "strategic default" which nobody can blame them for at this point then the the IRS is going to smack them with a MASSIVE tax bill. The point about insolvency only works if they truly are insolvent. That is based on my understanding of the tax code.
It just doesn’t seem right.
Anyone out there who is a tax attorney or CPA that can weigh in on this???
UGH!!!
In answer to the tax question on the IRS hitting someone with a tax bill on the deficiency between the mortgage amount and any amount the bank received on the tax lien sale, it depends on whether the bank decides to go after a "deficiency claim". Florida is a recourse state and mortgage holders can go after deficiency judgments. Whether or not they do is dependent on many factors, much beyond the scope of this reply. Let’s say that they don’t, then the owner will get hit with "forgiveness of debt" income to the tune of the deficiency. However, the owner was an investor in this property and will have a loss for the full amount. Depending on their overall tax situation, they may be able to utilize the loss to offset other income, including the forgiveness of debt income, depending on the characterization of types of income and loss that person has. Bottom line, it could be a wash or it could be a brutal hit depending on their overall tax situation this year!!
RE: to David
Thanks so much for the response. For arguments sake, let’s just say the lender doesn’t pursue a deficiency judgment.
You commented that as an investor that they can write the whole thing off as a loss. Can you explain how someone could claim a loss of the full amount of the property when the bulk of the money lost was a loan? I see how they can count the Down Payment as a loss but not the balance of the loan which just got erased.
Thanks in advance. This is a real concern of mine and I’m trying to work through the details so I can understand it better and plan accordingly.
Bottom keeps getting lower
As many properties are selling at prices above the low, some are still going down for the count. Let’s hope 2010 brings jobs, as interest rates are lowest they have ever been, and yet prices only show signs of a bounce off the bottom. Maybe some in Flagler will get work from SunRail, but that probably will be help for mid range properties only. High end is waiting for the low end to get all the way back to where it was, before it has legs to stand on.