Is A ‘Tidal Wave’ of Homelessness Coming To Your Market?

Written by Posted On Monday, 13 July 2020 05:00

According to Orlando Sentinel’s headline on July 2, 2020, Jeff Hayward, president and CEO of the Heart of Florida United Way, said he thinks one is coming to Central Florida.

“Despite an 11th-hour reprieve from evictions and foreclosures until August 1, Central Florida is still heading for a ‘tidal wave’ of homelessness in the coming months as federal unemployment subsidies end, utility companies shut off the power to delinquent accounts and landlords are eventually cleared to order out tenants with overdue rent.” 

Hayward was speaking in a virtual news conference to implore leaders to act. Howard said that there are still 14 million people in Florida who are jobless, and “what I don’t see anywhere is a plan.” 

“The money is gone,” he said. We raised almost $2 million, and we have a $17 million need. Some 14,000 people are still on a waiting list.  

“Non-profits have been drained by parallel cruelties of the pandemic. Fundraising events have been canceled, and donors who rely on profits and stock market earnings to fuel their contributions have less and less to give,” Hayward said.:

Here’s what could happen:

1. The problem, if not addressed and solved, will take years to resolve.
2. Millions of delinquent families may  be living without power,  then evicted for overdue rent, with no place to live.
3. Rental apartments will go into foreclosure and sit empty or vandalized.
4. Lenders will find themselves in the apartment auction business.

Millions of these tenants had good jobs and excellent credit, just a few months ago. They want to go back to work and at point most will. 

We are in a situation that requires a lot more than thinking ‘out of the box”. There is no box. There is only American ingenuity, and for more than 200 years, that has been enough.

Here’s the plan. Its called the Stay Home plan. The objective is to help as many current tenants stay where they are. The economy is rebounding. All involved need more time.

The Big Idea: Convert rental apartments to condominiums.  

How it works: Tenants become condominium owners. 

1. The benefit to the apartment owner – prevents losing his equity in a foreclosure. 
2. The benefit to the lender  –  not forced to foreclose apartment buildings.
3. The benefit to the tenants who become buyers – do not have to move. Protects their credit and can start building equity for a later home purchase or lease. 

Keys to making this work:

1. Apartment owners who are willing to convert their apartments to condominiums.
2. Overdue rent is paid at condominium closing, helping to reestablish credit.
3. Lenders, perhaps the apartment owner’s lender, must provide affordable mortgage rates and terms. For example, offer mortgage financing to creditworthy tenants at monthly payments less than their lease payment, including association fees. Add a one or two-year balloon to a long-term fixed mortgage to give the tenant the lowest possible payment, with a one or two-year mortgage payment history and restructure as required or needed.  

There are no doubt thousands of apartment renters who have run out of money and about to run out of the excellent credit they maintained for years. They are living in the worst conditions of hopelessness,  not have the slightest idea where to find a job. 

Waiting at the end of their needs is the United Way and many other nonprofits who will do all they can to provide the necessities of life, except a home. These groups are experienced, organized, yet short of help and funds.

Let’s say Apartment Owner Smith thinks converting his apartments is a good idea. Here are some suggestions to kickstart what the business model might look like:

Offer tenants first refusal to purchase a condominium, with incentives to purchase ‘as is.” 

1. The price they pay for the condominium is 20% less than the base price offered to the public.
2. Down payments could range from zero to more based on credit score.
3. Mortgages would ballon in 1 to 3 years to give the lender the option to renew or not, based on payment history. A balloon provides time for millions to find work and reestablish their credit and gives the lender the authority to renew the mortgage or call it with a year or two.
4. Monthly expenses must include association fees and be kept as low as possible. Mortgage loans could balloon in say 1, 2 years, again based on credit score and other factors, to protect the lender.
5. A lease option might work. 

Apply a portion of monthly payments toward a credit worthy down payment.  

One caution to lenders: Early sales to investors and speculators tend to generate a false sense of sales momentum followed by price increases that will prevent tenants from qualifying for a mortgage. 

Controversial? Maybe. But compared to the alternative. Not at all.  

For those experts who claim that less than 10 percent of the tenants will make a purchase, I say, that may be true. That is a good reason that the first apartments to convert should benefit most. Tenants in apartments not converting will become part of the condominium’s target market. 

These are simple ideas to try to give millions of helpless and soon to be homeless families what they need, hope and beyond that a place to live.

I know all the reasons this might not work. But we are Americans. With God’s help, we figure it out.

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David Fletcher, NHCB

David Fletcher is a co-founder and CEO of New Home Co-broker Academy LLC., an online e-commerce business. Visit David's website to take his famous 3-hour online course, How To Build  A New Homes Niche, to become a certified New Home Co-broker (NHCB). More than 5,000 graduates. Content is based on his long career and onsite sales success working with both builders and Realtors to list and sell more than $3 billion in new construction. If you are a broker who wants to offer your agents a way to add new homes to their resale inventory and home shoppers, this is your solution. 

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