"Creative" Sales Raising Suspicions In One Escondido Condo Development In Financial Trouble As Some Recent Transactions Resemble Straw Buyer Deals

In Escondido, California, North County Times reports:

• In the middle of a historic recession for North County's housing market, one south Escondido condominium complex experienced an extraordinary burst of sales. Twelve small units in Brookhaven Condominiums, a development of two converted apartment buildings, have sold since December for $360,000 or more ---- roughly double the prices of similar condos in the neighborhood. Indeed, the dozen Brookhaven units had surged by 31 percent in value since 2006, even as the median price of condos in the area plummeted 54 percent. Neither Brookhaven's developers nor their bankers would explain this remarkable performance, despite repeated requests from the North County Times.(1)

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• "You would think that after the huge market meltdown, that banks and lenders would be paying a whole lot more attention to make sure they're appropriately pricing the collateral," said Paul Leonard, director of the California office of the Center for Responsible Lending in Sacramento. With no knowledge of the Escondido condo market, Leonard said he could not comment specifically on the Brookhaven complex, but "to the extent that I hear about transactions like this one, it's clear that there are still some problems that need to be fixed."

For more, see Surging condo prices raise questions (Facing default, developer pulls off string of high-priced sales).

(1) For another recent story of a condominium developer using creative homebuying incentives to unload unsold inventory, see Promenade condos scarcely populated (Though sales are stalled, residents have faith luxury condos will avoid fall).

• [The developers real estate broker] said some new buyers may be eligible for a promotion in which the developer will pay the buyers' mortgage payments, property taxes and association fees for three years [claiming] "It helps keep the property value up for three years - That's the responsible thing to do. You want to keep the comparables up for sure, you don't want to hurt the property value of the building."