What's It Really Worth? (revisited)

The Surf oceanfront condo downtown Cocoa Beach with the Coa Restaurant and Coa Lounge ground floor. The restaurant and lounge opened last week.

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This a post from 2015 with updated numbers and stats. The updated version was first published at Larry's Take at Substack on March 20.

"What do you think it's worth?" That's the (literally in some cases) million dollar question. No one wants to sell for less than actual value or pay more than, but no one, appraisers, tax authorities, Realtors nor Zillow, has an always accurate method for determining present value of a property. In the rare situation of multiple recent sales of identical properties we can get very close. For everything else, looking at recent sales of the most similar properties, holding a wet finger in the breeze and adjusting accordingly is the best anyone can do to estimate current value. These adjustments are where the variations happen.

How much more, if any, is an identical 10th floor unit worth over a 4th floor? 3rd over 1st? How much should I deduct for no garage or add for a second garage? No elevator? High ceilings? Forty year old versus 15 year old building? Is a weekly rental unit worth more than a three month minimum rental unit? How much discount for a compromised ocean view? Is a complex with tennis courts worth more? How about reserve account balances? There are so many variables that the best anyone can do is come up with their best idea and hope to land on the good side of their estimate.

This is where it can get interesting. If I do my homework and crunch the numbers carefully and come up with a number that I trust is close, I will probably still have to be flexible if I hope to consummate a sale as the other party's opinion of value is almost certain to be different than mine. If I treat my number as a line not to be crossed, I am setting up for failure. I have seen deals fall apart with buyers and sellers whose drop-dead numbers were ridiculously close but which neither would violate. If I am selling in a dropping market, it may not matter if I accept an offer for less than I had hoped and, in fact, it might be prudent. Same holds true for buying in a rising market. If similar properties have been appreciating, paying more than my opinion of value might make sense. This is especially true when inventory is low, unlike today. For everyone involved it helps to remember that both sides' numbers are ESTIMATES.

Where do we start? Let's look at our bread and butter property here in Cocoa Beach and Cape Canaveral, a direct ocean condo with two bedrooms and two baths. The usual starting point for estimating value of properties of similar size and condition with similar attributes is price per square foot. Direct ocean units currently for sale with two bedrooms and two baths have an asking price per square foot ranging from a high of $668 to a low of $313 per square foot. Both the high and the low may actually be priced to perfection depending on their amenities and condition which are varied. There are 19 units asking more than $450 per square foot despite the fact that only one unit has sold for more than $450 a square foot in 2025. That unit in a weekly rental building closed for $497 per square foot yet there are three units in weekly rental buildings currently asking more than $600. Unwarranted optimism? Probably. Remember, opinions and differences thereof.

Excluding the brand new units in The Surf downtown Cocoa Beach, and a one bedroom unit at The Oaks in Cape Canaveral, units of all sizes closed since January 1, 2025 with an unobstructed east ocean view sold for between $329 and $497 per square foot with half landing between $345 and $442 per square foot. To put that in perspective, that means a typical 1300 square foot, direct ocean 2/2 unit will most likely sell in this market for somewhere in a range of $448,000 to $575,000. Conditions, rental restrictions and amenities will determine where in that range, or outside it, a unit’s value is. Don't marry your opinion of value. There is obviously a lot of wiggle room surrounding it.

Our takeaway: Your opinion of value, just like mine and every seller's and every buyer's is just an opinion. The owner of the weekly rental condo who just dropped his price to $668 per square foot no doubt thinks his opinion of value is correct and that that price should surely attract a buyer. Now if he can just find a buyer with the same opinion he may be able to sell. Before the Boardwalk top floor 2/2 closed last month for $497 a square foot I thought that $450 a square foot was probably the top in this market cycle for any older, unexceptional 2/2 oceanfront condo here. My opinion had to change. Flexibility, my people.

There have always been outliers that sell outside the range and there will continue to be. There are units that deserve consideration even if above our recent selling range but those better be exceptional units and/or in exceptional buildings. In my opinion, most of the units currently asking above the recent selling range are unlikely to sell close to their current asking prices. The exploding inventory and growing reticence of buyers does not bode well for the sellers at the optimistic end of our pricing spectrum. Perhaps my take is flawed. We can hope.

"When I found the skull in the woods, the first thing I did was call the police. But then I got curious about it. I picked it up, and started wondering who this person was, and why he had deer horns." ___Jack Handy

Spreading Acceptance

Some of the listing and pricing histories of older MLS listings in Cocoa Beach and Cape Canaveral resemble the five stages of grief expressed numerically. The oceanfront condo that hit the market a year ago asking $629,000 that is now at $419,000 after eleven price drops appears to have reached the acceptance stage but the market may yet test that. Same story with the Cocoa Beach house optimistically listed a year ago for $1,050,000 now asking $699,000. Some of the other long-lived listings tell a different story. The listing that has reduced their price by just 3% from $459,000 to $445,000 over the course of two years tells me this seller either isn’t serious about selling or they’re unable or unwilling to bring outside cash to the table to cover negative equity. If the latter case, it’s an incubating short sale. That seller is, after two years, still in the very first stage of denial.

The overall optimism of sellers in our market is waning. A lot of listings have been languishing for months (85 for six months or longer) while more realistically-priced new listings are picking off buyers. The practice of pricing crazy high and hoping for a miracle is still alive just not as widespread as it was before last year. Some of those who went with this method in 2023 and 2024 failed to sell and their properties are among those still sitting on the MLS. In an appreciating market, like ours was up until 2022, pricing ahead of the trend worked sometimes. Problem is, we are no longer in a rising market and that strategy is not working. Agents and sellers are getting the message and the trend with new listings seems to be headed towards more realistic initial asking prices. Whether this will lead to increasing transaction numbers remains to be seen. We are well behind recent years in closed sales so far this year so I remain pessimistic about activity rising to anywhere near historical levels. The new units closing at The Surf condo downtown Cocoa Beach have propped up the number of closed condo sales making our market look healthier than it really is considering that most of those contracts were signed years ago.

Warning of the day: Transaction (junk) fees. It’s a repeat and longtime readers can skip this. You’ve heard it all before. Nothing has changed and people are still being robbed.

It’s one of my most often repeated messages but there are still consumers who don’t understand what they should expect to pay a real estate broker or how. Brokers and agents are taking advantage of the confusion and profiting from it. I was reading messages on a real estate forum yesterday and someone asked about two buyers’ agents they had interviewed. One was asking for 3% commission PLUS a $425 “administration fee” and the other wanted 2.5% PLUS a $725 fee.

Which is the better deal? Wrong question. One may be better than the other but they are both bad deals for the buyer. Despite the agents’ probable presentation of the fee as a normal and common expense, it is not. Asking a buyer to agree to pay a commission plus a junk fee is proof that those agents are putting their own interests before the client’s. The fee is one they owe their broker and it is no different than the agent’s MLS fees, a cost of doing business. Those agents have the freedom to work at a brokerage that doesn’t charge transaction fees or that keeps them low so that clients don’t wind up being asked to pay them. Hundreds of thousands of real estate agents in the US never charge a fee on top of the commission. They and their brokerages manage to thrive without resorting to what amounts to an auto-gratuity of a few hundred dollars slipped on their clients’ tab on a deal that they already made thousands on. Adding insult to injury, many if not most agents who engage in this odorous practice pitch the fee as “non-negotiable”. Don’t pay it and don’t leave your car keys unwatched around any agent who tries to get you to agree to one. If asked to pay one, ask the agent if you should include an extra $92 for the current quarter’s MLS dues. I mean, why not?

For those who may not have noticed, this is a warning that the speed limit through downtown Cocoa Beach and to the south end of town is now 30 MPH and there is a speed bump on southbound A1A at south 1st St. and northbound at 20th St. Cops are out and are willing to write you an invitation should you not be able to stay close to 30. You’ve been warned.

Write me up for 125

Post my face, wanted dead or alive

Take my license, all that jive

I can't drive 55

_Sammy Hagar

 

Condo Conspiracy - It's worse than we thought

Was the Florida Legislature’s response to the collapse of Champlain Towers South less about avoiding another building collapse than it was encouraged and guided by interests that stood to profit from the resulting legislation? It’s starting to look like the guidance presented to the legislature by the task force had a secondary motive beyond the headline of building and occupant safety. What if legislation could be passed that would put undue financial burden on condo owners in older buildings leading to opportunities for developers to buy out condos on prime property that could then be redeveloped?

Members of the Florida Bar’s task force assembled to guide the legislation have admitted since that while the aim was never to “create financial stress or inordinate burden on anyone” it “would lead to new redevelopment opportunities for developers”. Members of that task force now appear to have been biased even by those like myself who were, at the time, too naïve to suspect that.

It’s beginning to look like our legislators were hoodwinked into passing legislation that would put financial hardship on every condo owner in the state for the benefit of a handful of developers who had their eyes on older condos in south Florida as redevelopment targets. Even our Governor who signed the bill has realized the unintended consequences and has said the new reserve requirements are “imposing costs in situations where it’s not like the integrity of the building is at stake.” Meanwhile condo owners all over Florida including Cocoa Beach and Cape Canaveral are suffering the consequences of substantially increased fees to maintain the newly required 100%-funded structural reserve. While that may not bother owners who don’t intend to sell in the near term, it is front of mind for some of the older residents on fixed incomes that suddenly find themselves struggling to pay their higher condo fees.

Read the entire story as brilliantly researched and written by Alexandria Glorioso and Rebecca San Juan at the Miami Herald here: 

"Since you're a gunslinger, you can't start crying about getting shot." _Chuck D

Wicked Games and Lies of Omission

[First published at Substack on Feb. 21]

The State of Florida initially gave condo associations a deadline of December 31, 2024 to complete milestone inspections and structural integrity reserve studies (SIRS) but later agreed to allow them until the end of 2025 to begin funding of the new structural reserve fund. Affected condos in Cocoa Beach and Cape Canaveral are all those with any buildings three stories or higher and 25 years or older.

True to their history of procrastination, many associations chose to take advantage of that grace period to delay the funding in addition to those who already missed the first inspection and SIRS deadline which was about 20% of condos in some cities like Clearwater and as much as 62% in southeast Florida. The fees at some condos in our area suggest that they have yet to increase their fees to comply with the funding mandate even though they may have the completed SIRS and know how much increase is going to be required. I suspect some of them will stretch out the delay right up to the December deadline. That makes their fees lower than similar units and for those owners trying to sell, more attractive to prospective buyers who don’t know that games are afoot.

No master list exists for buyers to identify those associations but a good hint for prospective buyers are fees that are substantially below other similar complexes. Looking at the current inventory of condos in our two cities, the median monthly fee for a unit with at least two bedrooms in an oceanfront complex is $920. For all condo types the median is $716 per month. Regardless the advertised fee, hopeful buyers should confirm that funding for the structural reserve fund has begun in full before making an offer. If an advertised fee seems too good to be true it probably is.

TL;DR A condo may have completed the structural integrity reserve study but plan to delay the start of funding possibly until the new deadline of December 31, 2025. Buyers should not assume that the existence of a completed SIRS means that the current fees include that funding. Confirm that funding for the structural reserve fund has begun with a copy of the approved 2025 budget. Knowledge is power.

“You’re all in this together whether you know it or not.” _Charles Manson

Fees, Fees and More Fees

A bright full moon rising over south Cocoa Beach last night. [First published on Feb. 13, 2025]

The City of Cocoa Beach has proposed to increase fees for vacation rentals. The increases are breathtaking and anyone looking to purchase a vacation rental property in Cocoa Beach should take them into consideration when estimating costs. The initial application and registration of a new vacation rental is proposed to increase from $525 to $2500 and the annual renewal of the same to go from $325 to $1500. If that got your attention, here is the entire list of proposed new fees. How about those $1000 a day fines for some infractions?

I had the pleasure of dining at the new Koko Japanese Pub across from City Hall downtown Cocoa Beach last night. Based on that one experience which was just three sushi items and a dessert I’d give a hearty thumbs up to our new neighbor. The yuzu ponzu sauce on the hamachi crudo was especially good as was the scallop tiradito with cilantro micro-greens. Our meal began with the bluefin roll made with three different cuts of bluefin which was likewise excellent. I don’t remember much about the tres leches cake sprinkled with chocolate crumbles other than that I kept repeating, Yum. It was delicious. The service was friendly and the atmosphere cozy. I’m pretty picky about restaurant meals but I liked everything about my experience there. I’ll be back. Koko Pub is a win for Cocoa Beach.

“There is nothing government can give you that it hasn't taken from you in the first place.” _Winston Churchill

Insurance Good News/Bad News

First published Feb. 10.

I was surprised and slightly suspicious to see a headline last week that Florida Governor DeSantis had announced a victory in stabilizing the ascending rocketship of homeowner’s insurance premiums in our state. It didn’t take much digging to uncover the rest of the story.

First the good news: For about 20% of policyholders with state-run Citizen’s Insurance, mainly in the southeast corner of the state, their renewal premiums will be slightly less than last year (5.6% average reduction). This is after multiple years with double-digit average increases; 10% in 2022, 10.7% in 2023 and 12.3% in 2024. It’s welcome news for that 20% of Citizen’s policyholders. For the remaining 80% of policyholders, their renewal notices will look like more of the same old, same old.

For the most common types of homeowner policies for a primary residence the statewide average increase is estimated at 6.6% and for all property types up 8.6%. For second homes and investment properties and all non-primary residence accounts, the average statewide increase will be 17%.

Note that Citizen’s does not provide flood coverage nor is flood damage covered by a homeowner’s policy from Citizen’s or any other insurance company as many property owners on the west coast of Florida found out last year during the two storm surge events. Flood insurance must be purchased in a separate policy through the National Flood Insurance Program. Another unwelcome discovery for many homeowners who did have federal flood insurance were the coverage limits. No matter the value of one’s home the maximum coverage available under the federal flood program is $250,000 for the structure and $100,000 for the contents. While welcome, a $350,000 check was little consolation for owners of multi-million dollar homes that were destroyed.

I’d be interested in hearing from readers about their own insurance increases. I have heard from some homeowners whose increases the last few years with providers other than Citizens far exceeded the already high average increases I noted above.

After a particularly frigid January, we woke up one morning last week to find that summer had arrived overnight. Straight from snow suits one day to shorts and flip flops the next. Hey, I’m not complaining, at least not about that. I will however repeat my annual whine about the seasonal slow play at the Cocoa Beach Country Club. If one is fortunate enough to actually be able to secure a tee time, it would be prudent to let the spouse know to expect an extended absence rather than to finally drag in the door five hours after teeing off. We expect slow play during snowbird season and prepare for it mentally but the reality is no less a bummer for that prep. We will survive. First world problems and all.

“Among men, hyperbole and character assassination mark the parameters of friendship.” _Doc Ford

Supply>Demand

As of this morning (first posted Feb 7) we have a total inventory of residential properties in Cocoa Beach and Cape Canaveral of 408 properties, 351 of those condos and townhomes. That is up from 346 total on December 28, an increase of almost 18% in five weeks. We haven’t had this much inventory since 2011.

In the most recent 30 day moving averages, properties closed for 91% of their original asking price and were on the market for 106 days. Average time on market of the inventory is dropping as new listings pour onto the MLS. However, in the midst of the flood of new listings, 20% of the current listings have been sitting for over six months. Over 40% of properties for sale today have come on the market just since mid-November. The 81 sellers who have been trying to sell for over six months have watched as 233 other properties around them found a buyer and wondered, “Why not me?” All while inventory continued to climb.

There may be issues with specific properties that explain taking over half a year to sell but in the vast majority of cases, the price is the issue. I would repeat my advice to sellers that now is not the time to play chicken with asking prices. With increasing competition and waning buyer demand, anyone hoping to sell has to accept that the market has changed and what the neighbor got last year is no longer relevant. I can’t predict what the market will do but the direction since early last year has been against sellers. Sticking with last year’s price and hoping for the market to heat back up might be the wrong bet. Fairly priced properties are selling. Over-priced properties are sitting. Sellers have the power to choose which group to be in.

“Market forces have a way of cutting to the chase rather quickly.” _JB Pritzker

I Just Want to Break Even

This post originally appeared at the new site on January 30. All new posts appear there first and most are republished here several days later. Some posts will only appear there. If you'd like access to all posts as soon as they are published, you can find them at this link. You can receive notifications of new posts emailed to you by subscribing for free. 

I’ve heard some variation of the “I just want to break even” many times over the years as new buyers embark on a search for a beach condo. Many buyers of oceanfront condos who don’t plan to reside in the unit hope to generate some income from their unit when they’re not using it. This is entirely possible in most condo complexes. The exceptions are those condos with long minimum rental restrictions. If a complex has a one year minimum rental period, of which we have quite a few like Xanadu or The Constellation, an owner’s plan to stay in the unit occasionally is not going to work. Likewise a complex with a six month minimum rental period like Coral Sands or Water’s Edge is going to be difficult to rent if the owner plans to use it during our high season between around Christmas through Easter. Finding a renter for at least six months that don’t include the months of December through April is difficult. Some owners get lucky but many sit empty when the owners aren’t there. The same holds true for three month minimum complexes like Solana Shores or Park Place. For owners who don’t plan to use their unit during snowbird season, finding a renter is usually easy and rents are highest during that time.

The chances of finding a renter outside of snowbird season become much more likely with minimum rental periods of a month or less. It’s not unusual to have visitors who stay for at least a month during the summer months. However, the bulk of our summer visitors are here for only a week or two so a one week or less minimum offers the greatest opportunity for income while still allowing some personal use. We have quite a few condo owners who stay in their units for snowbird season and enjoy income from weekly renters the rest of the year.

If you are hoping to buy an oceanfront condo that generates enough income to break even, your best shot at that is with a unit with a minimum rental period of one week or less in a complex like Sandcastles or Cape Winds. With decent management most of these units can cover all expenses and turn a profit. How much depends on how much and when the owners use the unit for themselves. Here’s a related post I did ten years ago with more on this subject.

All the Wrong Questions

Larry Walker

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June 22, 2015

The brutally cold winter of 2015 reignited a common dream for many, that of owning an income-generating vacation getaway in a warm oceanfront place. Cocoa Beach has made that dream a reality for many. Over the years I have gotten scores of requests for an ocean condo that would pay for itself while serving as a getaway for the owner. For most people, t…

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I hope everyone enjoyed our brief warmup this week. It’s been an unusually cold January. As we get into February I’m expecting a busier season than usual because of snowbirds displaced from their usual winter spots on the west coast of Florida that were damaged or destroyed by the hurricanes last year. Welcome.

On the wisdom of attending timeshare presentations for the free gift, Nisiprius said, “Stealing bait from mousetraps is dangerous, and I have a friend with an unwanted timeshare to prove it.”