Sunday, October 06, 2019
We've been in this particular dynamic for well over five years now. Buyers should keep this fact front of mind when making offers. The chance of buying a property below fair market value is practically zero and even finding a seller willing to accept fair market value is not a slam dunk. With the majority of listings asking delusional prices fair offers are often rejected. Here's an excerpt from an older post about offering strategies:
I've prepared and received many hundreds of offers over the years and I've seen quite a few that never stood a chance of success, a large number recently. Beginning negotiations on a positive note helps, and price and terms of the very first offer set the tone. Regardless of commentary to the contrary, emotions are a real part of most real estate transactions. We have humans on both sides so it's reasonable to expect human reactions and emotions. Assuming a property is priced within the range of what the data suggest is fair market value, an offer reasonably near that range will usually be received by a seller as a constructive beginning. An offer way below that fair range is usually received with negativity and little to no optimism that a deal will be possible. Constructive optimism or adversarial negativity. That first offer determines the tone of the negotiations and often has an impact on final terms. Anyone making a crazy low offer should be prepared to have to start over at a higher number when they receive no counter from a discouraged seller. Another thing; I have presented enough low offers to know that if one part of an offer is unattractive the other parts better be compelling if there is to be hope for a deal. An offer far below asking might be considered if it's cash, with a quick close. Might. An offer with a close more than 45 days in the future, contingent upon a mortgage or even worse, the sale of another property, better be close to the seller's wished-for selling price to stand a chance of consideration. Buyers who are compelled to offer low should consider the attractiveness of the terms and make them as shiny as possible if they hope to have any chance of success. New, overpriced listing might need a little seasoning time on the market before an unrealistic seller will consider reasonable offers.
I'm waiting for someone to consolidate the largest concrete restoration companies in the state and put together an IPO. It could be huge with demand for contractors off the chart. Condo associations contemplating concrete projects are finding that wait times can run into years if their project isn't a particularly enticing one. Owners in buildings that have been putting off addressing concrete repairs are in for a shock when they begin requesting quotes. If your building is showing cracked balconies or walkways and your Board is not discussing this, it might be prudent to push for what's only going to become worse and more expensive. [Translation: a large and growing special assessment] Procrastination can be very expensive.
My hope that the ocean would calm down enough during the annual mullet run to allow for some relatively peaceful surf fishing has not been realized. The ocean remains disturbed and the running mullet are safe from my cast net as are the snook that those mullet may have fetched for me. Oh, well. There's always next year.
“I thought Twitter was driving us apart, but I’m slowly starting to think half of you always hated the other half but never knew it until Twitter.” __Michael Arrington
Tuesday, September 17, 2019
It's that time of year again, the mullet run is on and big fish are in the surf. Now if the wind and waves would calm down enough to take advantage of it I'd enjoy catching a few rod-benders and maybe get a snook for dinner.
What can I expect to get for my condo if I list it for sale next year? Barring some unknown influencing factor you can probably expect more than if you sell it today. Notice the qualifiers? So many things can happen to change the value that it is fruitless to estimate future value. Changes in taxation or ordinances, economic and natural disasters; none of these can be predicted and can drastically change a property's value overnight. On the other hand, estimating current value is a relatively straightforward process. We can usually find recently sold similar properties that we can use to determine approximate value of the subject property. The question then becomes; can we trust the comps?
Specifics of listed properties are sometimes inaccurately stated on MLS listings. Using a sold property as a comp and not catching an inaccuracy makes for a flawed comp and flawed projection of value on the subject property. Sometimes honest mistakes, other times, intentional. Square footage is one of the more common mistakes. I've never seen a property that claimed to be smaller than it actually was which makes me think this one is almost always intentionally overstated. When in doubt, go bigger. When every unit in the building is and always has been 1315 square feet, claiming 1711 on the MLS is likely to be picked up by agents familiar with the building. Others might not catch the error and use it as a comp to suggest/justify fair value of a different property.
Terms of sale: Beneficial financing terms might explain an unusually high price. Included furniture or lawn equipment will certainly push the final number up as will a post-closing occupancy by the seller. Paying for furniture off the closing statement will reduce the closed price but the listing agent is probably not going to change the "full" furnishings notation in the MLS when she closes the listing. Listing agents
Condition and quality of updates: A remodeled condo unit is worth more than an identical unit in original condition. How much more is the big question. The cost to remodel a 2/2 condo can vary by $50,000 depending on the extent of the remodel and the grade of fixtures and finishes used. Most sellers are firmly convinced that their remodel job increased the value more than it did. My job is to use reasonably similar sold comps to illustrate how their conviction is misguided.
Sellers and their agents are often guilty of confirmation bias and naturally select the comps that seem to justify the price that they want. As a buyer's agent I am constantly pointing out flawed assumptions and bad comps. All buyers would be well-served to understand the nature of determining fair value and the ways bad comps can justify a wrong valuation. I may be able to show a seller that his asking price is too high and my offer price is fair but that means nothing if there is competition for that particular property. There are cases where participation may include knowingly overpaying. Knowingly overpaying can sometimes make sense, knowingly being the key word. The buyer that overpays also establishes the newest comp completing the circle of price justification. I was reminded in a recent episode of Million Dollar Listing New York that the newest comp thing can work in reverse for sellers. Holding out for an unjustified high price can backfire if a new comp records at a lower price.
New York agent Steve had a client interested in two similar units in the same building. The two units were similar enough to expect to sell for about the same price. Asking prices were $7.5 and $7.6 million, both well above market value. The buyer offered $6.5 MM on Frederick's lower priced listing. Frederick advised the seller that $7.5 was optimistic when he took the listing but went ahead and took it at that price hoping she'd be realistic when an offer came. She wasn't and countered at $7.4 MM. When delivering that counter, Frederick insisted to Steve that, to be successful, an offer number had to be in the sevens. Rather than counter at 7-something, the buyer decided to offer $6.75 on the other listing. Steve presented the offer and told the listing agent that they had offered and were negotiating at the same time on the other unit. That seller with that knowledge decided to accept the $6.75 MM offer with no counter. With a new comp of $6.75 established in the building the first seller realized she wouldn't be getting 7-something and wound up accepting a $6.6 MM offer. Had she countered more realistically to her first offer, there is a good chance she could have gotten at least what the buyer paid for the other unit, $6.75 MM. Her inflexibility cost her at least $150,000. Reality sucks at times but it can be expensive to ignore.
Buyers and sellers both need to stay aware of other sales and competition of similar properties and to use those as guidance for pricing. Values are not static especially in an active market. If a new comp changes the landscape it's productive to change one's expectations with it. That goes equally for buyers and sellers. For a better score, do your homework.
Thanks to all of you who have contributed to the various relief funds for the people of hurricane-ravaged Abaco. It's going to be a long, long time for Abaco and its people to get back on their feet. In addition to their homes and belongings most have lost their jobs as well. If you haven't contributed but would like to help some particular and especially hard hit people consider giving to the staff at Cruise Abaco in Marsh Harbour. These are personal friends and are all good and currently needy people. This money goes only to the staff. These guys are surviving on donations at the moment and crammed into crowded shelters. Most can't consider coming to the US in the interim because of our immigration policy. If you want to help the Bahamas in general, there are many worthy charities found with a quick search. If you'd like to help Shorty, Luke, Joe, Aaron, Ray and all the other Cruise Abaco staff and their families, you can contribute directly through Mark and Patti's GoFundMe here and see updates on how your money made a difference. Everything is appreciated and not a penny will be wasted.
This is Shorty and his kids who have lost everything and are currently living in horrid conditions at an overcrowded shelter in Nassau. Shorty said the men take turns sleeping standing up supported by each other and the women and the kids get the bare floor.
“The simplest acts of kindness are far more powerful than a thousand heads bowing in prayer.” _____Mahatma Gandhi
Sunday, September 01, 2019
South Cocoa Beach the Saturday before Dorian.
Waiting on a hurricane. As of Wednesday last week the prediction was for Hurricane Dorian to roar ashore in Cocoa Beach as a Category 2 storm during the night tonight and tomorrow morning. As of this morning, Sunday, the latest prediction is for the storm to pass close offshore as a Category 3 Wednesday morning. This after sitting over my beloved Abaco as a Category 5 for two days. The impact there is sure to be extensive and heartbreaking. My heart is with the Bahamians even as I breathe a sign of relief at the possibility of not taking a direct hit here. There have been no casual conversations with anyone around here for the last week that was not hurricane related. Cocoa Beach this Sunday morning appears to be well-shuttered and ready as best we can be for what comes our way. Best wishes for everyone.
Our inventory is almost back at the 2015 record lows with only 187 existing condo and townhome units for sale in Cocoa Beach and Cape Canaveral. Single home inventory is equally sparse with but 43 existing single family homes for sale in our two cities. That is the lowest number in the last 15 years, possibly ever. The developer of the old Joyce's Trailer Park property in south Cocoa Beach has once again changed development plans, this time shifting from riverfront condo towers to a small neighborhood of single family homes offered at prices from $895,000 to $1,395,000. They of course come with promises of dockage and an over-the-water clubhouse that will sound familiar to the buyers of several oceanfront condos in south Cocoa Beach.
Sales of single family homes in August were tepid with thirteen homes closed in our two cities at prices between $314,900 for a fixer-upper in north Cocoa Beach to $1,995,000 for a brand new, two story, direct ocean home just south of downtown. That beauty has five bedrooms, 5.5 baths, two garages (3 spaces), 4275 square feet and a pool. Median price was over a half million with three of the closed houses over a million.
Condo sales were strong with 64 units closed, more than the same month last year. Median price was $250,000 with seven closed over a half million and highest, a 2nd floor Meridian at $765,000. There appears to remain strong demand for ocean facing units with prices steadily rising. Three units at Boardwalk downtown went under contract in one week all reportedly over $400,000. Royale Towers in Cocoa Beach has likewise been busy with multiple sales in the month.
I wonder how big a commission discount it would take for a typical seller to risk not listing on the MLS if they could reasonably expect their listing agent to produce a buyer willing to pay their price? If the agent is already attracting a steady flow of both listings and buyers he has the means to accomplish some sales at fair market price without the MLS. I see a potential new business model for some agents that doesn't include the MLS or other brokers and agents. Sellers should already expect a discount should their agent or his team bring the buyer but I can see that discount becoming much larger without the MLS listing. You heard it here first.
My lifetime of religiously recycling has been undone by a single pre-hurricane day's sales of bottled water at the Cocoa Beach Publix alone. An approaching hurricane is not a good reason to buy four cases of individual size water bottles in my humble opinion. Extra water on hand? Sure, just not dozens of small ones.
"If everything in your portfolio is doing well at the same time, it is a good indication that you are not diversified." __Ned
Sunday, August 04, 2019
Residential inventory in Cocoa Beach and Cape Canaveral has been slowly retracting for several months and currently stands at 203 existing condo units for sale in the two cities, approaching the all-time lows of 2015. There were 63 units sold in the month of July according to the Cocoa Beach MLS. Over half of those sold within six weeks of listing, For the first time in many moons, more than half of the condo buyers used a mortgage for their purchase. With rates for a 30 year mortgage well below 4% even those with the cash to purchase see little reason not to take advantage.
The bulk of the activity was in the lower price ranges with 70% of the closed units selling at prices below $300,000. The highest priced unit to sell in the month was a furnished 3008 square foot four bedroom, 3.5 bath beauty covering the entire 5th floor at Riomar on the ocean in south Cocoa Beach. At the other end of the scale there were four units in oceanfront buildings that closed for less than $250,000. The standout was a remodeled and fully furnished 6th floor direct ocean Windrush Cocoa Beach 1/1 that sold for $245,000.
There were ten single family homes closed in the month, two of them over a million dollars, one on the ocean and the other on the open river at the Cocoa Beach Country Club. Inventory of single family homes has plunged to just 45 listings in both cities, only two of those asking less than $300,000. The median asking price of the 45 single family homes for sale in Cocoa Beach and Cape Canaveral has risen to a shocking $599,000 with the highest current listing at $4.5 million for an oceanfront monster in south Cocoa Beach. Have no fear if your budget is south of that range. An updated, non-waterfront 4/2 Cocoa Beach home with a pool closed for $343,000 in July. Nice houses at a reasonable price are out there, there just aren't a lot of them.
Good hunting to those of you looking to purchase here. Feel free to contact me if you need help finding your spot at the beach or if you have questions about our little slice of tropical Florida.
“You said I’m full of diseases / Your eyes were full of regret / And then you took a picture of your salad and put it on the Internet.” Matty Healy
Tuesday, July 30, 2019
Sellers, it would be prudent to check your listing for accuracy and omissions even if your agent is an old seasoned pro. Their assistant may be the one entering your listing and she may have made mistakes. Missing condo name is not the only error that I see but it is one of the more egregious. I'm assuming the several listings offering less than one percent commission to the buyer's agent are just decimal point errors but how am I to know?
"I believe we are on an irreversible trend toward more freedom and democracy, but that could change." __Dan Quayle
Thursday, July 18, 2019
It's relatively common for a buyer to write an offer on a property with the offer contingent upon the sale of their current home. The offer will typically have a provision that allows them an escape should their current home fail to close within a specified period. It introduces unwanted uncertainty to the transaction for the seller but, if all are acting in good faith and the seller's agent protects her client effectively and stays in contact with the buyer's agent about the other sale, the uncertainty can be reduced.
The best scenario for a contract with this contingency is with a buyer whose house is already under contract, past the inspection period and with mortgage commitment. That is rare. It's much more common for the buyer's house to be listed for sale but without an accepted contract. In this scenario it is prudent for the seller's agent to determine whether the buyer's house is correctly priced and can reasonably be expected to sell quickly. In most cases I would advise a seller not to accept an offer contingent upon the sale of another property unless the other property was already under contract and reasonably certain to close or that I could confirm was priced to sell quickly. In the absence of reassuring circumstances I always advise against accepting this contingency with a house that isn't already listed for sale.
Regardless of circumstances I advise sellers to keep their property listed for sale as "accepting backup offers". When a property is marked "Contingent" in the MLS it disappears from searches for properties for sale. Our MLS and many others have a category called "Backups" which keeps the listing in the actively for sale category even though it has an accepted contract. It might be advisable to immediately reduce the asking price if the accepted contract is below the asking price to increase the chances of getting a backup. My opinion on backup contracts is well known to readers of this blog. For the seller, having a backup contract in hand effectively removes the uncertainties related to the other property closing and puts the seller in a postion to deny any requests for concessions or changes to the contract. In the event the other property doesn't close by the contract date, the seller can cancel and proceed towards closing with the backup contract. A contract without this contingency is obviously more desirable but these contracts, in my experience, do have a good record of closing.
Takeaways for sellers who might find themselves considering this scenario:
- If the first property is not already under contract have your agent confirm that it is priced correctly and likely to contract quickly. Consider contract language about price reductions if not under contract within X days.
- Insist that your agent stays in contact with the buyer's agent about progress of the sale/listing. Lack of communication from the buyer's agent is usually a bad sign.
- Keep your house listed for sale as "Backups" and aggressively seek a backup contract.
- Have a plan for failure of the contract and, in the absence of a backup, be realistic about requests for extension of closing date from the buyer.
I hope everyone has appreciated the significant difference in temperature here on the beach during this incredibly hot July. We have consistently been 5 to 10 degrees cooler than just a few miles inland thanks to the reliable, cooling sea breeze which begins midday most days. Orlando? Forget about it. As I write this, it's 7 degrees hotter there.
"Insanity in individuals is something rare - but in groups, parties, nations and epochs, it is the rule." __Friedrich Nietzsche
Sunday, June 30, 2019
The price range of sold units is closer to our usual range after the multiple high dollar closings at the new Flores de la Costa last month. Median price for condo units closed in June was $280,000. Six units in the month sold for more than $300 a foot, all but one of them direct ocean, new or furnished with garages. The one outlier was a small, 1st floor Spanish Main weekly rental 2/2 that commanded a remarkable $380,000. Oceanfront units sold as cheaply as $220 per foot but the majority clustered in the $250 to $300 per foot range. Those at the high end of the range were usually remodeled and with garages, often sold furnished. Exactly half of the sold condos sold for cash, no mortgage. Almost a third sold in the first week on the market.
Fourteen single family homes closed in the month, all but one in Cocoa Beach. Prices ranged from $775,000 for a nicely remodeled two story, five bedroom Cocoa Beach pool home on a wide canal intersection with a dock and lift to $274,900 for a small 3/2 south of downtown Cocoa Beach a block from the ocean.
Man, it's been hot. It's hard to enjoy the cheap summer green fees at the Cocoa Beach Country Club when all you can think about is avoiding heat stroke. Then there's the lightning. As I mentioned last post, be aware of approaching thunderstorms. They move in quickly this time of year, usually in late afternoon and are almost always accompanied by a lot of lightning. Get off the beach before the storm arrives. If you leave any gear on the beach be prepared for the winds to have rearranged or removed it.
Pros of being a young, single male veterinarian: Lots of female attention
Cons of being a young, single male veterinarian: Most of that attention comes from women very, very high up on the Cat Lady Scale seeking a medical sugar daddy for their cat harem. __Bill W
Saturday, June 15, 2019
One of my relatives asked for a contract review on the sale of their home in another city. Imagine my surprise at seeing "$395 transaction fee to be paid by the seller" written into the contract by the buyer's agent. Aren't they being paid commission already? Yes, in this case the buyer's broker was being paid $14,000, but the agent felt compelled to try and squeeze an extra $395 on top of that. She should be ashamed. "But, wait" I can hear her saying. "We have to pay our transaction coordinator and provide her office space." I get it. However, $14,000 will easily pay expenses and leave a healthy chunk to be split between the broker and the agent. "But", she says, "my broker charges me a transaction fee of $395." OK. Maybe that's why they offered you a more attractive commission split when you joined their office. Do the right thing, pay the $395 out of the commission and stop trying to rob people. I was faced with this exact scenario when my previous brokerage was bought and the new brokers mandated a transaction fee. Many agents, myself included, refused to pass that fee on to our clients but, disturbingly, many others thought it perfectly acceptable to have their clients pay it. That particular broker cleverly called the junk fee a "Regulatory Compliance Fee" which they hoped would eliminate client protests. A transaction fee charged by the broker to the agent can be an entirely legitimate fee TO. THE. AGENT. There are very few circumstances that would justify passing that fee along to a client. Unless there are unusual circumstances justifying the fee, I would encourage anyone whose agent has tried to charge them a transaction fee to immediately find a new agent. Asking for a transaction fee is all the evidence necessary (in most transactions) to demonstrate that the agent is not working in their client's best interest. This stuff really bothers me.
For those that haven't read any of my blathering about brokers stealing from their clients, here's a good one from five years ago, Robberies Update
"Profit is sweet even if it comes from deception." __Sophocles