Saturday, June 19, 2021

Not So Fast

I received a call this week from a worried Cocoa Beach condo owner. He had just been notified that his condo association was about to vote to change the rental minimum from one week to one month. The ability to do vacation rentals was the reason he bought the unit a few months ago. I've addressed this in the past and the segment below is from an old post. 

In short, if your condo allows weekly rentals, they can't limit your right to do so in the future without your affirmative vote on the change. Don't be bullied by a condo board trying to restrict your property rights. They often get away with these bluffs because owners don't know that the Board doesn't have that right.

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I've recently heard about two local condo associations trying to change rental restrictions via rule changes. As we found out in an outrageous incident a few years ago, an association can't merely add a new rule to change property use. That particular incident was a Cocoa Beach association that attempted to limit how many units a person could own by burying a new rule in the existing rules and regulations. It doesn't work that way. Property use can only be changed by a properly announced and voted amendment to the condo docs. Any properly administrated new amendment that changes property usage does not apply to owners who vote no or abstain from voting on the new rental restriction. The condo docs determine the process and majority required for such changes. As always, I am not a lawyer and unit owners should seek qualified legal counsel if they think their Board is operating outside the law. Rogue Boards are not an uncommon occurrence in the Sunshine State.


From the Florida Statutes:
The Florida Condominium Act, in Section 718.110(13), Florida Statutes, limits the ability of a condominium association to amend its documents to impose new rental restrictions. The statute states that “an amendment prohibiting unit owners from renting their units or altering the duration of the rental term or specifying or limiting the number of times unit owners are entitled to rent their units during a specified period applies only to unit owners who consent to the amendment and unit owners who acquire title to their units after the effective date of that amendment.”

I'm always interested to hear stories of condo association shenanigans. Feel free to send me an anonymous email of shady goings-on at your association. I can share them or not, your call.

All art is unstable. Its meaning is not necessarily that implied by the author, There is no authoritative voice. There are only multiple readings.” __David Bowie

Saturday, June 05, 2021

Do You Remember?

In lieu of any interesting developments worth writing about since the last post, I'm reposting an old story that I was reminded of when I walked in a convenience store in south Cocoa Beach this week and saw an old familiar face behind the counter, Gary. He was one of the victims in the original story about the impact of the Magnolia Bay development in which I was unfortunately involved. 

I, in a moment of poor judgement, agreed to plead to the Brevard County Commission on behalf of the developer. The Magnolia Bay development was being opposed by the upscale River Falls neighborhood to the north on what I believed were unfair grounds. Thus my misguided appearance at the Commission meeting in which I was passionately villainized by the neighbors as a proxy for the developer. In retrospect, I regret supporting the development because of the unintended consequences to so many people. My only compensation was an attaboy from the developer. He won his case and the condos were built with the concession of one less story on the building closest to River Falls. The finished development is beautiful but many lives were changed to make way for it. Sorry, Gary, Sam and all the unnamed others. Here is my post from 2013 quoting the original from 2007.

______________________________________

Another One Bites the Dust (originally posted October 4, 2007)  In 2013 we saw almost all the remaining Magnolia Bay units finally sell. It's been a long hard road. I thought the readers who may not remember the drama of 2007 during the construction might appreciate this look back at the time of construction and some of the unintended consequences. There is a new store in the old Express Grocer spot now and they seem to be doing OK. The site of the old trailer park is occupied on one half by a self-storage facility and the other half by nothing. I have no idea where Sam and Gary are these days.


Oct. 4, 2007 - This unwinding of the housing bubble has touched many lives. Besides the flippers who were too late to the party and people who bought more home than they could afford with exotic mortgages, some innocent victims have been dragged down, too. A deadbeat homeowner in my building has decided to walk away from her mortgage and will be leaving the remaining owners with thousands in unpaid assessments. My life will go on even though it riles me to have to pay for someone else's bad choices. It may hurt more for my retired neighbors. More heartbreaking is the impact on the decent people who run the small grocery store close to my home. They didn't speculate on pre-construction condos or try to flip houses and yet their lives have been changed forever.

It all began when construction began on the big empty parcel of land that was to become Magnolia Bay. Business picked up as workers walked over for lunch, snacks, cigarettes and so forth and the promise of all the new families that would be moving in made the future look bright. Shortly thereafter, the trailer park next door that housed the biggest part of our grocer's customers was purchased. With plans to build townhomes on the site, the trailers were progressively moved out or torn down until the property was empty. Things were still looking good even with the loss of the regulars. With 77 new half million dollar plus Magnolia Bay units and 18 new townhomes right next door, the customer base was growing and being upgraded and the construction workers were providing business in the interim. Life was good.

Then, Magnolia Bay sales slowed and the planned 4 buildings got scaled back to 3. Scheduled closings failed to happen and the construction workers finished their work and moved on. Today, the grand buildings at Magnolia Bay are mostly empty and dust blows in the sea breeze on the site of the old trailer park. The only townhomes there today are in the picture on the "coming soon" sign. Business at the grocer who stocked my favorite beer in a corner of the walk-in cooler at my request dried up to a trickle and, this week, he told me that this is his last month there. He can't make it any longer.

There are multiple losers in this story; the developers of Magnolia Bay, the trailer park residents, some of whom had lived there for decades, the owners of the trailer park property, the customers of Express Grocer including me and, most of all, Sam, the grocer and his family, and Gary, his long-time employee, who has been known to extend credit to a down-on-his-luck customer or two. Sam, your family, and Gary, you will be missed by many. You are good people.

My favorite Express Grocer memory will always be the sign that appeared on the door one day. It read:
Do not ask Gary for credit. He is not allowed to give it anymoreSam

Friday, May 21, 2021

Expiration Date Unknown


Anyone looking to build their dream home in an island paradise close to Cocoa Beach? I can hook you up. The waterfront lot to the right of the dock above facing Tahiti Beach on Elbow Cay and Tilloo Cut is about to hit the market. From your dock to over 1000 feet of water in ten minutes. It's possible to fish for less than an hour dock to dock and return with mahi and/or tuna.

My comment in the last post about having reached an apparent "sustainable" inventory of 50 to 55 units can be filed under "bad predictions". Since May 1 sixty two condos and townhomes have gone under contract in Cocoa Beach and Cape Canaveral. That doesn't include any of the non-MLS sales of which there appear to be many. Two of my last six transactions did not record on the MLS and I imagine I'm not alone among local agents. Three weeks into May and we've had 62 MLS contracts and this morning our remaining MLS inventory of existing condos and townhomes in the two cities is 40, enough to get us to the end of the first week of June with no new supply.

Prices continue to confound and astound. A buyer today making their first offer is unlikely to win against a buyer who has lost out on previous offers. Those who have come up short in previous multiple offer situations are not shy about offering over asking and waiving contingencies. The practice of getting repair concessions after inspections has gone away except in the most critical of inspection findings and even then, if the seller is holding an attractive backup contract, she is unlikely to repair anything. Once prospective buyers accept this unfortunate fact the closer they get to being able to write a winning offer. If a buyer's agent is even slightly slow to act, they can cost their client a property as happened in a multiple offer scenario I was involved in recently. The highest offer came in after the deadline and after the seller has already accepted another lesser offer. I sincerely hope the fault lay with the buyers being slow to sign the offer and not the agent's fault in getting it in late. It's the World Series of real estate sales right now and every effort needs to be productive and efficient. Choose your representative carefully.

"There's no such thing as safety, only degrees of risk." __Sparrow


Wednesday, April 28, 2021

Last Condo Standing

 

For those who think of Outback Steakhouse when they hear the term, blooming onion, behold the actual item to the left. This is one of several spring onions from Publix that I plugged into a pot on my porch two years ago. They have prospered and produced a steady stream of green onion shoots over those years and this one decided this was the year to flower. Onions are biennial plants that typically flower in their second year. Most are harvested at the end of the first year after they've produced the onion bulb in the ground and never get the chance to bloom. For those who like to grow stuff, I heartily recommend cutting off a few root ends from grocery store green onions and dropping them into the ground or a flower pot. Mine have been productive and seem to prosper on neglect all while producing tasty green shoots that I cut off with scissors with no apparent negative impact to the plants.           

Our inventory seems to have reached a short-term sustainable level. The drastically depleted number of properties for sale has slowed sales enough that the stream of new listings is replacing solds at a nearly matching rate, at least for now. For condos and townhomes in Cocoa Beach and Cape Canaveral the magic number is between 50 and 60 total units. Single family home inventory has been stuck in a range between 15 and 20 total homes for sale since beginning of the year. That is a four week supply of homes at the current sales rate. Condo inventory this morning is 53 existing units for sale in our two cities. We have closed 91 units since April 1. At that rate, we have a 16 day supply of condos left. Uncharted territory although we have been steadily headed this way for years. I never dreamed I'd see the day that we had such little supply but here we are. I'd love to hear readers' thoughts on how they think this might play out. It doesn't seem sustainable but we've been imbalanced for a long time now with little effect other than rising prices and bidding wars. When we get down to the last property for sale, that multiple offer situation should be interesting. 

Speaking of multiple offers, which we're seeing a lot of recently, maybe agents will start asking for sealed bids when there are multiple offers and live stream the bid openings to all participants. I'd watch a TV show that did this. I remember listing agents asking for sealed offers on a few popular listings in 2005-2006 that had received multiple offers so it isn't a new thing. I would prefer that to the way many agents handle multiple offers. After having lost in a multiple offer scenario buyers are often suspicious that details of their offer were revealed to the winning bidder or that there weren't actually any other offers to start with. Sharing of competing offer details is sometimes done with the seller's permission but a listing agent lying about a competing offer is extremely rare. Anyone offering on a nice new listing should expect there to be other offers and prepare for how they want to respond to the call for best and highest. Twice in my career I've had buyers tell me after losing in a multiple offer situation that they would have paid more. It is foolish to think you'll get a chance to improve your offer after delivering your "best and highest". Keep in mind should you find yourself asked to make your best and highest offer that there is a better than 50/50 chance that the other buyer will be offering cash. For best chances of success, keep your offer simple and as attractive as possible.

"It's easier to fool people than it is to convince them they've been fooled." __paraphrased Mark Twain

Thursday, April 08, 2021

Objection Your Honor

This repost of an article I wrote in 2015 was prompted by a couple of recent conversations about condo boards overstepping their authority. There are a few condo boards in our area that are notorious for making the owners' lives miserable and they often overreach in their zeal to annoy. Enjoy.

Has Your Condo Board Gone Rogue?

Here we go again. Condominium boards exceeding their authority (or shirking their duty) is so common that I am no longer surprised when I hear crazy stories about a Board, officer or management company making up procedures to suit their own agenda. Without enforceable guidelines it would be next to impossible for a group of people to fairly share ownership and maintain reasonable living conditions in a property. If that group doesn't understand the laws and guidelines they are at the mercy of the overreach or indifference of the Board.

The State of Florida was kind enough to enact a long and detailed Statute (The Condominium Act) that spells out how condominiums shall be formed and run. You can read the entire Statute here. Each individual condominium also has a Declaration and By Laws detailing governance and use restrictions for that condominium. Condo owners are advised to read and understand the Declaration and By Laws for their association. Note that the separate Rules and Regs issued by your Board may not be legal nor enforceable.

With all the legalese of the governing documents, it can be confusing as to exactly what rights owners and Boards have. Not surprisingly, Boards and management companies routinely act in ways that violate the Act. Often unintentionally, sometimes not.

I saw a Cocoa Beach condo board run a sales contract through first right of refusal when no first right existed. In that case it was a misunderstanding not an illegal conspiracy. I have seen a management company insist on offering a contract out for first right contrary to the procedure in the Declaration. That case was also a misinterpretation not intentional misbehavior.

Now on to outright conspiracies. There is a condo in Cape Canaveral that has for years tried to keep sales contracts secret from owners who have first right of refusal. This has gone on with cooperation from the management company. They recently stepped up their illegal activities and skipped the first right process altogether in clear violation of their Declaration. Another Cocoa Beach oceanfront condo added an illegal use restriction to it's Rules and Regs and backdated the document to make it appear as if it always existed. They should have made sure there were no former copies still in existence. Busted. 

The incident that prompted this post occurred at an otherwise beautiful Cocoa Beach condo that just happens to have a particularly nasty management company. The management company has been a fairly constant source of grief for owners and tenants and I have heard many stories over the years. The Board tolerates the manager's actions and possibly supports it. I was sent a copy of one letter from the manager threatening to fine an owner. The threat was not illegal, but the manager did not have the authority to levy a fine. That is a clear violation of the procedure spelled out in the Act. Hopefully, the Board will follow the law if they start following through on the manager's frequent threats of fines. If not, and no one stands up to them, the grief will continue.

The Condominium Act is very clear about fining procedure. Neither the management company nor the Board can fine an owner or a tenant without first issuing a 14 day notice of a hearing before a committee of owners who are NOT Board members nor residents of a Board member's household. The committee can either confirm or reject the fine. The Board can't levy a fine without following this procedure and receiving the committee's confirmation. If you receive notice of a fine absent the procedure, inform the Board and manager that they have violated procedure and do not pay it until procedure has been followed. Your non-Board committee members may stand up to a bullying Board or manager and reject the fine. Not all fines are undeserved nor are all Boards and managers bullies. The procedure is there to give some check and balance to the fining process. Use the privilege wisely should the chance arise. As always, knowledge is power.


From the Florida Condominium Act Chapter 718.303 (b):
A fine or suspension levied by the board of administration may not be imposed unless the board first provides at least 14 days’ written notice and an opportunity for a hearing to the unit owner and, if applicable, its occupant, licensee, or invitee. The hearing must be held before a committee of other unit owners who are neither board members nor persons residing in a board member’s household. The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board. If the committee does not agree, the fine or suspension may not be imposed.


"If you smell something, say something."  __Jon Stewart

Saturday, March 27, 2021

Some Magic, Some Tragic

A quick flashback: I was reading old posts and found the one below from eleven years ago and it was such a great story I thought I'd share again for those that may have missed it. An update; Humphrey is happily retired in Australia and while he's done plenty of roads trips in Oz, none have been solo.


In a much-circulated article this week, the Wall Street Journal reported that there are more real estate agents than properties for sale in the US. It's been that way for a long time in Cocoa Beach and Cape Canaveral. If I search for a Cocoa Beach agent on Zillow, I get 250 hits. That is 200 more than the number of agents who have listings in Cocoa Beach and Cape Canaveral and 165 more than the total number of residential listings in the two cities. How can this be sustainable? It's actually worse than it looks. In addition to the 250 there are agents like myself that aren't part of the Zillow scrum so the number of pigs at the trough far exceeds the capacity of our tiny and shrinking feed bucket. Except for a handful of super agents and teams, the majority of the agents who do manage to list or sell a property here will only record one or two transactions in a year. With total residential inventory of 85 properties that is rapidly shrinking, I think we can safely expect many agents to reach a crisis point this year. Many of them already work out of offices off the beach so they can shift their focus to their home markets. Those working out of beach offices will have to either accept lower income or start crossing bridges to Merritt Island and mainland markets. Those markets are experiencing similar inventory drawdowns so competition among agents will get even more intense. I see no reason not to expect hungry agents to begin offering discount services to keep food on the table. Compete or eat is an easy decision.

Prices. They're ranging between high and ridiculous. We've had ten units without garages sell in oceanfront complexes since January 1 for over $300 per square foot. We're at and above 2006 peak prices in many older buildings. Conditions are different now but I would still advise buyers to be cautious. As I was writing this a new listing for a small oceanfront one bedroom unit hit the market at the incredible price of $459,900. Successful buyers will probably have to pay above fair value if they hope to purchase something but there is little need to blindly pay asking price or above without first knowing what fair value is. In the case of the $459,900 unit, the comps suggest fair value as possibly six figures less than asking. Having said that, there may be someone willing to pinch their nose and pay it.

I watched two surfers on foil boards being whipped into waves by jet skis way offshore last Sunday during the big beautiful north swell and get rides that were several blocks long at speeds that a regular board can't achieve on the same waves. When I caught my first small wave on a heavy 10' rental several decades ago I never dreamed that one day I'd see surfers flying along on tiny boards that didn't even touch the water while riding wave after wave for over a quarter mile. I feel old. Happy Easter everyone.

"Some of it’s magic, some of it’s tragic, but I had a good life all the way." __Jimmy Buffett

Monday, March 15, 2021

Sweet Sixteen

When I began writing this blog sixteen years ago in March of 2005, the Space Shuttle was still flying, the national average 30 year fixed rate mortgage was 5.77% and anyone, regardless of income, assets or employment, could qualify for multiple mortgages. New condo construction was happening everywhere and investors were reserving pre-construction units as fast as they were announced. Some developments used a lottery system to allocate units to prospective buyers. Most developers were allowing reservations on newly announced units for 10% of asking price and were imposing no restrictions on flipping prior to closing. It was not uncommon for early investors to make five or six times their initial investment when flipping their pre-construction contracts. It seemed everyone was a real estate investor and many people were holding multiple pre-construction contracts on new projects anywhere they could get their hands on one. Mortgages were readily available and holding contracts obligating one to purchase millions of dollars of new condos seemed perfectly normal nevermind that some of those investors were making less than the mortgage payment on even one of their reserved units. It worked out very well until it didn't.

In the short section of south Cocoa Beach between Patrick Air Force Base and the fork in A1A there were over 200 new condo units either under construction or slated to break ground shortly. Cheapest asking price was a lower floor Magnolia Bay for $549,900 which hadn't yet broken ground. The delay they experienced pushed their completion past the beginning of the crash and almost all investors walked away from their deposits without closing. That became common with projects that didn't close before 2006 and we saw several defaults from developers including several of those projects in south Cocoa Beach. When the buyers disappeared, some developers began renting unsold units to keep a little cash flowing with one converting an entire oceanfront building into vacation rentals. That latter one worked out quite well from what I can tell with the developer still holding and renting the majority of the units in the building fifteen years later.

Our inventory in March of 2005 was around 450 condo units (including pre-construction) and 50 single family homes in the two cities of Cocoa Beach and Cape Canaveral. That inventory would go on to more than double in the next twelve months as the party started to wind down and new investors raced for the exits. Their departures began the wave of short sales and foreclosures that took more than five years to unwind. The inventory contraction that began as those distressed sales worked through the system didn't stop when the distressed inventory was depleted in 2012 and has continued right through into 2021. This morning I see that we have 65 total existing condo units and 14 houses offered. Fourteen houses for sale in an area with a population of over 35,000 people. We had more than three times this inventory just one year ago. We have been in uncharted waters for some time now and I have no idea how this is going to work out although we are getting into extreme shallows now. Agents who have been used to executive-level incomes will probably need to be making some consumption adjustments. I predict we'll lose quite a few of the agents we've seen working this tiny market. It happened before and is sure to repeat as sales fall with the inventory. It's as natural as poor mango years following a good one.

The Cape Spaceport has been busy with a couple of launches in just the last few days. SpaceX now has over 1200 satellites deployed in their Starlink constellation which is bringing fast internet to remote areas worldwide. The Falcon rocket from yesterday's launch landed on the drone ship offshore completing it's ninth space mission. It's amazing to see the rapid advances in space flight and research and I feel fortunate to live in a place where I get to see some of it firsthand. 

"I would exercise caution with pre-construction condos and be aggressive (low) with offers. We have shifted from a seller's market to a buyer's market in high-end condos in a very short time." __Larry - March 4, 2005

Wednesday, March 03, 2021

Destination Unknown


In 2020 we had the 2nd highest number of closed sales of condo units in Cocoa Beach and Cape Canaveral since 2005, only four closings less than 2018's record sales of 734 units. That we did that during a pandemic and with about half the inventory of 2018 is a head-scratcher. We averaged about 140 units for sale at any one time in 2020 and are sitting at 84 existing units for sale this morning March 3, 2021. Can we do it again in 2021? If January and February are any indication the answer is yes. We closed 121 units in those two months this year compared to 91 in the same two months last year. We had sold a number of units equal to the entire inventory by February 12, just six weeks. Prices being paid continue to confound and I have promised myself to never again say "Good luck getting that" when I see a new overpriced listing. Having said that, as I look through the available listings I see a high floor direct ocean unit in Cocoa Beach with a garage asking $250,000. Even needing updating, that seems quite fairly priced considering the recently closed sales. Homework, y'all.

How about single family homes? In the first six weeks of 2021 there were 17 closed sales. Inventory of existing single family homes this morning in Cocoa Beach and Cape Canaveral is 13. Thirteen! 

Good luck to everyone looking to buy. It's as competitive as it's ever been and the good listings are going to those who are able to react quickly. I just closed a sale with a young agent who called immediately after a new condo listing hit the market and went to preview for his out-of-town clients and wrote an offer on their instructions site-unseen before the rush of other agents and buyers had been in the unit. They have an oceanfront unit today only because their agent was proactive and they trusted him. Out of town buyers need to find a buyer's agent they can trust and be prepared to offer on her recommendation without having physically toured the property. Inspections can be done after the unit is under contract. Obviously a buyer needs to determine what features they must have and convey that to their agent and have some flexibility should not all the boxes be checked by a particular property. Did I say find an agent you can trust? Paramount.

"Jazz students will study these key changes for decades to come." __@Elimatas1 on the National Anthem as sung at CPAC 2021