Saturday, September 24, 2016

Calm Before the Storm... or Maybe Not

The boaters in the crowd will appreciate the photo above from last week in the Gulf Stream on a rare dead calm day. These were the conditions when I crossed over to the Bahamas from Florida. These same conditions lasted for six straight days. It's not often like this.

Summer officially ended this week but you couldn't tell from the air or water temperature in Cocoa Beach. We've had a small background swell for a few days from the distant tropical storms out in the Atlantic and everyone is chomping at the bit for the first big one to arrive.

Real estate sales in Cocoa Beach and Cape Canaveral have been brisk if somewhat slower post Labor Day despite the ever-dwindling inventory. As of this morning there are only 202 existing condos and townhomes for sale in Cocoa Beach and Cape Canaveral. For those looking for a unit with any sort of peek of the ocean the choices number less than 100. Refine that search to direct ocean above the ground floor asking less than a half million and the total number of units for sale in both cities is 14 between $347,000 and $498,000. According to the Cocoa Beach MLS we've closed 37 units so far this month, 78% of those for cash.

I think it's worth repeating the point I made in the Is Your Agent Gambling post about escrow deposits. This applies to both sellers and buyers. If your agent recommends holding the buyer's escrow deposit in a title company or attorney's escrow account, ask him why and what happens should there be a dispute in the event of a failed contract. He may not know or may just be doing what he's always done, having never been involved in a dispute. In Florida, unless it's a foreclosure sale and you have no other option, ALWAYS insist that the escrow deposit be held in a real estate broker's escrow account.

Which contract should a buyer use when offering, Florida's standard Residential Contract for Sale and Purchase or the As-Is contract? The standard contract specifies guidelines for property condition and what a seller must repair or replace within the monetary limits set forth in the contract. The As-Is contract sets no requirements for property condition and relieves the seller from obligation to repair items found in the inspection. The implication of this relief is often misunderstood.

Example: During inspection the AC compressor unit is found to be non-functional. With the standard contract, the seller is obligated (after being notified by buyer post inspection) to repair or replace it within the limits set forth in the contract. Under the As-Is contract the seller is not required to do anything BUT the buyer has the option of cancelling the contract at their "sole discretion" within the inspection period. What usually happens is that the buyer makes a demand for a new unit or a monetary concession. The seller can either agree to the demand, reject the demand or try to negotiate some middle ground. As long as the inspection period has not ended the buyer retains the right to walk away and receive refund of their escrow deposit. If they deliver a release and cancellation to the seller and the seller refuses to sign, they'll both be hiring lawyers if the escrow is at the title company.

Which contract is preferable? I tend to lean towards the As-Is for a buyer as it gives the buyer the power to ask for a monetary concession rather than giving the seller the power to repair or replace. In the AC example, a seller would always choose to replace with the cheapest available unit while the buyer might prefer to replace with a better, more efficient unit. Note that in an As-Is contract, a buyer shouldn't expect to go back to the seller after inspections and ask for concessions for readily observable conditions or items that the seller disclosed up front. A seller may have designated that the property be sold As-Is to relieve himslef of the obligation to replace some of the minor items listed below. This doesn't mean a buyer shouldn't ask for a concession for a major item found during inspections.

Here is the language from the standard contract which is a good guideline even for those using an As-Is contract. 
_______________________________

Property Condition: The following items shall be free of leaks, water damage or structural damage: ceiling, roof (including fascia and soffits), exterior and interior walls, doors, windows, and foundation. The above items together with pool, pool equipment, non-leased major appliances, heating, cooling, mechanical, electrical, security, sprinkler, septic and plumbing systems and machinery, seawalls, and dockage, are, and shall be maintained until Closing, in “Working Condition” (defined below). Torn screens (including pool and patio screens), fogged windows, and missing roof tiles or shingles shall be repaired or replaced by Seller prior to Closing.

Seller is not required to repair or replace “Cosmetic Conditions” (defined below), unless the Cosmetic Conditions resulted from a defect in an item Seller is obligated to repair or replace. “Working Condition” means operating in the manner in which the item was designed to operate. “Cosmetic Conditions” means aesthetic imperfections that do not affect Working Condition of the item, including, but not limited to: pitted marcite; tears, worn spots and discoloration of floor coverings, wallpapers, or window treatments; nail holes, scrapes, scratches, dents, chips or caulking in ceilings, walls, flooring, tile, fixtures, or mirrors; and minor cracks in walls, floor tiles, windows, driveways, sidewalks, pool decks, and garage and patio floors. Cracked roof tiles, curling or worn shingles, or limited roof life shall not be considered defects Seller must repair or replace, so long as there is no evidence of actual leaks, leakage or structural damage.
_______________________________

If you're looking for a property in Cocoa Beach or Cape Canaveral I'm happy to help you find it and to guide you through the process. I know this market like the back of my wrinkled hand and I understand the process and the implications of the choices I recommend for you.I enjoy helping people find their own spot in this town that I love. Call or email me.

Speaking of email and somewhat related; I was asked one day years ago "So what does Condor Anger mean?" I initially chose the Condo Ranger email address in a childish moment as a play on Walker Texas Ranger. Just never realized until asked that Condor Anger could be construed. After contemplation it sounds way cooler but I digress.

"If in doubt, paddle out." ___Nat Young

Monday, September 05, 2016

Having a Record Year

Thanks to JewelrybyPam.com for the photo
It's not just Eric Church who is having a Record Year. The month of August set another record for the Cocoa Beach real estate market. The number of sales exceeded the last eleven years of same month sales including August 2005. It's the only month this year to have exceeded the same month numbers for 2005.

It's apparent now that September 2005 was the beginning of the end of the party that raged through the real estate market but we didn't know that at the time. Inflated selling prices held on here for another two years before it became obvious that the party was over.

It's been a long haul and prices are still far below 2005 numbers but, even with our current severely low inventory (less than a quarter that of ten years ago), participation is high and properties are selling. Our inventory of properties for sale is at an all-time low. This morning there are only 222 existing condos and townhomes for sale in Cocoa Beach and Cape Canaveral. We have closed that many in the last 14 weeks. Looking for a direct ocean condo with at least two bedrooms above the ground floor for less than a half million dollars? You have ten available, two of which have compromised ocean views. The more specific the criteria the shorter the list becomes. Single family homes are in equally short supply with only 50 available. 

Interesting side-note: A search for a Cocoa Beach real estate agent on Zillow yields 250 results while a search for a Cocoa Beach condo turns up 140. Mention too loudly that you're looking for property at a restaurant or bar here and you'll become the last piece of fried chicken at a crowded table when the lights go out. 

We had a total of 72 condo and townhome units sold in Cocoa Beach and Cape Canaveral in 2016 compared to 64 in August 2005. Let's compare selling prices of a few properties in the peak years with the prices they closed for last month.

A 2/2 Portside Villas that sold in 2006 for $174,600 closed last month for $123,500.
A River Gardens 3 BR townhome sold in 2006 for $252,500 and last month for $225,000.
A Windjammer 2/2 sold in 2004 for $424,500 and again last month for $362,500.
A Solana River 3/2 sold for $427,500 in 2005 and last month for $375,000.
A Puerto del Rio that sold for $599,000 in 2004 sold for $433,000 in August.
A Windward Apts 2/1 sold for $190,000 in 2005 and last month for $94,000.
An Aqua Sea 1/1 that sold for $154,000 in 2005 closed for $96,800 in August.
A Banana Bay townhome that sold for $235,000 in 06 closed for $172,500 last month.

I'd like to give a thank you to the listing agent who responded immediately to my message on a Saturday night of a holiday weekend to help arrange a last-minute showing the next day. This goes a long way towards repairing the bad impression left by the many who take days to respond.

We woke up this Labor Day morning to a fresh long-period north swell from the remnants of Hurricane Hermine wandering around south of Nantucket. Waves are expected to build through the next several days. With such a northerly wave source surfers need to hit beaches south of downtown Cocoa Beach to get any size. At the moment the Pier looks to be about knee-high for the contest while south Cocoa Beach was already seeing shoulder-high sets this morning on the lower tide. Get out there if you can. It'll be a goofy-footer's delight with plentiful loooong lefts.

"Squalls out on the gulf stream..." __J. Buffett

Monday, August 22, 2016

Is Your Agent Gambling With Your Money?

Pop quiz (all questions refer to Florida real estate transactions):

1. From a seller's perspective is it better to have the buyer's escrow deposit held at the seller's title company?

2. From a buyer's perspective, is it OK for the deposit to be held at the seller's title company?

3. From an agent's perspective, is there a good reason for not holding the escrow deposit in a real estate broker's escrow account?

Answers: All three, a resounding NO

This quiz was prompted by another instance this past weekend of a seller's agent requesting that the buyer's escrow deposit be held at the seller's title company. This has become more frequent over the years as more and more brokers stopped maintaining escrow accounts because of the hassles of reconciliation and Draconian oversight. To understate, they are a big pain in the butt, but worth it for the clients' protection.

Our local Association of Realtors made a mistake last year in a revision of the MLS listing entry form and added a listing field for "Escrow Agent". It has always been customary in Florida for the seller to select the title company as they usually buy the owner's title policy for the buyer. What has not been customary is for the seller to select the holder for the buyer's escrow deposit. As soon as this field appeared, rookie and experienced agents alike began demanding that buyers hold escrow with the title company or attorney named in the "Escrow Agent" field. Some of them did this out of ignorance and lack of experience. Others wrongly assumed that it was required since it was a part of the listing.

Our MLS committee corrected the entry form two weeks ago to "Closing Company" to relieve the confusion but some agents are still dangerously requesting escrow deposits to be held by a title company. Why does it matter?

It only matter if the sale falls apart and there is a dispute over the deposit. Most title companies and attorneys will not disburse escrow deposits unless both parties have signed a release and cancellation. A buyer can cancel in good faith under the terms of the contract and be entitled to return of the deposit but if the seller refuses to sign a release and cancellation, the title company will probably not return the deposit to the buyer. From the Florida Association of Realtors :"Ask an Attorney" forum.

In most cases, a title company will require clear written instructions from both parties before releasing the deposit.  If the parties can’t provide matching instructions within a reasonable period, the title company will likely deposit the funds with the local clerk of courts, and either party may then file a court case to argue why they believe they’re entitled to the deposit.

Under the same circumstances, if the money is held in a Florida real estate broker's escrow account, there is a free dispute resolution process. The broker holding escrow may request an Escrow Disbursement Order (EDO) from the Florida Real Estate Commission (FREC). They will review the facts and issue an order for disbursement of the funds based on their findings. No cost to either party. Holding escrow in a broker's escrow account is not a casual recommendation on my part. I have been involved in escrow disputes and, in every case, thankfully, the dispute was resolved for free by FREC. Agents who have not been involved in a dispute are likely to have a more cavalier attitude towards it.

Our takeaway: Barring unusual circumstances, it is always safer for the seller, the buyer and the agents involved for a buyer's escrow deposit to be held in a Florida real estate broker's escrow account. Listing agents reading this, be happy that I am willing to hold the buyer's deposit in our escrow account. You and your client are more protected. Buyers and sellers reading this, if your agent recommends the title company hold escrow deposit ask one question; "Why?"

"I wanted to be a comedian."  __Kelly Slater

Saturday, August 13, 2016

Turtles, Mangoes, Snook and Zika

The bumper mango harvest is almost finished here for 2016. It's been a good one.

The little turtle pictured hatched early in the morning (not a good time) in south Cocoa Beach and was just making his way to the ocean as the sun was rising. There was a flock of crows picking off stragglers but with a little human scarecrow action this one made it safely to the ocean for his first day of life.

We entered August with an inventory of just under 250 total condos and townhomes for sale in Cocoa Beach and Cape Canaveral. That's the number of units that have closed since early April this year. The demand/supply imbalance continues to pressure prices higher. Lacking some unforeseen macro event I see nothing to reverse this trend.

Our depleted inventory is part of the aftermath of the bust in 2006-07. When prices fell off the cliff then we had a tremendous amount of supply force-pushed forward. Many people who may have been planning to sell their properties a few years down the road suddenly found themselves upside down (owing more than the property was worth). The decision became; wait it out and hope the value returns soon, sell for a loss, do a short sale or let the bank take it back. Those that decided to wait it out, in some cases, are still waiting almost a decade later. The majority chose to dispose of their properties before it got any worse. The result for us in 2016 is low inventory because some of what would have been for sale this year was forced onto the market years earlier.

Many of those who decided to wait it out are still waiting. A unit at Magnolia Bay that closed last month for $435,000 was pre-construction priced in 2005 at $589,900. Another unit in the same building that closed in July for $530,000 had a pre-construction price in 2005 of $769,900. The story is the same in the older buildings. A unit in the 43 year old Villa Vista building on Ocean Beach Blvd. sold in 2005 for $367,500 and was then totally remodeled. Even with the remodel it sold last month for $242,000, 2/3 it's price 11 years ago. And, the granddaddy of extremes was a small 1/1 condo a couple of blocks from the beach in Cape Canaveral that sold last month for $55,000 after last selling for $142,000 in 2007.

I give these examples for those who are concerned about prices. Our increase has been healthy and orderly since bottoming out about five or six years ago. Bargains relative to peak prices are still being had as long as buyers can accept that they missed the absolute bottom. I see current prices in our slowly rising market with an abundance of demand as attractive. Long-time readers know I have no reservations calling it the other way if or when I see it.

I heard Bob Iger of Disney say this past week that he is not concerned with any impact from Zika fears to their Florida businesses. Maybe they're immune but I have lost $795 so far from Zika concerns. A pregnant guest cancelled a reservation on advice from her doctor not to travel to "anywhere in Florida". I agree with his "safer than sorry" caution and hope the few number of cases will be confined to the small area in Miami where the only Florida cases have shown up. Luckily we don't see many if any mosquitoes of any kind oceanfront in Cocoa Beach. The sea breeze does more than cool us off on hot days.

Two weeks until snook season opens and, on an unknown date but soon, the mullet run begins. Get the surf fishing gear ready for the best beach fishing of the year.

What's the deal?
Spin the wheel
If the dice are hot...take a shot
Play your cards. Show us what you got
What you're holding
If the cards are cold
Don't go folding
Lady Luck is golden
She favors the bold.

__________________Roll the Bones by Rush

Thursday, July 21, 2016

It's a Mango Year

I dropped off a few towels yesterday to guests from New York who were visiting south Cocoa Beach for the first time. I asked how their stay had been. They said that when they walked out onto the beach the first morning they were concerned that no one else was there. Was something going on they should know about?  By the second morning they realized that very few people on the beach was a normal thing in south Cocoa Beach. Their second comment was that the people in Cocoa Beach were, as a group, the friendliest they had ever encountered in Florida. I'm thinking we'll see them again.

Sales in Cocoa Beach and Cape Canaveral continue at a brisk pace. The 11 year record breaking number of sales in May and June despite record low inventory is evidence of the extraordinary demand for residential properties that we are enjoying. I see no evidence that this has changed. So far 34 units have closed and another 39 have gone under contract since the month began. There are only 237 condos and townhomes for sale at the moment in our two cities and another 25 in planned buildings. We closed more than a third of that existing unit number last month alone.

Of the condo and townhome sales closed so far in July the average selling price was 95% of the last asking price. That "last asking price"qualifier is important. Of the 35% of sales that were on the market less than a month, none had a price drop before accepting a contract. That means they were priced right when listed. Of those who started high and later reduced their asking price, average time on market was 83 days. Sellers take note.

It seems everyone in town is walking around with bulging grocery bags. In most cases they are filled with mangoes like the one pictured. This is one of those years when every mango tree is loaded down and the harvest is so excessive that those with trees are giving mangoes to everyone they know. The locals are forced to eat excessive amounts of mangoes every day or live with the guilt that they are going to waste. We can only make so much salsa and chutney and freezer space eventually runs out. It's a tough problem but we'll see it through. By the way, that mango pictured is as tasty as it is pretty. Juicy, not stringy and as sweet as ice cream.

“If it could only be like this always – always summer, always alone, the fruit always ripe and Aloysius in a good temper…”  __Evelyn Waugh, Brideshead Revisited

Wednesday, July 06, 2016

2016 - First Half Recap

We are squarely in the daily afternoon thunderstorm season with dark fronts like the one pictured a fairly common occurrence. Independence Day fireworks are no match for the fireworks that usually accompany these afternoon storms.

The first half of 2016 ended on a strong note with a record month of property sales in Cocoa Beach and Cape Canaveral. June 2016 was the second busiest month for closed condo and townhouse units since the peak of the boom in 2005 with 77 units recorded as closed so far in the Cocoa Beach MLS. As always, that number could increase as tardy listing agents get around to closing out their sold listings. For perspective, that is 29% of the entire inventory sold in one month. In addition, during the month there were 14 closed single family homes and a single half duplex. A third of the homes sold for more than a half million dollars with two river houses closing above the million dollar mark.


Condo sales were concentrated in the lower price ranges with two thirds of the 77 sales under $250,000. Only three units sold for a half million or more, the highest, one of the three big 4/4 Magnolia Bay units that closed for $565,000. Mortgage use for condo purchases continues to increase with just under half of the condo buyers in June using a mortgage for the purchase.

There were 81 closed single family homes and half duplexes from January 1 through the end of June. There are 55 currently for sale. Buyers who want a single family home on the water in Cocoa Beach have 31 to consider at prices from $2.95 MM for a brand new direct ocean 2 story with 4667 square feet to a nicely remodeled 55 year old 3/2 canal home with 1520 square feet asking $399,500. Almost two thirds of them have been for sale for more than 100 days so we can assume some resistance to the asking prices considering the number of buyers actively looking to purchase. Likewise over half of the condo listings have been on the market over 100 days. Same assumption about pricing can be made for most of these.

About "days on the market": This number can be manipulated by an ambitious listing agent so it can't always be trusted. Your buyer's agent can peek behind the curtain for the true listing history. A listing can be withdrawn and relisted to reset the days on market clock. Same thing can happen with an expiration and relisting. While we're on the subject of accuracy, I get lots of calls and emails from out-of-town buyers who have spotted a waterfront condo unit at a very attractive price on the MLS or one of the other big real estate websites. Those too-good-to-be-true prices are almost always misrepresented properties. While Villages of Seaport is technically an oceanfront community and a listing agent can code a listing there as "oceanfront" they never mention that the cute $115,000 two bedroom townhouse listed as "oceanfront" is actually a half mile from the beach. Likewise a smoking deal on an "oceanfront" Conquistador usually turns out to actually be in the non-waterfront Conquistador building on the west side of Ocean Beach Blvd.

Turtle nesting activity in south Cocoa Beach has been strong with a short walk on the beach most any morning revealing several new nests.


“Arguing with anonymous strangers on the Internet is a sucker's game because they almost always turn out to be—or to be indistinguishable from—self-righteous sixteen-year-olds possessing infinite amounts of free time.”  __Neal Stephenson

Monday, June 27, 2016

Approaching Halftime

Three days and we'll be halfway through another year. At the mid-point of 2016 there are 245 existing condo and townhouse units for sale in Cocoa Beach and Cape Canaveral and another 26 in buildings yet to break ground according to the Cocoa Beach MLS. At the same time there are 63 single family homes for sale. For perspective, ten years ago there were almost 1100 MLS-listed condos for sale in our two cities.

Despite these tight inventory levels, we are continuing to see strong numbers of sales. Since the first of the year 340 condo and townhouse units and 77 single family homes and half duplexes have closed in the two cities. In the month of June we've already closed 57 condo units with a median price of $211,000. Closed direct oceanfront units above the ground floor this month have sold for between $231and $304 per square foot. Nice direct river units have been closing in a range between $155 and $200 a foot. Thirteen of the 53 new condo listings this month are already under contract.

Since June 1, eleven single family homes have closed at prices between $255,000 for a cute little 1042 square foot home one block from the ocean south of downtown Cocoa Beach to $1.1 MM for a gorgeous 14 year old Key West style open river home with 3985 square feet north of 520.

Mortgage rates are close to their all-time low with the national average 30 year rate at 3.56% according to Freddie Mac's weekly survey last Thursday. Despite these historical low rates, over a third of the homes and over half of the condos closed so far this month were purchased with cash. Buyers need to keep this in mind. For a seller, cash is almost always preferable to an offer contingent upon a mortgage. No underwriter, no appraisal (usually) and no delays waiting on loan approval. I'm aware of three appraisals that came in under the contract price last week. Three things can happen when a property appraises below the contract price. 1) the seller can drop the price to the appraisal number and move forward towards closing 2) the buyer can make up the difference by bringing more money to close or 3) the contract falls apart if the parties can't find agreeable middle ground. Far better for a seller to have a cash contract with no appraisal contingency and the accompanying concerns.

"I got my own way of talking, but everything gets done
With a southern accent, where I come from."  __Tom Petty

Saturday, June 11, 2016

2000 Sq.Ft...More or Less

There was an interesting comment from an anonymous reader directed at my  last post. It concerned the condo that I mentioned selling for $318 per square foot. The buyer actually paid $343 per square foot  because of an incorrect MLS listing but may not know that. This particular unit has been listed and relisted many times over the years. Looking back at the previous expired listings I can find the advertised living square footage as 2011, 2170 or 2400 square feet, all from the same listing broker. The living square footage according to the tax appraiser is 2011 with  total square footage at 2400 including balconies. I have no idea where the 2170 size came from. Considering all the errors in previous listings I think it's probably innocent despite the suspicious fact that the errors have always been in the seller's favor.

There are Cocoa Beach condo listings on Zillow right now with inflated sizes that I suspect are outright attempts at deception by the owners. I would advise all buyers and agents to begin checking the advertised size against the tax records. A 159 square foot error doesn't sound like much but at $318 per square foot we're talking over $50,000.

Another relatively common error on the MLS is condo fees. Often an agent or her assistant entering a new listing will look at previous listings for the monthly condo fee amount if they don't already know it. If wrong, the error may go unnoticed. Same thing happens with long-listed units. The monthly fees may have changed since the original listing without getting updated. As always, it is up to a buyer and her agent to verify the data being presented to them. The MLS is only as good as the data being input. How about a FSBO? Same deal except probably even more important to question everything. Ultimately, it's a buyer's responsibility to verify everything.

There were 72 condo units closed in the month of May in Cocoa Beach and Cape Canaveral. A third of those sold in two weeks or less. Slightly more than half sold for cash. Inventory this morning is at 277 units with 25 of those in buildings yet to break ground. Those looking for a good, fairly-priced property don't have a lot to choose from. We are not seeing the same flow of new listings coming on the market that we were seeing earlier this year which is typical. For those hoping to purchase, this means, as always, know what you're looking for, know what a fair price range is and be prepared to offer quickly when you find it.

I witnessed another crazy closing yesterday. The buyer's lender botched the closing disclosure multiple times with inaccurate numbers and finally got it right just as everyone involved was ready to walk away from the deal. Buyers choose your lender carefully. Experience with the local market and property type is worth far more than the lowest promised rate. The guy in the call center in Texas who promises you a rate three basis points less than the local guy may have no idea what his underwriter is going to require for a Florida condo loan and may find out too late to close on time or at all. Rate means nothing if he can't close the deal.

After a week of daily rain, you can almost watch the grass and plants growing. The annoying sound of Florida's favorite tools, the leaf blower and weed eater, are rarely absent during daylight hours this time of year.

"To be one, to be united is a great thing. But to respect the right to be different is maybe even greater."  ___Bono