Another Record

The inventory of condominiums for sale in Cocoa Beach and Cape Canaveral first dipped below 300 total units in May of 2012 and has held steady right around that number ever since. The supply had been in steady decline since peaking right around 1100 units in 2006. Our MLS shows 303 units for sale this morning. Of that total, 23 are proposed and not under construction.

In 2006 there was not a single distressed sale. Four years later, in 2010 over half of all condo sales here were distressed, either short or foreclosed. By the time inventory bottomed out in 2012, foreclosures and short sales had declined but still represented one in every four condo sales. That decline continues. There are only six short sale condos offered right now and 14 foreclosures. At 7% of the total, this is the lowest level of distressed listings since 2007. If the banks would get realistic with their foreclosure asking prices, the percentage would be even less. Only one of the 14 bank-owned units has been for sale less than 50 days. That is a result of the banks' trend to unrealistically high asking prices.As recently as last year, most foreclosures were attracting multiple offers within the first two weeks of listing.

Buyers looking for a unit in an oceanfront building in Cocoa Beach or Cape Canaveral have a choice of 127 units at asking prices from $89,900 to $1.295 MM. There are another 57 units for sale in either Banana River or canal complexes at prices from $84,900 to $599,000.

I saw another interesting offer this past week. The buyer's agent had written in the special clauses section that the offer was contingent upon the buyer getting a "satisfactory" mortgage. There was no mention of interest rate, term or type of mortgage. If the seller accepts that offer as written, the buyer has, in effect, a contract from which they can walk right up to day of closing. Perhaps this was intentional strategy but I suspect based on that phrase and other terms of the offer that the agent didn't know what she was doing. Real estate isn't rocket science by any stretch of the imagination but that doesn't mean everyone with a license is competent. I've seen enough stupid mistakes to fill a book. I saw a Florida sales contract for the first time AFTER I had been issued my license from the state. Contracts are not part of the education required to get a license. My education didn't really begin until I began writing offers and seeing properties. I'm still learning. Every offer I write or read makes me better at what I do. All other things being equal, consumers would be advised to select an agent with experience and, if it can be determined, smarts. Buying an ad on a major real estate web site does not require either. Choose your agent carefully.

"If all your friends jumped off a bridge, would you jump too?"

"Oh jeez. Probably."

"What!? Why!?"

"Because all my friends did. Think about it -- which scenario is more likely: every single person I know, many of them levelheaded and afraid of heights, abruptly went crazy at exactly the same time... ...or the bridge is on fire?" 

_______Randall Munroe

To Proxy or Not

Many condo units in our area are owned as second homes or as investments. When condo association meetings are held, non-resident owners are often absent and important changes to condo docs can be passed with very few owners physically present. Sometimes remote owners will mail in a ballot with their vote or decline to vote but very often, owners will assign a proxy to cast their vote at the proxy's discretion.  The proxy may be a wonderful neighbor but he may have a dangerous agenda.

I recently attended an annual condo meeting of a popular weekly rental complex that was attended by less owners than the stack of proxies one of the board members was holding. The majority vote that he was holding in his hand combined with a few other votes carried the power to make every unit in the building more difficult to sell and potentially worth less. Specifically, the item on the ballot that day would have prevented any owner from self-managing or using an outside manager to rent his unit. It would require all rentals to be handled by the on-site office. The reason any owner would want this restriction is unclear.  Whatever the genesis, this amendment to the docs made it's way onto the ballot. Luckily for the owners, the item did not get voted on at that meeting because the ballot was improperly worded and the vote had to be postponed. If this item passes at the upcoming special meeting, any potential buyer who wants to manage his own rentals will have to exclude this building from consideration. The pool of potential purchasers will be limited to persons willing to trust the on-site office to effectively and fairly manage their unit.  This will exclude most of my investor clients and, I'm guessing, a good portion of all other potential buyers. When the time comes to sell a unit there may be some regrets. 

Condo owners should be aware that ballot items that restrict rental rights are not binding on owners who do not vote for them, however, the restriction will be binding on a new owner of their unit should they sell.

Florida Statutes 718.110(13) 
(13) 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.

"The songs that are played by every band are played by EVERY band. If I hear Mustang Sally one more time I'll puke."   _____A resident of the Villages

Keep It Simple, Señor

The Cocoa Beach area real estate market has been incredibly busy in recent months. Inventory remains at historical lows and competition for good properties is brisk. In this environment, buyers would be well advised to consider the attractiveness and competitiveness of their offer when preparing it. Bill Gates has mentioned that he strives to remove friction in all processes. Buyers of real estate in a competitive market should be approaching their offers with the same mindset.

Besides the usual bullet points of price, closing date, contingencies and specific contract form, buyers need to realize the impact of offer swerves like including non-listed items. I see offers fail far too often because a buyer included items that the seller did not want to sell and had not included in the listing. This ranges from all the furniture to just a washing machine. It doesn't matter that you really like the leather sofa. If the seller doesn't want to sell it, you may very well fail to purchase this condo unit that is otherwise perfect for your family. There are several big furniture stores right across the river on US 1. Don't let a house-hunt devolve into a bargain furniture-hunting mission.

There are two standard purchase offer contracts in common usage in our area, the FAR-BAR "As-Is" and the standard FAR which calls for seller-paid  repairs of 1.5% of contract price for "warranted items" and another 1.5% for repair for damage caused by wood-destroying organisms (unless deleted or limited). Given two identical offers made at the same time on the two contracts, the As-Is would likely win every time. Same is true for cash versus mortgage and quick closing vs. long close.

Buyers, when preparing your offers, try to keep them as clean as possible and remove any friction-causing details for the seller when possible. Don't let insignificant details become more important than the deal. That kid's Ferrari bed may be cute but don't let it delay the negotiations. The next couple through the door may offer the same amount sans the bed while you're still playing hardball over a $300 piece of furniture. Keep your eye on the ball.

Photo at the top is south Cocoa Beach midday March 1, 2014. Today looks to be a repeat. The cobia have arrived and we put a 54 pounder in the boat last Sunday.

"In real estate, national averages paper over the gritty details on the ground and are a crummy, often contradictory indicator as to what is happening in specific metro areas."   ___Wolf Richter

A New Record

2014 has begun with a bang in Cocoa Beach and Cape Canaveral. January was the busiest January of the last ten years for the total number of closed condo sales with 59 MLS-listed condo and townhome units closed in the month. So far in February we have recorded another 28 closed units. Single family home sales have not been equally busy with only eight closing since the first of the year. That is partially due to the disparity in supply. There are 317 condos and townhomes offered for sale at the moment and but 73 singly family/half duplexes. Priced-right oceanfront units are particularly in demand. Of all units closed since New Years Day over a third sold in the first four weeks on the market. Prospective buyers, have your quacking waterfowl arranged in a linear manner and prepare to move swiftly upon target acquisition. There are undetermined numbers of others just like you.

Jack Sparrow: [after Will draws his sword] Put it away, son. It's not worth you getting beat again.
Will Turner: You didn't beat me. You ignored the rules of engagement. In a fair fight, I'd kill you.
Jack Sparrow: Then that's not much incentive for me to fight fair, then, is it?

___Pirates of the Caribbean

Altitude Pemiums and Banker Insanity

How much more should a buyer expect to pay for an upper floor condo unit than a ground floor unit? Depends on the complex and the impact on the view but the move from the ground floor to even a 2nd floor identical unit typically costs more than $10,000. Ground floor units in all buildings will typically sell for a discount to the higher floor units, even in buildings where there is a decent view from the ground floor. There has always been more demand for units above the ground floor and the higher selling prices support that. In some cases there may be another premium for higher floors associated with the view opening up by getting above a neighboring obstruction. Example are the Constellation where above the third floor, the view from the west balconies opens up to include the three mile width of the Banana River and Merritt Island in the distance or Ocean Paradise where the north view opens up only at the third floor.

Hints for prospective buyers: 

Relying on unit numbers to filter out ground floor units can be faulty as some buildings with a garage on the ground floor start numbering units on the actual 2nd floor with misleading numbers like 101, 102.... Example: Meridian, Magnolia Bay and many others.

For persons or families who will be spending lots of time on the beach, the easier access to the beach off the patio may trump the better view of a unit separated from the beach by stairs or an elevator. Fishermen, surfers and kids seem to prefer the easier access of the ground floor.
________________________________________________________________

A quick story about banker insanity. I mentioned in an earlier post that foreclosures aren't selling as quickly as they were just a year ago because of the banks' increasingly optimistic, often-insane asking prices. Let me illustrate that insanity. A ground floor unit at the popular weekly rental complex, Cape Winds, failed to attract a buyer after being offered for five months as a short sale for $89,900 in late 2012 and early 2013. It was withdrawn the end of February last year and the bank foreclosed. Fannie Mae put the unit back on the market in May and increased the asking by $52,000 to $141,900. Not surprisingly, there was no interest at that price either. They began a series of price reductions until they got to $109,900 where they dug their heels in. Still no interest so the property went to auction last month. At the auction the bidding got to $75,000 which wasn't enough to satisfy Fannie's reserve and the bid was rejected. It went to auction a second time and the bidding peaked at $74,500 which was also rejected by Fannie. They held a third auction and the high bid was $64,354. This time Fannie Mae accepted the bid and the property closed last Friday.

Bankers aren't the only sellers with unrealistic expectations but they are the most consistent. Whether a seller is a bank or an individual, if the property isn't selling, it's probably because the price is too high. Sellers of the 71 properties in Cocoa Beach and Cape Canaveral that have been on the market for over 300 days, are you listening? Get real and you'll probably find a buyer.

There are 319 condos for sale this morning in the two cities and 72 single-family homes. Of those, 39 are bank or relo company owned and nine are short sales. Over 100 have been for sale for more than six months, 58 of those for over a year.

"The difference between reality and unreality is that reality has so little to recommend it."  __Allan Sherman

My Cousin Vinnie

The question of whether a buyer or seller of Florida real estate needs an attorney involved comes up frequently. I can't answer whether any particular party needs legal counsel. I can say that of the

hundreds of closings I've been involved with in Florida, attorneys were used in only a handful. Most of those were short sales where the attorney had been hired to negotiate with the bank. Typically in Florida, a real estate agent or one of the principals writes the contract and a title company handles the closing, with neither party represented by an attorney. If a buyer doesn't trust that the contract protects his interests then he would be prudent to have a Florida attorney or an experienced Florida real estate agent review the contract before signing. Hiring an out of state attorney to review a Florida contract might give a buyer less protection than having a less-esteemed but more experienced lowly real estate agent write or review it. If the used condo salesman doesn't inspire confidence, a Florida attorney is the best bet.

Will distant counsel know which Florida purchase contract is more suited to this transaction? What is the difference in the as-is contract and the FAR-BAR contract and why would a buyer ever want to use the as-is? Where is a buyer's escrow money more at risk in case of a dispute? Under what circumstances can a buyer cancel a contract and receive full refund of escrow deposit? How are contract time periods computed? What closing costs does the seller usually pay? The buyer? Relying on what is typical in another state may have one party paying for something they shouldn't. These are questions that "most" experienced agents can answer but might slide by Cousin Vinnie.

The contract can be fair to both parties or it can be slanted heavily in one party's favor. An unrepresented buyer or seller who isn't familiar with the details of our contracts and many addenda may leave themselves unnecessarily exposed if they wing it. If a party from the other side of the deal writes the contract don't assume it will be fair. Snowball in Cocoa Beach that's gonna happen. Stakes are too high.

"McVeigh's lawyer got him the death penalty which, quite frankly, I could have done."   Jon Stewart

What's My Home Worth?

What is my property worth? In most cases, not as much as you are thinking or hoping. One of our agents shared a story with me yesterday that reminded me that property owners don't always err on the high side.

A Cocoa Beach homeowner told her that she had recently tried to sell her house to a neighbor but that he wouldn't come up to her number and the deal didn't get done. In this particular case, the homeowner didn't have the house listed with a Realtor and was shooting for a number that was under fair value. I don't know if she was guessing or going on Zillow's "Zestimate" or perhaps the Property Appraiser's "market value" but, whatever method she had used to arrive at her number it was off considerably to the downside. Lucky for her, the neighbor also had a mistaken sense of the value and she didn't sell to him and leave tens of thousands of dollars on the table. Of course, she would have had the satisfaction of not having paid a real estate commission but her walkaway check would have been less even with the commission savings. I'm not making a case here for listing one's property with a Realtor rather than trying it alone. I am making a case for knowing what a property is worth before trying to buy or sell. Zillow and the Property Appraiser are not reliable sources for property value. Recently sold, nearby comparable properties adjusted for differences and market dynamics are the only realistic metrics one should use for arriving at fair value. Here's a link to Zillow's explanation to why the Zestimate is over 20% off on more than 15% of Orlando listings.

In our story here, the neighbor missed out on a good deal by not knowing what the house was really worth. Buyers, be aware that you can occasionally get a great deal from an uninformed, unrepresented seller. Usually, FSBOs are overpriced but sometimes not. Whether buying or selling, it's a mistake to assume that because there is no real estate commission being paid that the deal is sweet. In many cases, one party is getting the short end of the stick. If you've done your homework, you'll never be that one.

On another note, the asking price a prospective listing agent suggests is not the metric property sellers should be focusing on when interviewing agents. There was a time in the not too distant past when most good listing agents would not accept a substantially over-priced listing. Why take a listing that doesn't have a good chance of selling? It's a little different now. With the current low inventory it makes sense to take any listing just to generate leads from buyers that might buy something else. Continuing that logic, a listing agent might suggest an unrealistically high price in order to get a listing from an optimistic seller. Ask for comps and the basis used for the suggested asking price from a prospective listing agent.

I'm happy to give readers an opinion of fair market value of any property in our market. I'll arrive at that opinion based on research of recently sold comparables, not ten minutes on Zillow. Email me, larry@southcocoabeach.com

"I'd rather an incompetent ideologue than an apathetic cynic" __Regis

Sizzling

The sales numbers from the first month of 2014 are not going to accurately reflect the level of activity in the Cocoa Beach real estate market. We began the month in a slow steady mode but by the second week every agent I talked to was running ragged writing and negotiating offers. Activity is still frenetic. I get the sense that a lot of people that had been waiting and thinking of purchasing have decided that now is better than later to pursue a purchase. The rising closed prices tend to support that decision. The continuing low inventory is adding friction to the process.

The bread and butter of our market, direct ocean condos, are in short supply. The property type I am most often asked about is an east facing, direct ocean condo above the ground floor with at least two bedrooms. This morning there are 64 total direct ocean, east facing condos for sale in Cocoa Beach and Cape Canaveral. A quarter of those have been for sale for over six months. In this competitive market that screams "overpriced". A third of the remaining units are ground floor which means that a buyer looking for a fairly priced direct ocean unit above the ground floor has a selection of 35 to choose from. Remove the two one bedroom units and we have 33 possibilities for the "at least two bedrooms" buyer. Only five of those are asking less than $300,000 and fully half are above $400,000. Tight supply.

There have been 30 condos closed in the two cities so far in 2014 according to the MLS. Only three of those were direct ocean units. Highest closed price was $548,500 for a direct ocean top floor (5th) Solana Shores 3/2. The last 4/4 Magnolia Bay developer-owned unit closed for $465,000. Not bad for a 3000+ square foot never-lived-in unit with two garages and 10' ceilings. The Mag Bay developer has only one unit of any size left for sale there.

The smoking deal of 2014 so far was a foreclosed ground floor, completely remodeled Windward East direct ocean 2/2 with 1482 square feet. Someone stole it for $205,000.

There are 89 condos under contract this morning with 72 of those having gone under contract since December 1. That will fuel the closed numbers in the weeks to come. As always, if you're looking to buy, have your funds available and/or your mortgage pre-approval process started. You also need to be checking the MLS daily or have your agent set up an auto-alert that will email you directly from the MLS when a property matching your criteria is listed. When a good one hits, it's gone quickly, so be prepared to move. Happy hunting.

"The future is here. It's just not evenly distributed."  __William Gibson