Bandits Are Back in Town

Beware the junk fee. It's one thing to be bested by the other party in a transaction. It happens. It is another thing altogether to be taken advantage of by one's own team. Most purchasers who are getting a mortgage scrutinize their lender's disclosures trying to figure out if there are any junk fees and, if so, where they are buried. It can be difficult with today's complicated loan disclosures. Sellers are rarely concerned with the borrower's loan fees but the lender may not be the only shark in the tank.

In most Florida residential transactions, the seller is paying all real estate commissions which her listing broker shares with the buyer's broker, usually but not always, equally. There is a well-known local broker who frequently shaves off a larger portion for himself and tosses a leftover bone to the buyer's broker. Sellers agree in their listing agreement to the amount of commission and how it is to be shared with the buyer's broker. I'd love to hear Mr. Well-known's pitch for the unequal sharing. What Ms. Seller probably doesn't expect nor know to look for is an additional junk fee from her listing broker. I've written about these rip-off fees several times as far back as 2007 and thought they had quietly gone away by now but I encountered one last week.

I'm not sure at what point that $345 fee circled in red was disclosed to the seller or if it was just a coughed over small print item on the last page of the listing agreement. However it was disclosed/sold it was not justified and was a blatant rip-off of the client. In this instance the seller was already paying $12,762.50 which her broker shared equally with the buyer's broker. To gouge her for another undeserved $345 was, in my opinion, disclosed or not, shameful. My partners and I decided to form our company over a decade ago in large part because of our refusal to charge these types of fees to our clients when we were working for another local brokerage. At that time they cleverly called their junk fee a "Regulatory Compliance Fee". To quote Damon Wayans, "Homey don't play that." Adios.

Buyers and sellers of real estate, do not pay these fees. If you see one on the settlement statement, stop the proceedings and demand that it be removed. Trust me, your agent will be more than willing to pay that $345 out of his multi-thousand dollar commission check rather than let the deal die.

Some of the past posts about these fees for those who may have missed them.:
Unarmed Robbery Broker Style 
Revisiting Compliance Fees
Robberies Update

"Never make fun of people for mispronouncing a word. It means they learned it by reading." __Morgan Housel

The Curious Case of the Disappearing Agent

This is the true account of an interesting and perplexing transaction last month with a mysterious buyer and his communication-impaired buyer's agent from another city.

November 3: A buyer's agent calls the listing agent of a condo in Cocoa Beach asking to show. The unit is vacant and available to show anytime, but, being from Orlando, the buyer's agent doesn't have access to the local electronic lockbox system so he asks if listing agent can unlock the unit for him. No problem.

November 8: After no contact for five days after showing the buyer's agent delivers a very low offer contingent upon a mortgage. The listing agent presents the offer to the seller who doesn't want to counter as the unit is in a condotel complex where a mortgage is impossible to acquire unless it is from an unconventional source. The listing agent suggests countering without a financing contingency. Done.

November 9: Buyer counters at a lower number, cash, close in 30 days.

November 10: Negotiations ensue and buyer and seller verbally agree upon a higher number, cash purchase with a 30 day close and buyer's agent asks listing agent to write it up and he'll get buyer to sign. Written, signed by seller and delivered to buyer's agent same day.

November 11: Buyer's agent sends a lender's condo questionnaire but no signed contract. What? This was a cash offer. Buyer's agent says don't worry, buyer is just exploring his options. OK, management company completes the questionnaire three days later and listing agent forwards it to buyer's agent. Buyer's agent goes radio silent. 

December 7: The buyer's agent hasn't responded to any emails, texts or phone calls from listing agent for three weeks. Suddenly,  26 days after last contact, he emails listing agent to say that buyer is moving forward if the property is still available and is sending the signed contract shortly. Listing agent informs seller that the dead have arisen but neither holds their breath.

December 8: Signed contract is received from the buyer's agent with escrow deposit due in three days and a ten day inspection period with a close date of Dec. 30. Buyer's agent returns to his Faraday cage and relights the "Do Not Disturb" sign. Listing agent marks the MLS listing as "Backups" rather than "Contingent" and notes in the narrative that the contract is "shaky" and encourages backup offers. Fingers are crossed but seller's and listing agent's expectations remain minimal.

December 14: Escrow deposit is received, three days late. Buyer's agent surfaces briefly to acknowledge receipt and reenters suspension chamber blithely letting the inspection period expire four days later with zero contact..

December 26: After a two week disappearance buyer's agent notifies listing agent that inspections will be done Dec. 27 three days before closing. Inspection period expired on Dec. 18.

December 27 late night: Buyer's agent emails inspection report with a demand for all items to be repaired prior to closing on the 30th.

December 28: Seller refuses to do repairs but offers $300 credit at closing for the small items found. and buyer responds that he is willing to delay closing to give seller time to repair. Seller says, no dice, and closing will still happen on Dec. 30 or he will keep the deposit which became non-refundable ten days earlier at the expiration of the inspection period.

December 29: Buyer wisely agrees to the $300 repair credit, signs closing documents and initiates wire of funds late in the day which does not arrive until Jan. 3 for unknown reasons.

January 3: Buyer's agent who has been absent since demanding repairs the previous week sends his last text to the listing agent "Did you receive commission yet?"

While frustrating, this all-too-common level of incompetence from some of my fellow practitioners does provide entertainment and makes for lively discussions when the used house salesmen gather round the table for refreshments. I'd like to thank this buyer's agent and his peers for making the rest of us look better than we would sans the contrast. A hearty toast merry fellows.

"Just keep the motor runnin' this won't take very long
By the time the police get here we'll be already gone
We've got to leave 'em hangin' we can't leave 'em no clues
Just take the money and run
Lord I love robbin' banks" ___David Allan Coe

Realistic Expectations

9:30 AM, New Year's Day 2017 and the sky in Cocoa Beach is cloudless, there is no breeze with a temp of 70 degrees and an expected high of 77. According to the Cocoa Beach MLS there are 198 existing condos and townhomes for sale in Cocoa Beach and Cape Canaveral this morning. This is an all-time low. In addition, as I mentioned in my previous post, probably well over half of this tiny handful are over-priced by at least 10%. This makes for a frustrating search for the many prospective buyers hoping to buy in our town.

Condo sales for the year ended at 691 units, just a few less than last year's decade high with 31 units closed in 2016 that brought over $300 per square foot compared to just four in 2015. Prices continue their steady upward direction and I see no fundamental issues to change that trend. Mortgage rates are inching upwards but the Cocoa Beach condo market is not particularly sensitive to mortgage rates with over half of condo sales in 2016 paid for with cash, a trend that's been in place since 2008. Distressed sales have all but disappeared with just 5% of total sales in 2016 bank-owned or short sales.

Those of you looking for property here will be well-served by being aware of the low inventory situation and the price trend. If you're looking for a deal, you'll probably be disappointed, but if you can find a property close to current value, you'll probably be pleased with the value a year from now. We'd all like to purchase a beautiful beach property for less than it's current value. The big problem with that is that unless a seller is distressed she has absolutely no motivation to sell for a discount. In fact, with her property steadily appreciating, time is on her side. It only takes a few percent annual appreciation to cover the carrying cost of most properties. Why sell for for less than she wants if appreciation will pay the costs of not selling?  I've written dozens of posts about valuation and the dangers of becoming married to an estimation of value. A buyer whose search is focused on buying below his opinion of value better have an extremely accurate method for estimating value, a lot of patience and be prepared to possibly never buy. One of the dangers in the "must be a deal" mentality is that, in an appreciating market, values continue to move upwards while the search for  the "deal" drags on. Looking at sold properties in the last several years, even the highest dollar per square foot sales, the  buyers were rewarded with the passage of time.Your mileage may vary but it's probably worth keeping the historical trend in mind.

If anyone reading this lives at Ambassador Shores would you please have the maintenance guy put your navigational lights at the driveway entrance in the correct configuration of "red, right, returning" before a distracted guest takes out the bus stop some foggy night. And a big thanks to the person who took care of the crazy traffic light cycle on Atlantic Ave. at both Minutemen and Holiday Lane. My early morning drives through town are safer and faster. Happy New Year all and I hope the coming year proves to be prosperous and fulfilling. I'll continue my commentary on the market and the players in 2017. I appreciate all the encouraging words.

“My party has gone batshit crazy.” __Senator Lindsey Graham, Feb. 2016

I WIll Not Give It Away

"I will not give it away." is Parseltongue for "not really for sale" and is a phrase I hear far too often. It ranks right up there with "I won't play games." in popular self-defeating language I encounter in the often emotional business of buying and selling real estate. The "not really for sale" MLS listing (NRFS) is alive and well in our market. I've written about these properties in the past, in detail here. One of the types, the impossible-to-close short sale, no longer exists in our market, thankfully, but, all of the others remain with the way-overpriced, "I will not give it away" seller type flourishing.

We've averaged 55 condo and townhouse sales each month for the last six months in Cocoa Beach and Cape Canaveral. Half of those properties were on the market less than 50 days and 41% sold in a month or less. That's an indication of strong demand and accurate pricing. At the other end of the scale, ten of the sold units had been on the market for over a year before selling. Every one of those had multiple price drops before they got into a range that was finally acceptable to the market.

In contrast, half of the current condo and townhouse listings have been on the market for more than 90 days. The inference is obvious, they are over-priced. We currently have 229 condos and townhomes for sale on the Cocoa Beach MLS in our two cities. A third have languished for over half a year and an obstinate 8% have held their gilded units out for sale for over a year. The poster child of this NRFS parallel universe has been listed for almost two and a half years with a 20% price increase along the way. Zillow will allow anyone interested to play this game at home with their "Make Me Move" listings. Slap a crazy high price on your house and wait for the mythical buyer willing to pay your fantasy number. It's fun but has not proven to be a successful strategy. These stats tell us that the majority of the current MLS listings are owned by sellers with unrealistic expectations. History tells us that most will modify those expectations before selling. Some like the two years and counting listing will proudly cling to their incorrect opinion of their unit's value and never sell. Their listing agents will continue to sell other realistically priced properties to interested buyers who aren't willing to overpay for the listing that prompted their inquiry.

These over-priced listings typically have one of two types of listing agents. There is the agent who knows the price is unreasonable but encourages showings and offers with the hope that the seller will eventually see the light and accept or respond to a fair offer. In the meantime the NRFS listing may draw inquiries that lead to sales of other reasonably priced properties. Then we have the agent who for various reasons is committed to the fantasy price. She may be trying to boost or protect comps in the building, she may be related to or friends with the seller and can't speak the truth or she might not know the dirty details of the comps she's relying on to support the price. As a buyer's agent, it's frustrating to come up against these listings regardless the type of listing agent. I prefer the one who knows the property is overpriced but in the end, until the seller is willing to accept reality, some properties are just not for sale.

Of the 229 units for sale this morning, a large number are overpriced but haven't been listed long enough for our combined-days-on-market screen to identify them. I think it's safe to say that there are less than 100 condo and townhome units for sale in Cocoa Beach and Cape Canaveral that are asking within 10% of fair market value. Within that group are always a few recently listed gems. One of my clients was able to score what may turn out to be the smoking deal of the year in a luxury direct ocean condo in south Cocoa Beach. They were only able to do this because they had done their homework, knew what prices were fair for the type of unit they wanted, able to recognize a deal when it appeared and probably the most important part, able and willing to act immediately.

Those who are looking shouldn't despair over low inventory and unreasonable sellers. The search may take longer than planned but there are and will be reasonable sellers of the target property type. Buyers who know the range of fair value for their target property type and who are ready to act when something appears are the ones who will be successful in their search. If you need a well-trained bird dog with his nose in the ocean breeze, contact me. I know this patch of sand, the birds and the other dogs and they know me.

“It is difficult to get a man to understand something when his salary depends on his not understanding it.”   __Upton Sinclair

Deception Becomes Reality

Outside the city limits looking south over unincorporated south Cocoa Beach towards Patrick Air Force Base where the land widens in the distance, Banana River on the right, Atlantic Ocean on the left. Now you know.

Following up on my recent post, When There Are No Comps, I'd like to explore the trustworthiness of comps a little more. An oceanfront condo sold recently in south Cocoa Beach for what seemed an unbelievably low price. It was a private sale and not on the MLS. I saw the contract. Written in the contract was a line that the purchaser would get use of the unit for the months of January, February and March free of cost for life. Sounds crazy since by buying the unit the purchaser gets exclusive use of the unit anyway. It was a tactic to defeat the first right of refusal process in this particular condo complex. It was intended to make the contract unattractive to any owners that wanted to exercise their right which would have been sure to happen since the price was so low. I feel fairly certain that the sales price on this contract did not accurately reflect the actual amount of money that changed hands. By writing the odd clause in the contract, the seller defeated the first right process  AND, if the contract price was indeed lower than the actual money changing hands, reduced his capital gains tax liability and the purchaser's  property taxes going forward. A win for both parties to the fraud but not for other taxpayers and other owners in the complex whose units now appear to be worth less than they really are.

I am aware of another unit in Cocoa Beach, also a private sale not on the MLS, that is due to close shortly that will likely record for an amount less than the actual selling price. Any Realtors or appraisers using it or the previous sale for comps will be using flawed information and will not get an accurate estimate of whatever property they're trying to value.

This works in the other direction as well. Developers are fond of propping up the comps in a new development by issuing credits to buyers at closing. I've seen "decorating credits" of up to $75,000 issued to a buyer of a new condo unit. That sale may have recorded at $600,000 but with the cash back to the buyer at closing the actual price was $525,000. A seller a year down the road may reasonably think his unit is worth $600,000 plus some appreciation. As long as the new buyer isn't aware of the unrecorded credit or the giant bonus [bribe] paid to the first buyer's agent he may willingly pay $600,000+.

This brings up an interesting point. If sales after the developer's departure reflect the inflated recorded comps as true then the initial deception becomes reality. This is actually the case at one very popular luxury complex in Cocoa Beach. There is another luxury complex in Cocoa Beach where a good number of the post-completion sales were by the developer and entities that he controlled. Several of the recorded sales involved property swaps and other off contract compensation that make selling prices seem far higher than they actually were. Private sellers in this building can't figure out why they aren't able to get any action at their asking prices which seem in line when compared to the bogus recorded prices.

Comps are only as good as the veracity and completeness of the information contained in them. Agents rarely make notes on closed sales that the entire contents were included in the final price or that commission was reduced or that the owner is getting the month of March free for the next five years. All those things affect the actual price paid. In the end it is prudent for all parties to a transaction to realize that comps are just part of the story and that there are often details that will never be known. CMAs and appraisals are only one person's opinion of value and that opinion is often formed with incomplete and/or inaccurate data. Proceed accordingly and don't lose a deal because of an opinion of value that might be flawed.

"False opinions are like counterfeit money, printed first by guilty men and thereafter circulated by honest people who perpetuate the crime without knowing what they are doing." ___paraphrased from a quote by Joseph de Maistre

Entering the Home Stretch

As of this morning the Cocoa Beach MLS is showing 52 condos and townhomes sold in Cocoa Beach and Cape Canaveral in the month of November. Just over half were purchased for cash and almost a third were on the market for less than two weeks. The inventory is hovering just above 200 existing units and sales for the year look to come up just shy of last year's record 710 sold units.

At the high end of the range were four oceanfront units at prices between $465,000 and $610,000. Lowest price paid for a unit in an oceanfront building was $170,000 for a ground floor Driftwood Villas 2/2 with 1236 square feet.

Four riverfront 2/2 units with garages in Cocoa Beach closed at prices between $230,000 and $255,500 at Commodore, Beachwalk, Sunset Harbor and Diamond Bay. One lucky buyer scored the most desirable unit at Harbor Isles in Cocoa Beach. The totally remodeled top floor southwest corner 3/2 in the south riverfront building closed for $380,000. The view over the islands from this unit is unequaled in Harbor Isles.

Other river units included a 4th floor Magnolia Bay 3/3 for $435,000, a 3rd floor corner 3/2 at Harbor Club behind the Sunset Grille that went for $395,000 and a 2nd floor corner 3/2 River Bend in south Cocoa Beach that brought $389,900. A 2nd floor south corner 3/2 in the south building at Solana on the River in Cape Canaveral sold for $372,000.

There were two weekly rental oceanfront units sold in November. One was a 2nd floor poolside unit at Cocoa Beach Club that sold for $250,000 and came with a seven year special assessment. Ouch. A 2nd floor direct ocean Boardwalk 2/2 in downtown Cocoa Beach closed for $312,825 with a garage.

A 4th floor direct ocean Stonewood 3/2 in mainly original condition with 1588 square feet sold for $360,000 while a totally remodeled 8th floor 2/2 Sand Dollar floor plan with 1470 square feet closed for $465,000. A rare 7th floor NE corner 3/2 in the "A" building at Royale Towers sold for $500,000 fully furnished. Amazing unobstructed panoramic ocean views from this unit with a wrap balcony. A gorgeous 6th floor totally and beautifully remodeled 3/2 unit at Constellation sold for $585,000 the first day on the market. These upper floor units at Constellation have, in addition to direct ocean views, wide open views from their west balconies across the three mile wide Banana River to south Merritt Island in the distance. Highest price paid in the month was $610,000 for a direct ocean 4th floor SE corner 3/2 Cape Club in Cape Canaveral.

Eleven single family homes and one half-duplex also closed in the month. Lowest price paid for a waterfront single family was $329,900 for a small 3/2 on a canal off Minutemen Cswy. Highest recorded price was $765,000 for a gorgeous totally remodeled 3296 square foot Key West style 5 bedroom, 3 bath on a canal with island views, 2 car garage and pool. Five of the total were purchased with cash and half were on the market less than a week and a half.

The Cocoa Beach Art Show was excellent again this year with a great lineup of musical artists on the big stage at the west end of the show on Minutemen and a ton of great art on display. The spirit of our small town is really captured in these street events with the Thanksgiving show being the best example. A very big thanks is in order for Steve Romano and all the other volunteers who pulled this annual event together after the desertion of the Space Coast Art Festival in 2014. Ironically, that event found themselves without a venue this year while the adolescent Cocoa Beach Art Show carried on in fine form as if it had always been there. Well done, guys.

"It's a black fly in your Chardonnay." __Alanis Morissette

Radio Romance in Cocoa Beach

The Nashville boys killed it once again with an electric set on the big stage at the Cocoa Beach Art Show Friday night and followed up with an acoustic evening at Juice and Java Saturday night.

Red Light - Green Light

Can someone at the City explain to me why the Holiday Lane traffic light at A1A has a way shorter cycle than the much busier Cocoa Isles light? A1A traffic is repeatedly interrupted night and day for phantom traffic on Holiday. What's up with the light at Minutemen Causeway and Atlantic continuing it's cycle even while Minutemen is closed to traffic on either side? And, why do all of these lights stay on the same cycle through the night when there is minimal traffic entering A1A? Inquiring minds want to know.

A real estate contract is considered executed when all parties have finished signing. After that, the next step is to send the file to the closing agent which in Florida is usually a title company or, sometimes, an attorney's office that is also a title company. The title company then does the title search, co-ordinates with the buyer's lender if a mortgage is involved, determines tax liabilities and gets an estoppel letter from the association if the property is a condo. They then pull all this together and generate a settlement statement with exact numbers in enough time for the buyers to wire their funds for arrival by day of closing and then have all parties sign their respective documents (couriered or emailed to parties who will not be attending actual closing), disburse funds after closing and record the relevant documents. It's a complicated and under-appreciated job. The majority of closers I work with are legit rock stars at the process. I often think of them when I'm in one of those closings that have run past an hour and the closer is slowly reading every document before sliding it over for signatures. I see it like paper route math. As a paper boy if I've got 100 papers to deliver and can throw four a minute from my speeding bike, I can do my route in 25 minutes. Slow my pace down by just 21 seconds per paper or stop for  a couple of short discussions with customers and that same route takes an hour. A closer who can only do one signature page per minute is going to take at least an hour to do a 60 page closing. There are stars who can do a sixty page closing in 15 minutes. You know who you are and I appreciate you more than I can express.

Title insurance rates tend to be very close among the different companies and government charges are identical but the settlement and other fees paid to the title company can vary by several hundred dollars. In my experience, the slower and less efficient the title company, the higher these additional fees. Makes sense. A closer who can only close two or three deals a day needs to charge more to make up for inefficiency.

In Florida the seller typically selects the title company since they are the ones paying (usually) for the buyer's owner's policy. If the seller doesn't have a preference, their listing agent will suggest a title company that's, hopefully, conveniently located and good at what they do. Sometimes they are neither. I wish it were different because the difference in closing agent can be the difference in whether a transaction closes on time or actually closes at all. Since the buyer has very little influence in the selection I would encourage listing agents to recommend title companies that are good at what they do and to please use one somewhat close to the property and/or principals. It is a disservice to the seller and buyer of a Cocoa Beach condo when the listing agent selects a title company in Palm Bay because it's convenient to her office. Likewise for continuing to use a company that wastes everyone's time with closings that last way too long. I'm thinking specifically about a closing last month attended by nine people that took an hour and a half for no good reason. There were times when I expected someone to poke the closer to see if she was still awake.


As expected, mortgage rates rose sharply this past week as the bond market sold off. Freddie Mac's Thursday mortgage rate survey showed the nationwide average rate for a 30 year fixed rate mortgage at 3.94%,  half a percentage point higher than in early October and a .37% rise in one week. We began 2016 with rates at 3.97%.

Cocoa Beach Art Show this coming weekend. The live music lineup is stellar this year. Things kick off Black Friday at 5:30 with Nashville's Radio Romance on the big stage. We get to see these boys a few times a year at Juice and Java and it'll be a treat to see them on the big stage again. There's a good chance we'll be looking back one day saying "I remember seeing those guys before they hit the big time."


"Me, I won't be wearin' nothin' that I can't get wet."  ___Eli Young Band