Friday, July 31, 2009

Hard Decisions

Another hot Mayo board. This one is a 6'2" quad in Coke bottle tint.

I have talked to several distressed property owners over the course of the year who have found themselves in the undesirable position of owing substantially more on their mortgages than their properties are worth. Whether they bought at the peak or refinanced with cash out, they now struggle with their obligation to continue to pay off a loan that's far more than the property would bring in a sale. Many feel an ethical obligation to continue to pay regardless of the impact on their personal finances. Even some of those not so ethically encumbered continue to pay for fear of ruining their credit or even shame among their peers should they decide to walk away. Those who find themselves in this position have three basic choices; continue to pay, pursue a short sale or simply walk away. Without taking any position on the ethics or morality of choices two or three, I will point the reader towards a very interesting discussion of the subject at Mish's blog. Excerpt below.

"Mortgages are not ethical documents, they are legal contracts. The typical residential mortgage for an owner-occupied home gives the borrower two options: pay on time and in full, and keep paper title to the house, and full entitlements to any appreciation upon its later sale after the mortgage is satisfied; or, stop making payments, and hand the keys back to the lender. Morality and ethics don't even enter the equation. Either option is perfectly legal for the borrower, and the only criteria should be business-based. All the ethics you need are contained within the four corners of the pages of the mortgage contract."

"It doesn't matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions."_________Jim Rohn

Saturday, July 25, 2009

Breakdown, go ahead and give it to me.

Woke up this morning thinking another surf before work would be in store with a light morning wind and a dying swell, but, it was not to be. Swell has dropped enough overnight that the half tide this morning was just not working. Possibly at the late afternoon low tide if the onshore wind isn't on it. At any rate it's been a welcome three days of good surf.

In lieu of ocean communion I headed to the office early and began sifting and number crunching through the MLS trying to sniff out the ever harder to find gems hidden in the active listings. I focused my search on the type of unit I am most often asked about, direct ocean with a good view. To set a base line, I began by searching for all direct ocean units above the ground floor with at least 1200 sq. ft. that have sold in Cocoa Beach and Cape Canaveral since April 1 this year. [sales before April 1 are ancient history in this dynamic market] Discarding all sales of brand new units and those that didn't have a direct, east facing view the list contained 15 closed sales through yesterday. Lowest price was $207,000 for a 2/2 Driftwood in original but decent condition. Highest price paid was $675,000 for the northeast corner Xanadu penthouse, attractively remodeled. Sorting for price per square foot, the lowest price paid was $155 per square foot for a partially remodeled 2nd floor Constellation and the highest was $259 for a gorgeous 2nd floor, 5 year old Ocean Oasis. The average was $211 per square foot. I got the same number even when throwing out the high and the low. Only three of the sales were for less than $196 per square foot.

Now I have a number that the current market is paying for this type of unit. I also know from my research that these sales closed at an average of 90% of the last asking price. Searching using the same criteria for active listings and capping the price at $675,000, the highest paid price in my sold search, I have a list of 57 units actively for sale above the ground floor, east facing with at least 1200 square feet. Not surprisingly, the range of asking prices is out of touch with the reality of the sold range. Sorting on dollars per square foot, the lowest price is $184 per square foot (suggested short sale price) for a mostly-original Waters Edge 6th floor and the highest is, hold your breath, $353 per square foot for a Canaveral Sands 3rd floor corner with some updates but far from plush, offered furnished.

Of the 57 units on our list, 47 are asking more than 10% above the average on the sold list and fifteen dreamers are asking more than 10% above the highest. The average asking price of all 57 units is $260 per square foot or 23% more than the average sold price in the most recent four month period.

Our takeaway: The "for sale" market, for the most part, is out of touch with the recently sold market. There are anomalies and exceptions, of course, and these are the ones that buyers should be looking for in addition to the ones that are obviously priced right. I will consider paying above the average closed $/sq.ft. if the unit is exceptional in some way. If I can get someone's expensive remodel for a fraction of what it would cost me, it's worth consideration. I'm also willing to pay more for a corner or a second garage. On the other hand, I'm going to need to purchase below the average if a unit needs work. Buyers need to be thinking like appraisers. Establish a base price based on square footage and then adjust up or down for pluses or minuses. Also, as I mentioned in a recent post, it's vital to justify your offer with hard numbers like the ones here. Your offer may be far below asking but real world examples may be enough to snap an optimistic seller out of Lala Land. If you're offering and your agent is too lazy to do this research for you feel free to use my numbers here, or, probably smarter, find an agent who will.

By the way, in my search of active listings, there were six units asking less than the average sold $/sq.ft., two of them nice units firmly in the "deal" category at full asking price. Now, no TV until you do your homework.

"Deep greens and blues are the colors I choose."
__________James Taylor

Thursday, July 23, 2009

Slice and dice

While the developer of Ocean Paradise in south Cocoa Beach was slicing asking prices of all remaining units by up to $125,000, Chesnee Cogswell from Oceansports World was reeling in a fine cobia from a standup paddleboard out back.

Prices at Ocean Paradise are now as low as $575,000 for a brand new direct ocean, 2nd floor, 2444 sq. ft. unit. The same developer cut prices on four remaining units at Garden Bay on the river the same day to as low as $299,900 for a 2nd floor, 2210 sq. ft. unit. The developer of Magnolia Bay on the river in south Cocoa Beach has reduced prices for a brand new 3/3, 2183 sq. ft. unit to as low as $349,000. That's $200,000 off the 2007 asking price. They are offering in-house financing as well.

Up at the Meridian the developer has prices down to as low as $575,000 on the remaining five direct ocean units on the MLS. Back down in south Cocoa Beach, all units at the super-luxurious Villa Verde on the river are being offered as short sales directly from the developer. Prices as low as $599,900 for a 3/3.5 with 2875 sq. ft.

The eight new unsold single family homes at the Enclave between 3rd and 4th streets in Cocoa Beach have all been reduced to $845,000, some with 4 bedrooms and 4 baths and over 3500 sq. ft.

These are not all of the recent developer price cuts but represent the most significant. I suspect we'll see more.

"Every sale has five basic obstacles: no need, no money, no hurry, no desire, no trust."
_____________Zig Ziglar

Tuesday, July 21, 2009

Eat em up, Cocoa Beach

It's official. The Cafe Surfinista on N. 1st St. in Cocoa Beach lit up the open sign just a few minutes ago for the first time. It's in the old Da Kine Diego's building. I've been lucky enough to have a few sample meals this past week as the crew warmed up the kitchen in advance of opening. The menu is all healthy fare, heavy on sandwiches, wraps and salads. So far, I've had The Baja, which is a grilled sandwich with smoky grilled tofu, provolone, red onion, tomato, chipotle mayo, lettuce and carrots served with salsa and blue corn chips. Two big thumbs up. I've also had The Byron Bay which is a grilled wrap filled with hummus, avocado and assorted shredded veggies. It's another winner and big enough to feed two normal humans. I think today I'll go for one of the five salads offered, maybe the Hanelei which has baby greens, celery, mandarin orange, walnuts and goat cheese topped with slices of faux chicken. Weekends only they'll be offering ceviche, pico de gallo, shrimp and homemade guacamole. The menu is rounded off with locally roasted coffee, fresh squeezed juice, wheat grass shots, Sambazon drinks, tea, beer and sangria. I predict that this place will be a huge hit.

Disclaimer: I have no interest in this place other than excitement in having a good new place to eat.

"If we're not willing to settle for junk living, we certainly shouldn't settle for junk food."
________________Sally Edwards

Sunday, July 19, 2009

Is that short sale real?

I rarely link to other real estate blogs as I consider most of them embarrassing self-serving attempts to snare clients. One shining exception is the who had a brilliant post last week, Top 3 tips to buying a short sale I recommend it for anyone contemplating buying a short sale or selling a property as a short sale. I read it just after hearing another horror story about a buyer finding out several months into a short sale that the listing agent never presented her offer to the lender or the seller. I've encountered a similar situation in the past. In my case, the listing agent was accepting but not submitting other broker's offers because he was hoping find a buyer in time to score both sides of the commission representing the buyer and the seller. He would just lie and tell the other agents that their offers were in the works. I think in this most recent example that the listing agent is just a slacker or, as Dave put it so succinctly in the blog post I linked to above, an idiot. Read his post.

Be careful out there, folks. Question everything and have a contingency plan.

"Lies run sprints, but the truth runs marathons."
___________Michael Jackson

Friday, July 17, 2009

If it's not working, just bang on it harder

This week's launch of space shuttle Endeavor as seen from the backyard.

Those of you who get my direct updates will be interested to know that both the Coral Sands and Constellation oceanfront listings that I mentioned recently as attractively priced have accepted contracts after 11 and 4 days on the market respectively. Price it right and they will come, even in a crappy market. Apparently the concept of pricing to sell escapes the seller of the oldest listing in our MLS. The unit is a 2/2 riverfront condo in Cape Canaveral that has been listed for a remarkable 1512 days since May 2005. The listing is now at 57% of the original asking price and the commentary actually describes the seller as "motivated". Not surprisingly there is not a single photo of the unit on the MLS, just three exterior photos of the complex and no showing instructions. Even after four plus years chasing the market down and reaching the "motivated" state, this unit is still priced $25,000 higher than the lowest priced identical unit currently offered in the complex. Between slack listing agent and overpricing, this unit is at the center of a perfect storm of bad decisions that look to extend it's time on the market indefinitely.

With a similar time line, a Shorewood unit in Cape Canaveral finally closed this week after 1158 days on the market. It sold for 51% of it's original asking price in April 2006. An early price cut might have saved this seller six figures. Two other "priced-right" listings have closed this month after less than two weeks on the market. Both closed for 90% of asking price. Yin meet yang. A total of 16 properties have closed so far in the month of July in Cocoa Beach and Cape Canaveral, only one for more than $310,000. Our inventory of condos stands this morning at exactly 666?! It is a devil of a market after all.

Bonne chance to all sellers out there as we ease into slow season. Be aware that the competition for buyers will be intense from this point until New Years. Conduct your negotiations and decisions pertaining to pricing accordingly. Buyers, read the previous post, Self-defeating games.

Depend on the rabbit's foot if you will, but remember it didn't work for the rabbit._________________R. Shay

Sunday, July 12, 2009

Self-defeating games

Early morning on the Banana River in south Cocoa Beach, July 12, 2009.

I had an interesting email exchange this week with a frustrated buyer who was peeved at a seller's response to his lowball offer. People, if you're out there making low offers in hopes of stealing something, you had better be prepared for rejection, sometimes angry rejection. It doesn't matter whether you think a property is over-priced or not, an offer 30% or more below asking price is not likely to elicit a warm note from the seller thanking you for being so kind as to offer cash. Speaking of over-priced, it will increase your chances of success if you actually have a grasp of what price would be a good deal on a particular property and start your offers within the bottom of the range of what you know to be a "deal". Seeking advice from friends and neighbors who may know nothing about the market in which you're offering is not market research. You should be aware of recent comparable sales, pending contracts, competition and condo association issues so that you can make an informed decision about your offer price. Additionally, a cover letter with justifications for your offer will sometimes make the difference between angry rejection and consideration. If you can't find comps to support your offer, some commentary on likely market direction, seasonality of sales, unclosed short sales, assumption of the seller's risk and so on will increase your offer's chances of actually being considered. Having said that, even well-researched offers may sometimes be perceived as insulting by an emotional or unrealistic seller. When that happens, don't take it personally. Deal with it and move on.

The buyer I mentioned above began his process with a verbal offer slightly above half the asking price. When rejected he made a higher offer in writing. No wonder that the seller had a burr under his saddle by the time he actually received a real written offer. Even with a justifying cover letter, which was not included, the 2nd offer faced a steep mountain of resistance. Not a well thought out strategy. If you're hoping to buy, resist the urge to float a trial verbal offer before actually offering in writing. If you're selling, I would advise never to respond to a verbal offer with anything other than "put it in writing".

My advice about knowing the market stands for sellers as much as for buyers. Knowing what your neighbor got for their home next door last year is not market knowledge. It's history. If you don't know the market right now, you may be insulted by an offer that is realistic and lose a sale while you cling to yesterday's reality. Knowledge, people. It's not just for kids anymore.

"No matter how low I set the bar for common sense, you manage to slither under it."
__________Richard to Ali

Sunday, July 05, 2009

Fireworks and chiweenies

Tobias, Drew Bryant's chihuahua/dachshund mix.

In case you missed the fireworks last night in our area, the dozens of scattered displays (mostly illegal) added up to possibly the most impressive ever, at least from my end of the beach. For sleepy south Cocoa Beach, there were quite a few people going the duration on the beach celebrating Independence Day with dogs (at least one chiweenie) and kids enjoying a beautiful day at the beach. Oceansports World provided a huge selection of standup paddleboards and kayaks on the beach for any interested beach goers to try. All in all, a great day in Cocoa Beach.

We are officially through the first half of 2009 and, even though the market has been in turmoil, the sales trend has held true to years past as you can see in the chart above. We had a total of 36 closed MLS-listed condos in Cocoa Beach and Cape Canaveral in the month (as reported by this morning). Only two sold for more than $340,000, both at the Meridian, and nine of the total were in oceanfront buildings. Over half of all condos sold closed at prices below $200,000 and one short sale at Solana on the River sold for less than $100 per square foot, a remarkable price for a 5 year old direct river condo. Of the direct ocean, east-facing units above the ground floor, the prices ranged from $196 to $273 per square foot.

There were only four single family home sales in the two cities and two of those were waterfront.

Inventory continues to shrink and we are at almost half the number of listed units from our peak supply three years ago. One effect of this, as I've mentioned previously, is that the super deals are becoming more difficult to find. If you're looking, be patient but ready to pounce when an attractive target presents itself. If your criteria are broad, you can still find a smoking deal. If your criteria are narrow, your chances of finding the perfect property at a crazy low price are lessened. You may have to choose between the perfect unit and the perfect price. Be careful of putting the "deal" ahead of what may matter more in the long run. There's a reason that units with side views or no views sell for less. Saving a few thousand dollars now may mean less as you sit on your balcony in years to come looking at the building next door rather than at the ocean or river, your intention when you began your search. Examine your desires and focus on what matters. Deals are still out there but the juicier fruit are higher in the tree now.

MLS inventory July 5, 2009 Cocoa Beach & Cape Canaveral

Condos, all prices_____671
over $500,000_________93 - 15 sold since New Year's Day
Single family homes____106
over $500,000_________43

"Eric shreds (and scrawled by a second hand) lettuce"
____14th St. seawall graffiti