The rest of the story

The recent rains have ushered spring into my front yard with these wildflowers..

I promised an interesting update on a failed short sale that I detailed in my March 4 post, "One step forward, two steps back" . Here is my description from that earlier post;

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Another short sale fell apart this week when the bank (Wachovia) returned a "must-have" net higher than their year-ago number. This particular property was first listed in the MLS as a short sale in January 2009 for $119,000. After no showings for two months the price was dropped to $99,000 and an offer of $99,000 was received and submitted to the bank. Two and a half months later the bank returned with a price of $124,000. That buyer went away and the MLS price was raised to the approved price, $124,000. Five months later a bank representative called the listing office to ask what needed to be done to move the property. The listing broker suggested a price drop to put it back in line with the comps. Price was dropped to $99,000 but it received no action and, with the bank rep's blessing, the price was dropped again to $89,000. A full asking price offer was received and submitted with expectations of fast approval. Response was faster this time with the geniuses at Wachovia responding four weeks later with a must-have net of $117,000 which would mean a selling price of over $130,000 to pay off the back taxes, condo assessments and closing costs.
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And now for the rest of the story. The buyer, of course, walked away at the bank's "must-have" price. The unit went to foreclosure the following week and Wachovia sold the unit to an investor, having just one week earlier turned down $89,000 cash. To add irony to incompetence, the investor immediately sold the unit to the original buyer for the rejected $89,000, obviously at a profit. The buyer winds up with a good property at a good price, the investor makes a quick, easy profit and Wachovia throws an eight inch stack of new $20 bills out the window. That, ladies and gentlemen, is a glimpse into the madness that prevails in short sales these days.

"Welcome to my nightmare. I think you're going to like it. There'll be some more when you come down."____Alice Cooper

March preview

Temperatures have finally climbed back into the pleasant range with high 70s predicted every day for the next week. That trend and a southerly wind should finally bring the cobia run which has been delayed as long this year as anyone can remember. The crowds in town are thick as March is the peak of the spring season but that will change rapidly after Easter as the snowbirds begin their northerly migration in force and students head back to school.

As of this morning there are 87 short sales and foreclosures with offers in negotiation with the lenders in Cocoa Beach and Cape Canaveral. There have been 35 closed distressed sales in the two cities since January 1. The MLS shows 95 active short sales this morning at prices between $22,000 and $699,000 and 40 foreclosed properties offered at prices from $20,000 to $599,900.

We've had 29 condos and townhomes closed so far in March and four single family homes, two of those direct ocean houses for $875,000 and $960,000. Five of the condo sales were for less than $40,000 and only one was for more than $285,000, a 2nd floor Meridian that sold for $550,000 or $110,000 less than it was bought for in 2007.

Sales of note included;

The nicest unit in Cape Winds, a totally remodeled 2nd floor NE corner, 2/2 went for $250,000.

An 8th floor direct ocean 2/2 next door at Canaveral Towers also sold for $250,000.

A top floor (5th) Puerto del Rio 3/2 closed for $189,000. It sold new four years ago for $253,500.

A direct river Pebble Cove 1st floor 3/2 went for $135,000.

A very nice south Cocoa Beach Sutton Place 2/2 corner with a peek of the ocean sold for $130,000.

Inventory has increased slightly this month. For anyone looking for a special waterfront house, the best located (my opinion) single-family riverfront house in Cocoa Beach has come on the market this month. It is a walled and gated compound sitting on five lots with 132' of open Banana River in south Cocoa Beach with exotic mature tropical landscaping. The river is 3.5 miles wide out the back door and the ocean is right across the street.

MLS inventory Mar 25 , 2010 Cocoa Beach & Cape Canaveral

Condos, all prices_____610
over $500,000_________77
Single family homes___133
over $500,000_________43

If it suddenly ended tomorrow
I could somehow adjust to the fall.
Good times and riches and son of a bitches
I've seen more than I can recall.
__________Jimmy Buffett

Tracking the decline

North jetty, Sebastian Inlet

Another Cocoa Beach, Four Seasons non-waterfront unit with garage closed last week for $110,000. This particular unit had been on the market for a year, priced well above the comps until right before Christmas when reality finally set in and the price was dropped to a number in line with the market. With several sales every year of these particular units in that popular complex, I thought it would make a good subject for a micro review of the history of the decline. I have restricted this review to sales of non-waterfront units in Four Seasons with identical floorplans and garage.

Looking back to 2004 (MLS sales only), the year before peak prices for these units, there was one sale for $188,900. The market was red hot at the time and prices were notching up on all property types with every subsequent transaction. The next year, 2005, the peak of the mania, saw four sales of these units; $195,000, $215,000, $220,000 and $222,500 (the all-time high). Prices remained strong through 2006 even though there were subtle signs that the party had ended. There were four sales that year; $198,000, $200,000, $200,000 and $215,000.

The fading of the bloom was becoming obvious to most by 2007 when only one of these units closed for a shocking $159,000. Cautious buyers re-entered the market in 2008 and purchased three units for $150,000, $159,000 and $165,000. Long-time owners were relieved that the decline appeared to have abated with a year of steady prices. The joy evaporated when two units sold early in 2009 for $132,000 and $133,500.

The seller of the unit I mentioned in the beginning listed his unit early in 2009 for $157,900 shortly after the two sales in the low $130s. It sat there along with several other over-priced units for the remaining nine months of 2009 with no action in the complex. The sellers began lowering their asking prices late in the year and 2010 hit the ground running with three closed sales as of today, March 23. The highest price was $130,000 for an above-average, totally remodeled unit and the other two went for $103,000 and $110,000, the lowest prices in the complex since 2002 and only about double their brand new price in 1980. There is only one of these units actively for sale today, listed 20 days ago and hoping for $135,000. Hope springs eternal.

"If only. Those must be the two saddest words in the world."
________Meredith Lackey

Eye candy

Four thousand words for your viewing pleasure.






"What's another word for Thesaurus?" __Stephen Wright

Spring forward

Dune gaillardia enjoying the sunshine in my backyard.

It's March 14 and the February MLS numbers are in. The number of closed MLS sales of condos in Cocoa Beach and Cape Canaveral was disappointing following our record January, the best since 2005. The Cocoa Beach MLS reports 25 closed condo and townhouse sales in February in the two cities compared to 32 in February 2009. This is the first year in the last six that February condo sales did not exceed January's (see chart below). There were seven single-family home sales in the month. While contingent and pending listings remain at a very high level, the low inventory and the high number of failed short sales will probably contribute to a slow year for sales.



Sales for the month ranged from $22,500 for a tiny but nice 1/1 Beach Club unit in Cape Canaveral to a new 3000 square foot Ocean Paradise 5th floor corner in south Cocoa Beach that went for $900,000. The little Beach Club unit sold for 24% of the price it sold for in 2005. Other sales of note included;

A foreclosed Oaks 2/2 unit in Cape Canaveral that sold for $60,500.

A short sale Portside Villas 2nd floor, 2/2 in Cape Canaveral that closed for $88,000. Sold new in 2006 for $234,900.

A short sale Royal Mansions 1 bedroom in Cape Canaveral sold for $95,000. It last sold in 2005 for $271,000.

A direct water 2/2 Beachwalk in Cocoa Beach with deeded boat slip and garage closed for $155,000.

A 2/2 Royal Mansions sold for $173,000. This was a full round trip to the sky and back by this seller who purchased in 2003 for $175,000.

A 3rd floor direct ocean Wellington 2/2 in downtown Cocoa Beach closed for $225,000.

My favorite deal of the month was a 4th floor Cocoa Beach Towers 2/2 with a great view of the Pier from the generous balcony that closed for $260,000.

Another good one was a 6th floor direct ocean Waters Edge 2/2 in south Cocoa Beach that went for $270,000.

Capitulation sale of the month was a developer sale of a new Garden Bay direct Banana River 3/3 with 2210 sq. ft. that sold for $285,000.

Fastest evaporation of money sale was a short sale Magnolia Bay 3/3 in south Cocoa Beach that closed for $300,000 just three years after selling for $589,900.

A gorgeous 2nd floor south corner Coral Sands 3/2 in south Cocoa Beach went for $345,000.

There are 125 units under contract this morning according to the MLS with 64 of those short sales and 15 bank-owned. Inventory has increased slightly probably a function of the slow sales in February.

MLS inventory Mar 14 , 2010 Cocoa Beach & Cape Canaveral

Condos, all prices_____596
over $500,000_________72
Single family homes___131
over $500,000_________43

It was one of those March days when the sun shines hot and the wind blows cold: when it is summer in the light, and winter in the shade.
____Charles Dickens

Short Sale Questions

Early morning south Cocoa Beach. Not many condos this far south.

A reader asked the following questions in response to the last post about short sales. He thought the discussion might be interesting to others. Thanks, Bob.

Larry, Thanks for the very enlightening short sale story. Some additional information on this mysterious subject would be appreciated by many readers..

In your stories I saw 3 points which appeared to me to be either not logical, not ethical or not legal.

I find it surprising condo fees are limited to 6 months. That is certainly punishing the other residents to the benefit of the banks. In other states I believe the fees can be recorded as a lien, which stays with the property until satisfied. At what point does the local real estate tax authority begin to act on unpaid taxes?

If a bank rep blesses the price of a listing, how can a full price offer be subject to negotiation? I've always believed that the most basic foundation of the system was the offering of a property at a price the seller is prepared to accept. I can see there is an initial need for the seller to demonstrate to the lender what the market value of the property is.

Since it appears the listing prices may not include other fees and taxes, how can a buyer approach a short sale with some handle on what the final cost will be? In addition to what exists now, it is impossible to factor in what could accrue over the 8 to 22 months it can take the bank to make up it's mind.

Bob

In answer to the first question about the limitation of 6 months of condo fees. The law allows for up to 1% of the original mortgage amount or 6 months worth of assessments to an association if a lender acquires title to the unit via foreclosure or deed in lieu of foreclosure. One exception is if a third party buys the foreclosure at auction. In that case, all past due assessments are due. In a short sale, all past due assessments are due but can sometimes be negotiated. A very detailed discussion can be found here. No it's not fair to the other homeowners but it is something that associations who attempt to play hardball during a short sale should consider.

I recently assumed negotiations with an association in a short sale at the request of the listing agent. They were holding out for around $4500 of past due fees and were refusing to accept less. After pointing out that they would only be getting $2040 in the event of foreclosure should the short sale fail, they quickly accepted my offer of $2850, the buyer and lender saved $1650, the association got $810 more than they would have and we closed the sale. Win, win win. Note: because of the still-accruing fees before the eventual foreclosure, the association's savings probably exceeded $3000.

The tax collector has a much simpler process for getting taxes paid than forecloure. They sell the tax certificate at auction to investors who pay the taxes in exchange for a high interest rate on the amount from the entity who eventually clears the lien on the property. That entity will either be the lender at foreclosure or the owner who catches up on the taxes plus interest. In some cases the investor forecloses on the property if the lien is not satisfied.

Question number two is a doozy. In my example, which was highly unusual, a faceless bank rep "approved" the reduction in asking price for the short sale but the actual approval still had to come from the loss mitigation department who came back with a much higher price. The only time that a bank issues an approved price in a short sale is after a contract has been submitted and gone through the process and the bank comes back with their number. This is the point at which many buyers walk away. Many become married to their original offer price during the long frustrating approval process and often withdraw their offer rather than come up to the bank's approved number. This is when the listing agent will put the property back on the market with "bank-approved price" in the listing commentary. The approval letters are typically good for only 30 days so another buyer who can perform quickly can step in and buy the short sale in a quick deal.

Short sale listings in the MLS have the notation "third party approval required". The listing agent typically does a comparative market analysis to determine fair market value and then lists the property somewhere below that number in order to generate an offer. The banks will not accept that CMA as evidence of value. They will, after receiving the short sale package with an offer, order a broker price opinion or appraisal. That is what they use to establish value. In a recent deal a Fannie Mae desk jockey used Zillow of all things to override an appraisal to the upside.

Question number 3; A buyer shouldn't try to factor in accrued or expected expenses. Just as what a seller paid for a property is irrelevant to a buyer, so is the amount of loss to the lender in a short sale. A buyer should only be concerned with how far below current value she can purchase the property.

Don't expect the lenders to act logically in short sales. Their methods and processes are often illogical and counterproductive. And for buyers considering short sales, don't make the mistake of assuming that all short sales are good deals. Some are overpriced. It is also worth considering that the psychic damage of the often long and draining process may add a bitter taste to an eventual success. Good luck if you decide to engage.

Comments and questions are encouraged.

Of all the times that I've been burned,
By now, you'd think I'd have learned.
________Jackson Browne