Monday, March 24, 2014

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

Friday, March 07, 2014

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

Sunday, March 02, 2014

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