Thursday, February 20, 2014

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 It was withdrawn the end of February last year and the bank foreclosed.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