Thursday, December 31, 2015

The Balmy Wrap-up

It's hard to believe that it is the last day of the year. 8 AM and it's already 76 degrees and predicted to hit 84 which is 17 degrees higher than the average temperature in Cocoa Beach on December 31. The sky is blue, there is just a breath of wind and there is a small, waist high junky swell for those so inclined. Water temp in the mid-70s so wetsuits aren't necessary or even desirable.

Sales have remained slow since my last post but we have managed to close 704 condos and 164 single family homes for the year in Cocoa Beach and Cape Canaveral. Only 26 of the home sales were in Cape Canaveral but a remarkable 11 of those were in the small neighborhood of Harbor Heights in Cape Canaveral.

In Cocoa Beach we saw the highest price ever paid for a home when the oceanfront Pumpkin Center estate just south of downtown closed for $4,000,000. This estate sits on 200 feet of direct ocean and has over 10,000 square feet in multiple buildings with 11 bedrooms and 13 baths. Contrast that with another direct ocean home in south Cocoa Beach sitting on 50 feet of oceanfront that sold for $675,000. Someone scored a killer deal.

Of the 138 single family homes closed in Cocoa Beach this year, 37 sold for a half million or more. Lowest price paid was $120,000 for a tiny 2/1 cottage close to downtown. Overall median price was $375,000 and a little more than a third were purchased with cash.

Of the 704 condos closed so far over half were purchased with cash, 61% to be exact. Ten percent of the sold condos were bank-owned and 14 were short sales. There were 27 condos closed for a half million or more with the highest paid, $1,250,000 for a top floor southeast corner Meridian that sold in seven days on the market. That price came out to a jaw-dropping $508 per square foot. Unique properties command unique prices. Median condo price was $175,000 and lowest paid was $29,900 for a tiny efficiency at The Plaza in Cape Canaveral.

There are almost certainly dozens of people right now who hope to purchase a direct ocean (east facing) condo unit here in the coming year. Those potential buyers need to have a grasp of what units are worth if they hope to be successful in their quest. Prices paid for the 80 direct units that sold in 2015 ranged from $187 to $362 per square foot (if dropping the highest and the lowest). Pricing by the square foot is inexact but it's usually the best starting point in an exercise of estimating value. The median was $250/sf with only three units selling for more than $300 per square foot. Those properties that sold for more than $250 per square foot were generally newer or nicely remodeled and/or furnished. Buyers and sellers need to remember that their estimate of value, no matter how they arrived at it, is an estimate. The opposing party will almost always have a different estimate. Sales happen only when the two parties can reach an agreement or compromise on that estimate. I hope I can continue in 2016 to help many of you in your quest to acquire the perfect beach getaway in our favorite Florida beach town. A happy, safe and prosperous new year to all. Larry out. 

"You are the average of the five people you spend the most time with." ___Jim Rohn

Monday, December 21, 2015

A Big Thank You

I'd like to offer a few thanks to the listing broker with whom I just closed a sale. Thanks for always taking days to answer (when you actually did) my requests and questions about your listing both before and after we had an accepted contract. I got the impression that you check email once a week, texts every other day and never answer voice calls. Thanks for "leaking" the price of the other offer to me so my client could beat it. Shame on you for then taking our price to the other agent and "leaking" it so they could better it. Thanks for costing your client two full weeks by refusing to present our first offer because you didn't like the length of the inspection period. Thanks for then agreeing to those very same terms two weeks later. Thanks for taking four days to get the agreed-upon offer signed and returned. Thanks for never bothering to respond to repeated requests for survey and utility questions. Thanks for not bothering to get the seller to sign the last addendum until I offered to drive by for you to get it signed rather than miss closing date. AND, thanks most of all, for going on an cruise the week of closing without telling anyone and telling the seller that it was OK to keep a key and finish moving two days after closing. I assume you're back but who knows since I haven't heard a peep from you since the week before closing. Your client was impressed with how hard one of us worked. Guess who.

As we approach the holidays, property sales have slowed. After closing two condos a day every day since January 1 in Cocoa Beach and Cape Canaveral, only 26 condos have gone under contract since the first of December. That's not unusual and will likely change right after Christmas. In years past, activity has been at times frantic in the last week of the year and then ramping up as we move into the our busiest time of year. This coming year 2016 might be slightly different as we are entering the year with the lowest starting inventory in history. Or, maybe not, as we have continued to beat the preceding year every year for the last ten even as inventory continued to shrink. We'll see. Consider our starting condo unit inventory levels in recent years:
  • January 2010 - 525
  • January 2011 - 459
  • January 2012 - 365
  • January 2013 - 300
  • January 2014 - 303
  • January 2015 - 251
  • December '15-  224
We officially set a new sales record this week when closed condo sales in Cocoa Beach and Cape Canaveral passed last year's record 682 units. We look to easily pass the 700 mark by year's end. That means we'll have to sell more than three times the existing inventory to hold the same pace next year. Not an impossibility but definitely a challenge. I'm up for it. Those of you looking to purchase need to be nimble and ready to move quickly when your ideal property presents. If planning to use a mortgage to purchase, talk to your lender now instead of waiting until offering. Happy hunting and may the Force be with you.

Wishing everyone a safe and happy holiday season and a positive and prosperous new year.

“In case it’s not clear yet, the language of real estate listings is bogged down in secret rules and code words. It’s a language where 'modern' means the opposite, and 'unique' is just about the worst thing you could be.” ____Spencer Rascoff, Zillow CEO 

Sunday, December 13, 2015

Hope, Greed and Bad Advice.

This post was inspired by the closing this week of one of the handful of units that originally sold at completion at a big, new south Cocoa Beach condo complex in 2007. Nigel and Keanu are fabrications as is the story but the numbers are real. I have no idea who the actual parties to any of the pre-construction transactions were other than the cracker-jack real estate agent who sold several of the pre-construction contracts. He is very real but shall be identified only as "Cracker Jack".

It's the year 2005 and it seems almost everyone is making money hand over fist speculating in real estate. Keanu's neighbor, Nigel, refinanced his house and has been using the cash-out money to reserve pre-construction condos for 10% down and then flipping the contracts prior to closing for several times his investment. He made over a hundred thousand bucks on just two contracts at Portside Villas and is currently sitting on contracts at Solana on the River, Somerset in Titusville and Island Pointe in Merritt Island. These contracts look to profit several hundred thousand by the time he flips them next year.

Nigel calls Keanu one afternoon with the news that his cracker-jack young agent has somehow scored a pre-construction list for a just approved riverfront project in south Cocoa Beach. If Keanu wants in, 10% will reserve one of these to-be-built units starting at $549,900. The price only has to move to $600,000 to double the investment and a triple or more is possible depending on where the market is by the time the contract is flipped to another buyer. Both of them decide to go for one of the $549,900 units and plop down $54,900 each for the reservations.

As the buildings go up, things are looking good. Nigel flips one of his other contracts for a tidy profit but decides to sit tight on the remaining ones for more money. Both list their pre-construction units summer of 2006 for mid-$600s and mentally begin counting the profits. One little snag, the developer hasn't been able to sell all the units and is still offering identical units for $549,900. A few months later the notice of impending completion goes out and closings are set for early in 2007. It is now time to come up with the remaining $500,000 and close on the unit or, gulp, default on the contract and lose the $54,900 deposit. Nigel has a slick mortgage guy who will finance the entire remaining balance with a no documentation, interest-only jumbo mortgage at 6.5%. That's his plan as he expects to resell the unit for much more after the developer unloads his remaining units. After much thought and with much regret Keanu makes the very difficult decision to walk away from the $54,900 deposit. Nigel closes and mortgage, fees, taxes and insurance on his unit run just over $3900 a month.

Something feels different going into 2007. The optimism has evaporated almost overnight. The developer hasn't sold another unit and only closes eleven units that year. Nigel's cracker-jack agent suggests renting his unit while waiting for the market turnaround and is able to get a tenant for $1350 a month. After bleeding money every month for two years Nigel lists his unit for sale for $398,500. No takers and he rents again for $1350. Fast forward to summer 2014 and the unit is listed again sans tenant for $410,000. Unfortunately, the developer still has unsold units and is offering an identical unit for under $400,000. Nigel's unit sits empty until this week when it finally closes for $346,500. That's over $200,000 less than paid in 2007 and after almost eight years of over $2500 a month negative cash flow. For all Keanu knows, Nigel may have stuck the lender and association for a good portion of the losses and is vacationing in Cannes. For Keanu the evidence suggests that the decision eight years ago to walk away from the $54,900 deposit may have saved him more than a quarter million dollars. He has no idea how Nigel's contracts at the other complexes played out. Nigel hasn't mentioned them since 2007. The cracker-jack agent is still around, older and, hopefully, wiser and still closing a couple of deals a year. His star faded significantly after evaporating over a million dollars of client money with ill-timed pre-construction recommendations. I have a fond memory of the developer asking me after giving me the same list of available pre-construction units "Why aren't you selling any of these units to your clients? Cracker Jack is on fire." Really? Less than a year later the National Association of Realtors launched their ill-advised $40 million "Now Is a Great Time to Buy or Sell" campaign. They were half right. 

“We are ripping you off like no one has ever ripped anyone off as a per-unit basis,” but ”We are also building a time bomb that’s going to flatten us forever.” Sasha Frere-Jones talking about the music industry's shift in the 90s to CDs selling at higher prices than albums but, in the process, setting up the apparatus for music pirating with digital copies in the hands of the now-pissed-off consumer.

Thursday, December 10, 2015

What's It Really Worth?

"What do you think it's worth?" That's the (literally in some cases) million dollar question. No one wants to sell for less than actual value or pay more than, but no one, appraisers, tax authorities, Realtors nor Zillow, has an always accurate method for determining present value of a property. In the rare situation of multiple recent sales of identical properties we can get very close. For everything else, looking at recent sales of the most similar properties, holding a wet finger in the breeze and adjusting accordingly is the best anyone can do to estimate current value. These adjustments are where the variations happen.

How much more, if any, is an identical 10th floor unit worth over a 4th floor? 3rd over 1st? How much should I deduct for no garage or add for a second garage? No elevator? High ceilings? Forty year old versus 15 year old building? Is a weekly rental unit worth more than a three month minimum rental unit? How much discount for a compromised ocean view? Is a complex with tennis courts worth more? How about reserve account balances? There are so many variables that the best anyone can do is come up with their best idea and hope to land on the good side of their estimate.

This is where it can get interesting. If I do my homework and crunch the numbers carefully and come up with a number that I trust is close, I will probably still have to be flexible if I hope to consummate a sale as the other party's opinion of value is almost certain to be different than mine. If I treat my number as a line not to be crossed, I am setting up for failure. I have seen deals fall apart with buyers and sellers whose drop-dead numbers were ridiculously close but which neither would violate. If I am selling in a dropping market, it may not matter if I accept an offer for less than I had hoped. Same holds true for buying in a rising market. If similar properties have been appreciating, paying more than my opinion of value might make sense. This is especially true when inventory is low. For everyone involved  it helps to remember that both sides' numbers are ESTIMATES.

Where do we start? Let's look at our bread and butter property here in Cocoa Beach and Cape Canaveral, a direct ocean condo with at least two bedrooms and two baths. The usual starting point for properties of similar size and condition with similar attributes is price per square foot. Units currently for sale (with one notable exception) have an asking price per square foot ranging from a high of $454 to a low of $154 per square foot. Both the high and the low may actually be priced to perfection. There are 18 units asking more than $300 per square foot. Only one unit has sold for more than $300 a square foot in the last 90 days. Remember, opinions and differences thereof. For the record, sixteen of those $300+/sf units are less than 15 years old. Newness generally commands a premium.

The bulk of the recently sold units with an unobstructed east ocean view sold for between $215 and $295 per square foot with half landing between $250 and $260 per square foot. To put that in perspective, that means a typical 1300 square foot 2/2 unit has recently been selling in a range of $279,500 to $383,500. Don't marry your opinion of value. There is a lot of wiggle room surrounding it.

Our takeaway: Your opinion of value, just like mine and every seller's and every buyer's is just an opinion. The owner of the luxury Cocoa Beach condo who just increased his price to $691 per square foot this morning no doubt thinks his opinion of value is correct. Now if he can just find a buyer with the same opinion he may be able to sell. Before a Meridian penthouse closed last month for $1,250,000 I thought that $500 a square foot was crazy for any condo here. My opinion had to change. Flexibility, my people.

"When I found the skull in the woods, the first thing I did was call the police. But then I got curious about it. I picked it up, and started wondering who this person was, and why he had deer horns." ___Jack Handy

Sunday, November 22, 2015

Cash. What Is It Good For?

It's time for a statistics trip through the recent Cocoa Beach and Cape Canaveral residential real estate market. The more we know about the current market conditions and trends the better chance we have of being successful in a quest to buy or sell.

Sales have been brisk in 2015 outpacing every year for the last ten although we look to finish the year only slightly ahead of last year's 682 condo units closed. Unless we get an infusion of inventory, unlikely in my opinion, next year could show the first decline in ten years in sold units. Demand remains strong and prices continue to inch upwards.

Looking at the last 90 days of activity as recorded in the MLS, there have been 144 closed condos and townhomes. Another 62 have gone under contract in the same period but have yet to close. Cash remains king for condo purchases with 59% of the sales closing with cash. All sales over a half million dollars were cash. Just over half of the condo listings (74) sold in the first month on the market with a quarter of the total (35) selling in the first week. Dollars per square foot paid for direct ocean units had a wide range with a Meridian penthouse SE corner bringing a whopping $508 per square foot. The median for direct ocean units was $268 per square foot. If using this metric realize that it can have a wide range. Size of unit, condition and parking can account for wide variations. There are 204 condo and townhome units for sale this morning on our MLS.

Single Family Homes
In the same most recent 90 day period, 36 single family homes closed in our two cities. Two thirds of them were financed with a mortgage. Half sold in the first 45 days on the market with eight of those selling the first week. The median price was $408,000. There are currently 54 homes for sale on the MLS.

Karma police, arrest this man
He talks in maths
He buzzes like a fridge
He's like a detuned radio

Tuesday, November 17, 2015

A Couple of Shout-Outs

Just wanted to give a shout out to the listing agent who neglected to put her email address or her cell number in her Cocoa Beach condo listing. My clients asked late Friday afternoon to include your listing in our showings for Monday morning. The appointment phone number you gave in the listing was to an office that was closed all weekend. Unfortunately, because of your omissions your client's unit wasn't able to be shown. Perhaps they've instructed you to make it difficult to show. I understand your weekend vacation was a blast.

Shout out number two goes to the off-duty gate guard walking his dog at a popular Cocoa Beach oceanfront condo complex when I pulled in to show a unit for sale last week. You decided to approach me AND my clients to launch a tirade about my parking technique not being to your satisfaction. Rather than pull me aside to discreetly express your displeasure at my slight infraction, you decided to launch an angry attack directly in front of my clients. You're hurting the very people who pay your salary with that behavior. I and my clients and, I think, even your little dog were embarrassed for you. If the homeowners knew how you were conducting yourself in front of potential buyers and new neighbors, you'd probably be out the cushy gate job. As Don Henley said, "Keep carrying around that anger, it'll eat you up inside." Yours is the first face visitors see when entering the complex. First impressions and all that.

Condo and townhouse for-sale inventory in Cocoa Beach and Cape Canaveral has climbed back above the 200 mark with 204 units for sale this morning. A total of 26 units have received accepted contracts since November 1. In the same period six single family homes have gone under contract with 56 still for sale. Half of the total combined residential inventory has been on the market more than two months, an indication of the picked over nature of our tight inventory. The priced-right properties are usually under contract in days. The over-priced ones tend to linger.

Hope everyone is enjoying the mild temperatures. We are forecast to break 80 today for the first time in several days after lingering in the high 70s. The wind has shut down most ocean fishing since it cranked up this weekend. I did manage to slip out for a couple of hours last week to land a couple of giant catch and release redfish in the Canaveral Bight. River fishing is still on fire with redfish, trout, snook and tarpon there for those who know where and how to catch them.

"Give me your tired, your poor, your huddled masses yearning to breathe free. Unless they're darker than, say, beige."- Statue of Liberty inscription if written by Donald Trump

Tuesday, November 10, 2015

Million Dollar Listing Cocoa Beach

The luxurious life of a real estate agent; roll out of bed by 10, pick up a latte and check emails, drive a client to a couple of listings, fill out a few forms and collect a giant check for doing practically nothing while never breaking a sweat. Occasionally attend a fancy brokers' open, drink wine and eat fancy hors d'oeuvres with the other elite while gazing over the city and ocean from a seven figure condo balcony. Rinse, repeat.

I wish. The reality is somewhat less glamorous but there are moments even in Cocoa Beach that compare to some of the moments portrayed on Million Dollar Listing Los Angeles. I experienced one last week at a broker's open high in the Riomar building on the ocean in south Cocoa Beach across the street from The Fat Snook.

The listing agent was somehow able to talk the folks at The Fat Snook into sending over their chefs from the Snook and it's sister restaurant, Crush Eleven, to craft appetizers for the agents and their clients attending the open. The usual fair at an Open House is a grocery store vegetable plate with some ranch dressing for dipping and bottled water. Not so for this one. The Snook folks knocked it out of the park. Their creations, not surprisingly, had the attendees jostling for seconds. Even this somewhat food-snobbish pescatarian was at a loss for descriptors. For just a few moments I felt like Josh Flagg without the fluffy hairdo. This is the list of hors d'oeuvres. Try not to drool. They tasted as good as they sound.

    chilled carrot ginger soup shooter / candied ginger
    smoked seafood sausage /key lime mustard / black garlic and serrano crostini
    salmon belly "bacon" / green tomato kimchi / house-made sesame cracker
    old bay potato chip / local ossetra caviar / creme fraiche / micro radish
    chocolate bourbon pot de creme / graham cracker crumble / toasted marshmallow

We are lucky that this caliber of food is available to all of us here, all the time and not just at fancy broker opens. The Snook is open seven nights a week on A1A in south Cocoa Beach. Miami has NAOE. LA has Providence. Chicago has Everest. Cocoa Beach has The Fat Snook.

Coming soon, a tale of my saga of the last few weeks with one of this year's contenders for difficult agent of the year. He has spun a toxic blend of dishonesty, disinterest and arrogance into one of the more challenging transactions of my career. If the seller knew how her agent was handling her sale, he'd be flung aside faster than a booger on a 5th grader's finger.

"All you need is love. But a little chocolate now and then doesn't hurt." __Charles Shultz

Wednesday, October 21, 2015

Slow and Content

For your entertainment, the cashier's check pictured is a very good fake. It looks and feels legit. It has the micro-perf edge and all the expected printing on both sides. I received it from a scammer trying to book a vacation rental and then using the old "travel agent wrote check for too much money, please return the overage through Western Union or Moneygram". I get a few of these attempts every year and always try to play along long enough to get another check for my collection.

Inventory is slowly creeping back up in Cocoa Beach and Cape Canaveral, mainly because sales activity has slowed. There have been 44 new condo listings since October 1, with 7 of those already under contract and another 2 already closed. Eight of the remaining 35 are asking above $500,000 and two top the million dollar mark. Twenty eight units have closed in the same period leaving us with 197 actively for sale condos in Cocoa Beach and Cape Canaveral.

Single family home numbers are less as always but following the same trend; five closed in October and another six under contract. A total of 57 for sale with ten new listings in October.

Most agents I'm talking to are reporting slowed activity but we are still on track to clock the highest annual number of units sold in any year since 2005. Hopefully we'll get a fresh surge of new listings after the holidays. Fingers crossed. Temps have been pleasant in the 70s and low 80s for a couple of weeks and expected to continue in the same range. The ocean has been very rough for a week with hard onshore winds. Not good conditions for surfing or fishing. Protected lee shores in the rivers are still producing fish for those willing to make the windy run to find those protected spots. Five and a half weeks remain in the 2015 hurricane season. Nothing but a good run of surf for us here.

"Real G's move in silence like lasagna"  _______Lil Wayne

Friday, October 16, 2015

3Q - The Year On The Beach So Far

How is the real estate market doing in Cocoa Beach and Cape Canaveral? I get this question more often than "How have the waves been?" or "Catching any fish?" Based on personal observation I would say the market is the most active it's been in ten years. After crunching the numbers, that impression is confirmed. Comparing sales in the first three quarters of the year for the last ten years, 2015 tops the list with the highest number of closed MLS-listed residential properties. What other trends are we experiencing? Let's dig a little deeper.

The number of property sales in our two cities peaked in 2005 with a sharp dropoff in 2006 that continued until flattening in 2008-2009. I graphed condo and townhome sales only because they make up the majority of residential properties in our cities. Single family homes sales mirrored the trend in condos. Prices continued to fall for most properties for a little longer before stabilizing. From 2009 sales activity began rebounding and has increased every subsequent year.  Note that 2014 finished higher than 2013 even though we were lagging at the end of September that year.

Prices have been steadily creeping upwards for most properties since around 2010 although there are pockets that haven't moved as much as others. Condo complexes that experienced heavy investor buying during the boom years took longer to stabilize. The years of distressed sales in Cocoa Beach and Cape Canaveral have ended. There are no bank-owned nor short sale single family homes for sale in either city this morning. Only nine of the 190 condos and townhomes for sale are bank-owned AND all of us; buyers, sellers, real estate agents and title companies, should be celebrating the fact that there is but one short sale listing of any kind here today.

In the first three quarters of 2014 there were 118 single family homes closed in the two cities. Only two were short sales and 17 were bank-owned. Fifteen houses (13%) closed for $500,000 or more. This year sales increased by 14% with 135 closed through September. None of them were short sales and 16 were bank-owned. Thirty houses (22%) brought $500,000 or more. There are 55 houses for sale this morning with zero short or bank-owned offered.

From January 1 through September 30 of 2014 there 523 closed condos and townhomes. Distressed sales (short and bank-owned) made up 17% of the total. Seventeen units or 3% of the toal sold for $500,000 or more. 2015 saw activity increase by 8% with 564 units closed in the first three quarters. Distressed sales accounted for 13% of the total and $500,000 and above sales held steady at 3% (19 units) of the total. Inventory this morning is 190 units which is just over three months supply at the current sales rate.

Our takeaways:
Sales are increasing even as inventory shrinks (two thirds what it was just two years ago). New listings are being sold as fast as they are coming on the market propping up the activity for the moment. As is to be expected, with demand exceeding supply, price momentum is upward. Let's hope new lsitings don't dry up.

Short sales and bank-owned properties are no longer a factor in our beach market. Price direction (up) is reflecting the absence of these properties. Sellers are in the power position at the moment so buyers should negotiate accordingly. As is the case in any market, many are unrealistic about the value of their property and those will have to be ignored until they accept reality. The sales numbers tell us that many others are realistic. Those buyers and sellers who understand fair value and are willing to accept it can complete a successful sale/purchase. Any agent familiar with our market can approximate fair value for a property here. Speaking of; Beware the expert from afar. Zillow may be willing to sell an agent space on the "Search for a Cocoa Beach Agent" page but it's safe to say that three quarters of the 250 "Cocoa Beach Experts" displayed there probably can't distinguish high tide from Tide detergent and would have to consult Google maps to find Indian Creek Drive on their drive over from their office in another city. How's a consumer to know? Easy. Where is your office? If there is a bridge between that office and the

"When kids hit one year of age it's like hanging out with a miniature drunk. You have to hold onto them. They bump into things. They laugh and cry. They urinate. They vomit."  __Johnny Depp

Wednesday, October 07, 2015

Ah, October

There has been good surf every day in Cocoa Beach for almost three weeks now. We had two different overlapping swells under our belts by the time the first pulse from Hurricane Joaquin peeked around the corner of the northern Bahamas last week. That swell was manageable the entire duration with several perfect days of waves a few feet overhead with glassy conditions. The last remnants of the swell are still pushing in out of the north this morning as Joaquin chugs towards southern Europe with the promise of good waves for the Quiksilver Pro in Landes, Aquitaine France.

Property sales remained strong in September with 17 single family homes and 51 condos and townhomes closed in Cocoa Beach and Cape Canaveral in the month. Of the 68 sales, five were bank-owned and one was a short sale. Eight of the single family homes were over $430,000 and only five sold for less than $337,000. Highest sale was $700,000 for a remodeled waterfront 3/2 on Danube River. Lowest price paid was $195,000 for a handyman special on Park Dr.

Condo sales were concentrated in the lower price range with over 70% of units closing for less than $186,000. Only two units closed for more than $400,000, both direct ocean units above the third floor. Direct ocean units above the ground floor in good condition in older buildings have been commanding $240 to $295 per square foot depending on condition and size. When we begin to see sales of pristine units in newer buildings again (built since 2000) we can expect those units to bring considerably higher dollars per square foot, up into the mid-$300s.

Inventory of condos and townhomes in our two cities this morning stands at 189 units with another 69 under contract awaiting closing. Eight of the condo listings are bank-owned and one is a short sale. There are 53 single family homes for sale with no short sales and only one bank-owned.

We can probably expect the good surf to persist through the month as more storms pass offshore. The mullet are still running along the beach although the waves have made for challenging surf fishing. Fishing in the river is on fire with redfish, snook and trout there for the taking. Get out and enjoy some or all of it. This is the best month of the year in Cocoa Beach with no crowds, warm water and pleasant air temps. I am remined every day why I love this place.

According to Morgan Housel there are four types of investment returns:
  • Consistently bad.
  • Mostly bad and occasionally good.
  • Mostly decent and occasionally good.
  • Consistently good and fraudulent. 

Tuesday, September 22, 2015

Talking Story and Other Stuff

I was talking real estate story with a friend and Cocoa Beach broker last week. He mentioned a listing appointment he'd gone on the previous week. Things went well and the owner told him she would call him back in December to list the unit. It was listed the next day with another agent. Imagine my surprise when I realized it was the same condo owner who had told me, the same day apparently, that she was going to try to sell the unit by owner but would call me to list it if that didn't work out. Very nice lady otherwise.

I received a notice from the Board of a condo where I own a unit indicating that a unit was contracted to sell and I was being given my ten day first right of refusal to match the contract. One problem: no contract or details of the contract were furnished. I asked the Board for a contract and/or details of the purchase contract so that I could consider whether I wanted to purchase the unit. The seller of the unit refused to provide a contract and the buyer began contacting Board member privately asking for their approval to move forward with the sale without the first right process. After threats of legal action, the seller notified the Board that the sale had been cancelled. I suspect that the contract was fraudulent. Most likely scenario is that the contract showed a lower selling price than the actual amount being given the seller. That would have lessened both the seller's capital gains tax and the buyer's property taxes. The problem here is that if I or another association member exercised our first right, all we would have had to pay for the unit is what was on the contract, not whatever under-the-table extra money had been agreed upon.

The online real estate landscape continues to evolve. Realtors are spending ever-increasing amounts to have their ads appear next to listings on Zillow and the like. An agent fresh out of real estate school can pony up the admission at any of these sites and instantly appear next to seasoned veterans with a "Cocoa Beach Expert" appellation. That placement pays off with buyer and seller inquiries that, hopefully,  turn into commission checks. With literally hundreds of agents competing for these placements the ad price continues to go up even as the effectiveness is diluted. I have no idea how this will play out. One possible scenario is agents bidding for placement, high bid gets the ad. Another possibility is allowing advertising agents to compete on commission in their ads. At least three different sites have already begun promising rebates to consumers who choose one of their "experts". It's not a stretch to think that Zillow could do an end run around all of that and affiliate with an existing broker in each state and underbid everyone for listings with a discount listing model. Once they own the bulk of the listings and the inquiries they could sell the buyer leads to starving agents for a healthy referral fee. Several of the franchises already do this. Make an inquiry on a property on one of the major franchise sites and, unknown to you, the perky agent who responds to your inquiry will have had to agree to pay as much as 40% of his commission check to the parent company BEFORE the split and franchise fees.

 In the recent past, the overwhelming majority of listings in Cocoa Beach and Cape Canaveral were with local offices. This morning over a third of all listings here are with offices in cities other than Cocoa Beach or Cape Canaveral. Several are in offices in other counties. Does it matter to a seller where her listing agent's office is? Maybe not, but, it may cost her a sale. The buyer who flew in for a day to look at his six favorite listings may not see your unit if the key didn't get returned to the lockbox and the spare is miles away at your agent's office. I would advise sellers to reduce as much friction as possible to selling their property. A distant listing office is unnecessary friction. Less friction can translate into a faster sale and/or higher selling price. Don't get me started on tenants or 24 hour notices to show.

Schools of big tarpon are cruising the beaches gorging on the mullet that are streaming southward on their annual migration. In addition to the usual fishing boats, anglers are hooking up from kayaks, stand-up paddleboards and occasionally from the beach. It's a great time for beach fishing. Snook and pompano are being caught from the beach as well and decent numbers of big flounder are being brought in at the Port. [The snook in the photo was 32.5" from the beach on an artificial lure a couple of years back] Rock shrimp are plentiful right now and are available in bulk at Seafood Atlantic and Wild Ocean at the Port and in cooked meals at many local restaurants. Grills has been offering a very reasonable and delicious plate of them. If you've never had rock shrimp, I encourage giving them a try. Somewhere between regular shrimp and lobster but tastier than either.

"It's always good to be underestimated."  ___Donald Trump

Saturday, September 12, 2015

Winding Down

Man, it's been hot. Despite no crowds and cheap summer rates it just hasn't been worth risking heat stroke to play a few holes at the Cocoa Beach Country Club. On a more positive note, with school back in session the streets and beach are fairly deserted most of the time. Yen Yens is closed for their annual post-summer vacation. The mullet run has begun. Big breeder redfish are schooled up in the lagoon and river providing lifetime catch and release opportunities. Snook season is here and fishing from or just off the beach is as good as it gets. Giant tarpon are there for those crafty or lucky enough to hook up. We'll have several more weeks of it and hopefully a good swell or two from distant passing storms to take the edge off the wave-starved population of Cocoa Beach.

Not much has changed with the dried-up inventory situation. We are stuck in the same range with just 173 condos for sale this morning in Cocoa Beach and Cape Canaveral and 53 houses. Of those 226 residential properties for sale, eight are bank-owned and one is a short sale. Despite the low inventory 77 properties closed in August.

Single family home sales were robust with 18 closing in the month. Two open river Snug Harbor Cocoa Beach homes topped the price list at $592,000 and $630,000. At the other end of the scale, five houses closed for under $300,000, a couple in Harbor Heights Cape Canaveral and the other three in Cocoa Beach.

Activity at the upper end of the price range in condos was slow in August with only one condo selling for more than $400,000, a 5th floor fully furnished, direct ocean Palmas Majorca 3/2 that closed for $470,000 after almost a year on the market. Three quarters of all closed condo sales in August were under $250,000. The proportion of condo buyers financing their purchase continues to increase. Two out of five buyers used a mortgage to purchase their unit.

Days on market continues to drop with any decent unit priced close to fair value selling almost immediately. Of the 59 condo sales, 26 sold in less than a month and 11 of them the first week. It is more important than ever for prospective buyers to know what they want and to be prepared to move quickly when it sticks its snout out of the mix. Those planning to use a mortgage to purchase a condo need to talk to a knowledgeable local agent before compiling a list of units and then talk to a local lender to figure out what conditions might exist. There are buildings that no lender will touch and there are buildings that will only work with limited review mortgages. Sellers also need to understand the mortgage dynamics and qualifications of their buildings so they aren't tempted to accept an offer contingent upon a mortgage that will never happen. It doesn't matter how attractive the offer price is from that 10% down buyer if the building won't qualify. I'm here if you have questions. 

And then one day you find ten years have got behind you.
No one told you when to run. You missed the starting gun.
_________________Pink Floyd

Wednesday, September 02, 2015

Deal Killers

Congratulations. After months or years of searching and maybe a few unsuccessful offers you finally have the dream vacation home in Cocoa Beach under contract and are looking forward to parking a toothbrush and strolling to the beach in the backyard. It's practically a done deal. Nothing remains except closing. What could possibly go wrong?

Well, a few things. If one compares getting an accepted contract to filling a champagne glass, then the process of getting from accepted contract to the closing table would be running a 100 meter hurdle with a tray full of champagne glasses and arriving at the finish line with nothing spilled. Some common deal killers are:
  • Appraisal
  • Inspection
  • Lender
  • First Right of Refusal
  • Title Issue
  • Association Issue
  • Property Manager
  • Buyers Remorse or Circumstances
The surprise deal killer on the above list is the property manager. Condo sellers probably think their association's property manager will be helpful in the process of selling their unit. In most cases they are correct. In a few cases, they could not be more wrong. I briefly touched on the subject of bad property managers in the last post. I saw a property manager almost blow-up a condo closing this week with a mix of incompetence and sheer nastiness. When the estoppel letter from the manager arrived at the title company it showed a surprise balance owed the association of almost $3000. The sellers were current on condo fees and assessments and had no idea what the balance owed was about. When questioned, the manager came up with a history beginning with a missed monthly fee ten months ago that had compounded penalties and interest to the present amount. She was ultimately proved wrong but had the sellers not been able to produce the "missing" check deposited by her she would not have backed down on the erroneous balance owed and the condo unit would not have closed. This is the same property manager that had a young mortgage processor in tears on a separate deal a couple of years ago. For the record, this "worst property management company in the world" is not in Cocoa Beach or Cape Canaveral, but is nearby and manages condos in Cocoa Beach.

Quick quiz: How many short sale condos and townhomes are for sale right now in Cocoa Beach and Cape Canaveral?

Total inventory of units for sale in our two cities is 171. At the peak of the market in 2005, we closed that many units in a smoking six week period in May and June. Inventory at that time was just over 800 units and would increase to more than 1100 by mid 2006. There were zero short sales then. Short sales and foreclosures began showing up in 2007 and peaked in 2010 with almost half of all sales that year distressed, either short sale or foreclosure. Inventory and distressed percentage have both been in steady decline since and the answer to the quiz question is ZERO. There is not a single short sale condo or townhouse in Cocoa Beach or Cape Canaveral. There are seven bank-owned units for sale, only one of them oceanfront and none of them priced aggressively. Those looking for an oceanfront distressed "deal" have probably missed the boat. The current skew of heavy demand and little supply will likely continue to nudge prices higher though they are still well below the peak numbers of 2005 and 2006.

"The female, not the male, determines all the conditions of the animal family. Where the female can derive no benefit from association with the male, no such association takes place." _______Briffault's Law

Friday, August 14, 2015

Has Your Condo Board Gone Rogue?

Here we go again. Condominium boards exceeding their authority (or shirking their duty) is so common that I am no longer surprised when I hear crazy stories about a Board, officer or management company making up procedures to suit their own agenda. Without enforceable guidelines it would be next to impossible for a group of people to fairly share ownership and maintain reasonable living conditions in a property. If that group doesn't understand the laws and guidelines they are at the mercy of the overreach or indifference of the Board.

The State of Florida was kind enough to enact a long and detailed Statute (The Condominium Act) that spells out how condominiums shall be formed and run. You can read the entire Statute here. Each individual condominium also has a Declaration and By Laws detailing governance and use restrictions for that condominium. Condo owners are advised to read and understand the Declaration and By Laws for their association. Note that the separate Rules and Regs issued by your Board may not be legal nor enforceable.

With all the legalese of the governing documents, it can be confusing as to exactly what rights owners and Boards have. Not surprisingly, Boards and management companies routinely act in ways that violate the Act. Often unintentionally, sometimes not.

I saw a Cocoa Beach condo board run a sales contract through first right of refusal when no first right existed. In that case it was a misunderstanding not an illegal conspiracy. I have seen a management company insist on offering a contract out for first right contrary to the procedure in the Declaration. That case was also a misinterpretation not intentional misbehavior.

Now on to outright conspiracies. There is a condo in Cape Canaveral that has for years tried to keep sales contracts secret from owners who have first right of refusal. This has gone on with cooperation from the management company. They recently stepped up their illegal activities and skipped the first right process altogether in clear violation of their Declaration. Another Cocoa Beach oceanfront condo added an illegal use restriction to it's Rules and Regs and backdated the document to make it appear as if it always existed. They should have made sure there were no former copies still in existence. Busted. 

The incident that prompted this post occurred at an otherwise beautiful Cocoa Beach condo that just happens to have a particularly nasty management company. The management company has been a fairly constant source of grief for owners and tenants and I have heard many stories over the years. The Board tolerates the manager's actions and possibly supports it. I was sent a copy of one letter from the manager threatening to fine an owner. The threat was not illegal, but the manager did not have the authority to levy a fine. That is a clear violation of the procedure spelled out in the Act. Hopefully, the Board will follow the law if they start following through on the manager's frequent threats of fines. If not, and no one stands up to them, the grief will continue.

The Condominium Act is very clear about fining procedure. Neither the management company nor the Board can fine an owner or a tenant without first issuing a 14 day notice of a hearing before a committee of owners who are NOT Board members nor residents of a Board member's household. The committee can either confirm or reject the fine. The Board can't levy a fine without following this procedure and receiving the committee's confirmation. If you receive notice of a fine absent the procedure, inform the Board and manager that they have violated procedure and do not pay it until procedure has been followed. Your non-Board committee members may stand up to a bullying Board or manager and reject the fine. Not all fines are undeserved nor are all Boards and managers bullies. The procedure is there to give some check and balance to the fining process. Use the privilege wisely should the chance arise. As always, knowledge is power.

From the Florida Condominium Act Chapter 718.303 (b):
A fine or suspension levied by the board of administration may not be imposed unless the board first provides at least 14 days’ written notice and an opportunity for a hearing to the unit owner and, if applicable, its occupant, licensee, or invitee. The hearing must be held before a committee of other unit owners who are neither board members nor persons residing in a board member’s household. The role of the committee is limited to determining whether to confirm or reject the fine or suspension levied by the board. If the committee does not agree, the fine or suspension may not be imposed.

"If you smell something, say something."  __Jon Stewart

Saturday, August 08, 2015

Condos and Scallops

Somehow, even with the already-tiny and still-shrinking inventory, 62 MLS-listed condos and townhomes managed to close in the month of July. One of those was a short sale and seven were bank-owned. Of interest among the bank-owned units was a 2nd floor east facing Mystic Vistas corner 3/2 with 2059 square feet that sold for $327,000 in 26 days. A shocker was a 3rd floor east facing (behind the pool) Spanish Main 3/2 with only 1153 square feet and no garage (no fridge or washer/dryer either) that incited a bidding war and closed above asking for a remarkable $302,500. Even for a weekly rental unit, that price surprised me. That was not, however, the highest price per square foot paid for an ocean condo in the month. A furnished and partially remodeled ground floor direct ocean Sandcastles 2/2 with 1286 square feet and a garage closed for a jaw-dropping $380,000. That's $295 per square foot for a unit with no view.

Other sales of interest included;

A remodeled and furnished 2nd floor corner 2/2 direct ocean Windjammer in Cape Canaveral with 1196 square feet and a garage closed for $330,000 in 18 days on the market.

A partially furnished and remodeled 3rd floor direct ocean downtown Cocoa Beach Park Place 2/2 with 1316 square feet and a garage closed for $335,000.

An updated 7th floor direct ocean Stonewood Cocoa Beach 3/2 with 1588 square feet and a garage sold for $400,000.

An updated and fully furnished 2nd/3rd floor townhouse style Royal Mansion Cape Canaveral 2/2 with 1058 square feet and a peek of the ocean closed for $255,000. Open parking and weekly rentals.

A fully furnished mainly original condition 4th floor north ocean view Sandcastles Cocoa Beach 2/2, 1286 square feet and garage closed for $305,000. Weekly rentals permitted.

A one of a kind 7th floor penthouse direct ocean Ocean Pines downtown Cocoa Beach with 3 bedrooms, 4.5 baths and 2706 square feet closed for $628,750. Came with a private 2 car garage.

An updated wide floor plan 5th floor north ocean view Windrush Cocoa Beach 3/2 with 1852 square feet and a 2 car garage closed for $430,000 in 29 days.

A remodeled direct ocean Waters Edge south Cocoa Beach 1st floor (above garage) 3/2 with 1753 square feet and a garage closed for $364,750.

A 3rd floor south facing peek of ocean between the buildings Solana Shores 3/2 with 2095 square feet and a private garage closed for $400,000 after just 20 days on the market.

A 4th (top) floor direct Banana River River Bend south Cocoa Beach 3/2 with 2050 square feet and a garage closed for $370,000.

Right up the road in south Cocoa Beach a 4th floor corner direct river Garden by the Sea 3/3 with 2405 square feet and a 2 car garage closed for $424,000 after about four and a half years on the market and for about $200,000 less than the initial asking price in 2010.

I'm happy to send a link to details of all 62 closed sales to anyone who would like it. As we can see from the recently closed sales, prices continue to rise, mainly a function of the record low supply, standing at 175 units for sale in Cocoa Beach and Cape Canaveral this morning with only seven distressed listings in the bunch. Having said that, we are still far below the prices of ten years ago and remain the lowest priced oceanfront community in Florida. 

The rain continues although nothing like the Biblical rains being endured on the central Gulf Coast of Florida. Scalloping there has been limited to between the storms but we were able to score good quantities on our annual harvesting trip this week. Spicy scallop baskets (gunkan maki) like those pictured will be gracing our plates for a few days.

Got questions? Email me.

"When I was poor and I complained about inequality people said I was bitter, now I'm rich and I complain about inequality they say I'm a hypocrite". ____Russell Brand

Tuesday, July 28, 2015

Headlines < Statistics < Truth

I noticed a couple of interesting headlines in my morning coffee briefing yesterday, "U.S. Home Prices at Record High, Surpasses 2006 Market Peak" in the World Property Journal and "The Housing Market Still Isn’t Rational" by Robert Shiller in the New York Times. The first article's headline comes from NAR's most recent press release stating that the $236,400 median price for all property types nationwide in June exceeded the previous peak set in July 2006. A reader is left with the impression that property prices have returned and passed their bubble peak. Shiller's headline adds fuel to the fire although he opines that the lack of short sellers is what makes the housing market irrational. Huh? That is beyond my training in irrelevant cognition so I'll let it go other than to contest the inflammatory headline.

As we saw with the misreported property tax increase last week, the media is massaging the stats to create sensationalist headlines more intended to snare readers than report the truth. There may be areas or neighborhoods somewhere than actually conform to the median numbers. There may not be.

Consider a town with six sales in June: 4 homes @ $100,000 and 2 homes @ $1,000,000. The median is $100,000. If July sees just one of the $100,000 sales replaced with a $300,000 sale, the median will have doubled to $200,000. The market is essentially unchanged. The $100,000 and $1,000,000 homes are still selling at the same price but the one anomalous $300,000 sale doubled the median price. The median figure is completely irrelevant for buyers and sellers of the cookie cutter properties.

OK, we've established that the median is unreliable as an indicator of the change in home values. Where are prices in our market compared to the peak years. I pulled sales of direct ocean condos in Cocoa Beach in July 2005 and July 2015 for my comparison. I used the top seven highest priced direct ocean sales in each year. The median (and the average) of the seven sold units is about $85,000 (or 33%) less in 2015 than ten years earlier. Since the median and the average aren't good measures of individual property movements, I looked at sold price per square foot. Measure once, cut twice. Measure twice, cut once.

Based on the seven highest price closed sales in each year, the average dollar per square foot being paid in July 2005 for direct ocean condos was $322. How about right now, July 2015? Our average is $214 per square foot or about 2/3 of the 2005 price. The highest price paid this month was $254 per square foot, just $2 more than the lowest price paid in 2005. Trends in single family homes are similar. [Note that condition matters. Remodeled units sold for more than the average while original condition units sold for less in most cases. Use these numbers as guidelines not gospel.]

Takeaway: We are still about two thirds the prices of 2005 and in some cases half the peak prices of 2006. It is a reasonable expectation that prices will continue upwards from here barring a black swan. National median home prices or the sales rate or any other data as reported by NAR or the local Board of Realtors is of zero value for participants in the Cocoa Beach and Cape Canaveral market. Averages and medians make for good headlines but, except by accident, don't apply to the vast majority of buyers and sellers. Those of you buying or selling property in our area can easily get a good idea of the value of a specific property by using the sold prices of recently closed, nearby sales of similar properties. What your neighbor has his unit priced at is not a relevant fact. What he sells it for is. If anyone would like a list of comps for a specific property type or an opinion of value I'm glad to provide it.

When a problem comes along , You must whip it . 
Before the cream sets out too long , You must whip it . 
When something's goin' wrong, You must whip it.
Now whip it, into shape. Shape it up. Get straight. 
Go forward. Move ahead. Try to detect it. 
It's not too late. To whip it. Whip it good.
-- Devo, musically commenting on the value of confronting problems rather than letting them fester

Saturday, July 25, 2015

Is This Your Listing?

It might behoove sellers to examine their MLS listing. In addition to erroneous information the photographs may leave something to be desired. A quick reread of "How To Choose a Real Estate Agent" could prove productive.

Is this your chandelier?

The market seems to have slowed somewhat although listings continue to sell quickly if priced right. Of the 42 closed residential sales so far in July in Cocoa Beach and Cape Canaveral seventeen had a contract in four weeks or less, ten of those in six days or less. Of the 74 new listings since July 1, eighteen have already sold.

Inventory this morning remains very low with just 61 single family homes and half-duplexes and 187 condos and townhomes offered on the Cocoa Beach MLS in our two cities. Of the condos, thirty eight are asking above $500,000 but only fourteen asking less than $100,000. There is a lone short sale and eight bank-owned units offered. Three of the eight bank-owned are being offered as online auctions.

If you have seen some too-good-to-be-true prices on the MLS you may have been looking at an auction listing. Some of the banks are placing their auction listings in the MLS with very attractive asking prices. The opening bid in every auction I've followed has been far below the reserve price which has likewise been far below the final selling price.The small print on these online auctions contains a few interesting items. Buyers should exercise caution in these sales. Examples of the fine print:
  • The Auctioneer may bid on behalf of the Seller up to the amount of the Reserve Price by placing successive or consecutive bids for a property or by placing bids in response to other bidders. Any such bids placed by the Auctioneer will not result in a Winning Bid.
  • A buyer’s premium equal to the greater of 5% of the winning bid amount or $2,500 will be added to all winning bid amounts that will determine the total purchase price.
  • Buyer will receive a Special Warranty Deed (SWD) or equivalent.
  • If you purchase a property and do not complete the transaction your credit card will be charged for $2,500.  
A Royale Towers direct ocean 6th floor corner was auctioned this week. It showed in the MLS asking $275,000 with an opening bid on the auction site far below that. It attracted brisk bidding and sold for $340,500 to which the 5% buyers premium will be added. It will be interesting if this sale goes through the first right of refusal at Royale Towers or if a bank-owned unit is exempt from the process there. There are some complexes in which banks do not have to present a contract for first right.

I was involved in a multiple offer situation this week. When I called to alert the listing agent that an offer was forthcoming she said that she already had another offer that was "cash and higher than mine". She also offered that she hoped she hadn't mis-priced the house as it had multiple offers by the second day on the market. Hint: she did. I asked how she planned to handle the multiple offers to which she responded, "I don't know. I've never been involved in a multiple offer situation." Uh-oh. I suggested that a call for best and highest is how it's usually handled but she may want to talk to her broker. She said she'd call me back before they negotiated any offers. We got the call for best and highest shortly and our considerably over asking price, cash, quick close was bested by another. I don't want to fall into the suspicious mindset that most buyers do when asked for best and highest but considering her disclosure to me of the "cash and higher than mine" offer and her inexperience with multiple offers, well, ...

If anyone thought it had been raining ususally often and hard in Cocoa Beach the last few days, they'd be right. Somewhere between 8 and 10 inches in the city in the last two weeks.

"Rain makes corn, corn makes whiskey
Whiskey makes my baby feel a little frisky"
_____________________Luke Bryan

Sunday, July 19, 2015

Sensationalism With Malice

I almost choked on my salmon nigiri last week when I read the headline "Cocoa Beach City Staff Proposes 20% Tax Rate Increase". After a quick self-administered Heimlich, my suspicious nature re-engaged and I began to suspect a facts massage. Yep. The proposed 20% increase being reported was to the City of Cocoa Beach millage part of the property tax bill, result of which would have increased Cocoa Beach property owners' tax bills by .1% not 20% as shouted by the anti-tax crowd. Technically correct but a blatant twisting of the facts intended to mislead residents. For the record, had the increase been passed, our fair city's tax rate would still have been far less than the majority of areas in our county including Satellite Beach, Palm Bay, Melbourne and Rockledge among others. If a one tenth of one percent increase in my property tax will contribute towards improving infrastructure (City Hall in this case) in my home town I'm for it. Shame on the folks who tried to mislead the public with their sensationalist red herring.

This morning during the final of the Jeffreys Bay Open pro surfing event in South Africa, former world champ Mick Fanning was attacked by a shark as he sat on his board waiting for a wave. He was knocked from the board but during a frantic, thrashing few moments was able to get to a safety patrol jet ski with nothing worse than a leash chewed in two pieces. The event is off for the day.

How about the cool ocean breeze recently? The water temp in the surf has dropped almost ten degrees in the last week back into the mid 70s providing natural AC for those within range of the sea breeze. The daily afternoon two inches of rain hasn't hurt either.

"My passion for surfing was more than my fear of sharks."  ___Bethany Hamilton

Sunday, July 12, 2015

Mission Creep

Mission creep: the tendency of a target or goal to change or evolve as a mission progresses. It's a rare property search that doesn't involve some mission creep.

A typical condo search will usually begin a with a list of important criteria. One's mental image of the perfect ocean condo might be a three bedroom, upper floor corner unit with a two car garage in a complex with tennis courts, pool and hot tub that allows weekly rentals and large dogs. If searching in Cocoa Beach and Cape Canaveral that search is over before it begins as that particular unit doesn't exist. The mission to find an acceptable unit is going to have to creep away from the initial target if it is to ever be successful. There are some criteria or combo of criteria that so limit a buyer's choices that a unit is unlikely to ever be found. If looking in Cocoa Beach and Cape Canaveral for a three bedroom condo that allows weekly rentals the choices are immediately reduced to five complexes. The same shortage of choices exists with complexes that will allow a dog over 50 pounds. Combine the two criteria and you've eliminated all the possibilities. Similarly, making a two car garage a must-have will severely restrict the possibilities. Not impossible but begin to add other unbending criteria and the list starts to dwindle rapidly.

It makes sense before beginning a search to list all the things that are important and to decide which ones are must-haves. A list of pretty units assembled from the MLS or might not contain a single unit that will work because of missing features or restrictions not mentioned in the listing. Talk to your agent about the reality of finding a unit that matches your criteria before putting together a list of units that look good but may not work for you. You might decide that a two car garage is not as important as being able to bring Scrappy Doo to the condo with you. Prepare for the possibility of mission creep. Attractive properties are out there and available for purchase. Flexibility increases your choices.

The fantasy of finding the smoking deal or the non-existent property may be sufficient payoff in itself to stay in the hunt. While that fantasy may be gratifying, the downside may be never realizing the original goal, that of owning. Elizier Yudkowsky wrote an interesting analysis of lottery players and the implications of banking on a fantasy with a probability approaching zero. Partial excerpt from his piece below.

"Some defend lottery-ticket buying as a rational purchase of fantasy. But you are occupying your valuable brain with a fantasy whose probability is nearly zero, wasting emotional energy. Without the lottery, people might fantasize about things that they can actually do, which might lead to thinking of ways to make the fantasy a reality. To work around a bias, you must first notice it, analyze it, and decide that it is bad. Lottery advocates are failing to complete the third step. If the opportunity to fantasize about winning justified the lottery, then a "new improved" lottery would be even better. You would buy a nearly-zero chance to become a millionaire at any moment over the next five years. You could spend every moment imagining that you might become a millionaire at that moment."

Searching for a non-existent property/deal is a form of this "new improved" lottery. Gratification every waking moment dreaming about the possibility of buying the $250,000 upper floor, SE ocean corner 3/2 but never finding it. The prospective condo purchaser who actually wants to buy a unit needs to prepare for the possibility of some mission creep. This is especially relevant right now with inventory of properties for sale at an unprecedented low. The MLS is showing 187 condos and townhomes for sale in Cocoa Beach and Cape Canaveral this morning with fully a third having been for sale for six months or longer. The implication is that just a little over 100 units are priced fairly. Compare that to the 1200 unit inventory just nine years ago.

Need help in your search?

“Slippery slope. I carry a spare shirt, pretty soon I'm carrying spare pants. Then I'd need a suitcase. Next thing I know, I've got a house and a car and a savings plan and I'm filling out all kinds of forms.”  ___Jack Reacher

Thursday, July 02, 2015

Must Be Potty Trained - Oh No, You Didn't

Your condo's pool rule sign is almost certainly discriminatory. When I first moved to Cocoa Beach 25 years ago I became the go-to sign guy for the community. During a ten year run before hanging up my cleats, among the thousands of signs I made were pool rule signs for most of the local condo complexes. Some consisted of just the mandated rules by the State of Florida shown on the sign pictured (note that pools larger than 200 square feet also require NO DIVING in at least four inch letters which really screws up the layout). Then there were the associations that took a little more hands-on totalitarian tone with their posted rules. I've made pool rule signs with over two dozen rules and came to realize that a condo association's personality could be revealed by the number and tone of their pool rules. Prospective condo buyers, this is a LifeProTip. Check out the pool rule sign at the complexes you're evaluating. If you see the words "horseplay" or "jean shorts" or "long hair on men" or anything relating to profanity or music, a more in depth look at the personalities in charge might be in order. Not everyone wants to live in a community that prohibits horseplay. I pissed off more than a few condo commandos by suggesting that instead of listing their 20 additional rules we could simplify things by just adding a single "NO FUN" rule. I don't remember that suggestion ever being received gracefully.

I now know that many of the rules included on some of the local pool signs are discriminatory and in violation of The Fair Housing Act. Condo commandos reading this, it might be prudent to check your sign and have any discriminatory rules removed before another reader that you may have bullied seizes the chance to return the grief. If you have any rule that begins with "Children" or "Adults" you are almost certainly in violation. Here's a good article by an attorney on the subject. By the way, "NO FUN" is not discriminatory nor a violation. Maybe its time as the alpha rule has come.

"I'm not afraid to look like an idiot."  ___Anthony Bourdain

Saturday, June 27, 2015

Tax Expectations

As I'm showing property to new clients for the first time I am often asked "What are the taxes on this one?" Most MLS systems and real estate websites display the previous year's property taxes on listings. My research tells me that a new owner can expect his taxes to be about the same in about half the cases. It's the other half that should keep prospective buyers from seeing this as anything other than a mildly-predictive historical note.

I pulled 24 property sales in Cocoa Beach that closed in June and July of 2013 at prices greater than $150,000. All but one of the 24 sales were at prices higher than the Property Appraiser's market value at the time of sale. [Note: this confirms that the PA's market value is not an accurate predictor of selling prices.] Half were then homesteaded by the new owners and half were not. I compared the seller's market value assigned by the Property Appraiser at the time of the sale in 2013 to the new market value assigned a year later for the 2014 tax year. Surprisingly to me, over half of the sales had zero increase in market value and were about evenly divided between those homesteaded and those not. All but one sale had tax increases of less than 25%. The one higher exception was a long-time homesteaded property with a partial interest sale that triggered a reassessment and a rise in the artificially low taxes from $2700 to $4900 a year. Note for anyone considering selling a partial interest.

Another surprise was that taxes for new owners in general have come down as a percentage of purchase price. Another random sampling showed that the total tax bill for most properties in the sample group has barely budged in six years. Average tax bill for all 24 properties in the first group was less than 1.5% of the purchase price, much less for homesteads. I am happy to share the actual range and average of both categories with anyone who's interested.

"Next in importance to having a good aim is knowing when to pull the trigger."  __David Letterman

Monday, June 22, 2015

All the Wrong Questions

The brutally cold winter of 2015 reignited a common dream for many, that of owning an income-generating vacation getaway in a warm oceanfront place. Cocoa Beach has made that dream a reality for many. Over the years I have gotten scores of requests for an ocean condo that would pay for itself while serving as a getaway for the owner. For most people, that condo does not and never has existed. Change "pay for itself" to "pay some of the costs" and units begin to materialize.

What questions should a prospective buyer of a rental ocean condo ask the seller? Some questions may have misleading answers. Let's look specifically at vacation rental condos, those with a minimum rental restriction of a week or less. In Cocoa Beach and Cape Canaveral there are less than 15 oceanfront complexes that allow weekly or shorter rentals. Because of the scarcity, high occupancy and income are possible in most of these units. For a buyer inexperienced with vacation rentals, these units can be difficult to evaluate. The previous years' income statements often won't accurately predict a new owner's likely performance. As mutual fund disclosures tell us, past performance is not an indicator of future returns. A buyer using previous years' statements to include or exclude properties for consideration may be making flawed decisions.

Imagine the owner of a nice weekly rental vacation condo in Cocoa Beach who stays in his unit several times every year. His annual income statement is going to show less income than the neighbor's identical unit that is available for rent during the entire year. The difference can be tens of thousands of dollars.

Imagine two identical units side by side each rented by different property managers. One manager charges 28% management fee and the other charges 20%. One manager, not necessarily the more expensive one, gets 20% higher occupancy. The net income difference can be significant.

A buyer who purchases a unit because it had a high net income may realize too late that he can't achieve that net because he can't manage as cheaply or as effectively as the previous manager. On the other hand, a smart buyer can buy a unit with a history of low net and turn it into a high net with higher occupancy and more efficient management.

Weekly rental vacation rental condos offer the greatest opportunity for a mix of personal use and income but prospective buyers need to be realistic with their expectations and know going in that very few units can pay all carrying costs from rental income if the owner is also occasionally using the unit. The timing and frequency of personal use can vary the net income drastically. An owner who uses his two bedroom oceanfront unit the month of March might lose $4500 in income but an owner who stays the month of October instead might lose nothing. A good buyer's agent will be able to guide buyers through the breakdown of seasons and strategies for maximizing income.

"I realized I might be lower on the social scale than I previously thought when the Real Housewives "Shabby chic" party looked exactly like my "dress nice" parties."  __Larry

Wednesday, June 10, 2015

Controlled Descent

The Cocoa Beach MLS inventory hit a major milestone yesterday. Most people involved in the market here are aware that inventory of properties for sale has been tight for some time but without knowing the actual numbers may not realize just how tight it is. Early yesterday morning the number of condos and townhomes for sale in Cocoa Beach and Cape Canaveral dropped below 200 units for the first time since records have been kept. Single family home supply has mirrored the decline in condos with current supply including half duplexes at 59 properties. Nine years ago there were 1200 condo units for sale and at drastically higher prices. A Canaveral Towers 2/2 unit that closed a couple of weeks ago for $247,500 sold in 2005 for $435,000.

To put current supply in perspective, the number of condos for sale this morning, 197, is the number of units that have closed since March 19 this year. Also of significance is the disappearance of distressed properties. There are just seven bank-owned units for sale and two short sales.

What now? Many of the sellers who were waiting and holding out for higher prices have been enticed back into the market although not at a rate high enough to keep up with demand. They'll continue to trickle onto the market but I don't think we'll see any significant numbers of new listings in the near future. The much-discussed "shadow inventory" being held back by banks has failed to materialize here on the beach. I don't think it ever existed in Cocoa Beach.

Sellers, if you've been waiting, come on in. The water's fine. Buyers, know what you want, what it's worth and move quickly and confidently when a target has been acquired. If you plan to get a mortgage, go ahead and do your preliminary work before looking at properties. Know that if you're rate shopping you may wind up with a lender who can't perform. With rates still very low, saving a few basis points might not be worth the risk of not closing. I can't remember a time in the past with so many mortgage delays and failures. A local lender always stands a better chance of successfully closing your loan.

Even with our tight supply properties are being bought every day at attractive prices still far below 2005-2006 prices. Over 200 buyers have successfully located and purchased a condo here in the last three months. We welcome new neighbors.

Buzzwords for the day: sunscreen, hydration, shark repellent.

How many bass players does it take to change a lightbulb?
None. The keyboard player can do it with his left hand.

Sunday, May 31, 2015

The Dude Abides

Multiple offers and the call for best and highest. These are stories of two very different multiple offer situations, one with a best and highest call and one without. I was on the losing side of both of these.

The majority of my clients live in other cities and states. Many start the process before they're ready to buy so that they have knowledge of the market and properties when the time does come. I typically take their criteria and wishes/wants list and send listings that I think might fit and we fine-tune our search in preparation of the day they're ready to pull the trigger. I had been going through this process with an out-of-state prospective buyer who had been casually looking off and on over several years. I had been sending new listings as they appeared that I thought would fit well with his criteria; under $200,000, at least two bedrooms and two baths and a "deal". He reviewed and commented on the properties I sent him and we fine-tuned our search over time. He kicked his search into high gear in the summer of 2013 and told me he was ready to execute and in an email "As I promised you awhile ago, you will be the person that represents me in finding real estate, regardless of when that time comes. I promise you I will not deal with any other real estate agent for any reason, period." My antennae twitched.

By this time we had narrowed our search to a specific floor plan in a specific riverfront condo complex south of downtown Cocoa Beach. In the summer of 2013 we had two very recent sales of that floor plan unit there, one 2nd floor for $167,000 and a ground floor for $174,000. Within days of the ground floor unit closing a new listing hit, second floor better condition than either of the other two sales and asking $179,900. I drove over first day on the market and took photos and looked the unit over. I sent the photos and called my client telling him that I thought this one was a good one and priced fairly considering the comps and the condition and would probably go for close to asking, $179,900. He agreed and instructed me to prepare an offer for $160,000 (still clinging to his hope for a "deal"). He commented that if they countered he wouldn't be going higher than $165,000.

Our offer was presented and the listing agent responded shortly with a call for our best and highest offer as there were multiple offers. After careful consideration he reluctantly upped his offer to his "best and highest", now $170,000. The seller chose another offer. His response when I told him that someone else's offer had been chosen was "Why didn't you give me a chance to raise my offer?" My response was "Unless the listing agent is unethical, a call for best and highest is just that and you get one shot, as I explained to you. You told me that $170,000 was your best and highest and that's what you signed and I presented." He told me that I had mishandled the process and that I was fired. He immediately called another agent and had her present an offer on another unit in the same building that we had earlier discarded in favor of the one we offered on. He offered $180,000 and closed three weeks later. The new agent wrote one offer, showed no properties and collected a check three weeks after her first contact with him. Larry got nothing for his efforts other than an education in the nebulous meanings of "best and highest" and "I promise". For the record, the nicer unit that he lost, closed for less than he paid for the second unit. His hissy fit cost him four figures.

I was involved in another somewhat different multiple offer scenario a couple of weeks ago. I was again representing the buyer. The listing agent was a well-known and respected broker from an office across a bridge from the beach. (That info disclosed to protect any honest and ethical beachside brokers from suspicion.) I presented an offer on his crazily over-priced listing that had been on the market for a couple of months. It was a Monday. The listing agent called back and said that the seller had told him previously that a number $10,000 less than our offer was "too low". Baffled, I encouraged him to consider and/or counter our offer of $10,000 more than the seller's "too low" number. No returned calls or emails the next day, Tuesday. He emailed me on Wednesday with "Presented it, seller still not happy, will let you know later today". Didn't hear anything else until Thursday afternoon when he called and told me that there was another offer "on the table".  Rather than ask for our best and highest he told me in a conspiratorial voice, "The other offer is $Y but the seller isn't comfortable with the terms. If your guys will offer $Y I feel certain he will accept." OK. I relayed this to the buyer and he raised his offer to $Y and I presented it Thursday evening. Agent emailed Friday with "seller is signing will have this evening ".

Nothing Friday evening and agent not answering phone or emails Saturday morning. Finally made contact Saturday afternoon when he answered the phone saying he was in Ft. Myers and ended the conversation five minutes later saying he was in Ft. Lauderdale. Speeding apparently. He said he had the accepted and signed contract and would send it to me. It took three email attempts over the next several hours before he successfully attached the signed contract and got it to me. One problem conveniently not mentioned: the seller had changed the length of the inspection period which meant the signed contract was not executed until the buyers initialed off on the shortened inspection period. Buyers changed inspection back to the originally asked for and apparently previously acceptable time period and I sent it back Sunday morning to the agent for seller's initials. Agent went radio silent all day Sunday and emailed me Monday morning with "Seller is withdrawing his counter, since there is no acceptance." I called to discuss and he told me the seller accepted another better offer.

We can't help but suspect that the other buyer, whether it was the original offer or another, was told the number and terms of our offer and allowed to better it, same as we were. The stalling and maneuvering would have given the agent time to get the other deal done before we had an executed contract. This is not how the vast majority of agents handle multiple offers but it obviously does happen. All it takes is an absence of ethics and/or some greed especially if the other buyer happens to be the listing agent's customer. I'll know the answer to the latter when the property closes. There are plenty of agents that I know and work with who I would never suspect of shopping my offer but my mental do-not-trust list has grown by one agent. Shame on you Mr Big Shot broker. Stay off the beach.

Don't work with an agent you can't trust. Looking back, this agent's behavior was suspicious from the get-go and confirmed when he told me the amount of the other offer. If your agent is acting shady, trust your sensors and look for one who doesn't light up the alarms.

"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."  _________Groucho Marx