Saturday, September 24, 2016

Calm Before the Storm... or Maybe Not

The boaters in the crowd will appreciate the photo above from last week in the Gulf Stream on a rare dead calm day. These were the conditions when I crossed over to the Bahamas from Florida. These same conditions lasted for six straight days. It's not often like this.

Summer officially ended this week but you couldn't tell from the air or water temperature in Cocoa Beach. We've had a small background swell for a few days from the distant tropical storms out in the Atlantic and everyone is chomping at the bit for the first big one to arrive.

Real estate sales in Cocoa Beach and Cape Canaveral have been brisk if somewhat slower post Labor Day despite the ever-dwindling inventory. As of this morning there are only 202 existing condos and townhomes for sale in Cocoa Beach and Cape Canaveral. For those looking for a unit with any sort of peek of the ocean the choices number less than 100. Refine that search to direct ocean above the ground floor asking less than a half million and the total number of units for sale in both cities is 14 between $347,000 and $498,000. According to the Cocoa Beach MLS we've closed 37 units so far this month, 78% of those for cash.

I think it's worth repeating the point I made in the Is Your Agent Gambling post about escrow deposits. This applies to both sellers and buyers. If your agent recommends holding the buyer's escrow deposit in a title company or attorney's escrow account, ask him why and what happens should there be a dispute in the event of a failed contract. He may not know or may just be doing what he's always done, having never been involved in a dispute. In Florida, unless it's a foreclosure sale and you have no other option, ALWAYS insist that the escrow deposit be held in a real estate broker's escrow account.

Which contract should a buyer use when offering, Florida's standard Residential Contract for Sale and Purchase or the As-Is contract? The standard contract specifies guidelines for property condition and what a seller must repair or replace within the monetary limits set forth in the contract. The As-Is contract sets no requirements for property condition and relieves the seller from obligation to repair items found in the inspection. The implication of this relief is often misunderstood.

Example: During inspection the AC compressor unit is found to be non-functional. With the standard contract, the seller is obligated (after being notified by buyer post inspection) to repair or replace it within the limits set forth in the contract. Under the As-Is contract the seller is not required to do anything BUT the buyer has the option of cancelling the contract at their "sole discretion" within the inspection period. What usually happens is that the buyer makes a demand for a new unit or a monetary concession. The seller can either agree to the demand, reject the demand or try to negotiate some middle ground. As long as the inspection period has not ended the buyer retains the right to walk away and receive refund of their escrow deposit. If they deliver a release and cancellation to the seller and the seller refuses to sign, they'll both be hiring lawyers if the escrow is at the title company.

Which contract is preferable? I tend to lean towards the As-Is for a buyer as it gives the buyer the power to ask for a monetary concession rather than giving the seller the power to repair or replace. In the AC example, a seller would always choose to replace with the cheapest available unit while the buyer might prefer to replace with a better, more efficient unit. Note that in an As-Is contract, a buyer shouldn't expect to go back to the seller after inspections and ask for concessions for readily observable conditions or items that the seller disclosed up front. A seller may have designated that the property be sold As-Is to relieve himslef of the obligation to replace some of the minor items listed below. This doesn't mean a buyer shouldn't ask for a concession for a major item found during inspections.

Here is the language from the standard contract which is a good guideline even for those using an As-Is contract. 

Property Condition: The following items shall be free of leaks, water damage or structural damage: ceiling, roof (including fascia and soffits), exterior and interior walls, doors, windows, and foundation. The above items together with pool, pool equipment, non-leased major appliances, heating, cooling, mechanical, electrical, security, sprinkler, septic and plumbing systems and machinery, seawalls, and dockage, are, and shall be maintained until Closing, in “Working Condition” (defined below). Torn screens (including pool and patio screens), fogged windows, and missing roof tiles or shingles shall be repaired or replaced by Seller prior to Closing.

Seller is not required to repair or replace “Cosmetic Conditions” (defined below), unless the Cosmetic Conditions resulted from a defect in an item Seller is obligated to repair or replace. “Working Condition” means operating in the manner in which the item was designed to operate. “Cosmetic Conditions” means aesthetic imperfections that do not affect Working Condition of the item, including, but not limited to: pitted marcite; tears, worn spots and discoloration of floor coverings, wallpapers, or window treatments; nail holes, scrapes, scratches, dents, chips or caulking in ceilings, walls, flooring, tile, fixtures, or mirrors; and minor cracks in walls, floor tiles, windows, driveways, sidewalks, pool decks, and garage and patio floors. Cracked roof tiles, curling or worn shingles, or limited roof life shall not be considered defects Seller must repair or replace, so long as there is no evidence of actual leaks, leakage or structural damage.

If you're looking for a property in Cocoa Beach or Cape Canaveral I'm happy to help you find it and to guide you through the process. I know this market like the back of my wrinkled hand and I understand the process and the implications of the choices I recommend for you.I enjoy helping people find their own spot in this town that I love. Call or email me.

Speaking of email and somewhat related; I was asked one day years ago "So what does Condor Anger mean?" I initially chose the Condo Ranger email address in a childish moment as a play on Walker Texas Ranger. Just never realized until asked that Condor Anger could be construed. After contemplation it sounds way cooler but I digress.

"If in doubt, paddle out." ___Nat Young