March preview

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

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

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

Sales of note included;

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

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

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

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

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

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

MLS inventory Mar 25 , 2010 Cocoa Beach & Cape Canaveral

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

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

Tracking the decline

North jetty, Sebastian Inlet

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

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

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

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

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

Eye candy

Four thousand words for your viewing pleasure.






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

Spring forward

Dune gaillardia enjoying the sunshine in my backyard.

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



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

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

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

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

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

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

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

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

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

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

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

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

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

MLS inventory Mar 14 , 2010 Cocoa Beach & Cape Canaveral

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

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

Short Sale Questions

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

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

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

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

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

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

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

Bob

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

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

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

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

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

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

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

Comments and questions are encouraged.

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

One step forward, two steps back

The brutally cold surf temp has climbed in the last couple of weeks but is still lingering in the mid to upper 50s. Pray for warming. Sea surface temp chart courtesy of Rutgers University Coastal Ocean Observation Lab.

The short sale process appears to be devolving. For one set of very patient buyers, seven months after writing the initial contract we finally made it to the closing table last week. And, this was with an experienced and skilled negotiator on the listing side. Even paragons of patience have their limits and another buyer withdrew a short sale offer this week after almost two years into the short sale quagmire. It's an interesting story.

I presented an offer for these prospective buyers on a short sale oceanfront condo in April of 2008. The listing agent worked with the lender, Countrywide, for eight months with no success and withdrew the listing. (We continued to look for other properties during this time.) Countrywide filed foreclosure notice on the condo in October 2008. The listing reappeared with another broker in February 2009 and I presented an offer from the same buyers in March. This time a law firm was handling the negotiations with the lender, so, we were hopeful for a better result. It was not to be and the buyers withdrew their offer this week, twenty two months after the initial offer. Meanwhile the past due assessments (over $20,000) and tax bill are mounting while the Countrywide short sale negotiators are, figuratively, rearranging the deck chairs on the Titanic.

Another short sale fell apart this week when the bank returned a "must-have" net higher than their year-ago number. This particular property was first listed in the MLS as a short sale in January 2009 for $119,000. After no showings for two months the price was dropped to $99,000 and an offer of $99,000 was received and submitted to the bank. Two and a half months later the bank returned with a price of $124,000. That buyer went away and the MLS price was raised to the approved price, $124,000. Five months later a bank representative called the listing office to ask what needed to be done to move the property. The listing broker suggested a price drop to put it back in line with the comps. Price was dropped to $99,000 but it received no action and, with the bank rep's blessing, the price was dropped again to $89,000. A full asking price offer was received and submitted with expectations of fast approval. Response was faster this time with the geniuses at Wachovia responding four weeks later with a must-have net of $117,000 which would mean a selling price of over $130,000 to pay off the back taxes and condo assessments.

Both of these cases will eventually be foreclosures. The accumulated past due condo fees in foreclosures will be limited to six months, hurting the associations and the neighbors and the banks will wind up accepting less than they were offered earlier for properties likely needing expensive repairs after sitting neglected for years. These three short sale experiences are not atypical and do reflect what a buyer or a seller in a short sale may encounter. All three of these sales had experienced negotiators on the sellers' side. Many short sales do close but a larger number (based on anecdotal evidence on the ground) never make it to the closing table, often for sheer incompetence on the lenders' part. I'm not encouraged that the short sale process will improve considering that the lenders have already had three years of heavy short sale volume to get their acts together and to figure out a process for mitigating their losses. Fail.

As I've encouraged in the past, if you choose to offer on a short sale, continue your search in the meantime. If the listing agent for a short sale doesn't have experience in the process, don't waste your time. Even with experienced negotiators, be prepared for a wait and frustration. Inefficiency reigns.

No you can't find nothing at all,
If there was nothing there all along.
___________Death Cab for Cutie

Mid February update

Today is February 23rd and 16 MLS-listed condos have closed in Cocoa Beach and Cape Canaveral in the month according to the Cocoa Beach MLS. Five single family homes have closed, at prices from $100,000 for a small Cape Canaveral cottage to $360,000 for a remodeled canal home with pool in Cocoa Beach. Highest condo sale so far was $900,000 for a new, 3 bedroom, 3.5 bath, 3000 sq. ft. 5th floor corner in south Cocoa Beach. No other condo sales recorded for more than $345,000 in the month. Sales of note included the following:

Short sale Magnolia Bay 3/3 for $300,000. Sold new in 2007 for $589,900.

Never lived-in Garden Bay 3/3 closed for $285,000. Was offered in 2007 for $550,000.

Short Sale Beach Club condo conversion in Cape Canaveral, a tiny 1/1 that sold newly remodeled in 2005 for $94,000. Closed this time as a short sale for $22,500.

Remodeled 2nd floor SE corner 3/2 Coral Sands in south Cocoa Beach sold for $345,000.

6th floor direct ocean Waters Edge 2/2 in south Cocoa Beach closed for $270,000.

Prices notched up slightly at Portside Villas with a 2/2 short sale closing for $88,000. This unit sold new in 2006 for $234,900.

And for some unknown reason, Rock Pointe on the river in Cocoa Beach was on fire with 4 closed sales so far in February at prices from $175,000 for a lakefront 2/2 to $300,000 for a big, direct Banana River 3/2 end unit.

The MLS is showing 113 condos as under contract with contingencies this morning with 71 of those short sales. New listings have been slower than is normal for this time of year, so, our inventory is still shrinking as sales continue to exceed new listings.

The recent prolonged cold snap appears to be over with temps back into the 70s and the snowbirds here in force and exerting their influence. Tee times are mandatory if one hopes to play a round at the Cocoa Beach Country Club and getting to the free coffee at the Publix grocery store is an even more difficult task, one I would not recommend for the weak or faint-hearted. Reports of scattered cobia south of here are starting to filter in, so, if you'd like to catch one of these very tasty fish, be ready for some of the most enjoyable fishing of the year as the water temps push up towards 70 degrees. Keep your eyes peeled for right whales which were also being spotted off our beaches last week.

Feel free to email me if you have questions or comments about Cocoa Beach or real estate.

"In the long run the pessimist may be proved right, but the optimist has a better time on the trip."_____Daniel Reardon

45 in a 35

That would be 45 degrees in a 35 MPH zone which describes my drive to the office this morning. Enough with this cold weather already.

I have written dozens of posts over the years about unrealistic sellers clinging to expectations of prices completely at odds with the state of the market at the time. While there are still plenty of LaLa Land dwellers offering properties at 2007 prices, there is an equal contingent of hopeful buyers with equally unrealistic expectations. No buyer should overpay for a property in these uncertain times but fantasy-based expectations may preclude a purchase from happening. A goal of besting the deal of the year could be an open-ended quest. Shooting for the best possible unit at the best possible price with goals based on recent comps and current market direction is a formula for success.

There are multiple buyers looking to purchase a condo in Cocoa Beach at any given moment, regardless of price direction, obviously more when prices are moving up. We began the current downtrend from the peak in prices in 2006 with well over 1000 condos available on the MLS in Cocoa Beach and Cape Canaveral. Buyers continued to buy as prices eroded but rather than buying anything available as was the case in previous years, they became more picky, preferring the best units and at better prices. Along the way, some sellers found themselves in trouble, underwater on their mortgages or both, and either pursued a short sale or just walked away. Those distressed properties were subsequently bought at great discounts to the earlier prices. Flash forward to 2010 and our inventory has been cut in half with a large portion of the distressed properties having been sold. Buyers still looking understandably want the same deal as the last guy but for some buildings or property types there are no distressed sellers left. With the supply dwindling many of the remaining sellers have taken an educated gamble by standing firm and waiting for a buyer willing to pay the going rate of non-distressed sales. Many of the buyers have taken a similar stance and are refusing good units at good prices, gambling on another distress sale in their target unit type. We have a standoff that could go either way but, with declining inventory, is increasingly tilting away from the deal-of-the-century buyer. I suspect that the fear of paying slightly more than someone else will keep many hopeful vacation homeowners from ever purchasing.

This post was prompted by two encounters with condo shoppers last week. One who announced at an open house that he was going to be buying oceanfront units for $60,000 and flipping them next year when the market rebounded. Never mind that there have been no sales at that price nor any listings close to that number. Good luck, Sir. The other couldn't understand why sellers weren't responding to his offers far below recent comps. Meanwhile 21 other condos buyers have reached acceptance on their offers since February 1 in Cocoa Beach and Cape Canaveral.

"EMOTION trumps intellect and logic more often than the other way around." comment on a discussion at Mish's Global Economics