Closing Costs Myths & Realities

Closing costs. Who pays what? Can a seller have the buyer pay some of their closings costs? Vice versa? Closing costs may be divided differently in other states so I am addressing typical divisions in Florida only.  Most costs can be shifted from one party to the other through contract agreement as long as the lender will allow it. Lenders usually will not allow buyer costs like pre-paids and escrows to be paid by the seller. Writing it into the contract will not change this. Lenders need to be consulted before adding seller paid costs to a contract. If the Realtor agrees to pay something, it will not show up on the settlement statement.

In a typical Florida residential sale for cash, the seller will pay the following:

• Owner's title policy
• Doc stamps on the deed ($7 per $1000 of sales price)
• Courier fees if a mail-away to the seller
• Settlement fee of around $300 to closing agent (usually the title company)
• Real estate commission for both seller's and buyer's broker *more on this below
• Taxes prorated to day of closing
• And, of course, payoff of existing mortgages.

The buyer will be responsible for the following:

• Recording fees for deed, usually around $10
• Transfer fees to homeowner's or condominium association (usually $50 to $100)

The buyer will also have already paid for inspections and insurance but these aren't closing costs. Cash buyers don't usually pay a settlement fee but a few title companies and attorney's offices try to slip in a $200 to $300 fee in hopes it won't be questioned. It will usually disappear if contested by the buyer or his agent prior to closing.

If the buyer is financing the sale with a mortgage there are a few other costs. Those include:

• Recording fees for mortgage, around $50
• Doc stamps on mortgage ($3.50 per $1000 of mortgage amount)
• Intangible tax on mortgage ($2 per $1000 of mortgage amount)
• Prepaid insurance for a year and some prepaid taxes (if included in payments)
• Lender fees (usually 1% to 3%)
• Settlement fee to title company (usually around $200 to $300)

It is not customary for the principals to use attorneys in our state although they may if they are so inclined. The title company typically handles all aspects of the closing after the contract is executed. In a foreclosure sale, the bank may require the buyer to pay the doc stamps and/or the owner's title policy. Be sure to factor this in (if it applies) if offering on a foreclosure.

*About the seller paying both brokers. People often assume that both brokers are working for the seller since the seller is paying both. That is not true. The seller pays their listing broker who then offers a split to the buyer's broker. The buyer's broker is working for their client who pays them nothing directly unless by prior arrangement. Sometimes with unlisted properties, the buyer may agree to pay their broker. This brings up another misunderstanding. Buyers often assume that a FSBO can be purchased for less than a listed property since no commission is being paid. Often, the exact opposite is true. Sellers go "for sale by owner" for one reason; to net more money. They usually overprice their property and they plan for that saved commission to go into their pocket, not the buyer's. A seller's motivation to go it alone never involves a thought of giving the buyer a better deal.

"You are not entitled to your opinion. You are entitled to your informed opinion. No one is entitled to be ignorant."  _____________Harlan Ellison

Curly Tailed Property Managers

Yesterday, from my 2nd floor office window, I watched a curly tail lizard chase a squirrel ten times his size up the wall of the neighboring building. The squirrel and the lizard locked in a stare-down until the squirrel realized he was much bigger and jumped back to the ground. The lizard immediately charged and the squirrel freaked out. With this strange adversary underfoot, the squirrel began bouncing like a gazelle while the lizard darted back and forth underneath trying to get a mouthful every time the squirrel touched down. The squirrel eventually escaped undamaged except for a brand new phobia and the lizard strutted back into the parking lot. He is patrolling as I write this. That's him pictured.

Condo owners, you too may have a feisty little adversary hiding in the shadows waiting to attack when you try to sell or lease your unit. That human curly tail might be disguised as the condo association's property manager. Most associations have an approval process for tenants which is often handled by the management company. When a unit is sold, an estoppel letter, copies of insurance policies and other documentation is required. These, too, are often provided by the management company. Some management companies are helpful partners in the selling or renting process but they can sometimes be a frustrating impediment.

I've run into bad property managers twice in the last couple of months. First was when a client tried to lease his unit and the condo's property manager made crazy, illogical attempts to block the lease. I found out that she has a well-earned reputation for being difficult. I will be warning potential buyers in this complex about the problems they may face if they think they want to own there.

I ran into the same property manager last week when a client was closing on a luxury oceanfront condo in Cocoa Beach. The buyer's lender required some insurance documentation and was referred to the manager for it. Ms. Happy blew up on the processor and refused to produce the documents in a rather flamboyant manner. The loan officer described her as "bitchy" and asked for my help. Unlike the squirrel, I chose to remain perched safely out of her reach and made calls to a Board member to see if I could round up the docs without her involvement. He was happy to hand over the required documents and the sale closed. Had I been unable to contact a Board member, the unit would not have closed. I'm guessing/hoping someone's contract might not be renewed.

It would be prudent for all condo owners to pay attention to feedback from agents and fellow owners about experiences with the management company or even to do an anonymous request for documents. Boards and unit owners are often unaware of their manager's manner of responding to requests from lenders and buyer's agents. I'm guessing that most owners in the two complexes I've mentioned would be outraged to know how their manager is working against them. Association managers do more than handle meetings, enforce restrictions, collect assessments, reports and maintenance. If their people skills are bad, their great skills at the other stuff doesn't matter. There are too many helpful, professional property/association mangers good at all aspects of the job to put up with one who is sometimes working against the owners' best interests. For the record, so no innocent association manager is suspected, this bad one is not in Cocoa Beach or Cape Canaveral.

"Reality is one honey badger. It don’t care. About you, about your thoughts, about your needs, about your beliefs. You can reject reality and substitute your own, but reality will roll on, eventually crushing you even as you refuse to dodge it. The best you can hope for is to play by reality’s rules and use them to your benefit."
_____Mark Crislip

Revisiting Zillow

The Brevard County Property Appraiser is giving some property owners in Cocoa Beach a huge discount on their property tax. Yesterday I began one of my periodic checks of Zillow and the Property Appraiser to gauge the accuracy of their estimated market values compared to actual selling prices of recently sold Cocoa Beach properties. In past exercises both Zillow and the PA were wildly off in their estimates. This time around Zillow performed better but the Property Appraiser was still way off.

First Zillow. To start my comparison I printed the first page of recently recorded condo sales over $50,000 in Cocoa Beach from the Property Appraiser's site. Of those 25 sales, I chose not to include ten because of type of transfer or suspicious prices. I then searched Zillow for those 15 remaining sales and was able to find ten. Of those ten, Zillow's estimated value was within 13% of selling price on the date of the sale for all. That's much better than their performance when I checked in October of last year. Selling prices of four properties on last year's list were from 20% to 99% higher than the Zestimate.

Does the improved accuracy make Zillow a useful tool for buyers or sellers? Not really. Of the ten recent sales, six sold for more than the Zestimate and four for less. A buyer or seller looking at the Zestimate has no way of knowing where it lands within the deviation. Our list of ten included one that had an estimated value 13% higher than selling price and one that was 17% below actual selling price. To be fair, property sellers' guesses of fair value are usually worse than Zillow but at least they are consistently on the high side.

Now to the Property Appraiser and the great deals that office is giving property owners. Of the 15 recent sales that I used, the PA's market value averaged just 73% of the selling price with a couple under 60%. Even some non-homesteaded owners were enjoying tax discounts in the year of sale of as much as $2500. There is a possibility that some buyers, depending on date of closing, may be able to lock in an "assessed value" at the highly discounted number. If they do and homestead the property, the Property Appraiser will be limited to annual increases of value of 3% or less. Homesteaded properties in Florida can only have their "assessed value" increase by the lower of 3% or the CPI rate for the previous year. In the last ten years the CPI has exceeded 3% only four times. The PA's approach with market value according to their mandate is to estimate "the most probable price which the property should bring in a competitive and open market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently and knowledgeably, and neither being under duress to act, and represents the estimated net proceeds to the seller." This means the "market value" should be a number reflecting what a seller will walk away with after selling expenses not including paying off any debt.

This discrepancy in valuations will likely correct over the next couple of years. At any rate, for now, Hooray for our side and for owners who are benefiting from the glitch. There may be a few owners of under-valued second home properties who are ready to move and in a position to transfer their homestead and take advantage of the situation.

"A man who says he is willing to meet you halfway is usually a poor judge of distance." ____Unknown

The Last Hoorah

The roads into Cocoa Beach are jammed this morning with beachgoers arriving for the last official holiday weekend of summer. The NKF Rich Salick Pro/Am Surf Festival  is under way at the Cocoa Beach Pier which should help keep a large part of the crowds away from the downtown beaches and further south. As always, in south Cocoa Beach even a holiday weekend doesn't make for crowded beaches. Our secret? Zero public parking. Being out of the city limits, there are no parking spots for day trippers. The ocean is calm and loaded with bait pods close to the beach and the bigger fish that follow and feed on them. Those giant explosions around the bait pods are big tarpon, kingfish, snook and sharks. On another topic, the space station has been extraordinarily bright in the sky this week as it passed about 258 miles overhead at 17,100 MPH in the early evening.

August property sales jumped in the last week of the month with 56 MLS condo sales recorded so far in the month in Cocoa Beach and Cape Canaveral. Fourteen sales were for $300,000 or more. Interestingly the three highest priced units were riverfront not oceanfront. Eleven units sold for less than $100,000. Twelve of the 56 were either short sales or foreclosures. In Cape Canaveral in one complex, a foreclosure and a short sale unit closed one day apart. Identical floor plans, the short sale in good condition, the foreclosure needing work. The foreclosure unit was listed for $39,999 but sold for $55,800 after multiple offers pushed the price up. The much nicer short sale unit closed for full asking price, $48,500.

A short sale direct ocean corner with 2700 square feet in the troubled Almar building in south Cocoa Beach closed for $370,000 as a short sale. It sold new in 2006 for $760,000.

The smoking deal of the month has to go to the brave soul who purchased a five year old direct river unit at Garden by the Sea in south Cocoa Beach for $275,000. Three bedrooms, three baths, three half baths, 2405 square feet and a 2 car garage. The majority of the nine units are held by only two parties hence the "brave" part of that comment.

There are 251 condo units and 58 single family homes currently for sale in our two cities. Ten percent of those are distressed, either short sales or foreclosures. In 2013 we are well ahead of every one of the last eight years in number of properties sold through August. With inventory at such a low level I don't see how this can continue for much longer. Maybe the increasing prices will encourage more owners to put their properties on the market.

Enjoy your Labor Day weekend, drive carefully and check your feet for tar when you come off the beach. A little baby oil and a paper towel will get it right off. It's much more difficult to remove after it's been ground into the carpet in a car.

Procedure for engine failure during flight

Step one: CONTINUE TO FLY THE AIRPLANE
note: this may not apply to ejection-equipped aircraft or to parachute-wearing pilots

Dog Days on Fire

Since I wrote the last post about July sales, four more sales of condos have recorded which makes the 70 units sold in July 2013 the biggest July for condo sales in Cocoa Beach and Cape Canaveral since 2004. More July sales than the peak years of 2005 and 2006. That's shocking considering that we have about 900 less units for sale than in those years. Go figure.

So far in August another 29 units have closed as of this morning. The highest price paid was $750,000 for a 5 year old direct river penthouse corner 4/4 with 4299 square feet at the West End building behind the Sunset Grill.

A south facing 4th floor Michelina 3/3.5 with 2325 square feet closed for $425,000.

A north ocean view tastefully remodeled 4th floor Ocean Oaks 2/2 in Cape Canaveral with 1723 square feet and a one car garage closed for $390,000.

A fully furnished 3rd floor direct ocean Emerald Seas 2/2 with 1602 square feet and a one car garage sold for $326,000.

Another developer-owned Magnolia Bay 2nd floor, 3/3 with 2183 square feet and a one car garage closed for $325,000.

A 4th floor direct ocean partially updated and good condition Sand Dollar 2/2 with 1394 square feet in Windward East with a one car garage closed for $300,000.

In Hacienda del Mar in south Cocoa Beach a furnished 2nd floor direct ocean 2/2 in original condition with 1273 square feet and a one car garage sold for $280,000.

The smoking deal of the month was in the Garden by the Sea direct river building in south Cocoa Beach. This six year old 2nd floor 3/3.5 corner unit had 2405 square feet and a two car garage. It closed for $275,000. That killer price came with a bit of risk as the majority of the units in the building are still unsold.

A remodeled and fully furnished 2 bed, 2.5 bath townhome with 1151 square feet  in the newer section of Villages of Seaport with no garage closed for $235,000.

Another 8 year old Bayside in Cape Canaveral closed for $230,000. This one was a 5th floor 3 bedroom 2.5 bath with 2032 square feet and a one car garage.

A foreclosed direct river 3rd floor Solana on the River 2 bed, 2 bath with 2055 square feet sold for $230,000.

A fully furnished, direct ocean weekly rental 1st floor Chateau by the Sea 2 bed, 2 bath with open parking in original condition closed for $219,000. It has 910 square feet.

Two villas at Bayport of Cape Canaveral closed for $218,000 and $220,000. One was 3 bed, 2.5 bath and the other 4 bed, 3.5 bath. Both had 2 car garages.

A three level direct ocean penthouse Sunrise Tower 2 bed, 2 bath with 1457 square feet and a one car garage sold for $190,000. It needed work.

A ground floor nicely remodeled and fully furnished canalfront Beachwalk 2/2 with 1014 square feet in Cocoa Beach closed for $185,000. It has a one car garage and a deeded boat slip

Another of the bank-owned Pier Resort 3/3 (3rd floor) units has closed. Like most of the others, it has 1900 square feet and a one car garage. Closed for $169,100.

A 1st floor foreclosed direct ocean Canaveral Sands 2/2 sold for $165,000. One car garage and 1222 square feet.

One of the Diplomat 2 bed, 1 bath units sold for $120,000. Open parking, 750 square feet and original condition.

A 5th floor south facing unit in the north Twin Towers building closed for $115,000. Two bed, 2.5 baths in original condition with a carport.

A 900 square foot direct river 1st floor Fountain Cove 1/1 in original but nice condition with a garage sold furnished for $112,000.

A non-waterfront Four Seasons 2nd floor 2/2 with garage sold for $110,000.


A ground floor direct river Seminole Landings 3/2 with 1498 square feet sold as a short sale for $105,000. Don't get too disappointed at missing this one. Was moldy and needed a lot of work.

Two 2nd floor Dolphin Beach updated 1/1 units with a view of the ocean sold for $70,000 and $68,500. Open parking and 735 square feet. The lower priced unit sold furnished.

A ground floor Roosevelt Gardens 2/1 with 671 square feet and open parking sold for $42,500. Needed work.

Two other small Cape 1/1 units sold for $41,900 and $29,500.

I've long been advising buyers who are buying property here to use a local lender, especially for condos. A recent experience with one of the "region"al banks in our county has spurred me to qualify that advice. Just choosing a local lender does not guarantee a good experience. You might be unlucky enough to get a bad loan officer at a good bank. There are incompetent loan officers walking among us and they look just like the good ones at first glance. Ask someone for a recommendation based on a positive experience before you choose your lender and loan officer. Even with a good recommendation, it is prudent to maintain constant contact with the lender and to demand constant status reports. Sometimes the explosion happens before anyone notices the sizzling fuse.

On a positive note, the fishing right off the beach is on fire. Tarpon, snook, kingfish and other big predators are shadowing the plentiful bait pods up and down the beach.Conditions are such that they are easily caught from a small boat out of Port Canaveral or a kayak off the beach. A friend caught two sailfish in 40 feet of water off Cocoa Beach last Saturday.

"I know there are other errors but unless I'm being graded or paid I'm not trying to be perfect." ___CMO_Ratchet

Sizzling July

I'm more than a little surprised at the number of MLS-listed condos and townhomes that closed in the month of July in Cocoa Beach and Cape Canaveral. With a record low number of units for sale, somehow, 66 units were picked off and closed in the month. Our inventory now stands at 245 existing units actively for sale in the two cities with another 17 optimistically being offered in buildings that are but drawings on paper and dreams in the minds of the developers. At the offering prices of units in these two buildings, it seems unlikely that construction will begin anytime soon. I could be wrong.

Anyone hoping to pick up a deal on a short sale or foreclosure direct ocean condo has a grand total of three from which to chose. Two of those are unlikely to attract much attention in the condition and building they're in. Again, I could be wrong. There are 33 total short sales and foreclosure condos for sale right now.

Interest in attractively-priced new listings remains high and good units are under contract usually within a few days. Multiple offers are still common. The brouhaha over the new MLS has subsided somewhat as the crybabies have cried themselves out and realized that the new system is actually a great improvement over the old one. There are still some glitches as the data are migrated and criteria are tweaked to our needs but overall, I'm liking the change. The login for the public is now BrevardMLS.com so get rid of your old link if you have one saved and give the new system a try if you haven't already.

Weather has been typical for mid-summer except for a few cool days last week. This morning Tropical Depression Dorian is sitting directly off our coast and predicted to move east into the Atlantic bringing us nothing more than rain and cooler temps. I'll take it. If anyone needs help with the new MLS or a bulldog to represent their best interests in making an offer, I'm here to help. Larry@southcocoabeach.com

"Just goes to show that the ability to be a complete moron who eats confirmation bias for breakfast has no fixed place on the political spectrum." anonymous

Change Has Come

That loud whining sound in the air this last week was the sound of hundreds of distraught Realtors in Brevard County moaning and complaining about our powerful new MLS system. The majority, however, have embraced the new system and are working through the transition despite having to learn new software on the fly while conducting normal business. It has been challenging. Consumers going to BrevardMLS.com will now be directed into the new system. Don't despair on the first visit. It's fairly intuitive but if anyone has questions I'll do my best to assist. One powerful new feature is a custom portal into the MLS where favorite listings and searches can be saved. If anyone would like one, send me an email Larry@southcocoabeach.com and I'll set it up for you.

Our stats aren't quite as reliable this first week as many listing agents are still trying to figure out how to add and close listings so I'll report on what is showing this morning. According to FlexMLS we have had a total of 47 closed condos and townhomes in Cocoa Beach and Cape Canaveral so far in July 2013. Six sold for less than $100,000 and seven closed for more than $300,000. The two highest sales so far were both at the Meridian oceanfront in Cocoa Beach. These 2072 square foot 3/3 units closed for $650,000 and $575,000.

Two of the 47 were short sales. One was a 3/2 villa with 1507 square feet and 2 car garage at Bayport Cape Canaveral that sold for $205,000. The other was a lakefront Harbor Isles 2/2 in south Cocoa Beach that sold for $130,000.

Seven of the sales were bank-owned. They included;
A 2nd floor 3/2 direct ocean Coral Sands w/garage in south Cocoa Beach for $270,000.
A 2nd floor Pier Resort 3/3 with 1900 square feet and garage for $175,000.
An Ocean Woods Cape Canaveral 2/2 with open parking for $115,000.
A 2nd floor north bldg. Twin Towers 2 bed 1.5 bath w/carport for $104,900.
A 4th floor 900 sf Fountain Cove 1/1 w/garage for $92,000.
A 2nd floor Cape Shores 2/2 with 1091 sf and open parking for $79,900.
A Ridgeview 2/1 w/carport and 756 sf on south Brevard Ave. Cocoa Beach for $53,900.

Our inventory is at an all-time low with a total of 250 active for sale condos in Cocoa Beach and Cape Canaveral showing right now, 24 of those distressed. There may be a few new listings that haven't shown up yet as listing agents are struggling trying to figure out the new system but the trend before the change-over was shrinking numbers so I suspect that the real number is no more than 260. Compare this to almost 1200 listings in late 2006 and early 2007. Construction activity of single family homes is active right now in Cocoa Beach with several new homes slated to start shortly in addition to those currently being built.

Lobster mini-season this past week was successful with some of the biggest shallow water bugs caught in recent years. Those pictured were caught from a beach dive in Indian River County. Tarpon and other big predators are thick around the huge pogie schools off Cocoa Beach right now. They are easily reached by small boats from the Port or by kayakers from the beach in our calm summer ocean conditions. Remember the sunscreen and stay hydrated. Tropical Storm Dorian is approaching from the east but not expected to bring much impact to us. That could change.

"Why would I lay up now that I'm rich? I didn't do that when I was poor." __Angel Cabrera

Better Best and Highest

The seemingly missing comma in the title is not an error. Read the last part of this post and it will become clearer.

Halfway through July and property sales in Cocoa Beach and Cape Canaveral are ticking along at a heated rate. Of the 26 reported closed condos and townhomes so far in the month two went for more than a half million, both at Michelina, $600,000 and $575,000. Another high sale was a 2nd floor northeast corner at Villa Verde in the same stack as the collapsed 4th floor balcony in April. It has 3 bedrooms 3.5 baths, 2512 square feet, 2 car garage and closed for $395,000.

Shorewood in Cape Canaveral has been active with three closed sales of non-direct units at prices between $202,000 and $245,000.

One of the last bank-owned Pier Resort units closed for $170,000. Side peek of the ocean with three bedrooms, three baths and 1900 square feet.

A 2nd floor Diplomat 2/1, 750 sf with mild updating sold furnished for $116,000.

Two Bayport villas in Cape Canaveral closed for $205,000 and $240,000, 1507 and 1686 square feet.

A 2nd floor Royale Towers south facing C building 2/2 closed for $202,000.

The highest closing price since 2005 at Beachwalk on the grand canal on Banana River Drive in Cocoa Beach happened this month. A 2nd floor 2/2 closed for $190,000. It had a boat slip with lift and a garage. Several direct water units similar to this have sold for under $150,000 in the last three years. A ground floor direct with boat lift closed in January this year for $128,500. This same story is being repeated at most complexes as prices are ratcheting up with the evaporation of distressed inventory.

Let's revisit multiple offers. I had an interesting encounter with a buyer last week who thought multiple offers should include multiple chances to do "best and highest". It doesn't work that way. Typically in our market, if more than one offer is received at the same time, the listing agent will go back to all buyers' agents and give them the opportunity to bring their best and highest offer to be presented to the seller at the same time. This is risky for the seller as the pervasive distrust of real estate agents means that they run the risk of losing one or all of the buyers. I was involved in one situation where both buyers withdrew their offer when asked to bring their best and highest. The condo ultimately sold to an entirely different person for less than at least one of the first buyers was willing to pay. If your buyer's agent tells you that the listing agent has called for "best and highest" because there are multiple offers, you have three choices.

1. keep your offer exactly the same in hopes of being the winning offer
2. increase your price and/or better your terms in hopes of being the winning offer
3. withdraw your offer because you "don't play games' or believe the agent/s are lying to you

The seller also has choices of how they want to handle the multiple offers once received.

1. They can accept the offer they like best and proceed to closing. Note that the best offer may not necessarily be the highest. Closing date and terms may win out over price.
2. They can choose not to respond to any of the offers if none are good enough.
3. They can counter one or several of the offers. If none of the prices are acceptable to them they can offer the same counter-price to all and accept the first one (if any) to respond. Or, if one is clearly better than the others, they may choose to counter that one alone with a change of price and/or terms.

How a buyer responds when asked for his best and highest offer is entirely his decision. How a seller responds to the offers she receives is entirely her decision. The buyer I mentioned who was upset with the process was bothered that he didn't get a second chance to better his "best and highest" when someone else made a more attractive offer. The seller chose to negotiate with the offer that she preferred. That offer was apparently good enough that she saw no upside to re-approaching the lesser offer. It was her decision to make. Also note that in the event of multiple offers, a seller doesn't have to call for best and highest. She has the right to choose the offer she likes best without giving anyone a chance to do best and highest.

At this stage of our market, multiple offers are the name of the game for any priced-right listing so be prepared for this if you're offering and don't let it deter you from participation. You decide what price and terms you're comfortable with and then hope for the best. You might win just by staying in the game without changing the offer at all. If you don't trust your agent enough to be honest with him, find another one.

"All journalism is advocacy journalism. No matter how it's presented,
every report by every reporter advances someone's point of view."
_______Matt Taibbi

Larry Walker - larry@southcocoabeach.com  - 321.917.5786