Altitude Pemiums and Banker Insanity

How much more should a buyer expect to pay for an upper floor condo unit than a ground floor unit? Depends on the complex and the impact on the view but the move from the ground floor to even a 2nd floor identical unit typically costs more than $10,000. Ground floor units in all buildings will typically sell for a discount to the higher floor units, even in buildings where there is a decent view from the ground floor. There has always been more demand for units above the ground floor and the higher selling prices support that. In some cases there may be another premium for higher floors associated with the view opening up by getting above a neighboring obstruction. Example are the Constellation where above the third floor, the view from the west balconies opens up to include the three mile width of the Banana River and Merritt Island in the distance or Ocean Paradise where the north view opens up only at the third floor.

Hints for prospective buyers: 

Relying on unit numbers to filter out ground floor units can be faulty as some buildings with a garage on the ground floor start numbering units on the actual 2nd floor with misleading numbers like 101, 102.... Example: Meridian, Magnolia Bay and many others.

For persons or families who will be spending lots of time on the beach, the easier access to the beach off the patio may trump the better view of a unit separated from the beach by stairs or an elevator. Fishermen, surfers and kids seem to prefer the easier access of the ground floor.
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A quick story about banker insanity. I mentioned in an earlier post that foreclosures aren't selling as quickly as they were just a year ago because of the banks' increasingly optimistic, often-insane asking prices. Let me illustrate that insanity. A ground floor unit at the popular weekly rental complex, Cape Winds, failed to attract a buyer after being offered for five months as a short sale for $89,900 in late 2012 and early 2013. It was withdrawn the end of February last year and the bank foreclosed. Fannie Mae put the unit back on the market in May and increased the asking by $52,000 to $141,900. Not surprisingly, there was no interest at that price either. They began a series of price reductions until they got to $109,900 where they dug their heels in. Still no interest so the property went to auction last month. At the auction the bidding got to $75,000 which wasn't enough to satisfy Fannie's reserve and the bid was rejected. It went to auction a second time and the bidding peaked at $74,500 which was also rejected by Fannie. They held a third auction and the high bid was $64,354. This time Fannie Mae accepted the bid and the property closed last Friday.

Bankers aren't the only sellers with unrealistic expectations but they are the most consistent. Whether a seller is a bank or an individual, if the property isn't selling, it's probably because the price is too high. Sellers of the 71 properties in Cocoa Beach and Cape Canaveral that have been on the market for over 300 days, are you listening? Get real and you'll probably find a buyer.

There are 319 condos for sale this morning in the two cities and 72 single-family homes. Of those, 39 are bank or relo company owned and nine are short sales. Over 100 have been for sale for more than six months, 58 of those for over a year.

"The difference between reality and unreality is that reality has so little to recommend it."  __Allan Sherman

My Cousin Vinnie

The question of whether a buyer or seller of Florida real estate needs an attorney involved comes up frequently. I can't answer whether any particular party needs legal counsel. I can say that of the

hundreds of closings I've been involved with in Florida, attorneys were used in only a handful. Most of those were short sales where the attorney had been hired to negotiate with the bank. Typically in Florida, a real estate agent or one of the principals writes the contract and a title company handles the closing, with neither party represented by an attorney. If a buyer doesn't trust that the contract protects his interests then he would be prudent to have a Florida attorney or an experienced Florida real estate agent review the contract before signing. Hiring an out of state attorney to review a Florida contract might give a buyer less protection than having a less-esteemed but more experienced lowly real estate agent write or review it. If the used condo salesman doesn't inspire confidence, a Florida attorney is the best bet.

Will distant counsel know which Florida purchase contract is more suited to this transaction? What is the difference in the as-is contract and the FAR-BAR contract and why would a buyer ever want to use the as-is? Where is a buyer's escrow money more at risk in case of a dispute? Under what circumstances can a buyer cancel a contract and receive full refund of escrow deposit? How are contract time periods computed? What closing costs does the seller usually pay? The buyer? Relying on what is typical in another state may have one party paying for something they shouldn't. These are questions that "most" experienced agents can answer but might slide by Cousin Vinnie.

The contract can be fair to both parties or it can be slanted heavily in one party's favor. An unrepresented buyer or seller who isn't familiar with the details of our contracts and many addenda may leave themselves unnecessarily exposed if they wing it. If a party from the other side of the deal writes the contract don't assume it will be fair. Snowball in Cocoa Beach that's gonna happen. Stakes are too high.

"McVeigh's lawyer got him the death penalty which, quite frankly, I could have done."   Jon Stewart

What's My Home Worth?

What is my property worth? In most cases, not as much as you are thinking or hoping. One of our agents shared a story with me yesterday that reminded me that property owners don't always err on the high side.

A Cocoa Beach homeowner told her that she had recently tried to sell her house to a neighbor but that he wouldn't come up to her number and the deal didn't get done. In this particular case, the homeowner didn't have the house listed with a Realtor and was shooting for a number that was under fair value. I don't know if she was guessing or going on Zillow's "Zestimate" or perhaps the Property Appraiser's "market value" but, whatever method she had used to arrive at her number it was off considerably to the downside. Lucky for her, the neighbor also had a mistaken sense of the value and she didn't sell to him and leave tens of thousands of dollars on the table. Of course, she would have had the satisfaction of not having paid a real estate commission but her walkaway check would have been less even with the commission savings. I'm not making a case here for listing one's property with a Realtor rather than trying it alone. I am making a case for knowing what a property is worth before trying to buy or sell. Zillow and the Property Appraiser are not reliable sources for property value. Recently sold, nearby comparable properties adjusted for differences and market dynamics are the only realistic metrics one should use for arriving at fair value. Here's a link to Zillow's explanation to why the Zestimate is over 20% off on more than 15% of Orlando listings.

In our story here, the neighbor missed out on a good deal by not knowing what the house was really worth. Buyers, be aware that you can occasionally get a great deal from an uninformed, unrepresented seller. Usually, FSBOs are overpriced but sometimes not. Whether buying or selling, it's a mistake to assume that because there is no real estate commission being paid that the deal is sweet. In many cases, one party is getting the short end of the stick. If you've done your homework, you'll never be that one.

On another note, the asking price a prospective listing agent suggests is not the metric property sellers should be focusing on when interviewing agents. There was a time in the not too distant past when most good listing agents would not accept a substantially over-priced listing. Why take a listing that doesn't have a good chance of selling? It's a little different now. With the current low inventory it makes sense to take any listing just to generate leads from buyers that might buy something else. Continuing that logic, a listing agent might suggest an unrealistically high price in order to get a listing from an optimistic seller. Ask for comps and the basis used for the suggested asking price from a prospective listing agent.

I'm happy to give readers an opinion of fair market value of any property in our market. I'll arrive at that opinion based on research of recently sold comparables, not ten minutes on Zillow. Email me, larry@southcocoabeach.com

"I'd rather an incompetent ideologue than an apathetic cynic" __Regis

Sizzling

The sales numbers from the first month of 2014 are not going to accurately reflect the level of activity in the Cocoa Beach real estate market. We began the month in a slow steady mode but by the second week every agent I talked to was running ragged writing and negotiating offers. Activity is still frenetic. I get the sense that a lot of people that had been waiting and thinking of purchasing have decided that now is better than later to pursue a purchase. The rising closed prices tend to support that decision. The continuing low inventory is adding friction to the process.

The bread and butter of our market, direct ocean condos, are in short supply. The property type I am most often asked about is an east facing, direct ocean condo above the ground floor with at least two bedrooms. This morning there are 64 total direct ocean, east facing condos for sale in Cocoa Beach and Cape Canaveral. A quarter of those have been for sale for over six months. In this competitive market that screams "overpriced". A third of the remaining units are ground floor which means that a buyer looking for a fairly priced direct ocean unit above the ground floor has a selection of 35 to choose from. Remove the two one bedroom units and we have 33 possibilities for the "at least two bedrooms" buyer. Only five of those are asking less than $300,000 and fully half are above $400,000. Tight supply.

There have been 30 condos closed in the two cities so far in 2014 according to the MLS. Only three of those were direct ocean units. Highest closed price was $548,500 for a direct ocean top floor (5th) Solana Shores 3/2. The last 4/4 Magnolia Bay developer-owned unit closed for $465,000. Not bad for a 3000+ square foot never-lived-in unit with two garages and 10' ceilings. The Mag Bay developer has only one unit of any size left for sale there.

The smoking deal of 2014 so far was a foreclosed ground floor, completely remodeled Windward East direct ocean 2/2 with 1482 square feet. Someone stole it for $205,000.

There are 89 condos under contract this morning with 72 of those having gone under contract since December 1. That will fuel the closed numbers in the weeks to come. As always, if you're looking to buy, have your funds available and/or your mortgage pre-approval process started. You also need to be checking the MLS daily or have your agent set up an auto-alert that will email you directly from the MLS when a property matching your criteria is listed. When a good one hits, it's gone quickly, so be prepared to move. Happy hunting.

"The future is here. It's just not evenly distributed."  __William Gibson

Serendipity or Crafty Marketing?

And so it goes. I went to Satellite Beach yesterday to check out what looked to be a compelling oceanfront condo listing that had just been reduced to $245,900. The unit was described in the MLS as "Sought after South East corner condo with awesome ocean views".  Not a bad price for an upper floor, direct ocean southeast corner with 1305 square feet. I arrived to discover that the unit was a southwest corner on the A1A side with a north facing front door not west facing as indicated in the MLS. There was not a single east facing window or slider in the unit. The views of the ocean over the parking lot and adjacent property were nice. Now I realize a lot of people have trouble with directions and confuse east, west, north and south. Maybe that's the case here. Serendipitous mistake for the listing agent if it is. She got me there and has probably fielded quite a few inquiries. Maybe she's even been successful at steering a buyer disappointed with this unit to another bona fide southeast corner. Mistakes can be profitable.

The photo is of the beach at the end of Minutemen this past Friday. You can probably guess from where the shot was taken.

"Sometimes serendipity is just intention unmasked.” __Elizabeth Berg

Stretching the Truth

From this morning's hotsheet of new, sold and price changed listings in Cocoa Beach and Cape Canaveral; a Portside Villas 2/2 unit that closed yesterday for $97,000. At $97,000, I consider these big (1211 square feet), 8 year old units to be an attractive buy. What I have never considered is that they could legitimately be described as "across the street from the ocean". The description in the MLS states "Adorable 2 bedroom, 2 bath Condo across the street from the Ocean!!! (Triple exclamation marks not mine) Technically, there is but one street between Portside Villas and the ocean. What an internet shopper might not know is that the walk from the unit to the beach is within a few feet of one mile. If a buyer was a bird, she'd be but 4402 feet front door to the beach. Unfeathered residents will have to walk to the nearest road that winds to the beach and according to Google maps that closest ground route is 4945 feet. Listing agents, please consider that you foster the bad opinion the public has of all of us when you do stuff like this. That unit would have sold just as fast if you had said "One mile to the beach". Larry out.

Written across the bottom of the inside of a bathroom stall door.
BEWARE OF LIMBO DANCERS

5000 Words

Too Much Information

I figure it's been long enough now, eleven days into the new year, for almost all the laggards to have updated their sold listings on the MLS for 2013. Here are what we'll arbitrarily call the "final" numbers. These numbers apply to Cocoa Beach and Cape Canaveral only and reflect just those property sales reported to the MLS. There were a handful of non-listed sales during the year that aren't part of these stats.

As I mentioned in a previous post, 2013 saw the highest number of condo sales since 2005. Cash still dominated the purchases with three out of five buyers stroking a check rather than getting a mortgage. The number of distressed sales continued to decline with short sales shrinking to only 7% of the total. One in three listings sold in less than a month on the market.

2013 Total condo sales - 660

Purchased with cash - 402

Short sales - 43

Bank-owned - 109

Sold in 30 days or less - 226

The story was similar with single family homes sales in 2013. Almost half of the buyers paid cash. Distressed sales were few and short sales were but a tiny blip on the screen. Almost half of all homes sold had a contract in less than a month from listing.

Total single family home sales 2013 - 125

Purchased with cash - 56

Short sales - 8

Bank-owned - 12

Sold in 30 days or less - 56

As of this morning, there are 62 total single family homes in the two cities for sale on the MLS. Seven of those are either under construction or not yet built. Two are short sales and three are bank-owned.

There are 303 condos for sale with 23 of those not yet built (possibly never). Of the 303, seven are short sales and 25 are bank-owned. Of the 25 bank-owned units, well over half have been on the market for more than 50 days, with four growing mold for over 100 days. This is a reflection of the banks' too-optimistic recent pricing.

The surf temp is lingering in the high 60s making short sessions without a wetsuit still possible. With winter guests arriving every day, the days of breezing through nine holes in less than two hours are over until after Easter but with today's forecast high of 79, I'm going to brave it.

Snowbirds, don't forget to tip your server. She is probably being paid $4.91 per hour (the minimum in Florida for tipped servers) which means she needs your tip to feed the babies.

"I embarrassed a lot of people. At this point I should know better than to make political statements."  __Dennis Rodman