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

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 beach...next.

"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

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. 

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

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

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

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

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. CBLarry@outlook.com

"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