Big changes for condos revisited

Father's Day 2010 just before sunrise, south Cocoa Beach.

A followup to the post about the new condo law going into effect July 1. I have been very involved over the years with sales in the few weekly rental complexes that exist in Cocoa Beach and Cape Canaveral. Unlike other coastal areas in Florida, most ocean condos in our two cities do not allow short-term rentals of units. This dearth of competition is great for the owners of the limited number of vacation rental condos. However, there have been attempts in recent years by groups of owner-residents and (rumored) the hotel/motel industry to limit or restrict weekly condo rentals in our area. Two issues in the new law are of particular interest to owners and prospective buyers of vacation rental condos.

I mentioned in the other post the sprinkler system retrofit rules. There has been some anxiousness among owners in these complexes as the cities and state began making noises about possibly requiring short-term rental buildings to be retrofitted with sprinkler systems. This really reached a feverish pitch when a small group of resident owners at Cocoa Beach Towers attempted to stop weekly rentals at their building just north of the Cocoa Beach Pier. The City of Cocoa Beach and the State of Florida became involved and the sprinkler system issue became a focus. It was eventually decided that the building could not be forced to retrofit under the existing law and the new law reiterates that fact.

Another reiteration in the new law concerns associations that try to change rental restrictions by a vote. The law states (paraphrasing here) that any amendment that prohibits renting or leasing of units, changes the permissible lease term or that specifies or limits the number of times a unit may be rented within a certain period will only apply to owners who consent to the amendment and owners who acquire title to their unit after the effective date of the amendment. This should alleviate concern for investor owners in buildings like Cocoa Beach Towers that have a large enough contingent of owner-residents to conceivably pass such an amendment.

To read a synopsis of the entire bill, go to Donna DiMaggio Bergers excellent condo law blog and scroll down to her June 10 post about the bill and link to the synopsis.

As always, I am not an attorney nor ever wanted to be. For legal advice, seek the advice of a lawyer rather than trusting my Barney Fife interpretations. If using me for the services for which I am trained, real estate, and the information I've freely disseminated here for the last five years, I appreciate your loyalty.

"You'll miss 100% of the shots you never take."____Wayne Gretzky

A day in June

Our depleted MLS inventory continues to drag on activity. We never saw the usual increase in new listings that we've come to expect every spring and it's making the search for good properties tougher than it's been in a long time. The good properties that do come on that are priced right are selling. If you're looking to purchase, it will pay to have your ducks lined up in advance and be ready to move when the opportunity presents itself. The competition is intense in desirable property types like weekly rental condos.

Twenty MLS-listed condos and townhomes have closed so far in June in Cocoa Beach and Cape Canaveral, none for more than $430,000. Sales of note include:

The highest price sale so far; a four year old, top floor (5th), 4 bedroom, 3.5 bath, direct ocean northeast corner at Almar in south Cocoa Beach. This unit has 2713 square feet and a private 2 car garage. Sold new in 2006 for $900,000 and closed this month as a short sale for $430,000.

A beautifully remodeled 5th floor southeast corner direct ocean at 2100 Towers in Cocoa Beach sold for $350,000. This over-sized (1600 square feet) 2 bedroom, 2 bath unit with a single garage sold fully furnished.

A super nice direct ocean 3 bedroom, 2.5 bath, 2 story unit at Cocoa Beach Club closed for $280,000. This unit had been over-the-top remodeled and was never rented even the Cocoa Beach Club allows weekly rentals. This was a deal.

Two Spanish Main units in the popular weekly rental building in downtown Cocoa Beach have closed. One, a furnished 3 bedroom, 2 bath, 2nd floor with a peek of the ocean from behind the pool with some remodeling sold as a short sale for $240,000. The other was a foreclosed 2 bedroom, 2 bath, 3rd floor in need of lots of work, also behind the pool. Sold for $214,000.

A cute but small direct ocean, 2 bedroom, 2 bath, 4th floor at Ambassador Shores in south Cocoa Beach sold fully furnished for $200,000. Even without a garage, that's a smoking deal.

A direct canal front, 1st floor, 2 bedroom, 2 bath in original condition with garage and boat slip at Beachwalk in Cocoa Beach sold for $169,000.

A 5th floor direct Banana River, 2 bedroom, 2 bath unit at Costa del Sol in Cape Canaveral closed for $145,900. It had a private garage and was in mainly original condition.

Two short sale Oak Park townhomes, both with 1855 square feet and 2 car garages have closed. One was a 4 bedroom, 3.5 bath that sold new in 2006 for $299,900. It closed last week for $135,900. The other was a 4 bedroom, 2.5 bath that sold new in 2006 for $318,000. It closed last week for $129,000.

A lakefront 3 bedroom, 2 bath ground floor at Harbor Isles in Cocoa Beach sold for $115,000. Needed work but had 2 private garages.

A foreclosed 2 bedroom, 1 bath at the Diplomat in Cocoa Beach sold for $107,000. Two week minimum rental at this very popular with snowbirds complex.

A small, furnished 1st floor 2 bedroom, 2 bath flat at Villages of Seaport in Cape Canaveral sold for $103,000.

And a short sale, 2nd floor condo conversion at Brisa del Mar on Ridgewood in north Cocoa Beach sold for $58,000. This same unit sold for what now seems insane, $178,000, when 1st converted in 2005.

Three single family homes have closed so far this month, only one worth noting. It was a short sale direct river pool home that had one of the nicest remodels that I've ever seen. It had 2730 square foot, 3 bedrooms, 3.5 baths in like brand new condition with top of the line everything and a beautiful view of the islands. Closed last week for $510,000.

"A ship is safe in harbor, but that's not what ships are for."_________William Shedd

Big changes for condos on July 1

The new Distressed Condominium Relief Act signed into law by Governor Crist on June 1 will take effect on July 1. There are provisions within Senate Bill 1196 that will have a significant impact on almost all Florida condo associations. Some highlights of the Act are;

Lenders liability for past due assessments in foreclosure
Lender's (First Mortgagee) liability for unpaid assessments when acquiring title through foreclosure or deed-in-lieu after July 1, 2010 is increased to the lesser of 12 months unpaid assessments or 1% of the mortgage debt. This is an increase from the lenders' current 6 months liability and a welcome aid for troubled associations with multiple foreclosures.

Association's right to collect rent from delinquent units
If a condominium-unit owner is more than 90 days delinquent in paying monetary obligations to the condominium association, the bill authorizes the condominium association to require that the condominium-unit owner's tenant, in lieu of paying rent to the unit owner, pay the rent directly to the condominium association to cover a unit owner's delinquent monetary obligations to the condominium association. This will put a halt to the all-too-common practice of unit owners collecting rent while not paying condo dues (and often not making mortgage payments as well).

Delinquent owners banned from the pool.
In addition to authorizing fines, a condominium association is authorized to suspend the right of a unit owner to use the common elements, common facilities or other association property until such unit owner has paid the required assessments (maintenance), as well as suspend the voting rights of the delinquent unit owner. This applies to any "monetary obligation" that is more than 90 days delinquent. It also extends to the unit owner's tenants, guests and invitees.

Fire Sprinkler System
The bill states that a condominium association cannot be required to retrofit its fire sprinkler system before the end of 2019 (instead of 2014). The association may still vote to forego retrofit. Buildings of less than four stories with exterior walkways providing egress are exempt.

There are several other provisions but these are the ones that will apply to the greatest number of associations in the Cocoa Beach and Cape Canaveral area. A complete synopsis of the bill can be read at Donna DiMaggio Berger's excellent condo law blog.

"Sometimes not getting what you want is an amazing stroke of luck."_________the Dalai Lama

Revisiting rental restrictions

Prospective condo buyers who haven't been reading this blog for long may benefit from reading a few posts from the past. Many buyers embark on a search for a condo without considering what issues are important to the selection of a unit. Some people never intend to rent their unit but many hope for some rental income to help with expenses. I've addressed the issues of rental restrictions on several occasions and for those buyers who haven't considered the impact of restrictions on their enjoyment and/or prospect of income from their unit, here are three good ones from last year that will, hopefully, assist in refining your search.

Ten questions for prospective condo buyers

Positive cash flow, does it exist?

Why rental restrictions matter

“Faced with the choice between changing one’s mind and proving there is no need to do so, almost everyone gets busy on the proof.” __________John Kenneth Galbraith

May sales

The month of May 2010, with 49 closed sales of MLS listed condos and townhouses in Cocoa Beach and Cape Canaveral, was the biggest May for condo sales in our market since 2006. This has been true for every other month so far this year except February. Only eleven of the total sold for more than $200,000 but only two were for less than $75,000. The sub-$75,000 condo market has been very active in recent months with a big supply of short sales and foreclosures but that supply appears to be drying up as investors have been actively buying those rock-bottom units. In another divergence from the trend, four units closed for over $500,000. I've been talking about the trouble in this market segment for a few years and the recent sales are confirming my predictions that the over-supply had to lead to considerable price reductions before sales would resume. The highest priced sale was a bank liquidation, the 3556 square foot, four bedroom penthouse at the Ocean Club in north Cocoa Beach that sold for $750,000. That's half the once asking price. Get the price low enough and buyers will make peace with a compromised view.

The northeast corner penthouse at 3800 Ocean Beach Blvd. closed for $675,000, three years after selling new for $1.1 million.

The former developer's model at Meridian of Cocoa Beach sold for $552,500, having sold new for $649,900 in 2007.

And the fourth of the half-million plus sales was a 7th floor Michelina that closed for $552,500, three and a half years after selling new for $865,000. We have passed crunch time for several new buildings that are sitting dead in the water right now. Either the note holders are going to continue to ignore reality while carrying these buildings (the strategy they've clung to so far) or they are going to have to take the same step that the Ocean Club bagholder was forced to take, keep reducing prices until the buyers are willing to step in. I can think of three new buildings in south Cocoa Beach with zero sold units and several others with less than 50% sold. All of these are luxury units with current asking prices from $475,000 to over a million and, so far, itty bitty price reductions have failed to produce more than a couple of sales. Stay tuned, tipping point approaching.

"How people treat you is their karma; how you react is yours." _____Wayne Dyer

Just around the corner

The crew at Walker Bagwell Properties has moved it's offices just around the corner to 125 N. Brevard Ave., across the street from the Pompano Grill. Look for the beautiful ancient live oak tree out front.

Out of the 33 closed condos and townhomes closed so far this month in Cocoa Beach and Cape Canaveral, only four sold for more than $250,000. Interestingly, of those four, three were in weekly rental complexes, two in Boardwalk and one in Sandcastles. Look for a comprehensive wrap-up of the month's stats early next week.

"He who hesitates is poor."___Mel Brooks

Shifting dynamics

Our MLS condo inventory in Cocoa Beach and Cape Canaveral appears to have stabilized at around the 600 unit level having been below that number for the last seven months. In May 2006 inventory was close to the peak at 1047 units while today, four years later, we stand at 581 total MLS-listed condos and townhouses in the two cities ( short sales and bank-owned units are down to 19% of the total). With monthly sales running at almost the same level as sales in 2006, and 45% less inventory, there appears to be a dynamic building that, absent a flood of new inventory, could impede continued price erosion. This is not a bottom call, just an observation of market conditions that haven't existed for some time. There is still an unknown quantity of underwater and otherwise troubled owners who are not yet represented in the actively for sale numbers but we know from the stats that a significant number of the distressed owners have already been shaken out in the brutal decline of the last three years.



The predicted higher mortgage rates have not materialized so far. Rates have been in a steady retreat since March with the average rate for 30 year fixed rate mortgages back below 5% this week. I was made aware yesterday of new mortgage money available for Florida condo loans to qualified borrowers with 25% down. Those of you paying cash need to get your proof-of-funds documentation together before offering. All foreclosures and many other sellers are going to require proof of funds if you offer cash. Proof of funds documentation is usually an account statement in your name (account numbers can be blacked out) showing liquid funds in excess of the purchase price or a letter from your banker stating the same. Don't grump. This is no different than having to document credit worthiness when applying for a mortgage and is just part of the process.




"There is nothing wrong with change, if it is in the right direction."
______Winston Churchill

From April showers to May flowers

The little house on the hill that's been home for the last week. Almost the exact same distance from Cocoa Beach as Marathon in the Florida Keys.

Not surprisingly, the real estate market in Cocoa Beach and Cape Canaveral did not grind to a halt in my absence. There have been eight new single family home listings, all in Cocoa Beach, at prices from $143,000 for a a small 2 bedroom 2 bath in Cocoa Isles to $469,000 for a nicely remodeled pool home on canal with boat dock and lift off Minutemen. Of the 13 price reductions on other homes during the same time, none were significant. Five single family homes closed during that time at prices between $94,900 for a small, foreclosed 3 bedroom 1.5 bath cottage on Woodland in Cocoa Beach to $380,000 for a big (3061 sq. ft.) 3 bedroom, 3.5 bath on Ridgewood in Cape Canaveral.

The condo market, as always, was much more active. There were 33 new listings during the same 12 day period. Prices began at the low end at $29,900 for a small, Fannie Mae owned studio at Essex House in Cocoa Beach. The highest priced new listing ws for the northeast penthouse unit at 3800 in Cocoa Beach. This 5th floor unit sold for $1.1 million new in 2007 and is offered now for $774,900. I expect some action on this one as the seller is offering an obscene buyer's agent bonus on top of the commission. Two very optimistic Meridian sellers are offering their units for $669,000 and $724,900, both more than they paid new a few years ago.

Other new listings of interest include a Park Place top floor southwest corner with a southern ocean view for $269,900. A 2nd floor corner, direct ocean 2/2 Windjammer in Cape Canaveral hit at an asking price of $214,500.

A total of 21 units have closed as of this morning so far this month at prices from $33,250 for a 1/1 Star Beach unit in Cape Canaveral to $355,000 for a 6th floor nicely remodeled 3/2 Crescent Beach Club unit in south Cocoa Beach. Two Boardwalk 2/2 direct ocean units in downtown Cocoa Beach closed for $312,000 and $340,000. These units both had garages and weekly rentals are allowed.

A direct river River Bend 3/2 in south Cocoa Beach closed for $307,000. A 7th floor, north facing Sandcastles 2/2 with garage closed for $260,000. Weekly rentals allowed. And the smoking deal of the month so far, a lakefront, ground floor Harbor Isles 2/2 with garage closed for a shocking $110,000.

Look for more updates in the next few days.

"No vacation goes unpunished." ____Karl Hakkarainen