Condo Fee Ripoff...or Not

"I'm not looking at condos because the fees are a ripoff." I heard this one again this week. It's a common sentiment but is less based in fact than in ignorance of exactly what a condo fee covers. There are plenty of good reasons for preferring a single family home over a condo but the existence of a condo fee shouldn't be one. That nasty condo fee usually covers insurance on the building, water and sewer, lawn and landscape maintenance, basic cable, sometimes WiFi, pool maintenance and reserves for future major expenses like painting, roof, parking lot and driveway. In almost every one of the many comparisons that I've done, the monthly costs of owning a single family home have matched or exceeded the average monthly condo fee. Not all condos fund reserves but those that don't have respectively lower fees.

The average homeowner rarely has a discipline for setting aside reserves for future major expenses. Replacing a roof on a condo might be entirely funded from the reserves without the need for an extra assessment. That average homeowner will be pulling out the checkbook and stroking a big check when the roofer presents his invoice. Same for painting the house or cutting down a damaged or diseased tree or replacing a pool pump.

I'm not making a case for condos over homes here. Families with several big dogs or needing four or more bedrooms may not have many, if any, condos worth considering. My intention is to educate those who haven't accurately considered the differences in expenses.

Speaking of education, the gas stations at both forks in A1A in Cocoa Beach (4th St. North & 21st St. South) continue to gouge customers on premium gasoline. If your vehicle uses premium gas, you'll save around $.40 a gallon by getting your gas at the Sunoco at 1st St. South.

The Thanksgiving weekend Cocoa Beach Art Show was a great time for all yesterday and continues today. While the Space Coast Art Festival moved to the Port to attract out-of-towners and cruise passengers, the Cocoa Beach locals collectively ignored it and swarmed the downtown festival as they've been doing for 53 years. Most of us are happy to enjoy the hometown feel and the chance to visit with friends and neighbors as we stroll the streets. That vibe can't be recreated elsewhere, especially a location that requires Cocoa Beachers to drive. We tend to favor bikes, skateboards and walking for our transportation. Good luck to the other Festival. I'm sure it was well attended and will continue to thrive in it's new venue.

"You're less pressurized - the cabin tends to be pressurized to the equivalent of a few thousand feet. You expand, not contract. That's why you tend to get a bit gassy on planes. Flight attendants have mastered the art of stealthily farting as we walk down the aisle - a practice generally known as "Crop Dusting"." 

___flight attendant in response to the Food Babe's error-ridden blog on airline meals

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2014 Buyers, You May Be Owed Money

Buyers who closed on property in 2014 before November may be owed money from the seller. In Florida our property tax bills for the year arrive in November. For closings before then, property taxes are prorated based on the previous year's bill and the seller's portion of the unpaid taxes (the period from January 1 through day of closing) is credited to the buyer.

Buyers and sellers both sign a document at closing agreeing to pay the other party the difference in the actual tax bill and the estimated figure used at closing should the shorted party pursue it. During a period of rising property values such as the present many buyers will be owed money from the seller as taxes rise. The most significant differences will be for properties that were previously homesteaded with artificially low taxes. Closings that happen later in the year will have accrued larger differences, if any, than those that closed earlier in the year.

I looked at recent closings on the property appraiser's site this morning for a good example. I found a Cocoa Beach oceanfront condo that had been homesteaded for years and closed in September this year for a little over $300,000. The ad valorem portion of the property taxes was $1874 in 2013 based on a homesteaded taxable value of $129,000. This was probably the figure the closing agent used to prorate the taxes for the September closing. When the new owner's 2014 tax bill arrived this month, the new taxable value was $252,000 and the tax bill had increased to $3958. If the closing agent used the 2013 tax figure for pro-rations, the new owner is owed around $1450 from the seller. In order to get this money he needs to contact the seller and/or the closing agent to request it. No seller is going to send a check if not asked.

Of the last 15 recorded condo closings in Cocoa Beach, only four had taxes increases large enough to amount to over $250 owed the buyer. My example above was the only one with more than a $400 difference. A couple of hundred dollars might not be worth the trouble but $1450 certainly is. New owners who closed before November should check the tax history of their property at the Property Appraiser's site by looking up their property and clicking on the "Taxes" tab on the left of the property page to get to a history of property taxes. If the 2014 ad valorem taxes are substantially more than the 2013 figure the seller may owe the prorated difference.

After approaching 50 degrees Tuesday night, temps are forecast to bump back to 80 by Sunday. Nightly room rates are at their lowest of the year right now for anyone needing an escape from the snowbank. We're having dueling Art Shows next weekend with the traitorous Space Coast Art Festival newly relocated to the Port while a new downtown festival The Cocoa Beach Art Show will pick up where the backstabbers left off. It's an easy decision which show to attend for most locals. Bring the kids and the dog and I'll see you downtown.

In 19 years of pro basketball Shaquille O'Neal only attempted a three point shot 22 times and sank just one of those. Know your weaknesses and use your strengths.

Preceeding the Snowbirds

 A quick non-real estate related post. We have a few  magnificent frigatebirds that summer somewhere at the Cape and are often seen in the summer months flying high above the Canaveral Bight, almost never more than two at a sighting. Yesterday the sky along the ocean shore in Cocoa Beach was a steady stream of these giant birds heading south. Frigates summer as far north as North Carolina so I imagine the dozens that I saw during lunch were northern-summering birds whose southward migration was triggered en masse by the approaching severe cold front. Whatever the reason, it was very cool to see this unusual sight in Cocoa Beach.

"Never approach a dock at a speed greater than you're willing to hit it."  ___Capt. Joe

The Seller Always Wins...IF

Real Estate Myth: A buyer who purchases a property directly from the listing agent is more likely to get a good deal because the listing agent may cut the commission since she gets both sides of the deal.

About that. I recently found this comment on a popular real estate forum from a top-producing listing agent, her words, verbatim, in blue.


"All buyers deserve to have proper representation and it's impossible if the listing agent is doing his job properly. My team and I are listing agents, and we ONLY represent the seller. There are always bumps in the road to the closing table, and buyers without representation are at a great disadvantage. Our seller will always win if the buyer is without representation.

Listing agents, do not encourage buyers to work directly with you. It's not to anyone's benefit, especially yours. The clean deal is the goal."  

Real Estate Truth: Buying a property from the listing agent makes as much sense as allowing the district attorney to represent the defense while leading the prosecution. Neither side should expect to get the most favorable result. Not only will a buyer probably fail to get the best deal when purchasing through the listing agent, he may find himself with his escrow deposit unnecessarily exposed and with terms less than optimal. Even if the listing agent cuts her commission in half, she is not allowed to advocate for the buyer in the negotiations. In fact, she cannot tell a buyer that the seller will take less than the buyer just offered even if she knows it. When I am representing a buyer I am obligated to use everything I already know and that I can find about the property and the seller in the battle to get the best deal for my buyer.

In a typical week, I am talking to listing agents, seeing properties and negotiating multiple offers. Not all of these negotiations result in accepted contracts. However, those failed negotiations do result in knowledge about those properties. That knowledge can be a powerful edge in subsequent negotiations for the same or similar properties. The result may be a lower price and/or better terms for my buyer. The listing agent can't share knowledge with a buyer that will give the buyer an edge and is certainly not going to beat up her seller trying to get a buyer a better deal. I am happy to. In fact, I am bound by my relationship with my buyers to do just that. All buyer’s representatives may not be as aggressive as I am, but, the good ones will almost always hammer out a better deal for their buyers than the buyers could get on their own through the listing agent.

Real world example; A condo purchaser in Cocoa Beach went directly to the listing agent, bargained really hard and somehow got the agent to reduce his commission to $1000 total for both sides of the deal and closed feeling good about his savings. I closed for a buyer on an identical unit in the same building in better condition a few weeks later for over $15,000 less. The kicker; it was listed for the exact same price as the first one.

Folks, you may not like real estate agents. Heck, I don’t like most of them, but, if a bulldog buyer’s agent can save you money, pinch your nose and get the deal done rather than shooting yourself in the foot in a misguided attempt to reduce the commission. I'm not alone in my opinion about buyers using the listing agent but it's not common for listing agents to advise a buyer that they should have their own representation. The lure of a bigger check is too great for most. Having said all that, an honest agent can serve as a transaction broker, advocating for neither side and pilot a deal to closing with neither party being harmed or at risk during the process. If you trust that the listing agent is honest and you're getting the best possible deal without unnecessary risk, have at it. If you're uncertain, do yourself a favor and get your own representation.

Cliff's Notes version; "...seller will always win if the buyer is without representation."

"Careless shepherd make excellent dinner for wolf."  ___Earl Derr Biggers

Strong Despite

October was surprisingly strong for property sales in Cocoa Beach and Cape Canaveral. The Cocoa Beach MLS shows a total of 59 condo and townhome units and 12 single family homes closed in the month. That's considerably more than I was expecting. Besides the high number of sales, the percentage of sales financed with a mortgage continued to increase with almost half, 38, buying with borrowed money. Just three years ago close to three quarters of all property purchases were with cash.

Short sales continue to dry up with only one short sale closing in October. Foreclosure sales increased slightly with 13 bank-owned units selling. Note that Fannie Mae ended the Homepath mortgage program in October so we won't be seeing any more of those low down payment, no appraisal loans on future foreclosure sales. Today's inventory of all property types is 9% short sales and foreclosures.

Inventory is still decreasing with 242 condo and townhome units and 59 single family homes for sale today in our two cities. The majority of direct ocean units sold in October closed for prices in the $200 to $240 per square foot range. There is considerable buyer interest in direct ocean units at the moment with little resistance at those price levels but their searches are butting up against the inventory shortage. Sellers who price in the range of recent sales are selling their properties in a few days. I see nothing on the horizon to change this trend. Successful buyers need to be smart, decisive and aggressive if hoping to get a good one. Good luck out there. Contact me if you need help putting together a strategy.

"And I do believe it’s true,
That there are roads left in both of our shoes."  __Death Cab for Cutie

Buyer Shall Pay...

I saw an offer a couple of weeks ago with the phrase, "Buyer shall pay a $295 processing fee to 'Name Withheld' Realty" inserted in the special clauses section by the buyers' agent. The buyers had signed the offer and apparently were OK paying their agent this junk fee on top of the 3% he would be making on the transaction. I've discussed these junk fees before but haven't seen one in a while. Folks, if your agent is asking for a fee on top of his commission you might need a new agent.

There are situations where a bank, greedy listing agent or FSBO seller may be offering no or very little commission to the buyer's agent. In those cases, a buyer may need to make up the difference to their agent. Tacking on a blatant junk fee, no matter what it is called, on a deal where reasonable commission is being paid shouldn't be tolerated. One of the national franchises in Cocoa Beach used to pressure their agents to tack a $495 "regulatory compliance fee" on all their clients, both sellers and buyers. Many people paid the legitimate-sounding junk fee not knowing they were being blatantly ripped off. Clients who questioned the fee didn't have to pay it. Those who didn't question had their pockets picked. Ignorance is often costly.

The big (20 to 40 pounds) bull redfish are schooled up just outside Port Canaveral and are feeding voraciously. Anglers have been catching and releasing these monsters during the perfect windless conditions this week. Anyone who'd like to catch a redfish of a lifetime can do a half-day charter out of the Port right now and check that item off their bucket list.

Gas prices in Cocoa Beach retreated below $3 per gallon at several stations this week. Motorists buying premium gasoline continue to be gouged by the stations at the north and south forks in A1A. Premium at these stations hovers around 40 cents more per gallon than at the Sunoco at 1st St. South. As long as people pay those prices, they will continue the gouging. Please don't.

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again." ___George W. Bush

Backup, What is it Good For?

Backup contracts are widely misunderstood, in my experience. In simple terms, an executed backup contract is a contract that will automatically become primary if the existing contract fails or cancels. If the existing contract does not fail and closes, the backup dies. The backup buyer can cancel the backup at any point during the process prior to becoming primary. In a market like ours with more demand than supply, a savvy buyer should be ready to deploy a backup offer in the right situation. That situation often happens when a buyer loses a desirable property in a multiple offer situation. It can also happen when a buyer realizes that the property that best fits their criteria is already under contract.

What are the drawbacks for a buyer making a backup offer? Other than the small amount of time it takes to write and negotiate the backup or the slim odds of it becoming primary, I can think of none. A buyer does not usually make an escrow deposit at the time of making a backup offer and most continue their search. If they find a property they like better, they negotiate for that one and, if successful, cancel the backup. If a backup offer is stronger than the primary, higher price, better terms, etc., then the seller is less likely to make any concessions for the first buyer. That means when the first buyer makes a request for post-inspection repairs or an extension to closing date, those requests are probably going to get denied by the seller increasing the odds that the first buyer will cancel. Sellers should welcome backup offers first for insurance of a closing and second for post-contract bargaining strength with the first buyer.

Our TL;DR takeaway: Buyers and sellers should employ backup contracts when suitable as another tool for successfully buying or selling property.

I took the pic at the top last week in the northern Abaco islands during a boat delivery from Florida. It was a smooth crossing with little to no wind the entire trip. Not so good for sailing but, with reliable diesels, not a problem. The beauty of these very close islands is breathtaking and off the radar for most Floridians. A shame for them but a plus for those of us who visit this special place.

"A goal is not always meant to be reached, it often serves as simply something to aim at." ____Bruce Lee

Declination

Sales of residential properties in Cocoa Beach and Cape Canaveral continue at a steady pace. We finished September with 56 closed condos and townhomes according to the MLS. Of those 56 sales, 36 closed for cash. Eleven were distressed. Only one of those distressed exceeded $200,000. The highest prices paid were $482,500 for a 5th floor north facing Artesia 3/2 and $400,000 for a 6th floor direct ocean Waters Edge 3/2. Half of the sold units were on the market less than 50 days and 16 sold in less than a month.

There were 16 sales of single family homes and half duplexes. Seven closed for cash and there were zero distressed sales. Five sold in less than a month on the market.

There are currently 52 single family homes and half-duplexes for sale in the two cities. Three of those are distressed. Ten have been for sale longer than 250 days.

There are 225 existing MLS listed condos and townhomes for sale in Cocoa Beach and Cape Canaveral this morning, an all time low. Of those 26 have been for sale for over a year so we can assume they are priced too high to sell. That leaves 199 potential targets for a buyer looking with no other restrictions. By the time a buyer filters by location, size, price, etc., her choices are slim, to put it mildly.

We are showing 90 units as contingent or pending so that little backlog will support our closed sales moving forward in spite of the low inventory. As always, those looking to purchase, need to know what they're looking for and what it is worth in order to move quickly. Out of town buyers are at a disadvantage unless they are willing to go ahead and negotiate for a property without first physically stepping foot in it. In the time it takes the average person to book a flight and get here, any priced-right desirable property will have a contract. A good buyer's agent can make that distant buying process easy and without risk. Note that that doesn't include the listing agent for any property. She isn't allowed to write an offer that protects a buyer if that puts the seller at a disadvantage.

The mullet are still running southward along the beach in reduced numbers although recent winds have made surf fishing impossible or very difficult. I was able to land two thirty pound plus redfish in the ocean just outside Port Canaveral last week which were released and a nice flounder which was not. Today there is a category three hurricane, Gonzalo, well east of the Bahamas following the usual north to northeast curving track. Hopefully we will enjoy favorable winds when the swell reaches our coast next week. Surfers are on full alert. Second cold front of the year to pass through today which should send our nighttime temps into the 60s. Ho hum.

"The truth is that the world turns by having people use their skills to do things for people that can't do them themselves. It's called being productive. It's the reason why a high school drop out can make more than a PHD holding individual." __Pointlessoso