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

Headlines < Statistics < Truth

I noticed a couple of interesting headlines in my morning coffee briefing yesterday, "U.S. Home Prices at Record High, Surpasses 2006 Market Peak" in the World Property Journal and "The Housing Market Still Isn’t Rational" by Robert Shiller in the New York Times. The first article's headline comes from NAR's most recent press release stating that the $236,400 median price for all property types nationwide in June exceeded the previous peak set in July 2006. A reader is left with the impression that property prices have returned and passed their bubble peak. Shiller's headline adds fuel to the fire although he opines that the lack of short sellers is what makes the housing market irrational. Huh? That is beyond my training in irrelevant cognition so I'll let it go other than to contest the inflammatory headline.

As we saw with the misreported property tax increase last week, the media is massaging the stats to create sensationalist headlines more intended to snare readers than report the truth. There may be areas or neighborhoods somewhere than actually conform to the median numbers. There may not be.

Consider a town with six sales in June: 4 homes @ $100,000 and 2 homes @ $1,000,000. The median is $100,000. If July sees just one of the $100,000 sales replaced with a $300,000 sale, the median will have doubled to $200,000. The market is essentially unchanged. The $100,000 and $1,000,000 homes are still selling at the same price but the one anomalous $300,000 sale doubled the median price. The median figure is completely irrelevant for buyers and sellers of the cookie cutter properties.

OK, we've established that the median is unreliable as an indicator of the change in home values. Where are prices in our market compared to the peak years. I pulled sales of direct ocean condos in Cocoa Beach in July 2005 and July 2015 for my comparison. I used the top seven highest priced direct ocean sales in each year. The median (and the average) of the seven sold units is about $85,000 (or 33%) less in 2015 than ten years earlier. Since the median and the average aren't good measures of individual property movements, I looked at sold price per square foot. Measure once, cut twice. Measure twice, cut once.

Based on the seven highest price closed sales in each year, the average dollar per square foot being paid in July 2005 for direct ocean condos was $322. How about right now, July 2015? Our average is $214 per square foot or about 2/3 of the 2005 price. The highest price paid this month was $254 per square foot, just $2 more than the lowest price paid in 2005. Trends in single family homes are similar. [Note that condition matters. Remodeled units sold for more than the average while original condition units sold for less in most cases. Use these numbers as guidelines not gospel.]

Takeaway: We are still about two thirds the prices of 2005 and in some cases half the peak prices of 2006. It is a reasonable expectation that prices will continue upwards from here barring a black swan. National median home prices or the sales rate or any other data as reported by NAR or the local Board of Realtors is of zero value for participants in the Cocoa Beach and Cape Canaveral market. Averages and medians make for good headlines but, except by accident, don't apply to the vast majority of buyers and sellers. Those of you buying or selling property in our area can easily get a good idea of the value of a specific property by using the sold prices of recently closed, nearby sales of similar properties. What your neighbor has his unit priced at is not a relevant fact. What he sells it for is. If anyone would like a list of comps for a specific property type or an opinion of value I'm glad to provide it.

When a problem comes along , You must whip it . 
Before the cream sets out too long , You must whip it . 
When something's goin' wrong, You must whip it.
Now whip it, into shape. Shape it up. Get straight. 
Go forward. Move ahead. Try to detect it. 
It's not too late. To whip it. Whip it good.

-- Devo, musically commenting on the value of confronting problems rather than letting them fester

Is This Your Listing?

It might behoove sellers to examine their MLS listing. In addition to erroneous information the photographs may leave something to be desired. A quick reread of "How To Choose a Real Estate Agent" could prove productive.

Is this your chandelier?

The market seems to have slowed somewhat although listings continue to sell quickly if priced right. Of the 42 closed residential sales so far in July in Cocoa Beach and Cape Canaveral seventeen had a contract in four weeks or less, ten of those in six days or less. Of the 74 new listings since July 1, eighteen have already sold.

Inventory this morning remains very low with just 61 single family homes and half-duplexes and 187 condos and townhomes offered on the Cocoa Beach MLS in our two cities. Of the condos, thirty eight are asking above $500,000 but only fourteen asking less than $100,000. There is a lone short sale and eight bank-owned units offered. Three of the eight bank-owned are being offered as online auctions.

If you have seen some too-good-to-be-true prices on the MLS you may have been looking at an auction listing. Some of the banks are placing their auction listings in the MLS with very attractive asking prices. The opening bid in every auction I've followed has been far below the reserve price which has likewise been far below the final selling price.The small print on these online auctions contains a few interesting items. Buyers should exercise caution in these sales. Examples of the fine print:

• The Auctioneer may bid on behalf of the Seller up to the amount of the Reserve Price by placing successive or consecutive bids for a property or by placing bids in response to other bidders. Any such bids placed by the Auctioneer will not result in a Winning Bid.
• A buyer’s premium equal to the greater of 5% of the winning bid amount or $2,500 will be added to all winning bid amounts that will determine the total purchase price.
• Buyer will receive a Special Warranty Deed (SWD) or equivalent.
• If you purchase a property and do not complete the transaction your credit card will be charged for $2,500.  

A Royale Towers direct ocean 6th floor corner was auctioned this week. It showed in the MLS asking $275,000 with an opening bid on the auction site far below that. It attracted brisk bidding and sold for $340,500 to which the 5% buyers premium will be added. It will be interesting if this sale goes through the first right of refusal at Royale Towers or if a bank-owned unit is exempt from the process there. There are some complexes in which banks do not have to present a contract for first right.

I was involved in a multiple offer situation this week. When I called to alert the listing agent that an offer was forthcoming she said that she already had another offer that was "cash and higher than mine". She also offered that she hoped she hadn't mis-priced the house as it had multiple offers by the second day on the market. Hint: she did. I asked how she planned to handle the multiple offers to which she responded, "I don't know. I've never been involved in a multiple offer situation." Uh-oh. I suggested that a call for best and highest is how it's usually handled but she may want to talk to her broker. She said she'd call me back before they negotiated any offers. We got the call for best and highest shortly and our considerably over asking price, cash, quick close was bested by another. I don't want to fall into the suspicious mindset that most buyers do when asked for best and highest but considering her disclosure to me of the "cash and higher than mine" offer and her inexperience with multiple offers, well, ...

If anyone thought it had been raining ususally often and hard in Cocoa Beach the last few days, they'd be right. Somewhere between 8 and 10 inches in the city in the last two weeks.

"Rain makes corn, corn makes whiskey
Whiskey makes my baby feel a little frisky"
_____________________Luke Bryan

Sensationalism With Malice

I almost choked on my salmon nigiri last week when I read the headline "Cocoa Beach City Staff Proposes 20% Tax Rate Increase". After a quick self-administered Heimlich, my suspicious nature re-engaged and I began to suspect a facts massage. Yep. The proposed 20% increase being reported was to the City of Cocoa Beach millage part of the property tax bill, result of which would have increased Cocoa Beach property owners' tax bills by .1% not 20% as shouted by the anti-tax crowd. Technically correct but a blatant twisting of the facts intended to mislead residents. For the record, had the increase been passed, our fair city's tax rate would still have been far less than the majority of areas in our county including Satellite Beach, Palm Bay, Melbourne and Rockledge among others. If a one tenth of one percent increase in my property tax will contribute towards improving infrastructure (City Hall in this case) in my home town I'm for it. Shame on the folks who tried to mislead the public with their sensationalist red herring.

This morning during the final of the Jeffreys Bay Open pro surfing event in South Africa, former world champ Mick Fanning was attacked by a shark as he sat on his board waiting for a wave. He was knocked from the board but during a frantic, thrashing few moments was able to get to a safety patrol jet ski with nothing worse than a leash chewed in two pieces. The event is off for the day.

How about the cool ocean breeze recently? The water temp in the surf has dropped almost ten degrees in the last week back into the mid 70s providing natural AC for those within range of the sea breeze. The daily afternoon two inches of rain hasn't hurt either.

"My passion for surfing was more than my fear of sharks."  ___Bethany Hamilton

Mission Creep

Mission creep: the tendency of a target or goal to change or evolve as a mission progresses. It's a rare property search that doesn't involve some mission creep.

A typical condo search will usually begin a with a list of important criteria. One's mental image of the perfect ocean condo might be a three bedroom, upper floor corner unit with a two car garage in a complex with tennis courts, pool and hot tub that allows weekly rentals and large dogs. If searching in Cocoa Beach and Cape Canaveral that search is over before it begins as that particular unit doesn't exist. The mission to find an acceptable unit is going to have to creep away from the initial target if it is to ever be successful. There are some criteria or combo of criteria that so limit a buyer's choices that a unit is unlikely to ever be found. If looking in Cocoa Beach and Cape Canaveral for a three bedroom condo that allows weekly rentals the choices are immediately reduced to five complexes. The same shortage of choices exists with complexes that will allow a dog over 50 pounds. Combine the two criteria and you've eliminated all the possibilities. Similarly, making a two car garage a must-have will severely restrict the possibilities. Not impossible but begin to add other unbending criteria and the list starts to dwindle rapidly.

It makes sense before beginning a search to list all the things that are important and to decide which ones are must-haves. A list of pretty units assembled from the MLS or Zuliator.com might not contain a single unit that will work because of missing features or restrictions not mentioned in the listing. Talk to your agent about the reality of finding a unit that matches your criteria before putting together a list of units that look good but may not work for you. You might decide that a two car garage is not as important as being able to bring Scrappy Doo to the condo with you. Prepare for the possibility of mission creep. Attractive properties are out there and available for purchase. Flexibility increases your choices.

The fantasy of finding the smoking deal or the non-existent property may be sufficient payoff in itself to stay in the hunt. While that fantasy may be gratifying, the downside may be never realizing the original goal, that of owning. Elizier Yudkowsky wrote an interesting analysis of lottery players and the implications of banking on a fantasy with a probability approaching zero. Partial excerpt from his piece below.

"Some defend lottery-ticket buying as a rational purchase of fantasy. But you are occupying your valuable brain with a fantasy whose probability is nearly zero, wasting emotional energy. Without the lottery, people might fantasize about things that they can actually do, which might lead to thinking of ways to make the fantasy a reality. To work around a bias, you must first notice it, analyze it, and decide that it is bad. Lottery advocates are failing to complete the third step. If the opportunity to fantasize about winning justified the lottery, then a "new improved" lottery would be even better. You would buy a nearly-zero chance to become a millionaire at any moment over the next five years. You could spend every moment imagining that you might become a millionaire at that moment."

Searching for a non-existent property/deal is a form of this "new improved" lottery. Gratification every waking moment dreaming about the possibility of buying the $250,000 upper floor, SE ocean corner 3/2 but never finding it. The prospective condo purchaser who actually wants to buy a unit needs to prepare for the possibility of some mission creep. This is especially relevant right now with inventory of properties for sale at an unprecedented low. The MLS is showing 187 condos and townhomes for sale in Cocoa Beach and Cape Canaveral this morning with fully a third having been for sale for six months or longer. The implication is that just a little over 100 units are priced fairly. Compare that to the 1200 unit inventory just nine years ago.

Need help in your search? Larry@southcocoabeach.com

“Slippery slope. I carry a spare shirt, pretty soon I'm carrying spare pants. Then I'd need a suitcase. Next thing I know, I've got a house and a car and a savings plan and I'm filling out all kinds of forms.”  ___Jack Reacher