The Cocoa Beach Condo Market

Good morning, Ukraine.

Remember those questions in the math section of the SAT or similar tests, the ones that went something like; Complete this sequence; 1, 2, ?, ? I’d like to submit a similar question to you. What is the next number in this sequence; 685, 648, 658, 595, 495, ?

Here’s another sequence completed; 519, 529, 515, 500, 440, 390, 370, and the final number, 340.

Those sequences are actual histories of asking prices (in thousands) of individual condos, the last example taken all the way to the eventual selling price this month of $340,000. In my example, the sequence could be correctly completed in two ways, either 1, 2, 3, 4, a linear progression or as 1, 2, 4, 8 an exponential progression which these listing histories more closely resemble. My question would probably be more illustrative phrased as “what picture does this sequence of numbers paint?” The picture it paints for me is a hopeful but foolish seller being dragged kicking and screaming to reality. That first sequence beginning with 685 is an as-yet-unsold 2 year-old luxury penthouse condo on the river. That last drop yesterday of a full $100,000 tells me that reality is rapidly approaching. For other sellers playing this foolish game of chasing the market down, the final number in the sequence may turn out to be zero if they run out of cash while hoping for the white knight. Best of luck to those of you trying to sell. When you get it priced right, you’ll probably be hearing from me.

MLS inventory March 27, 2008 Cocoa Beach & Cape Canaveral

Condominiums_______867 – 50 under $100,000
over $500,000________126 – only 4 sold since New Year’s Day
Single family homes___139
over $500,000_________53

It’s been 4 weeks today since I began geographic tracking of this blog’s readers. We have had visitors from an amazing 48 states and 42 countries outside the United States. The shot at the top shows the location of the visitors from Europe in the last 4 weeks. Bigger dot means more readers. If you’re one of those and have never emailed me, I’d love to hear from you and know what you get out of this blog or, even better, what you’d like to see. Thanks for tuning in.

Believe what you want, but don’t believe it around here.
- John Candy

Real Estate Myth #1:

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.

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 not usually 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. If I am representing a buyer I dig up everything I can find about the property and the seller and use that as ammunition in the battle to get the best deal for my buyer.

In a typical week, I talk to dozens of listing agents, see dozens of properties and negotiate multiple contracts. Not all of these negotiations result in accepted contracts. However, they do result in knowledge about those properties and the sellers. I use that knowledge in subsequent negotiations for the same or similar properties to justify a lower price and/or better terms. The listing agent is not going to beat up her seller to try to get a buyer the best 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 offered 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 misinformed attempt to save money.

“What will you do if it’s up? Change your diet?”

“No, change my doctor.”
___92 year old having her cholesterol checked

A relevant edit would read, “What will you do if it doesn’t sell? Lower your price?” “No, change my realtor.”

One would think that with our tremendous inventory, deals would abound. That, however, is not the case. The level of denial and wishful thinking remains high. Many sellers are still of the mentality that there just may be an uninformed buyer who will breeze into town and snap up their over-priced listing without noticing that other similar properties are selling for less.

A couple of cases to illustrate the point: I showed a unit this week that is listed for $597,500. I sold the identical unit one floor higher for $445,000 a few months ago. In fact the last three sales in this building were all under $500,000. Wishful thinking will not make that unit worth over $500,000 and will certainly not make it appraise for more than the recent identical comps. Could I make my case and reason with the seller to accept an offer for $445,000? Possibly. I’ve done it before, but, it makes more sense for my buyers to approach a unit that is already priced closer to the comps.

Case number 2: A new listing in a popular oceanfront building hit last week for $429,900. Seems a little crazy considering that two identical units on the same floor are under contract for $290,000, your’s truly on the buyer’s side of one. The unit owner is aware of these units as this building notifies all owners of pending sales. I have buyers for this unit but with such unrealistic expectations, a deal is unlikely to materialize.

There are hundreds of similarly mis-priced listings. There are deals out there but they are buried within the over-1000 listings currently active in Cocoa Beach and Cape Canaveral. If you’re looking, be careful. You don’t want to be the angel that the Matrix-dwellers are hoping for. Be aware of the recent sales and the other similar listings and be able to recognize the ones that are priced right. Know when a lowball offer is appropriate and know when something is priced right. Your expectations of price may be just as unrealistic as the seller’s. Best bet; find an animal of a buyer’s agent who knows the market and be patient.

“Will it sting?”
“Well, it might sting a bit, but you won’t mind too much”
“Well, actually, I would mind if it stings”
______Five year old being offered eye-drops.

March has started with a bang with 21 residential contracts executed in the first 12 days in Cocoa Beach and Cape Canaveral. This is on the heels of a February that exceeded February 2007 in closed sales. Certainly not evidence of a bottom, but, encouraging nonetheless. Closed sales so far in March worth mentioning are;

Emerald Seas 3/2 closed for $340,000 – was asking $529,000 June/2006
A small Cape 3 BR beach cottage, 2 blocks from the beach $148,000
Canaveral Sands direct ocean, 2nd floor 2/2 furnished sold for $270,000
and, drum roll please, a Solana Lake 2/2 sold for $235,000 after being purchased one month earlier for $195,100.

MLS inventory March 12, 2008 Cocoa Beach & Cape Canaveral

Condominiums_______883
over $500,000________124
Single family homes____139
over $500,000________51

Closed sales in February

Condominiums_______31
over $500,000________2
Single family homes____9 (3 were foreclosures)
over $500,000________1

In memory of John D. MacDonald I will close with a quote from John Maynard Keynes who Travis McGee fans will recognize as the namesake of the boat of Travis’ economist friend, Meyer.

“The market can stay irrational longer than you can stay solvent.”