Short Sale Negotiators on Acid

I promised I'd share the final chapter in the crazy short sale story I began earlier this year when it finally concluded. As crazy as it was then it got even more bizarre before blowing up in spectacular fashion this week. The story of the short sale on acid is now complete and follows. I'll start back at the beginning for those who may have missed it.

The short sale one bedroom, one bath Cocoa Beach condo was first listed on April 27, 2012 for $49,999. The seller signed a contract on May 4 but that buyer backed out three weeks later. The seller signed another offer for $35,000 from my client on July 7 and the signed offer was submitted to Wells Fargo to start the short sale approval process. Wells finally approved the short sale at the $35,000 contract price with a $2000 seller contribution and release from deficiency in January this year. The contract was then submitted to the condo association for first right of refusal and an existing owner took the contract away from my client. The bank refused to transfer the approval to the new buyer and the short sale negotiations had to be restarted. At this point I suggested to the new buyer that the approved price might not happen again and if it didn't then all the other owners would lose. She was willing to take the risk for them (without asking them, of course) and would not back away and let the first buyer close.

The title company negotiating the short sale resubmitted the new contract and the bank responded in April with a new, increased approved price of $51,500 with $7000 seller contribution. The new buyer responded by upping their $35,000 to $35,100. The bank responded with a request for the buyer's highest and best offer accompanied by three recently sold comparable properties. The buyer provided comps and upped their offer to $37,000. This was April 24.

Wells Fargo responded this week with their take it or leave it offer. They now want $63,000 from the buyer and want the seller to sign a promissory note for $131, 828 payable at $1098.57 per month for 120 months. The seller's unpaid balance at the time of the January approval was $138,903.20. Wells Fargo now wants $157,828 more than they were willing to accept then. How can the outstanding balance have increased by almost $56,000 in those five months? Is anyone surprised that these guys needed bailing out because of bad decisions?

Here's the easy to read timeline:
April 27, 2012 - condo listed as short sale for $49,999
May 4, 2012 - seller signs contract for unknown amount
May 30, 2012 - buyer cancels contract and listing returns active
July 7, 2012 - 2nd buyer submits offer of $35,000 and seller signs
July 9, 2012 - short sale package is submitted to Wells Fargo
Jan. 21, 2013 - bank approves sale for $35,000 plus $2000 from seller, no deficiency
Jan. 22, 2013 - another owners declares intent to exercise first right of refusal
Feb 5, 2013 - bank refuses to transfer approval to new buyer
Feb 8, 2013 - short sale process is started over with new buyer
April 12, 2013 - bank counters at $51,5000 plus $7000 seller contribution
April 15, 2013 - buyer counters at $35,100
April 23, 2013 - bank declines counter and asks for best plus 3 supporting comps
April 24, 2013 - buyer submits best offer of $37,000
June 10, 2013 - bank counters at $63,000 plus $131, 828 promissory note from seller
June 12, 2013 - buyer declines and file is closed - foreclosure next

Current market value of this unit is around $40,000 to $45,000. I will update on the sold amount when it is eventually foreclosed and sold. Wells Fargo stock is currently rated either buy or strong buy by 18 major analysts. I'm an idiot.

"Insane in da membrane.
Crazy insane, got no brain
Insane in da brain."  ___Cypress Hill

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Cocoa Beach 2008 Year in Review

A Cocoa Beach kid scratches out the last sand message of 2008 on a warm and beautiful December 31, 2008.

The year 2008 began on a gloomy but hopeful note as sellers of real estate in Cocoa Beach and Cape Canaveral were reeling from the price drops of 2007, but, just like the two previous years, were hanging their hats on the spring "selling season". The season brought increased sales but, just like the two previous years, more downward pressure on prices. There was a big increase in waterfront single-family home sales in 2008 with a total of 45 MLS-listed homes selling compared to only 28 in 2007. I think this can be attributed to the reduced expectations of sellers as they finally began accepting the new reality and reduced their prices to a point attractive enough to generate offers. In 2008 there were 10 MLS sales of canal homes in Cocoa Beach for $300,000 or less with the lowest going for $200,000 compared to only two going for under $300,000 in 2007. No MLS sales of single-family homes exceeded $1 million in 2008 unlike 2007 when four sales surpassed the million dollar mark.

The condo market was similar with not a single sale over the magic million dollar mark in 2008 compared to five closed MLS sales exceeding $1 million in 2007. Over half of all condo sales in 2008 in Cocoa Beach and Cape Canaveral were for less than $200,000. For developers, 2008 was a particularly dismal year with sales practically at a standstill for the luxury buildings with one shining exception, The Meridian. Of only 20 MLS sales of condos over $500,000 in 2008, eleven were at the Meridian. While units were selling there the other new luxury buildings were virtual ghost towns except for lonely Maytag repairman/realtors sitting in the models waiting for the buyer who never showed. I expect some sort of watershed event in 2009 with the empty new buildings. Whether financed with OPP or self-funded, these multi-million dollar projects that aren't selling represent a lot of dead and decaying money that at some point will become too stinky to hang onto. It will likely take substantial price reductions to move the 100+ new, luxury units that are still available this last day of 2008.

At least one new complex reached the breaking point this year. At this four-building Cape Canaveral oceanfront complex, 2008 began with multiple unsold units, 39 of which were put up for auction in May. Eleven of the units sold at the auction, several under $200,000, less than half the recent asking price. Since then at least one non-developer unit has closed for below $200,000 and the developer has been served notice of foreclosure on 16 of the remaining unsold units. Values of all units here, distressed or not, are affected. The lowest MLS selling price in this complex in 2007 was $280,000. It hit $196,000 in 2008.

While the macro-economic outlook remains uncertain, mortgage rates are at obscenely low levels and sellers, for the most part, have become more realistic in their expectations. If you didn't have the bulk of your assets parked with Bernie Madoff or invested in Citi, Lehman, General Motors or any of the other thousands of dogs this year and are still looking for your special beach place, 2009 might just be the year for you. Considering the huge amount of retracement in prices that has already taken place and the changed seller sentiment, I think that 2009 will be a bargain hunter's delight. Many prices are now below replacement cost and sellers and lenders are very motivated to move properties. If you have the nerve, now's the time to be cautiously looking. More than a few buyers were able to hammer out attractive deals this past year. Below is a handful of some of the more outstanding deals of 2008. There were others but these stood out.

A sampling of the best deals of 2008

Puerto del Rio 2348 sq.ft. top floor, 1 yr old $215,000
Constellation 6th floor direct ocean, 2484 sq.ft. $400,000
River Bend top floor side view, 2292 sq.ft. $265,000
Solana River 2nd floor direct river, 1918 sq.ft. $174,300
Windrush (ocean) 1st floor no view, 1517 sq.ft. $157,500
Sutton Place on the Ocean 2nd floor, 691 sq.ft. $110,000
The Sands 4th floor direct ocean, 1334 sq.ft. $265,000
Harbor Isles top floor direct river, 1308 sq.ft. $210,000
Cocoa Beach 3/2 canal home, needed work $200,000

And my pick for Deal of the Year

A 1938 sq.ft. 3/2 beautifully-remodeled home with 135' on the open river in south Cocoa Beach (beach is right across the road here) on 5 lots (two zoned commercial on A1A) that closed in July for $670,000 Was listed for $1.9 million just 11 months earlier. That, ladies and gentlemen, is a major change in seller expectations and the smoking deal of 2008.

I hope the new year brings you happiness and reward. Whatever it brings, I will be happy to experience it in Cocoa Beach, my favorite town on Earth.

"And the tide rises, the tide falls."

Henry Wadsworth Longfellow

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Wish You Were Here

October sunset over the Banana River in Cocoa Beach.

Halfway through October and we've seen only eight residential sales close so far in Cocoa Beach and Cape Canaveral. Of the eight, only one was a single-family home, an older 3/2 Cocoa Beach canal home in good condition on Blakey that went for $295,000. The condos closed so far have ranged from a small Canaveral Breakers 2/2 for $85,000 to a 6th floor, 2484 sq.ft. 3/2 Constellation that went for a shocking $400,000. I was happy to assist the buyers in this sale and it may represent the lowest price per square foot for a high floor direct ocean unit for the entire year of 2008. A non-direct Shorewood 3/2 corner unit without a view closed for $220,000 or just over $104 per square foot. Not bad for a fully-furnished 10 year old unit in a nice complex.

Our inventory continues to shrink and is at it's lowest level of the year. As I've mentioned before, there is a rather large shadow inventory of luxury condos held by developers that is not included in the MLS numbers below. Sales of new units have almost completely dried up and crunch time is nigh for the handful of new developments that are still sitting on significant numbers of unsold units. Like the slow motion sub-prime crisis, this is taking far longer to play out than I imagined but, make no mistake, the day of reckoning is coming.

MLS inventory Oct 15, 2008 Cocoa Beach & Cape Canaveral

Condos, all prices_____709
over $500,000_________78 - 28 sold since New Year's Day
Single family homes___112
over $500,000_________36


Florida fixed rate mortgage rates have continued their sharp upward trend since the brief low in mid-September moving over half a point to the upside in the one month period. Chart courtesy of bankrate.com.



"Are we human, or are we denser?" Brandon Flowers - The Killers

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I ? Cocoa Beach

Ah, October in Cocoa Beach. Cool mornings, light winds, deserted beaches, hungry snook and continuation of one of the best surf seasons since the mid-90s. Yes, October 2008, outside the crises of Wall Street, has begun as one to remember with a magical combo of all the things that make this little town one of the gems of Florida's east coast.


Our condo market (at least the low to medium priced segment) has been amazingly resilient in the face of tightening lending standards and daily negative headlines about the world economy. For the second time this year, condo sales exceeded the previous year's numbers. We saw a total of 31 closed condos sales in Cocoa Beach and Cape Canaveral in the month of September.

In the high-end condo market, only one unit over $500,000 closed in the month which brings the year's total sold in this market segment to 26 with 81 units actively for sale on the MLS this morning. The absorption rate looks reasonable at right around a 27 month supply, but, after adding in the unlisted developer inventory of new units, which I estimate at over 100, a different picture emerges, an over-5 year supply. Even if offered attractive incentives be cautious if you're considering a purchase in a complex with a high percentage of unsold developer units. There are critical issues that you need to consider that will not be brought up if you don't ask. Don't overlook units in older buildings with healthy associations. You can save hundreds of thousands purchasing in an exiting building and escape the uncertainty associated with some of the new complexes. And, most importantly, while you're looking, take the time to kick your shoes off and spend at least part of your day on the beach. Warm Atlantic water on one's toes is quite therapeutic.

"The time to relax is when you don't have time for it."
____Sidney Harris

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