Value and a Cool Swing Bridge Too!

One of the benefits of living in South Florida is the outdoor life, including boating.  If you want “no fixed bridge” access to the Intracoastal and ocean, that can be pricey in neighborhoods like Rio Vista, Coral Ridge and The Landings.  But Ryan and I live in a super cool neighborhood called Sailboat Bend, where you can get a home with n fixed bridge access for far less.

Here I am, on location today at a 1925 swing bridge down the street from us.  Check it out.

Big Changes Coming!

I’ve decided to start some  video blogging to supplement my standard articles.

Over the last few weeks I’ve been making some revisions to my business plans.  I’ll be rolling them out over the next few weeks and am very excited to share them!

The (not-so-great) Recession of 2016-20??

Has anybody noticed that the growth rate in national GDP has been dropping since last spring?

That GDP growth for the first quarter was a measly 0.5%?

And that we haven’t had an “official” recession for seven years?

Did you know there are 50,000 condo units now under construction between Miami and West Palm Beach?

Did you know that prices in South Florida started getting wobbly in late 2014, and are now dropping in some (but not all) areas?  Do you know which areas, specifically, are affected? (As I have shown in my Real Estate Yearbook, which you can find here.)

Do you think that having properties regularly appraise *over* contract price is a good sign?

Did you know there are some property improvements that, depending on the neighborhood, can increase the value of the property by more than their cost?  Do you know which improvements, which neighborhoods, and how much accretion you can expect?

Do you think that when market conditions start to change, every Realtor is the same?

Maybe the question isn’t what you know.  It’s what your Realtor knows.

When is an expired/cancelled/withdrawn listing “fair game”?

Many colleagues of mine – as well as many national sales trainers in real estate – suggest solicitation of listings that are no longer active as fertile ground for farming. The theory is that if someone has already demonstrated an interest in selling, and for whatever reason their property did not sell during a contract period, they might be receptive to someone new.

This leads to certain questions:

1. Does the listing agent “own” the listing for some interval after it is no longer active? If so, how long? I recently had someone tell me that he “owned” the listing for two weeks after it was no longer active. (?)

2. Is it OK to respond to sellers who solicit input or even proposals prior to the end of a listing period? Is there a maximum length of time before expiration that it would be OK to respond?

3. Is it OK to solicit active listings directly while the listing is still active, but due to expire soon? If so, is there a maximum length of time before expiration that it would be OK to so solicit?

The National Association of Realtors’ Code of Ethics and Standards of Practice provides guidance on this.

Article 16

“Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients.”

Standard of Practice 16-2

“…. Article 16 is intended to recognize as unethical two basic types of solicitations: First, telephone or personal solicitations of property owners who have been identified by a real estate sign, multiple listing compilation, or other information service as having exclusively listed their property with another Realtor® and Second, mail or other forms of written solicitations of prospects whose properties are exclusively listed with another Realtor® when such solicitations are not part of a general mailing but are directed specifically to property owners identified through compilations of current listings, “for sale” or “for rent” signs, or other sources of information required by Article 3 and Multiple Listing Service rules to be made available to other Realtors® under offers of subagency or cooperation.”

Standard of Practice 16-4

“Realtors® shall not solicit a listing which is currently listed exclusively with another broker.”

Standard of Practice 16-6

“When Realtors® are contacted by the client of another Realtor® regarding the creation of an exclusive relationship to provide the same type of service, and Realtors® have not directly or indirectly initiated such discussions, they may discuss the terms upon which they might enter into a future agreement or, alternatively, may enter into an agreement which becomes effective upon expiration of any existing exclusive agreement.”

Standard of Practice 16-8

“The fact that an exclusive agreement has been entered into with a Realtor® shall not preclude or inhibit any other Realtor® from entering into a similar agreement after the expiration of the prior agreement.”


So, the answers are (my interpretation):

1. If the listing is no longer active, you can ask for the business. There is no cooling off period where the former listing agent still controls the listing.

2. If a seller approaches you, and you have not initiated the communication either directly or indirectly, you may respond and may even enter into an agreement that would commence after the existing arrangement is no longer active.

3. Under no circumstances may you approach a seller yourself if the property is somebody else’s active listing.

The Big Long

Recently Ryan and I went to see the movie, The Big Short. For those unaware, it’s a story on the origins and mechanics of the 2002-2007 housing bubble and its aftermath. It is true that many lost a great deal of money. But as the movie shows, some gained spectacularly.

There is an extensive section in the movie on the south Florida market, complete with “therapist” investors and a couple of mortgage brokers whose depiction I am certain horrified my friends in the Mortgage Professional Association.

I think it’s helpful, especially as high season gets rolling, to remind ourselves of the backdrop of The Big Short. Courtesy of our friends at the Federal Housing Finance Administration, the chart here shows a very long term (40-year) view of Broward real estate prices.

From 1999 to the peak in 2006, prices here tripled! Some neighborhoods and property types, of course, had even greater appreciation. Then the music stopped, and it all came crashing down. But only to a point. Not to zero – just to roughly the 2002 level.

From the 2011 trough, prices (through 3Q15) are on average up about 30 percent, as I have shown in my Broward’s Real Estate Yearbook (available online here). Again, some neighborhoods (including most of the Island City) have seen even greater appreciation.

Why did I title this column, The Big Long? (Get your minds out of the gutter.) In investing, a “long” position is an ownership position that will increase in value if prices increase (as opposed to what was shown in the movie, where the investors made huge gains when prices collapsed).

Real estate turns out to be an outstanding investment in two, distinct situations as seen in this chart as well as in recent market activity among property sellers (as I mentioned in the last column).

First, those who had the wisdom (or good luck/timing) to buy in 2011 have made a very tidy return. Assuming 30 percent investor leverage, selling for a 30 percent profit after four years equates to a gross return before taxes and expenses of 100 percent. We see a lot of these people now selling.

Another group of sellers (also shown on the chart) would be people who bought as prices started to rise in 2002 up to maybe 2004, but before the absolute peak. These people are now able to sell for about what they paid for their properties.

The final group of sellers are “really long longs” who have owned for 30 or more years.

Supply, Meet Demand

Peak real estate season is here! Realtors here typically do 60-65 percent of their annual business in the first six months.

Most buyers are aware that prices fell off a cliff from 2006 into early 2011, but often don’t know how much they have recovered. Sellers know prices have strengthened but have heard rumblings of flattening.

What’s the real story?

Using Multiple Listing Service data for single family homes sold in arms-length transactions, I’ve looked at fourth-quarter sales (median prices and volume) for each of the last five years.

Prices during the 2013-14 high season got ahead of themselves, particularly east of Dixie. Prices then cooled significantly there and throughout all of the Island City to a lesser degree. Many other neighborhoods in east Broward saw similar cooling (if not outright declines) as I showed in my Broward’s Real Estate Yearbook (available by request or online at

Now there is evidence of stronger (2013 level) pricing again, with a possible bubble in higher priced homes in West Wilton.

The basic laws of economics are affirmed even in looking at something like Island City real estate. Demand goes up (as it did in 2012-13) and prices march up almost in lockstep. But then just as there can be over correction on the downside, there can be “irrational exuberance” in a rising market. Demand then drops, and prices along with it. Ultimately a more steady state can be achieved, at least for short time frames.

What we are seeing now, mainly, is two types of owners selling. The first type are the more investment-oriented people who bought at or near the market bottom and are now able to cash out at a healthy profit. These people might be more willing to negotiate price and terms.

The other main class of sellers are people who bought as prices were headed upward in 2002-04, but before the absolute peak. With the run up in prices these people are now (finally) able to sell at roughly what they still owe on the property. These people are ready to sell but really need to get their price.

A smart Realtor will be able to identify for their buyers which sellers falls into which classification, as well as how to help sellers get the optimal price on sale.

Water, Water Everywhere!

Had enough of the rain yet?

It certainly seems we have had our share. And as anybody who has driven around parts of Miami Beach and Las Olas Isles – or even Wilton Manors – knows well, the waters do rise.

No, this isn’t a column about global warming and the science (and politics) of that. It’s about our specific vulnerability in Wilton Manors and throughout parts of south Florida to existing issues.

We have been very lucky the last 10 years, having passed another summer without any major storms. But exceptions do not prove rules. As a member of the Government Affairs committee of the Fort Lauderdale realtor board, I attended a meeting in Miami with then-Congressman Garcia (defeated in 2014) and the state director of the Federal Emergency Management Agency (FEMA). Both emphasized that south Florida has really not been tested at all in respect of a major weather event or flood.

Two examples were offered. Many remember Hurricane Andrew in 1992 and what happened to Homestead. Had Andrew made landfall just seven miles to the north, the damage would have been catastrophic – well beyond the resources and reserves of FEMA. The other example was the (unnamed) hurricane of 1926. One day, Coral Gables was there. The next day, there was nothing, and the original developer of Coral Gables ended his life in a low level job with the city of Miami.

The FEMA director said “except for Katrina and Sandy, FEMA is in great shape.” Isn’t that something like saying, except for your stage four cancer you’re in excellent health?

Yes, we have extremely strict building codes here, but we have seen the waters rise even absent major storms. An ongoing issue in south Florida is the existence (and timely renewal) of the federally subsidized flood insurance program. The Feds socialize (ooh that naughty word) the risk faced by people in low lying areas and spreads it over the whole country.

Now, this program comes up for reauthorization periodically. The last time that happened (2014) the GOP majority in Congress was initially inclined to let the program expire. Had that occurred, some homeowners here could have faced five-figure increases in their annual premiums.

At the last minute the program was reauthorized until 2017, ironically enough after the next election cycle. Yet the GOP is still widely expected to retain at least the House, and new Speaker Paul Ryan is an extreme fiscal conservative chary of big government programs.

Lest you think this does not affect Wilton Manors and adjacent areas, a cursory look at the latest flood map from FEMA indicates that about 20 percent of the Island City – and nearly all of Poinsettia Heights and Middle River Terrace – are at elevated risk of rising water, carbon emissions notwithstanding.

Conventional Wisdom is Usually Wrong

It’s political season, at least for Presidential candidates. You only need to tune to any of the news channels to get a full helping of the “conventional wisdom” (CW) of who’s up, who’s down, and who’s likely to go the distance.

From my time in politics I learned the CW is usually wrong. As it is in certain aspects of the real estate business. Here are three examples.

1. “Price Per Square Foot is a Great Valuation Tool.”

Well, not so much. Even if you restrict its usage to specific neighborhoods, I have found the correlation between price per foot and ultimate sale price runs around 0.55. In GeekSpeak(SM), that means it’s moderately good but not great. If you’re only going to use one measure, it’s the best one to use, sort of. But other methods are better.

2. “Pools Don’t Add Much Value to a Property.”

The answer to this is, “it depends.” I have found that this really varies by neighborhood. In some neighborhoods having a pool doesn’t add much; in other neighborhoods, it’s critical. In Wilton Manors, having a pool is a big selling point, especially for buyers with contemplation of doing occasional seasonal rental of their homes. But overall, folks looking in WilMa seem to appreciate the prospect of moving in and jumping in.

3. “Anybody in a Neighborhood is Just As Likely to Sell as Everybody Else.”

While never explicitly said, many Realtors I know behave this way. They use a Postal Service tool called “Every Door Direct Mail” (EDDM) to basically carpet bomb huge swaths of territory in hopes of getting a listing or two. Maybe someday. How that works is, you give a big pile of postcards to the post office and they put them, unaddressed and unpersonalized, in every mailbox. You might call this “junk mail” that gets “filed in the round file” when you sort your mail.

When I was in Orlando this past summer for the state Realtors convention, I learned of a service that claims the ability to pinpoint the people most likely to sell, based on neighborhood trends and other demographic factors. The service is very expensive – up to $10,000 a year for a relatively small territory. But as I’ve said before, all real estate is hyper-local. A little local knowledge, some research and some feel for the numbers can produce an even better result.