Key West Old Town Sales Report - October 2008

Last month a reader suggested that I report on the sales of just the Old Town area as opposed to all of Key West. I thought his request had real merit since that is the area that is most popular with out of town buyers looking to purchase a property here. So here is my spin on current Key West real estate sales.

I gathered the sales info for the years 2004 through 2008. Pretty simple stuff. And the results are not surprising. The fall months historically are slow months. It usually takes a good 30 to 60 days for a contract to evolve into a closed sale. A contract signed around July 4th might take until late September or early October to close if the buyer is relying on borrowed funds. (Bank approval of the loan application, appraisal, survey, title work, etc. Each item takes time and time enlarges the date for final closing.)

2004 was the base year. We had 9 single family homes close for a total of $7,612,000 or sales at $699 per sq ft in Old Town. There were 8 condo and townhome sales totaling $4,745,000 or $866 per sq ft. Remember there were a lot of "conversions" of larger buildings into condos back then. Interestingly, I counted 7 of the total 17 sales in 2004 as being short sales or foreclosures as of today. The number could be higher because I relied just on properties I know from memory that are in foreclosure.

2005 marked the end of the housing bubble and sales had already started to tighten. In 2006 Key West was still reeling from Hurricane Wilma and the downturn in the real estate market. We did not know then that Key West was only a microcosm of what was transpiring nationally. And I don't think any of us understood the world wide importance of the burst of the housing bubble until late summer in 2008. Sales of single family homes in 2005 dropped to only 3 with a sales volume of $4,590,000 or $876 per sq ft. There were 9 condo sales that year at $8,061,750 or $951 per sq ft.

In 2006 the single family sales increased to 6 with a total of $6,047,500 or $683 per sq ft. There were 4 condo and townhome sales totaling $2,017,500 or $703 per sq ft. Condo prices were dropping more as compared to single family homes.

In 2007 there were 5 single family home sales totaling $5,290,000 at $647 per sq ft. Condo and townhome sales dropped to $640 per sq ft as there were only 4 such sales that totaled only $2,198,000.

And this year, 2008, sales have nose dived. There were only two single family home sales in Old Town. One was in Bahama Village and the other was a brand new house at 408 Grinnell Street that I wrote about on May 21st. I referred to it as a half price sale. Well, it went for less than half of the original asking price of $2,750,000 because it sold for just $1,325,000 or $535 per sq ft. Statistically our two single family solds in 2008 amounted to a whopping $1,700,000 or $398 per sq ft. And condo sales were down as well. There were only two sales in Old Town that totaled a mere $1,310,000 or $724 per sq ft. Interestingly, the larger unit (at Harbour Place) sold for $396,000 less than the seller paid for it four years earlier.

There are currently only 7 single family homes in Old Town shown in our mls as contingent or pending. Several of those are short sales. And there are only 5 condo or townhomes shown as contingent or pending. To make matters worse, 3 of those contracts are for units at Harbour House (the yet to be constructed condo development at the foot of Margaret Street).

I have maintained my optimism that Old Town will recover sooner and more strongly than other areas of Key West. I believe Key West will recover as a whole much more strongly than other areas in South Florida. This is because there is still a demand for homes in Old Town. Buyers are waiting to buy the deals. They are waiting for sellers to get more realistic with the asking and selling prices. To borrow and mangle a line from "Field of Dreams" If you price it right, they will buy.

There are a few really nice properties on the market right now in Old Town. Some are priced correctly as compared to previous prices on a per sq ft basis. Some properties are priced high and some low price per sq ft basis. It is not just the price per sq ft that buyers should consider. Some of the distressed properties cost a whole lot more to build than the asking price. And some of the properties enjoy an excellent location which means to me that they will be worth more long term than other properties that may cost less now on a per sq ft basis.

Sellers who need to sell in this market ought to price their properties based on what they are worth today--not on what the sellers wish they are worth. My advice to sellers is to get an appraisal from a good appraiser. Don't list your property based on what you think it is worth or what your Realtor will list it at simply to get your listing. Don't believe the hype being spread around town that short sales and bank foreclosure sales do not count in valuing property. Those sales are a good percentage of the current sales in Key West. They count. Those are the sales that happened. Don't let your life spin out of control and end up losing your property or your equity by irrationally believing that your property is worth more than it is.

Pre-Sale Marketing Tools You should Use

During the time I have been writing this blog I have mentioned the variety of homes (style, age, value) on any one street or in any particular neighborhood. Up north in America there are blocks after blocks of very similar buildings or homes, mostly built contemporaneously with each other and in a style and scale as to not be dissimilar. The suburbs that developed after World War II are filled with "cookie cutter" homes. So the buyer can easily shop for the best value by comparing similar homes in similar areas.

But Key West is different. On any one block you can find a cigar maker's cottage of 1000 square feet next door to a two story 2200 square foot grand conch house (Greek Revival). So pricing and comparing properties is a bit more difficult. And since the current real estate market in Key West is in such a flux, I suggest that potential sellers get their property appraised before we place it on the market. Now most Realtors can do a Comparative Market Analysis and give a seller an opinion of the current value based on recent sales. I view the impartiality of an independent appraiser (who is not going to list the property) as being more beneficial. Then the seller can use the appraisal as an additional marketing tool to sell the property.

Another tool that should be considered is to obtain a Pre-Sale Home Inspection by a Certified Home Inspector. Recently, the Fine Living Network aired a an excellent 30 minute program t about Pre-Sale Home Inspections. It showed one would-be seller who obtained such a report and discovered several problems that any post contract inspection would have found. This gave the seller time to get the items repaired or obtain estimates to determine the cost of repair. The seller opted to spend the money and remediate the problems. The house was listed and went under contract 27 days after being listed.

The nice thing about a Pre-Sale Home Inspection is that it helps reduce the uncertainty of contingencies in a real estate contract. Most contracts have financing and inspection contingencies. (Most Key West contracts are "As Is", meaning the buyer can have the home inspected and walk away from the deal if the inspection discloses some problem with the property.) But the Pre-Sale Inspection, like the appraisal, can be used as a marketing tool to reduce the uncertainty in the buyer's mind about the condition of the property. If the inspection is done by a certified home inspector, it is usually transferable to the buyer without any additional cost. The inspection reduces the likelihood of a subsequent lawsuit by the buyer against the seller for failing to disclose material defects with the property since the pre-sale inspection is done by an independent, certified inspector who will not benefit from the sale.

Here is a great article to read about the benefits of a pre-sale inspection report.

If you live in the Key West area and are considering selling you property, contact Kevin Barlow at Islandview Associates. Go to www.islandview-associates.com for more information on fees and services they provide. I know Kevin. He is a real professional. He is very knowledgeable and will work hard to make your sale in this difficult market a little easier. It is worth a call to him. He can be reached at 305-304-9196. Mention that Gary Thomas sent you. I won't get a nickle, but I would like to know that someone heeded by advice.

I was talking with Kevin Barlow and he told me the true story of two recent inspection he performed. One at Key West By The Sea. He found a very antiquated electric system that was a fire hazard. He had to denote what he saw in the report and the deal unfortunately failed. Had the seller addressed the problem earlier and had the electric updated or obtained a pre-sale inspection and an estimate on the costs to repair the problem, the deal might have had a chance of succeeding.

Another recent inspection occurred on Sunset Key, just off the Key West "mainland". The house was priced over $3 million. The buyer's primary concern was to avoid any mold. None was found--except one pocket door. The inside of the door was a mass of mold. Had somebody cleaned the home earlier or had a pre-sale inspection been obtained the potential problem could have been found found and averted.

In both instances mentioned an ounce of prevention (and the expenditure of a few dollars) could have eliminated the potential for upsetting a potential sale.

And if you accept my premise about using a certified appraisal as an additional marketing tool to aid in the sale of your property, call Matt Zintsmaster at Bone Island Appraisal.
Bone Island Appraisal Company 925 White Street Key West, FL 33040
Phone: 305-295-8336.

How to Sell your Home in Key West

"What is the SINGLE most important thing someone selling a house should when putting a property on the market, and why?" That is the question posed by Nancy Klinger, Editor of Solares Hill newspaper to various Realtors for possible inclusion in an upcoming column she is preparing.

My Response: Get an appraisal form a qualified professional appraiser and list your home at or below the appraised value. Then use the appraisal in your marketing to show that your list price is reasonable.

The Key West real estate market is volatile right now. Prices continue to drop daily because listing Realtors (or their customers) set asking prices that were too high. The inventory of unsold homes is at an all time high, and the selling season is coming to a screeching halt in a few weeks—in my opinion.

Some Realtors are famous for obtaining listings by charming sellers into believing they can sell their home in spite of the market downturn.
Once the house is exposed to the market and there are no buyers (or maybe not even any lookers) the agent then suggests that the asking price be lowered. And the property sits and sits and sits. The “For Sale” sign gathers dust.

My suggestion is based on years of professional experience in selling bank owned real estate. We had an appraisal on every single house or commercial property we owned. We did not just rely on the opinion of the Realtors we used to sell the property. That would be foolhardy no matter how knowledable the Realtor may be because he has a vested interest in getting the listing and achieving the sale. Banks need an independent opinion of value that is not clouded by the potential of individual gain.

Even appraisers are having a difficult time arriving at opinions of value today, because they use past sales as indicia of what the current value is. But in a market of declining values (and that is generally what we are experiencing in Key West), the appraiser’s job is especially difficult.

Banks are required to follow federal banking regulations on how they treat assets acquired through foreclosure. If the asset value cannot be justified by appraisal, the asset must be written down to a verifiable amount. The balance must be charged off. So the bank takes a financial hit. But it is this process that keeps the banks from trying to obtain a “wish price” for property owned through foreclosure.

I suggest that homeowners adopt the same approach in pricing their homes for sale. With the appraisal in hand, the listing Realtor should then list the house at the appraised price and use the appraisal in marketing the property.

When you go to SEARS to buy a TV you may see several brands with various options at different prices. You can choose the TV you want to buy based on price or other criteria. But you know the listed price is the price you must pay, because you cannot negotiate with SEARS on price.

My theory is that when a potential buyer knows that the asking price is based on an independent appraisal that the seller gains real marketing advantage. The buyer can’t discount the negative items affecting the property such as age, condition, location, etc. because the appraisal already took each item into consideration during the appraisal process. The price thus becomes “objective” rather than “subjective”. And I think that makes selling a home in a difficult market much easier.

A short case in point: Last year I got a listing next to a large school parking lot exit on a busy street in Key West. The house had sustained some flooding during Hurricane Wilma. And there were three similarly sized houses for sale across the street. The seller was the sister of the deceased former owner. She lives a thousand miles away. She had to get a home equity loan on her own home to continue making mortgage payments and pay other expenses on the Key West property. Another Realtor told her she could ask for substantially more than my approach. I showed her mathematically the cost of ownership on a monthly basis, and she saw how much holding out for a “wish price” could potentially cost her. She accepted my approach. I got the listing, and we closed the deal 53 days after listing at 98.91% of asking price.

By using the appraisal as part of my marketing strategy I was able to get the seller to accept listing the property at a realistic price. The seller was disobliged of questioning whether she could have sold for more money. And I was also able deflect potential buyers’ criticism by showing that all the property’s negative attributes were already taken into consideration in pricing the property.

This approach works. Banks use it all the time. It takes the drama out of selling your home. It treats the process as a business deal.

If you are thinking of listing your home or business for sale in Key West, think about contacting me. You may not know my name, but now you know my game. And it works. Call Gary Thomas 305-766-2642.

What is my Key West home worth?

What is my Key West home worth?

One of the factors that makes Key West so interesting is the character of its architecture and the diversity of its neighborhoods. And those two factors have a great impact on how homes are valued for re-sale in Key West.

The Old Town area has four Principal types of homes: two story Greek Revival structures built in the late 1800's through the 1930's; "cigar maker's cottages" (often called shotgun style homes elsewhere) which are one story houses with a long hall on one side of the house with all rooms opening onto it; "eyebrow houses" which are two story homes with a center stairway leading to second floor bedrooms that have unique windows that are situated so that they may remain open during a rainstorm and are protected from the elements by the extended roof that resembles an "eyelid"; and fill in homes built throughout the years including some post World War II modern homes.

The mid town and Casa Marina areas have a mix of housing types with the typical being CBS (concrete block structure) as well as some sporadic "conch homes -- a mix of Greek Revival, cigar maker cottages, eyebrow homes".

The new town area is mostly single family homes built in the 1950's through the 1970's. Most of these are CBS construction. And there are many condos built in the 1990's through today.

Many homes, especially in Old Town, were neglected for years--maybe decades. As Key West has been revitalized, homes have been remodeled block by block, neighborhood by neighborhood. But not all homes have been remodeled with the same integrity or craftsmanship. Likewise, many homes in the other neighborhoods have been similarly remodeled .

Up north in America where many homes and neighborhoods are cut from cookie cutters, it is easy to extrapolate a home's worth based on what a similar home sold for. Realtors and appraisers do it all the time. Realtors' valuations are called "CMAs" (comparative market analysis) and are usually done as a tool to help obtain a real estate listing. Appraisers are licensed by individual states after completing coursework that teach them how to value real estate. They should be an objective third party who has no financial or other connection to any person involved in the transaction. Banks engage appraisers to evaluate the specific property and compare it to similar properties that have sold in the area or that are offered for sale. I recently spoke with one of the co-owners of a large Key West appraisal company. He said his company is having as much trouble keeping up with valuing homes in a declining market as it had when prices were rising just as rapidly a few years earlier. Homeowners and investors would be wise to use the services of an appraiser when pricing their homes for sale. Some Realtors pump the price up to secure a listing, and then recommend that the price be reduced after the property languishes unsold. Time is money is Key West just like it is anywhere else. The prime selling time is between late December through Easter. Sellers who have unrealistic prices, especially in the tight Key West market, will probably have their homes unsold.