CONDO BUYER’S CHALLENGE

Financing is always a challenge and most recently some purchasers have had financing problems because their lenders consider the condominiums at the Plantation as a “condotel” or “condohotel.” However, if the information provided to the lender by the association management is inaccurate or provided in a manner that allows misinterpretation, a sale could be voided due to financing problems.

The major source of confusion is the definition of “second homes” versus “rental units” as it relates to the determination of what is a condotel.

The source of the confusion is how the owner uses his unit. Does the owner use it as a second home but rents it to help offset some of the expenses? If this is the case and, as long as the owner occupies the unit for a minimum period of time annually, it can be classified as a second home. On the other hand, if the unit owner is an investor where the owner is limited or excluded from use of the property by the homeowners association covenants, it puts him in a different status with the lender.

MHI has always considered all of the units at the Plantation as independent entities unto themselves without any revenue sharing among them or having any commercial operations within the condominium complex itself that is operated by the association.

There are many other fine points which must be made to ensure that there is financing available for purchasers. If a condo is not warrantable by Fannie Mae or Freddie Mac, a mortgage broker or lender will not make the loan and will make it more expensive to obtain financing. This has a direct impact on the value of the condominiums.

Real estate activity is picking up!

The phone is ringing and the emails keep coming, with requests for showings, information on the property and questions about condo ownership.

If Spring was a hint of what’s ahead for the 2012 real estate market, sales and prices should continue to recover. Two of the six sales in March received multiple offers and one of those closed above its list price. This suggests that sellers are beginning to hold out for the “right” price and that buyers may have to make two or three offers to get a unit they want.

Summer always brings increased traffic in the form of rental guests, “walk-ins” and “lookers.” With our office located right in the middle of the activity, Mandoki Realty is perfectly poised to capture this traffic and turn potential buyers into Plantation owners. Look at our record since January 2011, when the market began to recover:

The sixteen Mandoki Realty-listed units averaged 313 days on the market. The overall average was 405 days.

Price: The average sales price for the forty-one units sold since January 2011 was 95% of the listing price; Mandoki Realty listings averaged 96.3% of the asking price.

If you are considering selling your unit, give me a call at            1.800.305.8885      . Inventory is lower than it’s been in years andwe need listings. Put the brokerage that specializes in Gulf Shores Plantation to work for you.

WOW! What a difference a month makes!

For the past two weeks, things have been scrambling here at the real estate office. We’ve had two sales where there were multiple offers, one of which closed above its list price! There was only one sale in January and February, but then March exploded with six sales (with one closing on April 2) and Mandoki Realty has three more sales under contract or pending as I write.

There are only thirty-two condos and two duplexes listed for sale at the Plantation. That is all listings, not just Mandoki Realty listings. This is an unusually low inventory; Pedro Mandoki says he’s never seen this few units for sale in his time at the Plantation and he’s been here since 1986.

This should help prices, but it will be a step-by-step process because the past several years of “fire sales” have lulled the buying public into thinking that prices for shortsales and foreclosed units are the new norm. So, it will likely take a touch of buyeramnesia to get past this mindset.

Here is a breakdown of listings by complex:

• Plantation East—10 Two-Bedroom

• Plantation Dunes—1 Two-Bedroom, 2 Sunsuites

• Plantation West—6 Two-Bedroom, 1 Two-Bedroom/Loft, 1 Sunsuite, 1 Sunsuite/Loft

• Plantation Palms—2 One-Bedroom, 5 Two-Bedroom

• PUD—2 Duplexes

If you’re considering selling your unit, you might want to consider getting in listing it now, as there is very little competition out there compared to times past.

You can find no better brokerage to sell your Gulf Shores Plantation unit than the one right on property...Mandoki Realty! We can answer buyers’ questions and we can show your unit by just walking across the parking lot!

From the Desk of Joe Savage

by Joe Savage, On-site Associate Broker

Happy New Year! Have you heard about Disney World? They were turning people away during Christmas break because there were too many! Could this be an omen? Will we have to turn people away during spring and summer because we can’t accommodate them?

Although I’m not an economist, the Disney situation seems to indicate that the American consumer is ready to spend again...notably on family leisure. Let’s hope this means higher occupancy rates in 2012 because more vacationers mean more (and higher priced) sales in two ways:

1. A certain percentage of vacationers are interested in purchasing a unit, so more visitors mean more potential buyers.

2. Higher occupancies mean more impressive rental histories. As a rule, buyers in this market plan to rent their units when they aren’t using them and some buyers purchase units primarily for their rental potential.

Rental histories strongly influence whether a unit gets offers or sells at, or near, the asking price, and that affects everyone’s property values.

And again, it is critical that a property be well-maintained and “renter-friendly” to improve property values through higher occupancy.

Mandoki Realty maintains rental histories of units it lists for sale and if the unit has limited or no rental history, we use rental histories of comparable units. In 2011, thirty-one condominiums sold and Mandoki Realty brokered fifteen of them, selling four times more than the next best agent. Mandoki Realty has a contractual obligation to its listing clients to promote, market, show and sell their units and that is evident in our performance.

Why Setting a Price Too High is as Bad as Setting it Too Low

The problem with setting your list price too low is obvious: you leave money on the table. But, the problems from setting a price too high are less so. Many sellers rationalize that we can always lower the price, but by then, the damage may be done. Here are some reasons why setting the right list price is possibly the single most important element of marketing your property: why you dont want to OVER-price!

1. Short Appraisal: Even if your agent convinces a prospect to buy at your inflated price, the deal may go sour when the appraiser comes acalling. Over 90% of buyers use some kind of financing, and that requires an independent mortgage appraiser, and the lender will only loan against the figure that appraiser produces.

2. Won’t Show: If the price is too high, you won’t be able to get prospects through the door to even look at the property, no matter what you have done to the interior.

3. Reputation: When a new listing hits the market, agents check it out against the needs of their clients. If your property gets a rep for being overpriced, getting the market’s attention later may take some extreme actions.

4. Helping the Competition: Your overpriced property will make your competitors’ properties look like real bargains, so you are actually helping your competitors’ properties sell FIRST!

5. Days On Market: The longer your house sits on the market, the more “Days On Market” show up on the MLS, and the longer it has to become “stigmatized.” Ever see a home or condo unit that seems to have been for sale forever? Did you wonder what might be wrong with it?

6. Negotiation Purgatory: The longer it’s on the market, the harder the buyers are going to negotiate.

7. Missed buyers: You will lose many buyers who are outside of your price point, but who are buyers looking in the price range in which your property will eventually sell. They’re off to buy your competitor’s property!

If you already have your unit listed for sale and have not had a lot of action on it, there is an opportunity to review your pricing strategy- we’re in low season right now and will be there through January. If you are considering selling your unit, be sure to consult with an agent who is familiar with your unique market and its current values in order to assist you with pricesetting… and no one knows the Plantation like Joe Savage and Mandoki Realty.

Mandoki Real Estate Newsletter July 2011

MID-YEAR RE SALES RECAP

Here is a snapshot of the Gulf-front/beachside condos currently for sale in Gulf Shores (GS), Fort Morgan (FM), Orange Beach (OB) and here at Gulf Shores Plantation (GSP):

	Units for Sale	Units Under Contract or Pending (UCP)	% UCP
Gulf Shores	229	23	10.04%
Fort Morgan	107	13	12.15%
Orange Beach	371	34	9.16%
Gulf Shores Plantation	43	7	13.28%

The inventory at the Plantation is getting whittled down, which is helping values slowly recover after the double-disaster that was 2010: 1)Taylor, Bean Whitaker foreclosures coming to market as “fire sales” in the first quarter and 2) the BP Oil Leak in the second.

The general year-to-year trend seems to show a slight price recovery at the Plantation and Fort Morgan in general:

# of Units Sold by Year and Area
	Jan-June 08	Jan-June 09	Jan-June 10	Jan-June 11
GS	76	128	129	90
FM	56	32	42	55
OB	102	108	133	162
GSP	29	9	20	17

# of Units Sold by Year and Area
	Jan-June 08	Jan-June 09	Jan-June 10	Jan-June 11
GS	76	128	129	90
FM	56	32	42	55
OB	102	108	133	162
GSP	29	9	20	17

This data comes from the Baldwin County MLS and represents sales of Gulf-front or beachside condos in the four markets for the period of January 1 thru June 30 for years 2008 through 2011.

The following graph shows how the four markets interact. Keep in mind that the data is a composite of condos of varying sizes, construction types and age, but they are all Gulf-front or beachside units. This data is useful in comparing each market to itself on a year-to-year basis, but not necessarily in comparing one market to another.

The bar graphs are the number of units sold in each of the four markets for the first six months of 2008 to 2011 (# Units Sold on the left side of the chart). The line graphs are the median price per square foot in each market for the same period (Median Price in $ per Square Foot on the right side of the chart).

The chart shows that Gulf Shores Plantation and Fort Morgan prices increased from 2008 to 2009, but at the cost of the number of units sold. Conversely, prices steeply declined from 2009 – 2010, with a corresponding increase in sales. (Note: The correlation between Gulf Shores Plantation and Fort Morgan stats is easy to understand, as the Plantation makes up a significant portion of condo sales in Ft. Morgan.) However, from 2010 to 2011, this pattern appears to change, with some interesting implications.

It looks like Fort Morgan and the Plantation to some degree, are recovering in both pricing and sales. Unit sales increased over the same period last year (which was mostly before the oil spill) and pricing is also increased. This suggests that prices may have genuinely bottomed-out.

In Gulf Shores, prices seem to have flattened, but sales are down compared to last year. In contrast, prices have slightly increased in Orange Beach, but sales are up dramatically. In fact, sales in Orange Beach have steadily increased since 2008, again, as prices fell. Even with the strength of Orange Beach sales, I hesitate to predict that their prices will have flattened out by year’s end because there is so much beach-front inventory actively for sale (337 units).

Sales inventory at the Plantation is at a real low; the 36 units actively for sale represent less than 6% of the 623 units on property. Most of the speculators and many of the second-home owners who bought at the 2005-06 “peak” have been eliminated by foreclosure and/or short-sale, so there just are not many “distress” sales available. “Scarcity” is a factor in driving price, and it appears that units for sale are becoming scarce at the Plantation. Keep in mind that prospects are also looking at other properties and that Gulf Shores Plantation must compare favorably with them. It is critical that the property be well-maintained and have an up-to-date look and “feel.” Guests must enjoy positive vacation experiences that ensure that they return again and again. This is imperative to ensure GSP values recover strongly. In short: If the place isn’t kept up well and doesn’t have a strong rental demand, it doesn’t matter how few units are for sale...we still won’t be able to get the prices up.

Finally, a mid-year performance report for those of you considering listing your property for sale in the near future. Almost half (43%) of the 75 sales across the Plantation in the first six months of 2008-2011 were brokered by Joe Savage and Mandoki Realty. This represents 50% more than the next-highest performing brokerage, and FOUR TIMES more than the next best-selling agent. While there are other good reasons to use Mandoki Realty to market and sell your Plantation property (location, knowledge, availability) the proof is always in the performance….and ours speaks for itself.

Wishing you all a great Summer!

Real Estate "Farming" News

Many of you may have received correspondence from agents or brokers listing sales here at the Plantation. In the real estate industry, this type of mass mailing is called “farming” and is used to obtain real estate listings in a particular complex, neighborhood or community. The agent obtains owner names and addresses from county tax records, title companies or a marketing firm and sends these mailings soliciting business.

Such correspondence often suggests that the agent already has buyers lined up or that he/she is very familiar with or has been successful in selling properties in your area. As long as the agent is not outright lying, this is an acceptable practice. But, be a good consumer and look into claims critically before accepting them. For example:

• In describing recent sales in your complex, is the agent listing the sales he actually brokered himself, or all of the recent sales? There is a huge difference in the two: anyone can list sales - what matters is who did the selling.

• If an agent suggests that he already has a buyer, ask yourself why that buyer doesn’t already have a contract to purchase another unit. There are always units for sale at the Plantation. If a buyer wants only yours, why is the agent not soliciting you for a “one-time showing” listing agreement for that particular buyer? That’s how it’s done, after all.

• If an agent boasts of his familiarity with the complex, ask him for particulars:

How many total units are at the Plantation? How many are currently for sale across the complex?

How many units are in our homeowners association? How many directors sit on the board?

What’s included in the association dues? What are the other expenses of ownership at the Plantation?

What are the amenities at the Plantation?

This information is critical when working with buyers because this is what they want to know. Shouldn’t your agent have that information on the tip of his tongue?

• Finally, ask your prospective agent where his office is and how many properties he currently has listed in Fort Morgan. This will tell you how often he drives out here from town or does he even have to. With gas at $4-plus a gallon, you want an agent who doesn’t feel like he’s trimming his profit margin by showing properties in Fort Morgan.

Bottom Line: Be a good consumer by recognizing “farming” mailings from agents when they come your way and carefully evaluate all claims they make before you put the sale of your property in their hands.

April 2011 Condo Sales Gulf-front units south of the Intracoastal Waterway:

Gulf Shores

Units sold: 22

Average sales price: $233,232

Median sales price: $213,000

Average days on market: 207

Orange Beach

Units sold: 27

Average sales price: $369,593

Median sales price: $286,000

Average days on market: 255

Fort Morgan

Units sold: 3

Average sales price: $249,667

Median sales price: $259,000

Average days on market: 132

Source: Mobile Register, May 15, 2011