The 10 Biggest Lies in Miami Real EstateOctober 13, 2016
These are the 10 biggest lies told in Miami Real Estate
I have been selling Miami real estate for nearly 10 years and I still cannot believe it. I have always tried to tell it like it is, purposefully shying away from the entertainment side of the business that sensationalizes the market or the people involved within it.
I have written a number of controversial blogs over the years (we have been writing pure Miami content for 6 years now) and have found that many buyers like the ‘grit’. They don’t want to be told how wonderful things always are. They avoid the easy pitch and often want to be warned of the dangers, which many agents find all too easy to avoid talking about as they don’t want to appear negative. I don’t see it like that, I think that silence creates pessimism and over-skepticism, and that exposing the pitfalls actually gives confidence to buyers who know that they want to buy real estate, but just need to know how to decipher the good from the bad. So, here are my top 10 biggest lies that exist in Miami real estate.
1. Everybody wants to buy a Luxury Condo on Miami Beach!
If you are reading this article you’ve probably done your fair share of researching real estate in Miami. It’s a city that has been often portrayed as immeasurably sexy and desirable, all sandy beaches and buzzing clubs. Miami is often ticketed as an ‘aspirational’ purchase for home buyers. Less of necessity, but often more of a second home or investment location. This is just not the case anymore; permanent relocations are becoming increasingly more common (especially in light of the current economic climate) where uncertainly and rising taxes across both the US and the world has driven many to move to Miami on a more permanent basis, and one with a greater level of stability than it previously experienced.
With that caveat in place I can tell you that it is narrow minded to think as Miami as one dimensional, and not everyone is focused on the beach. Believe me many people are, but there is a great number of investors and end-users who definitely are looking into other neighborhoods, which offer just as much appeal. It is important to be aware of these markets: Coconut Grove, Weston, Coral Gables to name a few. As I say on my video “its a whole different life once you live here – a totally different environment.”
2. This is the best Condo AND there is none better.
Misdirection is a trick I have seen time and time again. Be wary of developers who promote ‘unique’ (see point 11), but not long-term advantages of their building features. By virtue of fashion, trends, art or a branded name. These developers like to charge higher prices than the competing buildings, and their sales agents happily claim that they beat out better finished condos just because they are newer, well branded or have some new cooler technology. To do so is to stand on the shoulders of giants and claim you are the tallest. The truth is that the core of any project must be good; the location, the architecture and the floor plans. Everything else is window dressing and adds only a small percentage of value to a project.
3. That this is not 2008 and that the market will keep going up because everyone wants to live here!
The market is certainly different right now than it was nearly a decade ago. It is extremely unlikely that we will see a subprime market collapse like that of 2008, but that does not mean that markets can not drop. Value increases do not rise in perpetuity and in 2016 we have seen some markets recede. This DOES NOT however denote a crash either. It is easy to sensationalize the markets with terms like ‘Boom’ or ‘Bust’ but there are happy mediums to the market also and although some markets may correct, others can continue to grow in value and strength as long as months of inventory stay manageable and price per sqft stays in line with relative household income levels.
4. That renderings and floor plans are a precise representation of the finished product
Just look at those views! They look great in the picture don’t they? But I have seen condo projects with renderings that bear little actual representation to the reality. A building that promises ‘Bay Views’, but has none. If you are looking to buy a unit, get on a plane and come into town, pay a little attention to the neighborhood and with the help of someone like myself figure out exactly what view you will be left with. Condos are sold, knocked down and replaced all the time and if you buy a condo that ends up with another condo right in front you better be aware of it.
Know the difference between a ‘marketing floor plan’ and the ‘floor plan attached to your contract’. I have already this year picked up clients furious with developers and the agent who sold them a unit in a new project which turned out to have a giant column running through the center of their living room! It is not what they expected or what the marketing floor plan showed. It did however magically appear on their contract, but they never paid attention to it, nor did the agent bother to pick up on it because they were too busy focusing on the commission.
5. Celebrity Branding
Mr ‘X’ put his name behind this project so you should feel happy buying here. Oh, and they are so incredibly rich and successful, that it means it’s GUARANTEED to be successful!
This is probably one of the biggest lies I hate the most. I have been told this by a number of agents over the years: ‘Mr X the owner is so rich that of course it is going to be successful’. This is not always the case. Sure he may have made his money from owning car parks or fashion houses on the other side of the world, but that does not make him an expert in buildings or high quality condos! Maybe he is so wealthy he got bored and wanted to do something different, perhaps expand his portfolio, tie money into the currency or get a tax break or two. Wealth in not transferable through constructional osmosis and just because a developer is very rich it does not mean he is going to spend the money.
Chose projects where the developer has a track record, where they know what they are doing because they have done it before. Chose a project where the developer is heavily involved and invested, and make sure that the subcontractors are also top notch who deliver without compromise such as; Architects, Interior Designers, Service Companies or otherwise.
6. I am perfectly positioned to give you investment advice (because I have 63 hours of training!).
63 Hours is all it takes to get a real estate licence in Florida. Using a newly licensed agent who is your friend, family member or fellow parent from your kids school is akin to using your life savings to trade stocks with your friend who has just signed up for an e-trade account! Or making someone run the kitchen in a Michelin level restaurant because they own a frying pan! Its insane people, so don’t do it! Market knowledge does not come from training, it comes from real world ‘on the ground’ experience as well as a willingness to analyze and understand the market in all its complexity.
7. The agent who works in the sales center and ‘knows the market’ with your best interest at heart.
Don’t get me wrong, there are some agents who work outside projects as well as inside the project and know the markets well, but then there are many of those who are ‘freshly licenced’ but feel well poised to tell you exactly what is happening in the neighborhood, Miami and even the US or greater Global economy. I have seen so many of these over the years. Sure they are well dressed and well presented young professionals, they want to please you and are also willing to give strong advice on forecasted future market values, finalizing on why you should buy their project (but not anyone else’s).
Unless they are some kind of secret global economics savant they are not likely to be able to give you solid advice on what the exact $ per sqft prices will do in 2 years from now when the project is finished. The best thing to do is quiz them on market stats (feel free to use my 2016 Report!). Ofcourse they may also tell you only their project is great and all the others are ‘questionable’, that’s their job, its what they get paid to do. You would not call the CEO of a company and ask if you should invest in their stock and expect fair advice? Of course they say yes! It is called a vested interest. So be careful, allow for a margin or error and don’t just trust someone because they look good in a suit and speak with authority.
8. The newspapers say that the market is going – up, down, sideways. So it must be true.
No, its not! Much of the material put out through media and news channels is very general and none specific. It is something that the masses can understand easily, but it wont serve you well if you are serious about knowing the numbers for buying or selling. Markets are way more complicated than simplified stats that comment on a whole city. You need to drill down to a micro level to understand the best strategy. Sadly, most people would be bored to tears with the ‘facts’ so the newspapers have to sensationalize a little to make the reading more palatable. Its dumb to generalize and its dumb to listen to people who generalize. Pay attention to the person who wrote the article: “Do they actually sell real estate”?, “Do they even live in Miami”? and “Do they have a professional base of economics”?
9. I am right 100% of the time. 50% of the time!
We all love stats, and nobody loves quoting stats more than developer agents or real estate experts. We are 80% sold, we are 90% sold, we are 110% sold. Reservations are not sales and numbers can be misled and misleading. When we talk stats we always add a point of reference, without that the stats are meaningless and the interpretation of those stats can be highly manipulated. That is why my reports always have a significant amount of narrative.
Here is one example: ‘We are asking $800 per sqft for our Biscayne Bay new Condo, but that’s so cheap compared to the South Beach boutique luxury condos, which charge $2,000 per sqft’, so of course it’s a deal. They are not the same thing! These are in two completely different parts of town with completely different views and potential dynamics. If I sell you a bicycle as a mode of transport and ask for $20,000 saying it’s cheap because a Ferrari costs your 20 times more, its not good justification for buying my insanely expensive bike. YET sales agents use it all the time. Apples to apples comparisons please!
10. The maintenance fees wont go up!
If you hire a cleaning lady to clean your house once a week, then decide to hire 5 more cleaning ladies your cleaning bill will go up. Simple math! Luxury buildings that offer amazing services yet charge the same price per sqft on maintenance as buildings that have a low level of service will find it is impossible to maintain the level of cost. Initially developers carry the burden of the maintenance for the first 2 years, once an association is in place then the gloves are off and the maintenance fees can change. If you are investing be sensitive to this. Your income on your unit might be great, but if your costs escalate then this can change your CAP rate very quickly. A penny saved is a penny earned.
A bonus point:
11. It is unique so it must be good!
Let me say I firmly believe that unique and highly desirable condos or homes are worthy of praise, but the key word here is ‘desirable’. Being told that everyone desires it does not make it so. A property that is just unique has no intrinsic value above one that is not, unless the attribute that makes it unique is one that people universally appreciate. My daughter makes unique painting every day but that does not mean I can sell them at a Christies Auction! I have seen many buildings that scream unique features. We have unique Art work, we have a unique service or we have unique technology. If that unique attribute does not add real value, to not just a few but a large number of that market, then it is redundant!