Emily Flax

Q. Recently, I lost out on a house in a multiple bid situation. When I found out there was another offer, I freaked out. What advice can you offer me for the future, in case this happens again?

A. Multiple bid situations are tricky. Sellers who receive more than one offer have several options: they can accept the best offer, they may counter one offer while putting the others aside, they can ask all parties to submit their ‘highest and best’ offer, or they can negotiate one offer while rejecting the others. They can even disclose the amount of one offer to the other buyers in the hopes of getting the price up (Although this is not a common practice in the Cape Cod market, it is routinely practiced in other markets).

Being a buyer in this situation can be frustrating. Keep in mind that the amount of your offer is only one part of the offer package. Oftentimes, other terms like the closing date or financing contingencies, can carry as much weight for the seller as the amount of your offer. If two offers are the same amount, but one is offering cash while the other is dependent on financing, the seller may opt for the cash offer so as to ensure a more expedient closing. Try to keep your terms as simple and ‘clean’ as possible.

It is important that you try to remain as unemotional as possible when you make an offer. Study the comps and decide ahead of time what price you would go to and stick to it. Don’t let the competitive bid scenario cause you to offer an amount outside your comfort zone. By the same token, when you are in a multiple bid situation, don’t waste time getting to that number. I have seen buyers lose out on properties because they did not go right to their ‘highest and best.’

You may feel that the seller has all the power in these negotiations but remember this: you are always in the driver’s seat when it comes to spending your money. Keep in mind that inventory is high these days, and if you miss out on your #1 choice, it is likely that another property will come along that meets your needs.

Q: "I have heard that it is difficult to get insurance on the Outer Cape. How will this affect me in my search for a property and the ability to get financing?"

A: It is true that in recent years, and especially since Katrina, many large insurers have pulled out of Cape Cod and other coastal markets based upon the great potential risk of a hurricane. But don’t worry, you will be able to get insurance (and therefore financing) and depending upon what type of property you are buying, it may not be a concern for you at all.

For example, if you are purchasing a condominium, insurance will already be secured for the property, and you will be paying your share through the monthly condo fees. Insurance policies for condominiums cover you for most damage to the building(s) and allow for rebuilding after a catastrophe. We recommend that you take out an additional policy to cover the interior of your unit and your contents.

If you are purchasing a single-family home, first try the local insurance companies to secure coverage. If there are no private insurers that will take your property on, you are guaranteed coverage through the Massachusetts FAIR Plan, which is a legislatively created program to provide coverage for those who cannot secure private insurance. Our local insurance agents (call us for recommendations!) can guide you through the process with the FAIR Plan.

One note to property owners, whether you are in a condo or a single family. Discuss flood insurance with your insurance agent. If a property is not located in a flood plain, you are not required to carry this type of insurance. But being so close to the water, it is not a bad idea to opt for additional coverage. If you are in a condo, bring it up at your annual meeting.

The real estate market on the Outer Cape is holding its own. In comparing sales from January through May of 2007 with activity from these same months in 2008, the sales volume in Provincetown is up slightly this year, Truro is about even and Wellfleet is down by 30%.

Following find a breakdown of the Sales this year by town:

PROVINCETOWN (2008 YTD Sales Volume: $40,460,801 vs 1/1/07-5/29/07: $35,875,000)

Single Family 13 have sold with an average price of $938,000.
Multi Family 2 have sold with an average price of $1,175,000
Lots and Land 0 have sold
Commercial 1 sale with a price of $1,650,000
Condominium 52 have sold with an average price of $349,362
Hotel/Motel 1 sale with a price of $6,1000,000

TRURO (2008 YTD Sales Volume: $15,122,000 vs 1/1/07-5/29/07: $16,020,100)

Single Family 13 have sold with an average price of $697,792
Multi Family 0 have sold
Lots and Land 4 have sold with an average price of $812,500
Commercial 0 have sold
Condominium 8 have sold with an average price of $350,088
Hotel/Motel 0 have sold

WELLFLEET (2008 YTD Sales Volume: $11,645,190 vs 1/1/07-5/29/07: $16,746,175)

Single Family 14 have sold with an average price of $639,928
Multi Family 0 have sold
Lots and Land 2 have sold with an average price of $212,100
Commercial 3 have sold with an average price of $182,667
Condominium 4 have sold with an average price of $428,500
Hotel/Motel 0 have sold

A: The town of Truro has a zoning by-law that limits the use of condominiums to seasonal use only. The dates of permitted use are April 1 through November 30. You may not occupy your unit between December 1- March 31. Often times the association will drain the water and turn off the utilities during this period. There is an exception included in this by-law which allows for one unit in each complex to be lived in year-round as a “manager’s unit.”

By contrast, there is no law against using property year-round in Provincetown. If a unit is noted as “seasonal” and it is located in Provincetown, it is likely that the unit is not insulated or that the pipes are not deep enough in the ground to avoid freezing. Many of the cottages in the beach point area of Provincetown are seasonal simply because they were never built with year round use in mind. Each association can decide for itself how the property will be used; a seasonal association in Provincetown may vote to change to year round, but they would have to make sure that the utilities and the units themselves are sufficiently insulated for year round use.

A: Hire an engineer to create a site plan and individual unit plans. The engineer will come to the site and measure each unit as well as the entire lot. When the engineer finishes, he/she will give you a preliminary plan. From that plan, you will decide which areas of the property will be exclusive to which units, where the parking spaces will be, and any common storage areas. You will then have an opportunity to mark up the plans. You should review them with your attorney and based upon that review, your engineer will amend the plans and make them final.

Next, work with an attorney to take the plan and draw up condominium documents. Your attorney will create a Declaration of Trust and a Master Deed. Part of the process will include a description of the units and a determination of the percentage of ownership for each unit. Your attorney will arrive at these percentages after you let him/her know what you intend to sell the units for. Your Broker can assist you with pricing the units based on recent sales. The percentages of ownership are based upon value.

Your attorney will also need you to provide: a master insurance policy, a description of the property, (i.e. is the heating oil, propane or electric, is it private septic or sewer, are there separate electric meters, are there any other costs associated with the common areas of the property? What rules would you like to see in the association (i.e. will weekly rentals be permitted, will pets be permitted, etc). Consult with your Broker when you are considering the rules and restrictions and when you are ready to create a budget. Your Broker can shed light on the reactions of buyers to certain rules.

When documents are complete, the attorney will record the Master Deed and Declaration of Trust with Barnstable County. At this time, you should establish a bank account for the Condominium Trust.

Now you are ready to sell your units. It is best to complete this process before you list the units for sale. It will save you many headaches in the end.

The Broker Team at Atlantic Bay Sotheby’s International Realty has assisted countless clients with this process. If you are thinking of a conversion, contact us first. We can connect you with all of the necessary players to get your job done properly and efficiently.