Reality Bites
(October 29, 2006)

By Anne-Margaret Sobota
Citizen Staff

Whether you call it a bubble, a slump, a slowdown or a decline, there's no disputing the Key West housing market in the past year has gone from a gushing faucet to a modest drip.

Some blame a leveling off of interest rates that reached an all-time low in 2003. Others, especially in Florida, blame last year's overactive hurricane season. Still others chalk it up to the cyclical nature of most things in life, which naturally ebb and flow with time.

"(The market)'s taking a natural break," said Terri Spottswood of Truman & Co. Real Estate Services. "It was just escalating out of control. It was so strong, and that's what's not normal."

As of October, there were more than 1,400 residential listings in Key West, compared to 1,021 in August. That number is up from 853 in August 2005.

The bottom line is sellers and Realtors are challenged to move homes on the current market. As a result, they are employing new strategies and stepping up their tactics.

Going once

Months on the market and dwindling home prices have drawn the owners of 22 Key West properties to participate in a Nov. 4 housing auction at the Doubletree Grand Key Resort. The auction is being conducted by Hudson & Marshall, a nationally known, full-service auction firm, in conjunction with Truman & Co. and Resort Realty & Appraisals of Key West.

"I was approached by Hudson & Marshall, as were other Realtors in town, and asked if we thought we would have any sellers or properties interested in an auction," Spottswood said. "I approached a lot of my sellers, and they would say, 'Yeah, why not. Let's go for it.'"

Similarly, Resort Realty distributed 9,000 letters to all property owners from Key West to Big Coppitt Key to gauge their interest, Resort Realty's Shawna Allen said. Because there was so much interest, the company had to extend the deadline and move the auction date. It's even considering having another auction early next year to accommodate people who didn't have enough time to get in on this one.

While similar auctions in other markets have drawn the wrath of some Realtors who claim an auction of this size locks up the market, that doesn't seem to be the case in Key West.

"I think the auction will be a good thing," said Joanne Tarantino of Island Group Realty. "The company handling it has structured it so that local real estate brokers can participate and earn a brokerage fee. This has fostered a feeling of cooperation and goodwill with the local real estate community."

Tarantino also sees the Nov. 4 auction as a way to attract attention to Key West's real estate market.

"I know a lot of my friends and customers want to go just to see what it is about and how it works," she said. "If it does work, I am sure there will be a tremendous interest from other sellers for future auctions. This would also be a great vehicle for getting a surplus of inventory off the market."

Most sellers are drawn to auctions because of the increased exposure it brings to their home and, of course, the guarantee of selling their property.

"An auction is a definite date -- you will get a cash offer without any contingencies on financing or inspections," said Steve Slokumb, Hudson & Marshall's chief operating officer. "Some bring more than the sellers were expecting. Some bring less. But on the average, it's usually fair market value."

Although auctions are more common overseas than in the United States, they may become more prevalent as buyers and sellers become more accustomed to the process, said Larry Maas, president of the Key West Association of Realtors.

"Americans have this stigma about auctions for real property as a distressed sale situation -- perhaps a holdover from the [Great] Depression days," he said. "This is no longer true. In fact, within the last few years, properties were selling so fast and for over asking-price that it was as if we were having an auction with buyers bidding against each other. We just didn't call it an auction, we called it a listing."

Added appeal

Many sellers who are testing their luck on the market have had to get creative to make the property more appealing.

"A year or so ago the market was hot and ... you could sell almost any kind of house," said Maria Lybrand, owner of Lybrand Redesign in Key West. "You didn't have to go out of your way to showcase your home. [Now,] the house has to really stand out among the others to really compete. What does your house have that maybe the one down the street doesn't"

Sometimes something as simple as decluttering and rearranging furniture can add value to a home.

"You clear everything out, and then you bring everything back in piece by piece as to where it fits best in the room to enhance it," Lybrand said. "You can be taking out some of the personal things that made it personal and your own home, and you give the new home buyer the opportunity to visualize themselves in that home."

While the redesign concept first took off as an inexpensive way to redecorate a room or give new life to a home, it's become an invaluable real estate tool. Staging also has become more popular in recent years, including in the Keys.

It's a technique Spottswood recently used to help sell a Keys home. "It was a lovely home, but the furniture was just too big for the home," Spottswood said. "This was a compact home, and so we took a lot of the furniture out and brought smaller stuff in."

Spottswood said many buyers purchase a home based on emotion and the "feeling" they get from a home. A house that feels too cramped won't fare as well as one that feels airy or homey.

"Right after we did (the staging) we got an offer immediately, so stuff like that does work," she said.

While Key West hasn't given way to crazy gimmicks and expensive incentives, such tactics have taken hold in other major real estate markets around the country. Some realty companies are taking the staging concept to another level, stocking homes not just with furniture but paid actors who portray loving families engaged in fun activities, such as playing Scrabble or baking a cake. Other companies are offering anything from new cars to trips to gift certificates and shopping sprees worth thousands of dollars, all in the name of selling the house as quickly as possible for the highest price.

Maas said Keys Realtors are using more conventional methods, such as increasing their Internet marketing efforts, instead of encouraging buyers to offer such lavish incentives.

"I haven't seen the use of gimmicks like you hear about in other parts of the country where the purchase of multimillion-dollar properties include a one-year lease of a car or anything like that," Maas said. "Buyers are pretty sophisticated now and know that those gimmicks aren't free, and they pay for those gimmicks through the sale price of the property."

As for the future of the market in Key West, most real estate professionals are optimistic.

"The first thing we have to remember is the old adage location, location, location," said Norman B. Wood, Resort Realty's principal broker. "Key West has not floated away. We will remain a strong destination resort.