You Want To See What An 'Illiquid Market' Produces?
A: It brings out those that must sell! Here is a good example of actions that will be taken in an illiquid marketplace, to move property. Recall my piece on Thursday, 'Chasing A Moving Target', where I stated..."Think about what will happen when NOV & DEC sales get recorded in JAN & FEB of next year! These fresh comps, that reflect the erosion I have been describing recently, will set the new hallmark for analysis!". This market is certainly interesting!
UPDATE: This seems to be an error with the wrong price, floorplan, and description. The floorplan is a CONV2/1BTH and smaller than 1,200 sft. The description states 2BR/2BTH, 1,200 sft, $2,000/Maint, and a price tage of $595,000, yet the internal system shows the price as $1MIL. I would expect this to be corrected in a day or two.
PRICE: $595,000 (reduced $405,000 on re-listing Dec 12th)
SIZE: 1,200 SFT - 2BR/2BTH
MAINT/RE TAX: $2,000/Mth
ON MARKET SINCE: 10/25/2008
Now, I would expect tons of calls on this property and since its a sponsor sale, those considering only condos may at least take a peak considering there is no board approval, up to 90% financing, and immediate sublet allowed. Monthlies are high, but I think the price discounts this. I would not be surprised to see a bidding war for this property by next week; as all it takes is two qualified and interested buyers.
The property is asking $495/sft at the current asking price assuming 1,200 sft is accurate for the total size. Looking at the last few sales in this building which closed in AUG & SEPT (before the Lehman collapse as the contracts for these sales were likely signed around JUNE/JULY timeframe), I get a trading value of aprox $767/sft (9F) & $728/sft (2G).. for a studio units and low floor 1BR unit.
Using the average of these last two sales, $748/sft, I'm curious to see what the above unit would be valued at:
$748 x 1,200 = $897,600
This is the rough valuation based on the market when the last two comps went into contract. Forget for a moment premium being on a higher floor and for being a 2BR/2BTH, renovations, etc.. Assuming the market dropped 20% from June, and using the above figure as a rough valuation based on the last two sales, I get a current aprox market valuation of about $718,000 for 14C2. The current asking price is $123,000 below that! This is a very quick comps analysis and I haven't seen any of the units. Normally I would have to calculate in discount/premium for higher floor, light/view, and renovations to past comps to get a more accurate #, but for sake of this discussion, it's safe to say that the current asking price is still a great deal.
In an illiquid market, with no bids, we find out who must sell and things like this pop up! This is where deals are found, and it doesn't even matter if we are down 15%, 20%, or even 25% because if you have to sell, you have to sell! Now, as long as this market remains illiquid and deals are happening at discounted levels, the next 2-3 months will reveal how weak the current market really is. This is when comps will be exposed and a new benchmark set to conduct future bidding strategies too. This is when things get interesting!
Will future buyers set the trends of bidding below these distressed sales when the comps become public record? How will co-op boards deal with quickly deteriorating prices and distress sales? How will it affect future actives? How will it affect future appraisals? How will it affect future buyer confidence? As with most slowdown cycles, there is an adverse feedback loop that feeds the process. I don't see this slowdown being any different.
Comments (25)
$2,000 a month maintenance is going to scare a lot of people away. If the maintence was normal, I would buy that place this very second.
Any reason why the maintance is so much Noah? Is it a land-lease building? Because I heard bad things about those...
Posted by Donald | December 13, 2008 1:39 PM
Hi Noah - interesting information, thanks for sharing. Is the seller's broker a friend of yours? (Just kidding) I find this ad very misleading. This is NOT a 2BR 2 bath apartment - unless if you cut the foyer/living room in half which has not happened yet from looking at the pictures. And WHERE is the 2nd bathroom? In the attached garage perhaps? I would think that the stated surface area is probably wrong as well (the dimensions on the floor plan are all blurred). Why would I believe anything this broker says? If I were the seller, I'd be very impressed with the level of professionalism of my broker ...
Nevertheless, interesting and, in a way, entertaining information.
Posted by chris | December 13, 2008 1:44 PM
Also, the Elliman site says 25% down, so are you sure you can buy with only 10% down?
Posted by Donald | December 13, 2008 1:44 PM
Yeah, I can't find the second bathroom either. Somethng does not smell right. And consderng this looks like a 1 bedroom that was converted into a 2 bedroom, I would wonder how big the living room and second bedroom are.
Posted by Donald | December 13, 2008 1:50 PM
And on a final note, the secnd bedroom has no closet so legally it CANNOT be counted as a bedroom. This listing agent is committing fraud.
Posted by Donald | December 13, 2008 1:52 PM
I agree Donald. Count the number of windows in the 'main' picture vs the count in the floorplan. There is no 2nd BR yet. The 10% vs 25% downpayment is murky as well, as you correctly observed. Why would I even begin to believe that this apartment is 1,200 square feet? Maybe she included the surface of the garage? None of this holds up ... this is just shameless.
Posted by chris | December 13, 2008 1:56 PM
The kitchen and bathroom are not that big so if the apt. is indeed 1,200 square feet, I sure would like to know where they put all that square feet.
Posted by Donald | December 13, 2008 2:00 PM
had to run out on a showing, and did this post real fast. I didnt really look at floorplan and just saw the data 2BR/2BTH, 1200 sft.
I doubt you'll even be able to do 90% financing right now.
Yea, floorplan is lacking. I think the #s have to be right and its a combo sale with next door studio or something. Has to be. The marketing cant be that wrong!
Posted by Noah | December 13, 2008 2:48 PM
But where is the second bathroom? It seems MIA.
Posted by Donald | December 13, 2008 2:57 PM
its in the 2nd unit not included..something is messed up here. The elliman listing clearly states 2BR/2BTH, 1200 sft, and 2000 maint...but it syays only 2 rooms?
this is a pretty bad error though if this turns out only to be the reduced price on 1 of the 1BR's...somethings fishy
Posted by Noah | December 13, 2008 3:03 PM
Donald - when oil was at $140 I was telling clients that the avg maint ranged between 1.20 - 1.65 or so a sft...every bldg is unique and how funds are managed, collected, costs, revenues, and amenities offered, and host of other cost issues affect what ultimately is collected via maint to run the building.
At 1200 sft, 2000 main is high but not crazy high. Landlease units are normally at or above $2/sft, so really high. They are hard sells...
You guys are right though, this has to be wrong but how can it be THAT wrong!
Posted by Noah | December 13, 2008 3:09 PM
Maybe if anyone has spare time, you can call or e-mail the listing agent to find out what the deal is. I would do so myself, but I'm worried that I will get constant calls and e-mail if she has my contact info.
Posted by Donald | December 13, 2008 4:02 PM
This has to be a mistake. Im sure we'll know by Monday and someone will pick up on it.
Certainly the broker or sponsor should realize, because Im sure more than a few people called or emailed in response to that webad. Then again, maybes its a strategy to make the mistake for a few days and get those calls. You never know in this business
Posted by Noah | December 13, 2008 4:11 PM
all that matters is the actual SF. if it's accurate, the PSF is heading closer to where the market average will in fact end up after the holidays burn off and lenders start fire selling the top end of the market next year. also, this broker Stefani is a rabid blowhard poster on Trulia. someone should tell her to stop using michelle pfeiffer's smirk....
Posted by Fred | December 13, 2008 4:28 PM
Noah, check out 58 Walker, they just had a 585k price reduction on a 2.8 mil unit. We are now starting to see some desperation selling. As you rightly point out, this is beyond a buyer's market because, even if you have a willing buyer, they may not be able to obtain financing. For the first time in many years, the banks are not interested in writing mortgages, even for "well priced" units. Prices have farther to fall, especially if banks are going to require more and more cash to write a mortgage.
Posted by mh23 | December 13, 2008 5:10 PM
That aparment is mediocre in any market. Really just a big 1 Bedroom with an optimistic floorplan that shows a chopped up 2 Bedroom, minus the "second bath."
Barely Home Depot quality kitchen and bath, and very high monthly charges.
I agree, the market is highly illiquid, but I am not sure this unit's price and performance history is the best example.
Posted by EML | December 13, 2008 6:00 PM
this has got to be a mistake by the broker
Posted by Noah | December 13, 2008 7:17 PM
or a bait and switch by the borker. If I'm a broker who wants people to call me, I can't think of anything better than listing a 2 bed/2 bath apartment for $595,000. And to cover my butt so that I don't get busted by the ethics police at REBNY, I include the floorplan of the actual apartment (a 1 bedroom).
Posted by Donald | December 13, 2008 7:57 PM
shady, but your prob right
Posted by Noah | December 13, 2008 8:25 PM
A couple things about this listing:
#1 - I do not see a second bathroom
#2 - It is a conv. 2 that does not look like 1200 sf - That being said it could be made into a legal 2 bedroom by putting up a wall and then filing for a legal change with the city. Without filing for a change, it will never be a 2 bedroom on paperwork or on the contract.
#3 - interesting to note that in regular OLR and Taxi, the price is still listed at 1 million. $450K reduction on 1 million does not seem right.
Posted by David Kahn | December 13, 2008 9:34 PM
David - yea, we pretty much realized this is an error. Not sure why elliman.com's webad is so wrong, but clearly this is not the deal its represented as.
The post was written very fast when I saw the raw data on SE. Found out later on it was likely wrong.
Posted by Noah | December 13, 2008 9:37 PM
If the apartment is indeed only a 1 bedroom/1 bathroom, then it is at least $100,000 oveprriced based on the $2,000 maintenace. For the same price, I can easily find plenty of comparable places with maintenaces that are much less.
Posted by Donald | December 14, 2008 1:44 PM
It seems that the Elliman website has been updated and the "mistake" has been corrected. The unit is 700 square feet and the maintenance is $1,300.
Posted by Donald | December 14, 2008 2:46 PM
Noah - understand about the quick post. I would also guess that something from Elliman would be accurate.
Still what do you make of the correction, making it $850 per square foot.
I say it should be priced at no higher than $525K and expect it to sell for not more than $480K.
Being a broker myself, I really appreciate your take on the current market. I am still amazed to see how a lot of brokers overprice just to get listings. Maybe it may make a bit of sense in a healthier market, but when activity is so low, you would be lucky to get a buyer. I think you should start a bi-weekly entry on the best deal to come to market, and the most overpriced one. I would be glad to help!
Posted by David Kahn | December 14, 2008 7:43 PM
David - I think its overpriced. Not a bad idea. I used to do GREAT DEALS years ago but it became too much time to handle it.
Email me. lets at least keep in touch! thanks
Posted by Noah | December 15, 2008 12:47 PM