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More Supply Puts Sellers In A Weakened Bargaining Position

A report from the Wall Street Journal on New York. “A pair of developers is planning to auction off units in their luxury Manhattan condominium project. The units will be among the highest priced condos ever to be auctioned by a developer in the U.S., according to Paramount Realty USA, the auction house handling the sale. Real estate veterans say the move is highly unusual for Manhattan, though luxury auctions appear to have gained more popularity in other parts of the country as a means to sell a property quickly.”

“Three of the units at the five-unit building, located at 6 Cortlandt Alley in Tribeca, will be auctioned off November 10, said Misha Haghani, owner of Paramount. All three units are four-bedroom lofts, originally priced at up to $7.3 million. One home—a 3,646-square-foot, four-bedroom, 4½-bathroom unit—will be sold to the highest bidder at or above a minimum bid of $4.75 million, which represents a 35% discount from its original price.”

“Two other full-floor homes will be auctioned with suggested opening bids of $4.85 million and $5 million, representing discounts of more than 30% off their original prices.”

“Developers Imperial Development Group and MCG Fund 1 Manager, an affiliate of Megalith Capital Management, launched sales in the spring of 2016, but none of the five units have sold despite a change in brokerage representation and price cuts, according to Mr. Haghani, who attributed the slow start to the shifting Manhattan market for high-end condos.”

“He said there was a ‘chicken and egg problem’ where no one buyer wanted to get the ball rolling and set the market price by buying the first unit.”

“‘There’s more supply on the market today than there was 18 or 24 months ago,’ Mr. Haghani said. ‘Buyers have more choices, and that puts sellers in general in a weakened bargaining position. Sometimes a different strategy is warranted. In this case, it’s well warranted.'”

From The Bridge. “‘Getting this project would change my life! I will go from Ryan Serhant, who sells listings, to Ryan Serhant, who sells neighborhoods, who does billions of dollars in sales!'”

“Quite a cliffhanger. Who wouldn’t stay tuned to see if our hero real-estate broker gets the big assignment? That was the dramatic setup for a recent episode of Million Dollar Listing New York, the reality TV show tracking three ambitious brokers, including Serhant, the dashing former actor who runs a high-profile team for Nest Seekers International.”

“The record, however, suggests that any such drama was long past. Serhant already had the job. A look at the reality behind the reality show, based on the building’s documents and public reports, illuminates how such shows bend time and space to portray decisions as more dramatic and transactions as more spontaneous than in ordinary life.”

“In this case, close readers of real-estate trade publications would know that at the time the episode was recorded, Serhant’s team had already been hired by the developer of 550 Vanderbilt, part of the larger Pacific Park Brooklyn project, to sell the building’s 100-plus remaining units.”

“And that’s not all the sleight of hand. Our study of the sales documents involving five apartments Serhant purportedly sold around Aug. 2, 2017, the date of his big event, shows that all took far longer to enter contract (at least eight months) than one would expect from the flourish on TV.”

“Nor did the sticker prices shown on screen reflect what buyers at the event would have been told. Three of the five ‘list prices’ flashed during the episode reflect price cuts announced long after Serhant’s big event. That allowed Million Dollar Listing to portray Serhant as closing deals not far off list price. ”

“Perhaps most importantly, Serhant’s seeming sales wizardry on behalf of 550 Vanderbilt—already some $90 million in sales by his team, The Real Deal reported this past May—benefited from a little-noticed tailwind: an effective price cut, building-wide.”

“What about those deals? Let’s go to the videotape. For the three offers said to be ‘basically full ask,’ Million Dollar Listing displays the list price, not the sale price. But that list price does not necessarily reflect the reality as of August 2017.”

“For example, Apartment 1010 was said to list at $1,495,000. It sold for $1,450,000 in June 2018, just 3.2% off that ask, StreetEasy shows. However, when Serhant held his food fest, the list price was higher: $1,665,000, a figure that still appeared in the 13th Amendment to the building’s Offering Plan, dated Nov. 21, 2017.”

“Nine days later, according to StreetEasy, the price dropped to $1,495,000. The only way for Serhant to have sold it at ‘basically full ask’ around Aug. 2 was to practice time travel. The buyer got not only a discount, but a huge savings on real-estate taxes.”

“Then there’s Apartment 1115, one of the two units in the ‘below-ask’ category; it was said to list for $1,650,000, drawing an offer for $1,550,000. It sold for $1,535,229 at the end of May. However, as of Nov. 21, 2017, well after the Serhant event, Apartment 1115 was priced at $1,685,000 and, according to StreetEasy, that list price was not lowered. So the purported $1,650,000 list price comes out of thin air.”

‘Perhaps, as long as it’s a ‘million-dollar listing,’ the finer points just get in the way of a good reality-show story.”

From Curbed Hamptons. “Built in 2015, the 2.2-acre property at 68 Hedges lane in south-of-the-highway Sagaponack came on the market three years ago for $22.9 million. After several price cuts—the most recent $1,045,000 price cut happening last week—the home is now listed for $14.95 million with Corcoran Group agents.”

“According to the Zillow price history, the most recent cut is the second time that the property has had a decrease in price this year. In 2016, the home went from $22.9 million to $19.99 million, then in 2017 it went down again to $17.9 million. Earlier this year in May, the listing price went to $15,995,000, and now it’s currently sitting at $14.95 million.”

This Post Has 13 Comments
  1. ‘Developers…launched sales in the spring of 2016, but none of the five units have sold despite a change in brokerage representation and price cuts’

    Uh, CNBC, the NYC crater didn’t start a year ago like you said yesterday. It’s was full crater in 2016. After this auction, if it sells, these bozo developers will be writing a check.

    1. That was my first thought too. Saw it the one time this year I watched the local news. And I’m sure whoever supplied it isn’t on the hook to fix it. Ah the benefits of int’l trade and offshoring jobs.

  2. “no one buyer wanted to get the ball rolling and set the market price by buying the first unit.”

    So they want to set an artificial price floor with the assumption that it’s not really necessary because the market price must be higher? So why set a suggested opening bid? The mental gymnastics are gold-worthy.

    1. If it’s a flip, it’s an interesting indicator. The the difference in prices is just ~9%.

      Take commissions at 6%, then add in additional sales taxes fees, plus 1 year’s carrying cost of taxes and insurance and you’re at 9%.

      So these flippers have lowered their expectations – instead of making a profit, they’re given up on the idea and are trying to avoid a loss.

      Of course, that’s assuming they get the starting price which is the best they can do.. and probably won’t in the current climate.

        1. Oh, Hey. 🙂 It’s going Ok. That company in Redmond is giving me an ulcer, but what’s new there? I may be shifting gears come the new year, and no longer working from home. The raccoons and deer will miss me.

          No complaints about living here – the south end QFC stocks Larrsen’s Bakery Smorkage during the holiday, and I’m sure I’ll over indulge in it.

          Just taking the long, slow view with the house here. I figure it’ll be 3 or 4 years before I get my updates to it done, and it’s not that huge a list.

          Despite some of the posters here repeatedly poking at me, I’m still quite happy with the decision to buy it.

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