secretly very negotiable penthouse loft seller at 129 West 20 Street secretly negotiates a 28% discount

why not be public about it?
What is the purpose of an asking price? Feel free to tell me what you think, as I am not shy about telling you what I think. A successful asking price does (should do) only one thing, but there are 3 ways to do it. In order to achieve the highest price available in a reasonable time in the current market, an asking price will:

• tell The Market what other listings buyers should look at in order to decide to bid on this one;
• open the bidding, by inviting (acceptance! or, more likely) a counter-proposal from a buyer;
• signal to buyers the range of offers (those counter-proposals) that will be given a serious response.

Simple stuff, right? Which is why I do not understand either of the asking prices, or the marketing strategy, for the Manhattan loft #PH-C at 129 West 20 Street (the Chelsea Quarter):

(That must have been a difficult June and July!)

This strategy worked in the sense that it achieved a bid that advanced to contract from a buyer who was able to close. But I have no reason to think that $2.5mm was the highest price available in a reasonable time in the market of early 2011 because I do not see that many potential buyers who might actually have been  willing to pay close to $3mm were in fact encouraged to do so by the initial asking price of $3.995mm or the reduced asking price of $3.495mm.

To end negotiations a million dollars short of the asking price, how low must that initial offer have been? How many others might have bid if they had suspected that the seller would entertain an offer more than one-third off??

bad comps
I don’t get it. If I wanted potential buyers to compare this “2,120 sq ft” “very special retreat” with “three large private terraces” (a total of “780 sq ft”, sizes per our data-base) to other lofts on the market under $3mm, I’d have asked under $3mm. (The StreetEasy listing has lovely photos but lacks details and a floor plan; see the broker’s website for those.)

Instead, the listing would have been compared to

• this “incredibly bright” “2,800 sq ft” loft on top of Nobu in Tribeca,
• and this “2,134 sq ft” “spectacular living space” in a prime Tribeca full service condo (which I hit in my October 24, turn of the century Tribeca at $1,600/ft, again at 27 N. Moore Street),
• and this “3,000 sq ft” “combin[ation of] contemporary and classic New York loft living” just two blocks north of this one,
• and this “2,154 sq ft” “complete gut renovation has yielded an impeccable ambiance with contemporary finishes” at the Chelsea name-brand full service condo,

each of which had been asking between $3.45mm and $3.595mm and each of which sold between $3.2mm and $3.5mm.

like jumping off a cliff
Again, I wonder how many potential bidders would have thought they could buy this penthouse loft at $2.5mm, given that it had been asking $3.995mm to start and then $3.495mm. Penthouse C would have looked good in comparison to

• this awkward “2,736 sq ft” Chelsea loft that got price chopped down to $2.5mm from $3mm to close at $2.48mm, and which was the subject of my November 16, O’Neill loft at 655 Sixth Avenue resells at 21% loss over 2007

and might even have been preferred to

• this penthouse loft on the Chelsea side of 14th Street, which sold for $2.58mm at only a tiny discount from ask, with “2,000 sq ft” interior and 2 terraces of “1,300 sq ft” total
• or this “1,700 sq ft” penthouse loft in nearby Chelsea with “725 sq ft” of roof deck, which sold above ask for $2.63mm and which I hit in my November 7, Vision Loft at 124 West 18 Street sells with huge premium for roof deck
• this “2,300 sq ft” very idiosyncratic artist loft in Tribeca that sold for $2.7mm off a final ask of $2.97mm

signalling negotiability to The Market
One way for a seller to hint to the buyer pool that you will take less than your asking price is, when you have clearly started too high (say, at $3.995mm), to drop, and drop, and drop until you get some traction (i.e., interest; say, by dropping to $3.5mm, $3.25mm, and $3mm). The buyer pool will wonder how much further that seller will go to get a contract, but that seller might find multiple interested buyers in the upper $2s.

A more … errr … subtle way to hint that you are negotiable would be to adopt a wildly inappropriate price (again say, at $3.995mm) and then drop only once to a slightly less inappropriate price (say, at $3.495mm) and wait for some bidder at some price to call. I prefer the first course to the second (subtle) course, especially for someone who is secretly harboring the fear that only a really big discount will get a deal done.

I don’t have any systematic data for this, but doesn’t it seem logical that a loft that sells while being way over-priced (i.e., needing a large negotiated discount) is much more likely to sell ‘below market’ than if that loft had been priced near the market to begin with? Time for a Manhattan Loft Guy note to self …

I suspect that more potential buyers would have viewed Penthouse C at 129 West 20 Street as a purchase opportunity above $2.5mm if the asking price had not stuck at $3.495mm. The sellers were willing (eventually) to entertain an offer way below that last ask of $3.495mm, but more people might have figured that out if the last ask had been $3mm. Sitting 20+% above The Market after your only price drop is just not very inviting, except to bottom fishers.

sitting out the market?
Of course I remain interested in where loft buyers come from, and where loft sellers go. The Penthouse C sellers traded down in size from “2,210 sq ft” with 3 terraces and up in Chelsea, by moving from their small building to a very large building across 23 Street, as renters.

Sellers rented this high floor condo unit at 101 West 24 Street in the Chelsea Stratus, perhaps at $7,250/mo. (That “1,113 sq ft” condo unit with a terrace had been purchased on August 25 at $1.78mm; it has Empire State Building views.) They cashed out of the Chelsea Quarter at $2.5mm and should have a lot of cash to pay that Chelsea Stratus rent, having bought at 129 West 20 Street way back in 2000 at $1.604mm. Not as much cash as they might have had, but I think I should stop flogging that horse, finally.

© Sandy Mattingly 2011