cash was king when 152 Wooster Street loft sold

scooping ACRIS
You can’t tell (yet) on StreetEasy or in the city’s system, but the Manhattan loft #5B at 152 Wooster Street sold on June 29 for $2.85mm in cash. That cash is significant, as the seller had a "much higher" offer from someone who would have put down 50%, but took the cash deal instead.

long live the king
I am shocked that cash would command a large premium over a 50% down deal, especially in a small coop loft building described as "intimate, relaxed & reasonable". Every seller makes her own choice about how valuable cash is, compared to the risk that another buyer won’t get financing or pass the board. But I am shocked about this one. I will talk more about that, before talking about this specific loft.

For a coop around $3mm, the attractions for a seller in dealing with a cash buyer are

1.  no uncertainty about a buyer getting financing,
2.  (presumably) a stronger financial package to present to a board (i.e., a slam dunk for approval),
3.  (possibly) a shorter time before closing

Note that the only time you worry about cash buyer vs. mortgaged buyer is when both buyers are well-qualified.

If the two competing buyers are not both well-qualified, then they are not really competing … a seller would only consider selling to the qualified buyer, and not the unqualified buyer, regardless of other circumstances. (By the way, it is possible for a cash buyer to be unqualified to purchase a coop, but that is a topic for another day.) Note also that any timing advantage is likely to be quite limited, as the coop board application + approval process already builds in a lot of time, more than most banks would need to commit to a loan and to prepare for closing.

how valuable is cash?
In general, the value that a particular seller puts on an all cash deal depends completely on that seller. How worried is the seller about getting a buyer approved by the board? How long have they been on the market? Is the cash deal within the seller’s comfort zone, or does the seller have to painfully compromise to accept the cash?

For a recent transaction I worked on, that spread turned out to be less than 5%: that seller would have rejected a buyer-with-mortgage in favor of an all-cash deal in a coop if the cash buyer’s top bid got within 5% of the other (qualified) bidder.

Based on what I was told about the 152 Wooster Street #5B sale, that seller put a much higher premium on the cash deal than any seller I have dealt with.

lovely loft, lovely "project"
As is, the loft is two living spaces, with separate entrances and separate kitchens, suiting the former long-time owners. It is not hard to imagine that the walls went up (and flooring was laid down) over time, as their needs and funds changed. It resulted in some odd choices, in retrospect, such as the larger space having two side-by-side bathrooms that (although they are right next to the master bedroom in the floor plan) are a long way from the master bedroom when you are using the doors, and there are places where the floor is at different levels. But what space!

The ceilings are 11 feet, but (trust me, I have been in it) feel higher. The "3,325 sq ft" footprint is nearly square, with the long east wall being mostly windows. From the 5th floor on this block just below Houston Street, the east light is amazing, and the rooftop views extend quite a ways. The south windows (4) are not nearly so interesting, as they are over the parking lot next door. But there is the possibility of adding one or more south windows toward the corner, which would probably be between-building windows, so would at least provide light and an open look.

a rarefied market segment
The math for any buyer (cash or mortgage) involves costing out a gut renovation and comparing the Purchase + Reno dollars to buying a fully finished coop loft in prime Soho. Of course, there are not many coop lofts this size in prime Soho for sale at any price.

There was no market for this loft last year, as it was offered from March 2009 into December, at $3.39mm and $3.34mm, before coming back to market in February at $3.1mm, when it took just over two months to find a contract. If they had a bidder "much higher" than the $2.85mm cash deal that they did, I would guess they would have gotten the same bid off the old asking price as they did off the last one.

Figure a minimum of $750k for a quality renovation of "3,325 sq ft". Any buyer would expect to pay cash for that, so even the 50% down bidder would have been prepared to pay about $2.25mm in cash to buy and renovate, taking a mortgage of about $1.5mm. That is a lot of cash. That cash buyer is looking at a likely minimum of $3.6mm to buy, gut and renovate. That is really a lot of cash.

Yes, the 2010 Manhattan real estate market is a better market than 2009 (more buyers, with more money, and [probably] more mortgage lending available), but this is still a narrow slice of the market.

© Sandy Mattingly 2010