it’s only $15,000, but 449 Washington Street sales show the value of secrets to developers

there’s a celebrity angle to this Tribeca loft story

I don’t usually talk about Manhattan loft sales in new development projects, but the recent publicity for the sale of a “1,665 sq ft” Manhattan loft denominated “Unit 3” at 449 Washington Street both caught my eye and provides a wonderful example of the way new development sales can distort the market (in this case, how the knowledge imbalance between developer and buyers can cost the buyers money, which developers see as a feature rather than a bug in the current Wild West system regarding new development sales information). As you will see in the linked deed record on StreetEasy, some cute family trust with a famous trustee paid $3,029,292 for that Unit 3, which made The Real Deal (first place I saw it), the New York Observer, the New York Daily News, City Realty’s worthwhile 6sqft blog, and (probably) every other news site that covers the celebrity real estate space.

Far be it from me to criticize anyone for talking about the celebrities that buy (or sell) Tribeca lofts (ahem), but the most interesting thing about the Zero Dark Thirty $3,029,292 purchase isn’t the buyer but the neighbor. The One Who Soft Pedals Torture has a new neighbor who paid $3,044,282 for the identical loft one floor below. In a (very hypothetical) world in which buyers and sellers have the same information, you would not expect the buyer of a higher floor loft to pay less than the buyer of a lower floor loft. In the present reality of Manhattan new residential development, that happens all the time. Let me explain how, and why.

a tawdry form of Golden Rule applies in Manhattan real estate

Cynics say ‘those who have the gold make the rules‘, and realists sigh. In this case, the rules have to do with reporting transaction information within the Real Estate Board of New York, and the fact that public information about sales is never ‘public’ until the deed is filed (i.e., when the developer decides to sell to buyers under contract). In many instances in which there are two or more units for sale in a building with one in contract but not yet closed, there are ways for an agent representing a buyer interested in a (still) active sale listing to get an idea of the contract price for the unit that has not yet sold. Agents often as a courtesy offer information of more or less specificity (“we got very close to the ask”, or “we’re above ask”, or “tell me what your bidder is bidding and maybe I will comment”), especially if the seller’s agent of the in-contract unit is from the same firm of the agent for the bidder on the other unit. (Sometimes this happens when buyer agents are for the same firm, but it is difficult to identify buyer agents, especially before they close.)

I know from our listing data base (449 Washington Street is a Corcoran listing) when the two loft deals were struck. The Unit 2 (asking $3mm) buyer made an offer that was accepted by May 22, signed a contract by June 2, and (finally) closed on February 5 at the $3,044,282 above. (People familiar with how prices on deeds are recorded [and that buyers of new developments typically pay the NYS and NYC transfer fees that the seller would otherwise pay] have already done the math and know that the contract price for Unit 2 must have been $2,989,720.) Unit 3 had a very similar history off an asking price of $3.1mm, with the celebrity buyer making an offer that was accepted four weeks earlier (April 24) that was in contract by May 16 (a week before the Unit 2 deal was negotiated) and that (finally) closed on February 6 at the $3,029,292 above. (Yes, that’s as though the contract price was $2,975,000, with the buyer picking up the 1.825% transfer fees [maybe there’s a two dollar rounding error somewhere].)

To review: the developer had been offering both lofts since June 2013, and found a buyer (and signed a contract) for the higher floor unit about a week before the bidder for the lower floor loft made a bid. The developer knew the contract price for the celebrity unit, but was under no obligation to advise the new bidder, there was no public record of the other contract, and it was unlikely that the buyer’s agent would find out the contract price on the other unit. As a result, the second buyer paid about $15,000 more than the first buyer, for a lower floor loft.

In a perfect world, that only happens if the second buyer knows but the developer won’t budge, and the second buyer pays ‘more’ anyway.

Granted, this is only about $15,000, and the time between the two deals was pretty short. But in a larger development, this can happen with buyers who negotiate in the dark months apart, since prices are only ‘public’ when deeds are filed, and closings are only scheduled when the developer is ready to close enough units to make scheduling a series of closings worthwhile. (Often, sellers will finish a floor enough to get a Certificate of Occupancy based on which units are in contract.) Imagine being the ‘second’ buyer who finds out (when everybody closes and moves in) that he paid significantly more than a buyer of a substantially identical unit, sometimes because they made their deals at very different times, and sometimes because one buyer simply drove a harder bargain than another. It happens, pretty much any time a developer is willing to negotiate about asking prices, or to make other concessions. (Throw in a storage unit, or pay attorneys’ fees, or do a ‘free’ upgrade of finishes or appliances.)

Tough luck, buddy.

the numbering system for condo units perplexes StreetEasy

I really hope that another wrinkle about new development sales that can make them hard to track is not a feature, but a bug. The celebrity loft was “Unit 3” and the other “Unit 2” (as above, from the deed records) and we know from the StreetEasy building page (Tab 2, Past Activity) that there were two units for sale that were no longer available last month. Trust me on this: it is clear from the Corcoran listing system that “Unit 3” is the the 4th Floor loft, and “Unit 2” is the 3rd Floor loft. I don’t know the reason a developer would do this, but am willing to assume that this developer did not do this in order to confuse me. (Or you.) As I said, a bug (I hope), not a feature. (Maybe the Commercial Unit 1 is a duplex below the third floor Unit 2?) But I do know how these things happen (or are permitted to happen).

Developers have to identify new condo units when they file the tax lots for each unit, and (I suspect) they can use whatever system they like. You will sometimes see a new development with letter units, “A”, “B”, etc, that no letter carrier would recognize once people move in. Or a system that uses a two-digit numbering system (“21”, “22”, etc) that (maddeningly) does not correspond to units on, say, the second floor. ACRIS (and StreetEasy) may never catch up with this. Click the All Activity option on the Past Activity tab for 40 Mercer Street to see an example of original sales associated with units with two digit number designations, and resales with a Number-Letter designation that any pizza delivery guy would need. You may have your own favorite examples.

Enough minutia about recording deeds and designating units. Go back to looking for celebrity loft purchases or sales. And let me know of any that are interesting for reasons other than the identity of the parties.

 

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