712 Broadway loft sellers are the very model of modern motivated sellers (and unhappy flippers)

4 drops in 80 days, selling at huge haircut
Because it can be hard to track sales by units in the 2-building coop that includes 712 Broadway and 714 Broadway, there is no sales price associated with the StreetEasy listing for the “2,825 sq ft” Manhattan loft on the 3rd floor at 712 Broadway, but if there were, it would appropriately be in red. As would at least the last price drop or two. The pictures suggest a motivated seller (I can almost hear those 2 black leather chairs in the 4th photo pathetically shout out “no one lives here, make an offer … please”, as they are the only furniture in any listing photo), but nothing screams motivation quite like this listing history:

I am going to draw my fingernails across this chalkboard a bit: that’s price drops after 31, 9, 19, and 21 days, of $110,000, $74,000, $96,000, and $229,000. That last one was much larger than the rest and must have hit bone, as the sellers sat there for 7 weeks before (finally!) getting a contract. And what a contract! Off another $340,000 (14%) from the last ask, off 33% (but not quite 7-figures) from where they’d started.

If I’ve seen another example of a price history that screams ‘motivation’ as loudly as this one, I must have covered my ears, or otherwise blocked out the sound.

how to lose money by buying low then selling high
Streeteasy can’t match this listing up with the last time the 3rd floor loft was offered, and sold, either. Comparing that listing to the recent one tells you why the 2011-buyers-turned-2012-sellers were so excited about the loft, without explaining quite how they were over-excited. Yes, they bought low ($1.6mm on November 9, 2011) and sold high (the $2mm you’ve already seen), but the spread between buying at $1.6mm and asking $2.979mm 6 months later suggests they thought they had added huge value by renovating in between, while the spread between their (various) asking prices and their exit price proves The Market was not (very) impressed.

Here is what they bought: the opportunity to …

Design Your Own Floor-thru 2800 sq. ft. Loft!

This true artist’s studio features a wide open and expansive floorplan, approx. 2800SF, high ceilings, rear studio space with poured concrete floors (not pictured on floorplan), passenger and freight elevators direct-to-floor, west and east exposures, tree-lined view, hardwood floors, 1 bath, w/d, & great location!

The post-renovation broker babble is quite enthusiastic about what they did:

Brand new gut renovation of a 2,825 square foot 2 bed, 3 full bath full floor loft … 4 zone central air conditioning, barrel vaulted 12 foot ceilings, exposed beams and brick, solid white oak plank floors, antique Spanish and French tiles, custom zinc counters, Herbeau kitchen facets [sic], Wolf 5 foot self-cleaning double oven range that vents outside, 8 foot long reclaimed pine kitchen work island, Duravit baths, full size Bosch washer/dryer. …. Great light provided by huge thermopane tilt/turn windows with open views down Washington Place to the Park. … sub-basement storage room …, walk-in closets, built-in bookcases, huge pantry closet with space for waste and recycling cans, plus 20 x 25 foot vaulted storage attic. All rooms wired for cable/Internet/phone. Finished with 0% V.O.C. paints, waxed pine doors and water-based satin floor finishes. A special property, thoughtfully restored by true craftsmen.

I’ve already snarked on the photos (the black leather chairs), but I will have to take their word for the quality of the work and the truthiness of the craftsmen. I see wonderfully restored bones (the brick walls and [especially] valued ceilings, the front windows, the new floors) but the kitchen and bath photos leave me cold. Let’s just say that the plumbing rooms pictured are very stylized but not to my style, and not to a style that (to my eye) matches the loft character they so painstakingly (and truthfully) revealed or recreated.

Among other dissonant choices: the (huge!) kitchen appliances are stainless and the custom counters are zinc, yet the towel bar in front of the sink, the faucet, and the electrical outlets above the counter are finished in … brass? (As is the pot faucet above the [stainless] Wolf range and below the [stainless] hood.)

I won’t even take a stab at guessing the renovation that resulted in the truthy work (sealing all that brick!), the thoughtful materials (no VOC paints!), the designer faucets, custom this-or-that, new (4-zone!) air, new thermopane windows just 25 feet over Broadway, and the other elements in a (huge: 20×13 ft) kitchen or the 3 new full baths. Let’s just say that it blew past the old ballpark figure of $200/ft I’ve been using for a full loft renovation of basic (good) quality.

Take the $1.6mm they paid in November 2011, add a renovation budget well beyond basic (good) quality at $200/ft, and you are well beyond $2.1mm in hard costs before getting tinto transaction expenses and costs of carry. If I am not reading too much into that last (painful, large) price drop (I probably am, but you see where I am going), $2.34mm was a meaningful number for these erstwhile flippers. $734,000 in renovation costs for a “2,825 sq ft” loft is hardly out of the question (just $260/ft) and is probably low. Pain, indeed.

But they endured the pain, if not embraced it, in the sequence of price drops in the listing history above, and (especially) in negotiating to an exit a mere $400,000 above their November 2011 entry price (before renovation, obviously). Is there any chance at all that they could have gotten all that Euro-tiling and no-VOC-painting (etc, etc) done at $142/ft? Not unless they are so closely related to a large team of craftsmen that they didn’t have to pay them in money, and unless they owned discount suppliers of high-end materials.

blame the guy downstairs
I have to believe they were distracted by the experience of the loft below. Two months before they signed their contract to buy the 3rd floor (full history is below), the 2nd floor loft went into contract at $2.7mm. That one was beautifully renovated indeed (more on that soon), so there was certainly potential to buy-fix-and-flip at this address, if one could buy low (enough), renovate well but inexpensively (enough), and tap a buyer pool that would appreciate the work that was done enough to make the whole thing profitable (enough).

We know it didn’t work out, but the fact that the 3rd floor sold for $2.7mm in July 2011 means the idea was not crazy.

Remember my snark a few paragraphs up about having craftsmen in the family and access to quality materials? I will always regret not having blogged about that 2nd floor loft when it sold … it remains one of my all-time favorite classic loft renovations, and was done by a guy with lots of friends in the trades and with access to low-cost materials. (Regrets? [oh yes] I’ve had a few.) That guy also had impeccable taste (even if they did largely match mine), the patience to do the job right, and the foresight to have done it many years earlier (perhaps 10; I can’t remember at this point).

I have seen the 2nd floor loft up close, a few times. Those listing photos don’t quite show the quality of the work (just as they might not in the 3rd floor), but every detail was finished to a very high standard on the 2nd floor, including those that I might have done differently (the platform under the bed, the sauna). Maybe I am cheating here, but those listing photos obviously show an empty (unlived in) loft, but the black leather furniture in the 2nd floor photos do not strike me as pathetically screaming at all.

By the time the 3rd floor flippers came to market on May 12, 2012 at $2.979mm, the guy who bought that lovely 2nd floor loft for $2.7mm had been trying to flip the 2nd floor at $3.2mm for almost  6 months, and had just dropped the ask to $2.995mm. If you squinted just right in May of 2012, you could apparently convince yourself that there were two lofts in this 8-story building in the very NYU part of Noho worth almost $3mm.

By the time the still-not-a-flipper on the 2nd floor bailed from the market in August at $2.75mm, the still-NEED-to-be-flippers on the 3rd floor were down to $2.34mm, touching bone. You know what happened after that.

I have to guess that the 2nd floor history had an impact on the 3rd floor decisions. The timing and values match too closely for this to be a mere coincidence except in a world governed by capricious Manhattan Loft Gods. (Say it ain’t so.) Let’s take a look at what happened before our folks bought the 3rd floor, to see caprice in action.

they weren’t the only ones who over-valued the loft
The long-time owner of the 3rd floor (a “true artist”, they claim) thought the loft was worth a lot more than The Market did, circa 2010, as demonstrated by this history:

I am not going to beat this horse much longer, but note what that last Summer sequence implies. The true artist over-corrected by dropping to $1.5mm, to the extent that there was enough competition (finally!) to drive the eventual clearing price up to $1.6mm.

Settle on that for a sec …. The 2011-buyers-at-$1.6mm-turned-unhappy-flippers-in-2012-at-$2mm came thisclose to someone buying the opportunity out from under them before they got started picking out tile and faucets.

Regrets? They have a few….

a word to the wise
We see that the Manhattan Loft Gods can be capricious. Don’t make them angry. Sufficient?

© Sandy Mattingly 2013