Seaport loft in very old building sells up $10,473 over 2005, neighbors tremble

can’t blame That Storm
Manhattan lofts in buildings with slim past sales histories are, of course, difficult to comp. (If you are a buyer or an appraiser, or a Very Interested Spectator of the Manhattan residential real estate game.) And difficult to price. (If you are a seller or listing agent.) Such was the conundrum facing the seller and listing agent of the “1,424 sq ft” Manhattan loft #3R at 273 Water Street, in a 4-unit condo in which the last sale was … way back in 2005, when this seller bought #3R.

Given that they guy paid $1,089,527 then, asking (only) $1.225mm when coming to market on May 2, 2012 could be seen as a sign of humility, a (mere) 12% above the 2005 purchase price. The price drop after just 3 weeks to $1.15mm (a tiny 5% above 2005) then looks like an immodest attempt at humility. Perhaps tired of maintaining virtue, the seller dug in stubbornly at $1.15mm, with no further price drop until the contract was (finally!) signed by October 26. (As an aside about stubbornness, I have to wonder who was so stubborn in the post-contract period to delay closing until February 21; 4 months is a long time between a condo contract and closing.)

If you’ve been doing the math as these numbers are revealed, you already know that the (eventual) clearing price was $1.1mm, or $1,089,527 + $10,473. That’s almost a 1% “gain” for those tired of doing their own math. In other words, a more significant net loss, after paying a sales fee, New York City and State transfer taxes and other closing costs.

which one is the ‘wrong’ price?
Let’s slow down and stare at those numbers. The guy who paid $1,089,527 for loft #3R in April 2005 was hardly one of those (rudely derided) “greedy” sellers, asking first a 12% premium, then a 5% premium, but could not find a buyer for 6 months, when the best he could do was $10,473 more than he paid, which is more like a rounding error than a gain. O. U. C. H. A net loss of 6%, at least.

Since (we can agree) the overall Manhattan residential real estate market is not flat, 2005 v. 2012 (or 2013), if we want to be polite and consider the market as somewhat rational it appears that the problem was the 2005 price (too high) rather than the 2013 price. Yes, any arm’s length real estate transaction is (by definition) “at” The Market, but if you forced me to choose, 2012 into 2013 was much more of a seller’s market than a buyer’s market, with buyers famously starved for inventory. I would alibi this 2012 into 2013 at $772/ft as a micro-nabe issue, unless there are building problems I am unaware of.

That’s an unfair hint to make you guess that one micro-nabe issue that might account for the too small spread between the 2005 price (high) and the 2013 price (too low) had something to do with the Zone A thing-y that StreetEasy now helpfully appends to buildings in FEMA Flood Zone A. That’s unfair, because That Darn Storm (please don’t use the name given to it during its hurricane career) didn’t hit New York until Monday night, October 29 last year … at least 3 days after this contract was signed, a blissful period of ignorance (as it turns out) of storm surge damage potential for Zone A buildings in lower Manhattan. (I guess I just explained why this October 26 contract did not close for an unusually long time.)

the cost of mis-pricing can be high (unknowable, but high)
Under ‘normal’ market conditions, sellers keep dropping their price to attract one of the (normally) plentiful buyers out there. That might apply to the 2012 marketing campaign for #3R, with the seller going against that conventional wisdom to hold to a price that might give him a gross gain, but what I really want to focus on is the time between 2005 and 2012 when the 2005-buyer-turned-2013-seller tried to sell, without success. I trust our listing system more than I trust the scraps of information available on Streeteasy about the prior campaign:

Sept 16, 2007 new to market $1.495mm
Jan 9, 2008   $1.445mm
Mar 17   $1.3mm
July 30   $1.18mm
Dec 2 off the market  

You know the calendar for the overall Manhattan residential real estate market: that first asking price was just about 3 months before Peak Manhattan, the first and second price drops were at Peak Manhattan, the 3rd drop was in a period of flat pricing but reduced activity, and by the time the seller gave up the market was in deep freeze.

Retrospect is cruelly clear: starting at +37% over 2005 was a mistake, in the deepest set of buyers Manhattan has seen to date. As was +33%, and even +19%. The guy seemed to be negotiable in those days (note the next price drop), further supporting my theory that the 2005 price was the ‘wrong’ market price (it does not fit with the observed clearing price in 2013 or with the observed failing-to-clear prices in 2008).

Obviously, 2007 and 2008 were missed opportunities for this would-be seller. I have to believe that if he had started in September 2007 at $1.3mm, then adjusted as and if necessary, he would have sold (at higher than $1.1mm). Can’t prove it, but that’s my best guess. That period from August into mid-September 2008 is a bit troubling for fans of a rational market, but I would guess (reasoning backwards) that the listing was just too tired by then, so the shrinking buyer pool passed on loft #3R. Until September 15, 2008, after which the shrinking buyer pool passed on pretty much everything.

Then the would-be seller tried this (StreetEasy matches our listing system this time):

Oct 28, 2009 back on the market $1.2mm
April 26 2010 off the market

Rational market fans will have trouble explaining that failure. (Regardless, more evidence suggesting that 2005 was a too-high purchase.)

what’s not to like in this picture (or floor plan)?
Hint: not much. The interior space of #3R is a fairly conventional duplex of roughly even-sized stacked boxes, with the standard complaint about such a floor plan, that it ‘wastes’ space with the stairway and the don’t-clog-with-furniture spaces at the top and bottom of the stairs. In this instance, there is also the very inefficient space upstairs between the bath and the closet along the west wall. But “1,424 sq ft” should be more than enough space for a comfortable 2-bedroom set-up, even with this wasted space, as it proves to be with a nearly square 400+ sq ft living / dining space downstairs and 2 good-sized bedrooms upstairs.

These defects from the ideal could well drive the $/ft to the observed anemic $772/ft. But then you’d have to count 180 sq ft of private rooftop “patio” as free space. Let’s, instead, count it as worth 25% of the interior (no direct access from a residential space), yielding an adjusted value of an even more anemic $749/ft.

Note that there is no enthusiastic bragging in any of 3 sets of broker babble about the interior finishes. (A kitchen described merely as “open” and no comment about finishes other than the floors being “hard wood” is the very exemplar of a lack of enthusiasm in babbling.) So there’s nothing special about the space (ceilings look a little low, don’t they; un-loft-y for a 19th century loft building but not for one from the 18th century), and no views to speak of (none spoken of, at the least).

An adjusted $749/ft begins to make more sense, doesn’t it? I still can’t figure out that 2005 price, however. Neither (now) can the 2005-buyer-turned-2013-seller, especially having been a non-seller for 3 months in 2007, 11 months in 2008, 2 months in 2009, and 4 months in 2010.

The neighbors who were probably thrilled to have seen that 2005 purchase are now brought back to earth. Not as hard as the #3R seller, of course. O. U. C. H., indeed.

© Sandy Mattingly 2013


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