but wait, there’s more
As they say on late night television, "that’s not all …". When I asked the sellers if they mind me blogging about their active listing, they approved and sent me another link that gives fascinating context for their strategy here. Their inspiration is that items priced on eBay very low ($0.99) got bid up higher than items priced closer to their ‘real’ value. In this context, $850k is equivalent to $0.99 when #11B traded five months ago for $1.465mm (possibly in nicer condition, but still …). Like an eBay auction, they have a time limit: they want all bids in by 5 PM on Sunday, March 15.
(In reviewing this truly fascinating marketing effort [in my oh-so-wordy Manhattan Loft Guy ‘style’] I will offer close criticism, but I do not intend this to be taken as negative criticism. Because they have chosen such a radical approach to marketing, there are many, many questions — which they may have answers to. Regardless, major props to the sellers for attempting this — I wish them luck. )
exposure, exposure, exposure and competition, competition, competition
To the extent that this pricing strategy works on eBay, it is because eBay provides sufficient exposure to expose an item for sale to many, many potential buyers, then gives any bidders up-to-the-minute reports on the state of the auction (how many bidders, thecurrent top bid). Here’s what the seller said about market efficiency in the world of eBay:
(If you’re worried about the market price being less than you’re willing to sell for, you can always set a reserve price.)
In fact, if you start your auction low, I found the chances were actually better that you’d get a price higher than average.
… and about selling an apartment this way …
Although it’s not exactly an “auction,” by setting the price insanely low you will get a lot of offers that will result in a bidding war… as long as you get the word out about your property for sale.
Fortunately, the only thing you have to do that is get it on the MLS… and there are plenty of services that will do that for a flat fee.
These two elements are hard to replicate for a FSBO loft in Manhattan, where we definitely do not have an MLS equivalent to MLSs all out there in America.
With the search and sort capacities of NYTimes.com being so screwed up these days (when are they going to fix that??), this previously reliable medium for FSBOs is diluted in value. Friend Google shows this loft is also exposed on Apartment Therapy this week, but precious little other exposure (Zillow with a Zesteimate of $1.28mm, and StreetEasy with a link to [an open listing ?? on] ArdorNY have front page links; Ardor’s website does not come up on an address search because they don’t list the address; my old Manhattan Loft Guy blog posts about the building also make the front page!).
There’s another gimmick in the marketing that may provide exposure, but who knows how much? The seller apparently runs a web hosting firm, so is offering free web hosting for life to the buyer, whoever refers the buyer, or to anyone who makes a serious offer. That generated this post on an unrelated web site on Google’s second page, but (so far) only one comment. (I wonder if "for life" means as long as you live, or as long as he stays in that business in that form??)
Even with exposure, however, how will this FSBO seller match the fun of competition that eBay can provide? I will grant that $850,000 is his "insanely low" price that should (in an efficient market) start a bidding war. But (remember: nothing personal here) a bidding war on eBay depends on bidders trusting the seller (all eBay sellers are rated) and the other apparent bidders, and on The House to police fraudulent activity (over time, fake bidders should be discovered, but not necessarily in your auction) and to accurately report the bidding.
In the Manhattan real estate world, there are ethical rules even among REBNY brokers that govern best-and-final bidding, so there is a measure of agent-to-agent trust that is essential that process. Of course, it seems that everyone has had experience with a Manhattan real estate agent (probably) bluffing in a negotiation ("if you don’t sign the lease now, there is someone coming in a cab with a check"; "I will get an offer today on this apartment, so if you want to bid, bid now"; "the seller turned down that number last week").
An auction run by a very interested seller who has exclusive access to information about The State Of The Auction is a different scenario than eBay auctions or even a REBNY agent run best-and-final.
committed to selling?
As the seller himself said, "If you’re worried about the market price being less than you’re willing to sell for, you can always set a reserve price". Obviously, he intends to sell above $850,000 after a bidding war. I wonder if he has a reserve price. I don’t see fine print in his process equivalent to a REBNY agent running a best-and-final bid, wherethe agent should disclose if all bidders are deemed "qualified" (718 Broadway is a coop) and whether seller reserves the right to not accept any offer in the best-and-final (i.e., not to sell).
Google is not necessarily friendly
Having Googled the address to see what Internet exposure there might be for this listing, I also found a link to an old discussion on Curbed.com about possible development on the parking lot out the windows of #6B. That brings to mind two adages that might not be adages but should be: (1) ‘exposure’ is a two-way street; and (2) the web lacks a point of view.
degrees of inefficiency
My post about the 4 completed sales in 2006 at 718 Broadway commented directly on the efficient market idea (the bold and italics are new, and I corrected one bit of math):
Buyers with easy access to each of these contemporaneous listings in the same building – listings that were different in size, level of finishes and (possibly) light or views – established the market price for these units. Those marketing conditions were as close to an efficient loft market as you could expect in Manhattan.
I believe that these four building sales in 2006 show that the Manhattan real estate market (at least for lofts) is just not very efficient. In those frothy market days, #6B sold later for $44,000 less than #8B even though #6B had been recently (truly recently) and stunningly renovated, while #8B had a kitchen they admitted needed updating. I’d say that the only advantage that #8B had then over #6B was about 24 feet ofhigher view/better light and that a truly efficient market would have valued #6B over #8B by nearly the cost of upgrading #8B’s kitchen to match #6B’s ($50k-$75k??) instead of #8B having been valued at +$44k.
The spread between #10B and #6B also shows inefficiency. Although #10B was another 24 feet or so higher than #6B and probably had an even nicer renovation, these differences do not account for the $349k gap in trading prices. That is more than a 20% discount for #6B off of #10B’s clearing price. (Of course, asserting that that market at that time in that building was inefficient means that I cannot say which price was ‘right’, and which was ‘wrong’; I can only say that they don’t correlate.)
The current #6B FSBOs have clearly thought all this through. They are counting on getting enough exposure (and enough bidders) to assure efficient pricing and that buyers will trust them enough to play the game under the rules they have set. Gotta appreciate their faith (and hope). I am happy to do my small part in providing a bit more exposure.
To repeat: good luck to them.
© Sandy Mattingly 2009