Oct. 18, 2007 - the virtues of patience as a marketing strategy / 476 Bway gets full ask after 51 weeks
blinking at 'mature' listings
A week ago I asked who
blinked at 79 Laight? contract in 13th month. We won't know until that deal
closes how close that (seemingly) stubborn seller got to the asking price, so maybe the seller blinked and took a big
haircut or maybe the buyer blinked and gave the seller the price being asked.
Then the sales history of #11F at 476 Broadway caught my eye because it had been featured as a
closed sale in the NY Times early this month (you might have to play with that image size in order to read what it
says). Full research showed a long long sales history, capped by a full price contract closing nearly a year after the
last price change.
from May to September, from 2004 to 2007
The owner of #11F at 476 Broadway started to sell in May 2004, asking as much as $3.125mm
and as little as $2.85mm before changing firms in March 2006 and increasing the price to $2.995mm in June 2006. They held
at $2.995mm from June 2006 until signing a contract 51 weeks later and finally closing last month - at $2.995mm.
macro wisdom vs. micro fact
The common wisdom in the real estate business is that a property that does not sell after
being fully and well exposed to the marketplace has a price problem. Sometimes the common wisdom does not apply, with one
example at 476 Broadway and possibly a second example at 79 Laight.
back to The Text
Repeat after me: "Fair Market Value" is the price (a) agreed to by (b) a willing seller and
(c) a willing buyer, both of whom are (d) fully informed and neither of whom is subject to (e) undue compulsion. That is a
basic formulation of a core principle of Econ 101.
Without getting myself too confused here, FMV is relatively easy to discern for commodities
(something there are many of that are essentially inter-changeable) in a market with many buyers and sellers of the
commodity. FMV is much harder to discern when the asset is more or less unique, there are few sellers of similar assets
and few buyers who need or want such an asset.
Sellers of "unique" Manhattan lofts and their agents (enablers?) are the micro-level actors who account for deviation from the
macro-level rules. Thus, in the case of #11F at 476 Broadway, the presumed market "fact" was that the asking price of
$2.995mm did not represent the Fair Market Value of that asset from June 2006 until May 2007 - because no
willing buyer stepped up to it. Yet, in June 2007, a willing buyer agreed to that price and the deal has since closed.
where the rubber meets the road
One could argue that the #11F seller was not a classically "willing" seller before June
2007, because s/he did not adjust the price in light of the market's rejection of $2.995mm as the proposed value of the
asset. Rather than being a market seller, s/he was an I-will-sell-only-if-I-get-my-price seller.
One could argue that if that seller really wanted to sell before June 2007, that
seller had to drop the price in response to market inaction.
I bet various people did argue with that seller. Some bidders, almost
certainly. Probably the seller's agent. Perhaps a spouse. But the seller was stubborn and (ultimately) successful in
getting the price.
That's the behavior that makes The Market. Hundreds of micro events aggregating to a macro.
Not all of which 'make sense' under macro principles.
It's a bitch sometimes, if you are a seller, or a sellers' agent, or a seller's spouse. Or
the reasonable and well-informed buyer who wants to purchase an over-priced asset that cannot be purchased except
above the 'market value'.
© Sandy Mattingly 2007
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