Aug. 21, 2009 - risk, revisited / I am still a coward, but the 'brave' did not sell (yet)
checking back on the Spring
I recently had a conversation with a former shareholder in one of the Manhattan loft buildings that I visited in my March 25 lengthy rumination, am I a coward? assessing + bearing risk in a risky world, as she was curious about how her former neighbor's loft was (was not) selling. So I went back to look at the listing history of the three lofts I used as the specific scenarios that generated this conclusion:
whose risk is it anyway?
Agents are supposed to explain risk; sellers bear nearly all the risk. If courage is measured by the potential consequences one is willing to (knowingly) assume, these sellers are more brave than most. In addition, these agents are more brave than I am, as I would be very afraid of wasting my time with a listing at a price with a small prospect of finding 'the' buyer -- unless I had a firm commitment to 'take a shot' then address the price 'accordingly'. So there's risk all around.
More for the seller, no?
bravery is not rewarded
None of the three lofts has sold, but each has reacted to The Market a little differently.
One took one (very mild) shot at a price drop, reducing the asking price by 3% after 2 months. It went off the market "temporarily" a few weeks later. Perhaps it will come back after Labor Day. My guess is that it won't be back any time soon, or (if it does come back) that it will come back at a much sharper discount. This seller does not look like someone who
really
wants to sell.
That one appears to fit this profile, as they have made
no
serious effort to 'catch up to the active market':
To be even more pedantic about it, the law of supply and demand requires that some of these lofts priced above The Market will never sell -- not just that they will sell for fewer dollars. The ones that are over-priced today may be nimble enough to catch up to the active market, but they will be competing with an increasing number of new-to-market lofts. Some will simply never catch up.
The second one has tried, and tried, and tried. In fact, that one nearly fits one projection I offered on March 25:
Again, I assume that the sellers mentioned here have discussed all this with their experienced and professional agents and that the sellers have decided to run the risk that their unique lofts will do better than The Market would indicate generally, because their lofts are better than the general lofts. But if these sellers really want to sell, I assume that they have a plan in mind to adjust their prices if (when) they learn that The Market disagrees.
To me, if they have a $2mm listing, that means I expect them to be prepared to drop the price every month or so by six figures until they at least reach a point of serious interest from buyers. I hope they would consider a 'ridiculous' low ball offer if one came in early in the listing, but I suspect we will not see an immediate negotiation to a clearing price 25% off the ask. [Emphasis added]
That one started a bit under $2mm and dropped the price 3 times, changing the second digit each time. Problem (for them) is that they have dropped 20%+ and they have a 'tired' listing (about half-way to a birthday, so far). They may yet be willing to negotiate to a deal, but they have yet to attract a serious bidder. That female dog --
Hindsight, here, Hindsight
-- is barking that if they had started in February where they are now they would probably have struck a deal long since.
The third has taken yet another tack, sort of / kind of midway between the other two. That one has dropped twice, but mildly (about 7%, total), in nearly 6 months, with no price change in about 2 months. Manifestly, they have not found the part of The Market where the buyers are (
i.e.
, they have not been able [willing?] to 'catch up to the active market').
These sellers have seriously upgraded the loft since they bought it some years ago. Perhaps they are overmuch in love with their renovation, fitting this profile in my March 25 rumination:
Yet these well-served sellers decided to start marketing their lofts as if some serious buyers would be attracted by a price that most buyers would see as too high. Perhaps because their lofts are "unique"....
Loft snob that I am, I am ready to believe that many lofts are "unique", at least as that tired word is used in the real estate industrial complex, and certainly as compared to "apartments". So the temptation is for a seller to think that -- since "it only takes one" (buyer) to make a sale -- someone will agree with the seller that this loft, with this dazzling light, in this beyond triple mint condition, with landmark (protected!) views, with a gracious layout and spacious feel, on the best block in [insert nabe here], and that that someone has the means to buy the darn thing today, near the asking price.
Their problem -- to date -- is that no one else provably loves their loft as much as they do. Thus, no one has bought it out from under them. Even at the current price (down 7% in nearly 6 months) no one is likely to. Perhaps they plan to drop again after Labor Day, in a more significant way. If they
really
want to sell (like the second loft mentioned, but unlike the first), I can only hope that my assumption is correct that they have fully understood what they have been doing here:
As I said, I assume that these sellers understand the risk in asking these prices in these times. But I will be explicit, because readers who have not had to do this analysis may not -- and because Manhattan Loft Guy is just ... wordy (repentant, but wordy). Of course there is a risk that these sellers will end up selling for fewer dollars after a longer time than if they had priced closer to The Market to begin with, and that the number of dollars and additional months will be determined by their speed in dropping the price when they are unsuccessful. Of course, if current trends continue in the near term, the more months it takes, the fewer dollars there will be. But (in the immortal) words of late night television, that's not all!
I assume that these sellers also understand that there is a serious risk that their pricing will prevent them from getting any dollars for these lofts, not merely fewer dollars.
My guess is that they have gotten similar advice from their agent that the second loft owners got, but have been too stubborn to take it (so far). Absent a more aggressive price, I see this one as lingering on The Market until the listing expires.
more brave than I
In the first case, the more-brave-than-I agent made a 2-month investment of time and effort. In the second case, the more-brave-than-I agent had a seller with a Plan B, but has invested a lot with no return (yet). In the third case, the more-brave-than-I agent has (perhaps) been sucked into a great deal of effort and no reasonable expectation of making a sale until (unless) the sellers change their approach.
To repeat (again!):
these agents are more brave than I am, as I would be very afraid of wasting my time with a listing at a price with a small prospect of finding 'the' buyer -- unless I had a firm commitment to 'take a shot' then address the price 'accordingly'. So there's risk all around.
More for the seller, no?
I just hope the sellers understood what they were doing, way back when they started these marketing campaigns.
COUNTDOWN: 10 ... 9 ... 8 ... 7 ... 6 ... 5 [oops] ... 4 ... 3 ... 2 ... 1 ...
© Sandy Mattingly 2009
| 
RSS Blog Feed