Jul. 31, 2009 - why isn't a Tribeca premium renovation worth at least 250/ft?
a distraction?
You'd think that a stem-to-stern high quality renovation of a Manhattan loft would both (a) cost and (b) be worth at least $250/ft, wouldn't you? There is a loft in prime Tribeca that was gutted after being purchased in April 2007 right around $1,000/ft and is now being offered for sale around $1,250/ft. The renovation is pretty spectacular (more on that below). The asking price has not worked (yet) after a couple of months, but seems a reasonable beginning to a negotiation that should sell this thing around (maybe a little less than) the 2007 value, adjusting for the value of the renovation. Which makes me wonder if The Market is -- in this case -- unwilling to pay for the renovation because it is distracted. (I believe there is a market for quality.)
verbiage of value
I am a big fan of detailed bragging -- when there is something worth bragging about. This loft is being marketed with very detailed bragging (proper proper names, materials, custom features), all of which seems worthy. The description is much more detailed than this experienced and professional listing agent usually provides, which is by itself an impressive feature to close readers of broker-babble. Given the proper proper names, materials, and evident craftsmanship in the work, I would be shocked if this renovation cost less than $250/ft and could well have been much more. (For my post about ball-parking a renovation at $200/ft, see especially the comments from December 10, 2007 need renovation stories / a reader writes for help.) To repeat (again) (he said redundantly) this is not a "basic" gut job.
not buying it (yet)
A couple of months on the market does not mean that the current asking price won't work, but it clearly has not worked yet. Why not? The 2007 clearing price was $1,000/ft; the 2009 asking price is $1,250/ft. Buyers are undoubtedly using their own standards to assess whether the April 2007 value should be adjusted down, and by how much, but I wonder if they are getting hung up on how to value the work that has been done since. Even if you estimate a 10% reduction in value from April 2007 to now, I suspect that one could prove that the renovation cost enough to justify the current ask (i.e., $350/ft, or more). Certainly you'd be in the ballpark to attract an offer from the $1,250 asking price on any reasonable (to me) assumptions about the change in market values 2007-to-2009 and the worth of the renovation.
show the cost?
There may well be a difference between what an owner paid to renovate and what The Market thinks the renovation is worth on resale. But this one has not moved yet and any reasonable (to me) spread between Cost and Value should not preclude a bid from this asking price. Let me make something explicit about my read of the renovation: sometimes people over-improve a space, adding features, finishes or materials that no one else would possibly see as "worth it". This is not that loft. I see value in what has been added, not vanity.
I wonder if they have thought about showing interested buyers the cost of the renovation. I sold an apartment once that we priced about 20% higher than a very recent sale of the very same floor plan one floor above. We priced it there because the seller wanted to get her money back from a rather (to be generous) idiosyncratic renovation. (She actually wanted to price it much higher, because she had spent a ton of money, but was prevailed upon to moderate -- a bit.) We faced up to the obvious challenge directly, telling people the price was justified by the (Low) Comp Plus The Renovation and providing details about materials and costs. We sold at a slight discount from ask to a buyer who (obviously) agreed that the renovation added sufficient value to justify the price. (For what it is worth, it also appraised appropriately.)
Maybe this loft should be marketed with a folder of drawings, specs and receipts. Or maybe they should just be patient, as some buyer out there is likely to appreciate what they have done and may have the scratch to pay appropriate value for it. FAS-cin-ating.
© Sandy Mattingly 2009
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