« An Update on 18-29 Jackson Place Checking In On 349 Metropolitan Avenue »

August 12, 2008

Shenanigans at 279 Clermont Avenue?

When the four-story brownstone at 279 Clermont Avenue in Fort Greene hit the Corcoran website in early July at the surprisingly-low price of $1,382,000, it seemed like a classic, and probably quite smart, strategy for bringing out the bidders. (It had failed to sell earlier in the summer at a much higher price with a broker called Prospective Properties; we included it as an Open House Pick for $1,748,000 back in June.) In fact, there was enough interest that the seller held a "best and final" closed bidding process two weeks ago. One reader who took place in the process and bid over the asking price was more than a little miffed to find out ten days later that the seller had decided not to accept any of the bids. Instead, the listing re-appeared with a new asking price of $1,610,325. Illegal, immoral or just uncool?
279 Clermont Avenue [Corcoran] GMAP P*Shark

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uncool, annoying and idiotic, but that's probably all.

Posted by: i disagree at August 12, 2008 11:45 AM

also sleazy, unprofessional and Corcoran-ish

Posted by: daveinbedstuy at August 12, 2008 11:50 AM

illegal: no
uncool: yes
immoral: i dunno, everyone knows that nothing is set in stone until the contract is signed

the new asking price is unusually specific. that $325 must be very important to them!

Posted by: z at August 12, 2008 11:52 AM

Slimy. The eventual buyer has been given fair warning: the price they agree upon with the seller will be dangled as bait for other buyers for however long the seller can stretch out the contract signing process. Smart buyers will push through a short contract-sign period, like 48 hours, or they're gonna get screwed too.

Posted by: zeebee_in_bklyn at August 12, 2008 11:58 AM

Definitely not cool, but that's about it.

I am guessing that the highest offer was close to or equal to the new asking price (maybe that's what triggered the odd pricing). In any event, I think this could certainly backfire. Are there really that many new prospective buyers that may have cropped up since they last accepted offers a month ago? It seems that the people that were legitimately interested in this made their offers already.

Posted by: cortnyc at August 12, 2008 11:58 AM

dave - also not that surprising, is it?

z - far be it from me to defend the corco-devil, but it sounds like there wasn't even an accepted bid, much less a contract signed.

Posted by: i disagree at August 12, 2008 11:59 AM

Also annoying is the stupid names these brokers always give their properties.

Posted by: wasder at August 12, 2008 12:05 PM

Wasder..

Ur right. I can't stand that.

Posted by: Brooklyns_da_Boro at August 12, 2008 12:09 PM

I think this is more pushed by the buyer than the broker. If I were the broker, I would rather have a done deal at 1.5 than starting the whole process over again to get more money. I think at most this would net the broker an extra 3-5k (and likely less in his pocket). If there is a buyers broker, its even less 2-4k.

Posted by: cortnyc at August 12, 2008 12:11 PM

No more illegal, immoral and uncool than the hot money behind it's inflated "value".

RE is a dirty game, especially in NYC. Take the good with the bad.

Posted by: DOW8000SP800 at August 12, 2008 12:12 PM

Can we talk about the LAAAAMMEE green angle the brokers have thrown into this listing as well? If I were a buyer, I would wash my hands of the whole thing.

Posted by: new2hood at August 12, 2008 12:17 PM

Cue your other persona: Right on DOW8000! These asshats is drunk on Hot Money!

The What

Posted by: wasder at August 12, 2008 12:18 PM

"...more pushed by the buyer than the broker..."

Gotta be. Psychology is weird. I'm sure the seller was swayed back and forth between the alternating bullish and bearish news in the media.

Greed is risky in this slowing market. It may backfire. It seems they should be grateful for One and a Half. But who knows? It's a nice fixer-upper in a nice location. I think it'll be worth a lot less in the future but it should move today near ask.

Posted by: DOW8000SP800 at August 12, 2008 12:22 PM

See we don't even need your other persona DOW. This one works fine and the rest of us can fill in the profanity gaps.

Posted by: wasder at August 12, 2008 12:23 PM

That's real shitty! But I'm not surprised...anything goes when trying to sell a house these days. And mentioning GREEN in the ad is lame at best.

Posted by: A ClintonHillLady at August 12, 2008 12:23 PM

Oscar nomination, wasder. Sorry innocent bystanders.

Posted by: DOW8000SP800 at August 12, 2008 12:24 PM

I think this illustrates the cooling down of the market. I'm sure the sellers expected at least 1.7 for the vacant
4-unit building. They would have gotten it last year but now it may be tough sell. The house has potential but it would require a great deal of money to restore it to a quality family home.

Posted by: sam at August 12, 2008 12:28 PM

Thanks DOW. Your use of the term "hot money" was too much to pass up.

I agree by the way that this house will likely be worth less in a few years and that greed is very risky in this market. Having conducted both a sale and a purchase in the last few weeks I can testify that if you price reasonably you can still sell. I do think that long term though this house would be a great investment at 1.5.

DOW--if you are not What I am sorry. If you are, then you are doing a really good impression of what he/she would sound like minus the epithets and punctuation mistakes (yesterdays "comprimised kithen" not withstanding).

Posted by: wasder at August 12, 2008 12:32 PM

Do you guys remember the earlier ridiculous offer of purchasing this property in one or two pieces at crazy prices?

Posted by: DOW8000SP800 at August 12, 2008 12:32 PM

I really hope this place ends up languishing on the market and selling for less than the highest bid in the auction. Sweet market justice.

Posted by: lechacal at August 12, 2008 12:36 PM

how much would a decent-but-not fancy reno of this place cost? 600k + carrying costs?

Posted by: i disagree at August 12, 2008 12:36 PM

"I do think that long term though this house would be a great investment at 1.5."

Real terms? What if the market halves itself in real terms (say -25% nominally). You think we're gonna have another run-up like we've just experienced (again, in real terms), before we die? Inflation is very deceptive. Maybe the illusion of escalating value that nominal terms create is good enough for some.

Sometimes my wife "puts a gun to my head" and demands we push the "buy" button but I'm just not convinced that a "good" buy is anything other than emotional one. I do not enjoy overpaying. I'm a hardball negotiator by nature.

Posted by: DOW8000SP800 at August 12, 2008 12:47 PM

I don't know if I expect another run up similar to the one in the early 2000's but I also don't expect a drop in the terms that you are expecting (but in matters macro-economic I confess to a limited knowledge base). My guess is that if you bought that house for 1.5 this year it would probably be "worth" more like 1.2 or 1.3 in a year or two. Then even without a run-up or bubble, I do think long term it would have to be worth more than 1.5 in 20 years (in 2028 dollars).

But you raise an interesting point about whether a good purchase is an emotional one only. Clearly there is a lot of emotion that goes through a large house purchase, but one thing that the "value" conversation doesn't take into consideration is all the enjoyment and sense of community that comes built into a home in a neighborhood one likes.

Posted by: wasder at August 12, 2008 1:01 PM

This happens so much in the NYC market. I wish it was illegal to "fish." Isn't that essentially what the inital price did - fish for higher/highest offers?

@ wasder 1:01pm - that is a big difference/drop of 1.5 versus 1.3 mil. Do you really think it would take 20 years to recover to our current prices?

Posted by: helppls at August 12, 2008 1:12 PM

Illgal, no. Typical for real estate in NYC? Yes.

Karma, however, is a bitch.

Posted by: BrooklynButler at August 12, 2008 1:14 PM

helppls

Why would this be illegal? If anything, I wish posting prices would be illegal.

Auctions and haggling were the way business was done for the entirety of human history until the 20th century. If anything, the indoctrination of the American people to be debt enslaved consumers has been well served by the sheep mentality of the shopper who simply assumes the posted price is the one that has to be paid.

Posted by: Polemicist at August 12, 2008 1:16 PM

Given that most of us seem to think that this real estate ploy was, at the very least, uncool and sleazy, with the possibility of a well-deserved karmic backlash, then we should consider it having been unethical rather than immoral.

Jerks.

And the green thing made me throw up in my mouth a little.

Posted by: Nokilissa at August 12, 2008 1:24 PM

@ wasder 1:01pm - that is a big difference/drop of 1.5 versus 1.3 mil. Do you really think it would take 20 years to recover to our current prices?

helppls--Who knows? I tossed 20 years out there fairly randomly as a marker for when you could be reasonably assured that the investment aspect was on solid ground. My larger point is that if you are buying for the long haul to live in the property, some of the harder edged financial concerns are mitigated by the actual value of your enjoyment of living there.

Posted by: wasder at August 12, 2008 1:33 PM

Wasder,

Look backwards on this graph: http://tinyurl.com/g9vf4

Do you still think that "even without a run-up or bubble...long term it would have to be worth more than 1.5 in 20 years (in 2028 dollars)"?

If you do, I agree to disagree.

Posted by: DOW8000SP800 at August 12, 2008 1:38 PM

Seller is stupid. Good luck to you.

Posted by: billyboomer at August 12, 2008 1:38 PM

I went to the open house about a month ago. On the surface, the house appeared to be priced well. I can attest to the accuracy of the above-described scenario, as I participated in the "best and final" round. Regardless of the poorly run process by Corcoran, there are a few material considerations that one must assess if one were to even think about dealing with an illogical seller that will take any opportunity to capture the last possible dollar even if that means using unethical negotiating tactics.

Careful examination of the mechanicals revealed a few key concerns in the foundation (significant leaks and erosion of main supporting beam). $600k and 6-9 months is a reasonable estimate for a modest renovation. Additionally, this is a legal four family, so closing costs are a minimum of ~60k even if you find a lender that doesnt charge any extra processing fees. Add that, along with your carrying cost of ~7500 per month during the 6-9 months while you have the place renovated (~45k total), as well as the stress of the renovation, and you are looking at an all in outlay of over $2.3M at the new asking price. This doesnt even consider that mortgage rates have jumped almost 75 basis points in the past month. I dont think this could be considered a good investment by anyone except the guys that ran the CDO desk for Merrill or Citi, but the market can answer that one.

Posted by: TheJudgeandJury at August 12, 2008 1:39 PM

Definitely an odd strategy and yes, unethical. (If ethical means at the very least that you don't go back on your word)

I don't normally wish ill of people, but I do hope this comes back around in a bad way. I'd complain to Corco's management if i were the jilted bidder, as well as REBNY. At the very least it will feel good to vent. But I'm certain it's the seller who's behind it; no agent is going to start from scratch just to make a few extra dollars, as the earlier poster said.

Posted by: Bolder at August 12, 2008 1:45 PM

DOW--thanks for the reference chart. I notice that it was published in 2006 so no idea how far down that line has come since then. In general terms the progression is upwards for the last 60 years so that is good. And again, it depends on how low the line sinks in this current trough. My bet would be that it would not approach the 1990 levels though if it did I think we would all have economic problems far beyond what we can imagine now.

I will ask you honestly and non-snarkily now. Are you the What?

Posted by: wasder at August 12, 2008 1:45 PM

Back to the topic of "fishing". Business is business. Money talks. Pulling out before contract can be beneficial to the buyer and the seller. It's an equal opportunity strategy. If you got cold feet as a buyer, you'd do the same. Take the good with the bad.

Posted by: DOW8000SP800 at August 12, 2008 1:46 PM

"Are you the What?"

No, but I'm a big fan (for comedy, he missed his calling, and insight, looking beyond the profanity and grammatical imperfections).

"My bet would be that it would not approach the 1990 levels though if it did I think we would all have economic problems far beyond what we can imagine now."

It sure wasn't imagined in 1929. As Paterson and Bloomberg would tell you, this is a time of prudence.

Posted by: DOW8000SP800 at August 12, 2008 1:58 PM

DOW--two more questions. What would be the effect on the housing market if the DOW did in fact return to 8000 sometime in the near future. And when was it last at 8000?

Posted by: wasder at August 12, 2008 2:08 PM

Even without the history, I would find the weirdly specific new listing price ($1,610,325???) strange enough to think there was more weirdness to come, and just stay away. I've learned the hard way to walk away as soon as my BS detector starts blinking. If it starts out weird, it's bound to get weirder.

Posted by: slopefarm at August 12, 2008 2:18 PM

wasder...Sept 02 and Feb 03...before that you have to go back to Sept 98

Posted by: daveinbedstuy at August 12, 2008 2:27 PM

Thanks Dave. And if it were to fall that far again in the next year or so what would be the impact on house prices in your opinion?

Posted by: wasder at August 12, 2008 2:47 PM

wasder...hard to say. There'd be a lot of psychological damage. But interest rates would probably come down quite a bit as well. By the latter part of next year, there will be no measurable inflation as all these commodity prices continue to correct because of the global slowdown

If people are keeping money in the stock market that they plan to use as a home downpayment in the next 12-18 months they are quite foolish. That goes for anytime, not just the current environment. Its always very risky and volatile in any short term period of a year or so.

Posted by: daveinbedstuy at August 12, 2008 2:57 PM

"What would be the effect on the housing market if the DOW did in fact return to 8000 sometime in the near future. And when was it last at 8000?"

The effect would have to be significantly detrimental to comps because of a spike in unemployment and further tightness in lending. At worst, I would expect prices to return to 2003 levels. But just like widespread greed, widespread fear can make things overshoot.

Think about it. 2003 was not that long ago.

Posted by: DOW8000SP800 at August 12, 2008 3:38 PM

Nope, 2003 was not that long ago. I don't know percentage-wise what the difference was between average townhouse prices in 2003 versus today but I have given up worrying about it. I made my choice, I bought a house for my family to live in in Clinton Hill and that is where I will be for the long haul, so worrying about every drop and rise in property values does me no good (does it do anyone any good to obsessively worry about things like that they can't control?).

I am interested in your username though DOW. I guess that is a prediction of yours as you seem to be confident of your predictions of economic doom (malaise?). I am not arguing with you because as I said, I have made my choice. But are you really predicting the economic conditions in your user name?

Posted by: wasder at August 12, 2008 3:44 PM

wasder...DOW8000, through the use of his name, is making a prediction on an anonymous internet blog. He has not told us if he actually is short the market and if so, what he recommends as the short positions.

He has used that name, as far as I can tell, since July 16...when the market was 11,288 and it is now 11,631 so if he is short, he is losing money.

Timing is everything and the thing most people get wrong!

Posted by: daveinbedstuy at August 12, 2008 3:54 PM

A few observations:

1. You should not assume that there is so much correlation between the stock market and the real estate market. Prices went up 2000-2003, when the stock market went down (a lot). There is much more of a correlation between the real estate market and interest rates (e.g., 2000-2005).

2. I would be astonished if the S&P hits 800.

3. The economic forces that will cause the Manhattan and Brooklyn markets to drop are already in place. They just need time to work. I don't think the S&P is going to be particularly relevant to how this plays out.

Posted by: lechacal at August 12, 2008 3:59 PM

...or Dow hits 8000. Whichever.

Posted by: lechacal at August 12, 2008 4:00 PM

Yeah, timing is a bitch. I wonder though why so many have the need to be right about the end of the world as we know it, the same as I wonder why so many are on this board trying to make a fast buck. Neither irrational exuberance nor "walking bummer syndrome" help anybody out too much in the long run.

Posted by: wasder at August 12, 2008 4:06 PM

"The economic forces that will cause the Manhattan and Brooklyn markets to drop are already in place."

Please elaborate on this comment. Thanks.

Posted by: wasder at August 12, 2008 4:08 PM

There has been a very worrisome issue out there that was highlighted by Bloomberg News today. The credit rating for NYC is likely to fall because all of the banks and brokers and investment banks have booked all these large losses due to writeoffs. These losses are likely to carry through well into the next decade which means that the losses will offset any income these companies have. Where will the tax revenues come from????

The result is that these companies will not be paying any income taxes to NYC and NYC for many years. In fact, since they have prepaid some of these in early 2008 they are looking for refund of that money now.

http://www.bloomberg.com/apps/news?pid=20601110&sid=a4A3yRSaEHRA

Posted by: daveinbedstuy at August 12, 2008 4:20 PM

Wasder: Happy to do so. As I see it, the following factors are already in place and will cause prices to decrease. As with all things in the real estate market, this will probably take a couple of years at least.

1. Basic affordability issues. As in any classic bubble, people have been swept up in a feeling that they need to get in before prices get out of their reach, which feeds the bubble more. Once this natural cycle turns, the opposite happens on the way down. Put another way, the market has momentum in both directions and the upward momentum has clearly stopped.

2. Financing. There will probably never again be the same cheap and readily available mortgage financing that there was in the bubble run-up. This will put negative pressure on the market for a while.

3. Local economy. New York is going to go through a period of higher-than-usual unemployment in the finance industry.

4. High levels of foreign ownership (foreign buyers can turn into foreign sellers, and unlike residents they are not replaced by natural turnover). This is similar to the high levels of speculation in Florida, although the motivations of the foreigners is different.

Posted by: lechacal at August 12, 2008 4:22 PM

Dave: I have often wondered whether the incredibly low property tax rates in brownstone Brooklyn will prove an easy target for revenue-seeking politicians some day.

Posted by: lechacal at August 12, 2008 4:35 PM

lechacal...there'd be rioting in the streets...and I would join them. But yes, I couldn't believe how low the taxes were when I bought my house.

Posted by: daveinbedstuy at August 12, 2008 4:37 PM

"He has not told us if he actually is short the market and if so, what he recommends as the short positions."

I implicitly informed you that I do not play the markets like that because it's a dangerous game. I follow and therefore predict the DOW/S&P 500 (they pretty much align themselves) only as a rough barometer of the economy and thus my target home purchase price. So yes, I do not have skin in the shorting game. But why do I have to?

Posted by: DOW8000SP800 at August 12, 2008 5:11 PM

Hmmmmm. Thanks Lechacal for the explanation. I understand that the tougher mortgage standards make the pool of potential buyers smaller and why that effects prices negatively. However, in the long run shouldn't the tightening of lending standards create a more sustainable and realistic growth pattern?

Also, I have not heard too much about foreign ownership of NYC domestic real estate so this is news to me, but why wouldn't those sellers be replaced by natural turnover?

In general it seems as if the speculative aspect of this market is what made it unsustainable (obvious statement of 2008 I know) but if this downturn makes it less attractive for people to think that they can buy real estate for quick gain shouldn't that benefit those of us who want to live in and enjoy brownstone properties?

Posted by: wasder at August 12, 2008 5:11 PM

I don't understand anything about what you guys are talking about re the "shorting game".

DOW--what is your target price for a home?

Posted by: wasder at August 12, 2008 5:15 PM

Wasder: As to your first point, yes, I think that more sobriety in the mortgage market will in the long run make for a more sustainable and realistic growth pattern. After an initial price adjustment, of course. That sober growth pattern could mean it is many years before we see top-of-the-bubble prices again, but your point was well made and well received.

As to the foreign buyers, the amount of foreign buying activity, and its effect on NYC prices, has been pretty big news for the last couple of years. A weak dollar, expensive oil, and a safe city are all contributing factors. They are for the most part buying in Manhattan, but the Manhattan market and the Brooklyn market are obviously linked. Many Manhattan brokers point to all of the foreign buyers as further evidence that prices will just keep going up and up. What I was pointing out (and perhaps I phrased it wrong) is that foreign buyers, like speculators, can sell without having to move (just as they bought without moving in, which put "artificial" upwards pressure on the market). This is a big topic that could take up a lot more words than this paragraph.

Posted by: lechacal at August 12, 2008 5:38 PM

If I were the burned bidder I would offer one dollar less than the asking price and then not sign the contract.

Posted by: Iknow at August 12, 2008 5:48 PM

Cheap property taxes are only imaginary unless you are totally unemployed because the city income tax more than makes up for what you would be paying outside the city in property taxes. I looked really hard last year at selling and moving out to LI or up to Westchester, and in doing so compared property taxes out there to here versus my city income taxes that I would no longer have to pay. It would have been cheaper for me to move out of the city and pay triple-quadruple property taxes and not have to pay city taxes anymore. However I decided to just stay put since I don't think I could take suburbia for more than a few weeks at a time. I do own property down in the south so that is my getaway.

Posted by: wburghipstersaredirty at August 12, 2008 5:59 PM

I agree with Brooklyn Butler. Karma IS a bitch. These buyers of this property are a distinct group. Now do you think that they will come back and bid at the higher price? Only in NY do you see this kind of sleezy action, enabled by the brokers. What do you think of Corcoran participating in this kind of business? I think that in the end most sensible buyers will smell the bad faith and stay away after this. Also, if they can do this, they can do other borderline things -- string the buyer along and entertain other buyers on the side. When buying my place, I was jerked around by one of these marginal types. In the end, they outsmarted themselves and I bought the place much cheaper after the previous buyer walked away. Months of jerking around the other buyer made him walk away and they sellers actually exhausted themselves and I got it much much cheaper just to get the deal done. That didnt stop them from trying just one last greasy move but they closed at least 100,000 lower and 6 months later than they might have if they had just been on the up and up. They screwed themselves. This could happen to this person too.

Posted by: donatella at August 12, 2008 6:47 PM

Thanks Lechacal: this is very interesting stuff. I would imagine that the top of the bubble prices are at least 5 years away, but again I am not any kind of expert here.

I had not taken note of foreign ownership in the city but I do get why them selling out would cause a drag on the market as well.

Thanks for an educating and interesting discussion about things that can cause us all to act like jerks.

Posted by: wasder at August 12, 2008 7:21 PM

Wasder: I would guess it will be 10 years before we see top-of-the-bubble prices again. It could easily take 3 years just to shake the gremlins out of the system, and then it's a slow road to recovery. Remember the 10 lost years in New York real estate beginning at the end of the 1980s.

And note that prices are basically at the top now, having started to move down a just few breaths ago.

Posted by: lechacal at August 12, 2008 7:41 PM

Seems to me that we have already seen some significant if not drastic price reductions in many neighborhoods in Brooklyn. I bought the house I am closing on for 250 less than its original asking price. I say original because it went through a couple of asks before getting to the number I paid. I have only been participating in this board for a three or four months but it definitely feels like over all the market is down from where it was even when I first signed on.

Posted by: wasder at August 12, 2008 7:52 PM

Sellers are idiots. Hopefully the other buyers who participated in the process will move on to better things, too. Would anyone ever trust these sellers again???

As for the new listing price, under $1.5MM you can still rationalize the purchase price, but anything over that is ridiculous given the renovation and carrying costs AND the state of the market. For $2.2MM (assuming conservative $600K renovation costs), you can buy a better (renovated) brownstone that doesn't require such a huge cash outlay.

Posted by: iwannabrownstone at August 12, 2008 8:26 PM

What is illegal, immoral or lame about trying to get the most for one's property? In this market, pricing a property is difficult. Starting with a low asking and trying to work the price is no different than starting with a high price and buyers bidding it down. Look in the mirror and say to yourself, I'll take what they offer when I'm ready to sell my biggest asset. Yeah right!

Posted by: bilk at August 13, 2008 9:11 AM

It's more the being "strung on the line" that is so irritating. Or bidding and negotiating in good faith only to find out that the sellers aren't playing by the same rules. THAT's what's annoying, and probably unethical. I got "fished" on a property a few years back. The sellers (FSBO) took my offer, kept giving me reassurances that it had been accepted, after some price adjustments, then I saw they had posted another open house in the NYTs. I went to the open house just to piss them off: "So, does that mean that my offer has been turned down." It worked. It was a great place, but I just pulled out of their game once I realized how they rolled.

Posted by: Minmin at August 13, 2008 10:02 AM

Posted by: Minmin at August 13, 2008 10:03 AM

The thing is, you're saying you're negotiating in "good faith" but are you? Buyers can be sleazy, too. Either side can pull out at any time until the contract is signed (and sometimes after, don't think you'll ever get to keep that "escrow" money).

When you sign an agreement with a RE agent to sell your property, you are not obligated to sell the property at all--only to pay the agent if it does sell. You can't blame the broker for this kind of shit--he's gonna end up working this thing for another 6 months and never selling it. The seller is probably a greedy idiot, but it's also possible that all of those offers ran away when they found out about the condition of the house..

Posted by: Ppark at August 13, 2008 11:17 AM

FWIW, I would have thought that "Wasder" was The What. Given that his name is "What The" in German, and all.

Posted by: strangepork at August 14, 2008 11:45 AM

« An Update on 18-29 Jackson Place Checking In On 349 Metropolitan Avenue »

August 12, 2008

Shenanigans at 279 Clermont Avenue?

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