The FEVER was lost for two years, but it’s BACK!
My Virginia Real Estate blog showcases the trends before you ever knew they existed. This is a new trend, and it is on fuego. Problem is, is it real?
The message is slightly different, but the bottom line is still there: Buy Foreclosures, Flip (more…)
When two of my blog readers send me WSJ articles on the same day, you know something big is up.
Appraisals 101: An appraisal is a report that is supposed to be a 3rd party impartial review of a property (usually under contract) to make sure the price is in line with recent closed sales (not counting houses still “for sale”). This protects the bank from (more…)
NVAR Realtor update: Have you voted for me yet? Voting ends Thurs Nov 2 at NOON! Go to www.NVAR.com/vote Know a No. Va. Realtor? Let them know. More info at www.ChooseFrank.org
This is the Results Show for the Parkside of Alexandria Auction yesterday (Sun. Oct 28) at Hilton in Alexandria. As background make sure you read: Parkside Alexandria 47% Off Auction
About 300 people showed up. Of which, over 100 were registered buyers with an auction number. About 50% of those had attended an auction practice the night before. Also about 75% of the 100 were 1st-timers at an auction.
To the right is the price sheet and my notes with what went for what.
Below is a Youtube of an Auction for a 2br 2 level townhouse. Minimum bid is $225k
The event was publicized as a “one-in-a-lifetime opportunity”, as if units MIGHT go for $225,000 for a 2 level 2 bedroom 1.5 bath townhouse. Well that didn’t happen. For the units starting at $225,000, they were immediately bid up to $275,000 and the range ended at $287,000, most sold at $300,000, and the highest close was $306,000. Keep in mind that some units are MUCH closer to 395 and some came already upgraded with Hardwoods and Granite.
The developer even added Hardwood floors midstream as a “free upgrade” for SOME units that currently have carpet.
The 3 bedroom units had a minimum price of $275,000 with a “Last Asking” price of $390,000. These units sold for a low of $351,000 and a high of $362,000.
Below is a video of the 3 bdr with a minimum starting bid of $275k
Now did these people get a great “deal.” Maybe. I’m not sure. What I can tell you is it wasn’t at a “no-brainer” price that investors could buy it and easily flip it the next week for a $40,000 profit (don’t think the thought didn’t cross my mind), but if a buyer was looking to live in it, and was considering the units at $340,000 list, sure, they got 10-15% off.
If you are still interested in a unit, let me know. Sometimes they have units that come up if one of the buyers backs out. Megan, an agent with FranklyRealty.com used to live at Parkside and recently sold a unit there for $330,000. She knows the pros and cons for each unit. I believe the developer is now cooperating with Realtors (they were giving 66% less for Realtors during the Auction vs during regular sales), so it shouldn’t cost you anything to have representation.
- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.
Videos at YouTube.FranklyRealty.com
Update, Mon Oct 29 07: After reading about this auction, go over to the Parkside of Alexandria Auction RESULTS show (with videos).
Update 2-21-08: Eos 21 Just announced an Auction. More soon.
Just on the heels of my article New Construction Bargains: Risks or Rewards? on whether the “deals” at new condo constructions like Phoenix Condos in Arlington, were good ones, I get an email about Parkside Alexandria having an Auction on Oct 28th 2007.
Their advertisement is based on a “Minimum Selling Pr
ice”* of $225,000. These units went for as high as $425,000 in the heyday!
If they sell for that price, that is about 47% off! So NOW is it a good deal?
Again, I’m not saying to avoid new constructions since they might offer a deep discount versus a similar resale unit, but you have to look at their inventory levels and the risks of them unloading units like the condo townhouses of Parkside Alexandria.
Remember, it can ALWAYS go lower! No matter how much of a deal you think you are getting, it can always go lower. So when do you buy? Perhaps only when you are ready for the long term hold and can ride out any waves, or like I say in my Attn. Market Timers! The EXACT Best Day to Buy!, the day that you stop caring about finding the best day to buy, and simply want to enjoy YOUR house.
So what about this 47% off sale? Is that a good deal? Is THAT the bottom? I don’t know, but, like a broken record… it can always go lower. You would think that at that level of slashing, it can’t go down any more, but you never know. Nobody would have thought that they would have pulled back from $425k to $325k. That would be unheard of! Now at $225k… ???
Mad Money’s Jim Cramer put it well… He said the single best time to buy the Nasdaq Index was when it fell from 5,000 to 4,000. But so was 3,000, and 2,000 and 1,500!
Is your risk LOWER than somebody that bought a house at $300k or $400k, sure, but there is still risk. Risk has to be evaluated and measured versus the potential reward and return. Will buyers at $225,000 make a killing? Very possibly. Is it a “no brainer” for a Virginia real estate investors to jump in? I don’t know. Not for me, but then again, I’m too conservative and conservative people miss all the great opportunities.
* Minimum Selling Price MSP is a “reserve auction.”
Sometimes reserve auctions are fake since the reserve isn’t published and is sometimes right up near list price. They can be designed to entice potentially interested buyers to bite. For example if three people put in low balls below the reserve, the homeowner will just counter like a regular contract.
At the Parkside at Alexandria the MSP is published and is significantly under list price, with the hopes of attracting enough buyers to hopefully have people bid up from $225,000 to as close as full list price as possible. But then again, they might all go at $225k (for the 2 level townhouse). I’ll try to go to this event and report on it. I bet the attendance will be pretty good. Here is more info: ParksideAlexandria.com Here is the ad
What will other builders have to do to avoid the INCREASE in buyer fears that this will create? Will they agree to put $50,000 in escrow for a year to insure that the builder won’t drop auction off the rest of the inventory? If they don’t offer some insurance, buyers might just wait and wait and wait and these auctions might become more frequent because of it.
Which project will be next??? Sign up for this blog (upper right corner of blog) for free to make sure you are kept up to date on the marketplace. or Subscribe in a reader.
Feel free to forward this email to others that might be interested.
- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.
Here are other new construction communities: Parkside of Alexandria, Eclipse, Parkside of Courthouse. Condominiums at Carlyle Square, Bryon, Palatine, Phoenix, Turnberry Tower, Odyssey, Hawthorn, 1800 Wilson, Westlee, Vantage Merrifield Town Center, Bromptons, Brittany, Bearings in Old Town, Renaissance 2230, Park at Courthouse, Butterfield, Mercer. Parkside Alexandria
Many Virginia condo builders have bailed before completion of their projects, voiding thousands of contracts (see: Arlington Condos Trend: Back to Apts). Meanwhile, other builders, including single family home (SFH) builders, decided to plow through the rough market.
Earlier in the year, builders (condos and SFH) were finding buyers were backing out of new construction contracts. Some left 2-7% deposits on the table, some fought for their deposit (ask for specifics). Can you blame them? If a property has dropped $70,000 and you put a deposit for $20,000… um, I know that stinks but why not just leave your deposit on Monday, and go in on Tuesday and buy another one for less?
So now the builder has inventory that they need to move and fast! The liquidation sales are here! And “These prices won’t last!” But are they a good deal? I’ve said before that (No Such Thing As a “Good Deal”) but now I want to specifically look at new construction homes.
The decision is VERY tough for buyers.
You can buy a new place:
Or you can buy a resale:
I’ve heard from a source in a new construction project that they were considering hiring an auction house out of Boston to dump the rest of their 30 units, once and for all! So a buyer might get a $50k “deal” today, to find their value dropped $50k the next day.
Supply and demand is crucial, and with new constructions, it can be out of whack.
For example, take my Clarendon Condo (please take it!!) I saw as many as 40 of the 400 units (10%) on the market at one time. That was bad, prices tanked faster than other Arlington condos. Down $150,000 from the top price to the current lowest price.
Meanwhile the new construction Phoenix Condos in Arlington two blocks away has about 180 total units. Only 31 have closed and about 20 are under contract. They still have 130 units to move!
One agent just told me they got a steal of a deal there. They were able to get a deep discount off list from the builder through the sales office: McWilliams Ballard. She was brilliant. She made them show her actual HUD1 statements of other units (since nothing recorded yet on the MLS or tax records) and she went down from there.
But what about the other 130 units? Are they going to sell for the same or more? Probably not.
But her final price was $100,000 UNDER a comparable list price for 2 units in my building!
When she initially asked about my building vs the Phoenix, my first reaction was “All else being equal, I’d rather buy where there is less inventory, so you have less downward risk”
I might, if you were ready to buy, go as far as recommending paying $10,000-$20,000 MORE for a unit in a location with less inventory risk (5% at Clarendon 1021 vs 72% at Phoenix)
But the decision gets tougher if that spread is more like $50,000 to $100,000. 
Another example: A Realtor that I highly respect is currently focusing on new construction. She was thrilled that she got $70,000 off list (about 10%) for a home 2 months ago, yet last weekend at a “big sales event” she got another client $125,000 off at the same community!
So her first client effectively LOST $55,000 in 2 months!
What? You want me to: “shut up and tell you what to do”?
Written by Frank Borges LL0SA- Broker FranklyRealty.com
Frankly, builders are in a heap of trouble with excess inventory! (Just take a glance at Brian Brady’s mortgage blog for more details.)
So with this trouble comes questionable practices in order to unload properties. Get a Realtor (the price is built into the condo, you won’t get a better deal without one) to represent YOUR best interest.
I already called out one Arlington Condo builder (more…)
The first builder I noticed offering “Pricing Guarantees” was The Park At Courthouse. I thought the idea was brilliant. A promotional plan that would give buyer’s some security in their preconstruction purchase, in case prices dropped.
So in theory, if you bought a place for $400,000 and a few months later, that exact or similar unit dropped to $390,000, you would get (more…)
Joule condos, formerly owned by Ed Peete (Arlington Virginia) recently announced a transformation from condos ownership to apartment rentals. Canceling hundreds of contracts in the process (more…)
(Thank you to MRIS for warning agents about illegal MLS fudging, perhaps due to BusinessWeek’s story that referred to my blog. More at the end)*
Now I have reported to MRIS another violation.
Lets see what they do about it.
New Construction Fudging the Reporting of Seller Subsidy… how conveeee….enient.
Why does seller subsidy disclosure matter? So in conclusion, make sure your buyer agent knows the market well and knows about tricks like those and other listing agent tricks that could cost you $20,000. For all those super smart people that think like my Mom (read Mom Blog on not trusting Realtors) did “I don’t need no stinking buyer agent,” this stuff happens all the time. (shameless plug here: sign up to get emails of new blogs, the sign up box is at the bottom) - Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com Videos at YouTube.FranklyRealty.com
Before I get started on tricks that the builders are using to unload inventory, did you know that it doesn’t cost you anything to have a Realtor represent you? The cost is the same to the buyer, oftentimes the on-site sales agent gets the double commission. Sometimes a “free” buyer agent can save you even more, even if you think you already squeezed $100k out of them, who cares, if your buyer agent knows they recently dropped a place $200k around the corner. Price drops are relative, and a good Realtor can help protect you. See I Need A Buyer’s Agent! But For My Car.
So back to builder fudging. On the MLS, when a listing closes a Realtor must enter in the closed price. This can easily be verified by the tax records once it comes out. A Realtor is also required to post the seller subsidy amount. The “seller subsidy” is the “cash back to buyer” or “cash toward closing costs” and it is a marketing scheme to make a listing look more favorable, even though I tell my buyers to ignore them and just to net everything out. A $515k place with $15k back should be viewed as a $500k. Don’t let that marketing confuse you.
Anyhow, the builders are in a bad situation right now. Especially Arlington County condos in Virignia. They have already sold a ton of units at a great price, but they need to sell the rest of their inventory without pissing off the current owners and people under contract.
So how do they do this?
Well one way is through fudging the “seller subsidy”. If a place is $600,000 and they want to drop the price to $580,000, they will instead give $20,000 worth of “seller subsidies” or “cash back.” Effectively the sale is $580,000, but it gets recorded in the tax records as $600,000 (which is fine). The part that is not fine is they are leaving off the subsidy information on the MLS. Insert Dr. Evil’s voice: How convenient!How do I know they are fudging the MLS?
If you are considering buying a $500k condo in Arlington, you will look at the past sales as one of a dozen metrics to value a home (I wish I could show all my tricks on pricing and offering on homes, but the competition might be
reading this, email me if you want a sample). If the builder just sold a nearly exact unit for $500,000 and recorded no subsidy, you might actually consider buying the unit near $500k. However, if you knew that there was $20,000 cash back, and the net price was actually $480,000, that is basically a Honda Civic value of information ($20k).And you all think all we do is push paper and get you to buy quickly?
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.
*Thank you to MRIS continued: I would like to thank MRIS for warning agents about MLS fudging.(the local MLS system) for posting a bulletin board on Matrix (the back end Realtor system) warning listing agents that Data MLS fudging is illegal and will not be tolerated. I believe my MLS Data fudging Blog (Part 1 and Part 2) and the resulting Business Week article probably lit a fire under them. While I wanted to copy and paste that notice, it wa
s gone after 24 hours. Oh well. Update: I found the link to the notice.
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