Sunday, October 28, 2012

Falling Up the Stairs: 308 Clermont Avenue

They say, "It's better to be lucky than good," - and they're right.  Even if you don't know what the heck you're doing, you can luck into a better situation than those who tried to deliberately plan it all along.  Such is the case with lots of low-ball buyers who never bought a house during the 2006-2008 boom, then suddenly in 2009-2010, their low-ball offers stuck and they lucked into great houses.  Many still didn't know what the heck they were doing, mind you, but suddenly fate swung their way and they get to look like geniuses in retrospect.

As is the case with sellers over the same time period.  Some tried to sell after the crash in 2008-2010 for prices that simply weren't tenable in that market.  Those who held out for irrational figures then are actually seeing the pendulum swing back their way now, but out of no brilliance of their own.  More stubbornness, really.  Because they still don't know what the heck they're doing.

Take the turnkey 3-Family brownstone in Fort Greene at 308 Clermont Avenue, for instance.  We covered this bad-boy back in July of 2010 when it wanted $1.694M.  Back then, for that price, you could pick up way more prime pieces.  And people hadn't woken up to Fort Greene or Clinton Hill entirely yet, and there were still plays to be made within the (gasp!) FHA loan limits.  The price on 308 Clermont made no sense.  It was a pre-crash price in a pre-rebound market.  If you think that price was bad, you really didn't want it the next Spring of 2011 for $1.9M.  Again, tone deaf price with no rationale and a terrible marketing strategy.  Flash forward to the Spring of 2012, and they come back out on the market for $1.39M, as a "short sale", listed nowhere besides the Long Island MLS (of all places!).  This is our fractured Brooklyn real estate market, people!  That's right, the market did a 180 degree turn and this guy thinks it's suddenly time to sell for ~$300K less than his post-crash price and list in a place where no one can find his listing?  They list it as a "short sale" even though the asking price is hundreds of thousands above what he owes the bank??  The owner's obviously flailing, trying to make sense of this market.  And to say that the involvement of his real estate agent was "the blind leading the blind" would be generous.


As soon as we saw that a little reality might've set-in and that the place was mis-priced again (this time in the buyer's favor), we put the bat signal out for Platinum Members who pounced on the house on its first weekend.  The offers poured in from $1.2M financed one week, then $1.25M cash the next week, to $1.32M financed the following week, finally to the full asking price of $1.39M.  As one reader put it, "He wakes up every morning and his house is worth another $50,000."  And to this owner's "credit", it would've been irrational to stop the music at any point and take one of those low offers when all he has to do is wait another week for a higher offer.

The music didn't stop there.  There was $1.45M, then $1.5M, then $1.55M.  We sat with the owner and his agent at a diner over coffee to proudly present an offer of $1.6M.  The owner - who happens to be a commercial real estate agent - waxed poetic to us about the good old days of real estate.  Yes, long before e-mails and faxes, people used to meet in person and shake hands and give each other $100,000 checks the next week without even signing a contract - as his story went.  He longed for the days when people met face to face and were accountable for what they said they'd do.  We figured our sit-down was perfect for these nostalgic yearnings of his.  Sitting at a table, giving him a signed offer in person, shaking his hand.  We told each other we'd look forward to his response over the weekend.  And what do we get after all that?  Never heard from him again.  Our buyer was poised to go to $1.65M if necessary, but instead of countering, the owner went MIA.  We hounded his listing broker, who had little input.  We rang his bell months letter and he sent his grandson down to tell us he's not there.  Meanwhile, he's raised his price again, and finally taken urgings from more sensible brokers and gotten his broker to put the listing - now $1.75M - on Streeteasy at least, finally.  This chart shows the list price vs. market value for this house over the past few years.  As you can see, we put the bat signal out at the highest discrepancy in favor of the buyer:

Yes, this owner is clearly falling, but in this market he's fallen up the stairs.  The motivation to sell in the first place was his inability to pay the mortgage.  The bank put a lien on his property in 2009 for $1.1M.  Many will remember when the economy was sliding off the cliff back then, banks were taking multi-billion dollar write-downs each quarter for bad loans, some even willing to negotiate with owners struggling to make their payments.  We'd heard this owner was even given the chance to settle his outstanding balance for a lower sum back then, somewhere in the $800K's.  Mind you, he refused to take the offer at the time, but these days we hear he wants to have his cake and eat it too.  He wants to sell his house for more than it's worth, and pay the bank back less than he owes.  That's simply not how it works.  He could've taken that deal on the table then, but that deal's not on the table now.  If he sells, the bank ostensibly wants the full amount now.

To hear them tell it, "This property may not be much on original details, but is in the heart of the Dekalb Restaurant Row and at this price could be considered a bargain."  Someone will eventually snag this great brownstone on a great block, lodged between the Brooklyn Flea and the hipness of Dekalb Avenue.  But how and at what price is anyone's guess.

Pro's:  location, turnkey, quintessential 3-Family with owner's duplex, yard, and rentals above

Con's:  no original details, generic renovation, shallow lot, paved backyard, senseless pricing, untrustworthy seller

Ideally:  someone will forge ahead on this place before the bank takes it away, but it won't be easy

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