Photo: Associated Press
A lot of property owners aren’t selling properties these days because they won’t accept prices offered in the current market as ‘fair’. By fair they usually mean equal to or higher than their purchase price. They’d rather just sit on their property until they can break even.Yet this phenomenon has caused some property observers, such as ourselves, to wonder whether these reluctant sellers were distorting the true, lower, value of properties across the U.S.. If they were forced to ‘mark to market’, then their properties would all show price declines.
Well some people are learning the bad news, even without selling:
But Dan Berwitz, a sales representative for a computer company who paid $204,000 for a unit in the Monteverde in 2007, has mixed feelings about the deal. He is pleased that the sale will bring financial stability to his building, but he isn’t happy that the bulk-sale buyer plans to sell the units far below what he paid, in some cases as low as $100,000. “But unfortunately, right now, there’s nothing we can do,” he said.
Condo Developer LLC, a Delaware-based company, in late spring closed on the $25.9 million auction sale of 165 units in the Vue at Lake Eola, a 375-unit luxury condo complex in Orlando, Fla., that had been operating under bankruptcy protection. The Vue, which has floor-to-ceiling windows, 20-foot ceilings and a rooftop terrace, cost $340 per square foot to build, but this latest purchase price works out to about $126 a square foot.
Note the above is even way below construction cost.
The new owners plan to sell the condos, one at a time, at a price of about $225 a square foot, at a profit of about $75 a square foot, when factoring in carrying costs including maintenance and real-estate taxes.
Bulk sales such as these will help establish a bottom for the market, especially if buyers discover that they can earn profits re-selling them. The sad news is that this bottom may be far lower than many current owners realise.