Friday, August 5, 2011

This doesn't feel like a million dollar apartment?

A big part of what I do is to work with my clients to understand what a property is worth or, more accurately, what current market value is. There is an empirical process for this that is primarily based on an analysis of recent comparable sales in the building. I use square footage and price per share as my baseline, then adjust for condition, floor, light, view, and date of sale. The other part of this is the emotional component. How much does the client love the space? Is it enough to stretch to a higher valuation to close the deal?

Sometimes I walk into an apartment and just think, "I would never pay $900,000 dollars for this." Today I looked at a property with a client and was left with that impression. I had already looked at the comps and my first impression was that it was over-priced. After looking at recent sales it appeared to be in the ballpark. There had been what appeared to be a "fear trade" early in 2009 on a similar unit in the building, they always throw things off kilter(in this case I think this "fear trade" is the right price!) But there was also a recent sale just a bit below what this place was asking, I found that surprising...but there it was. Certainly the seller and their broker were anchored to that trade, not the 2009 trade that was $160,000 less and just 4 floors lower.

This apartment was located in an 80's condo building, 650 square feet (maybe) with a doorman and not much else. What really puzzled me was the fact that they were asking almost a million bucks yet did a Home Depot-style renovation on the kitchen and bathroom-not even IKEA! They also chose to re-do the old (cheap) parquet floors and sanded them so thin you felt as if they would crack under the weight of your feet. Who buys this stuff?

This is just one of those examples of feeling taking the front seat to so-called empirical data. This did not feel like a $900,000 dollar home and my client agreed, thank goodness.

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