Wednesday, October 10, 2007

WaPo Discovery: Developers are Car Dealers

Fun article on the front page of WaPo's Monday edition. The title says it all: "Car Dealer Tactics on the New-Home Lot." Basically, developers are doing anything they can to push sheetrock, including auctions. One lucky family was the only bidder on a townhome in Fair Lakes [OK, some of you are probably muttering, "What's lucky about Fair Lakes?" Be nice]. They got the $536,449 property for $429,999, a 19.8% price reduction. Good for them.

I especially like the fact that condos are now being auctioned off. I've quoted developers in an earlier post who were loathe [or said they were] to slash prices because of the negative impact on folks who paid retail or retail plus. Well, at least one developer has looked deep into his heart and said, "I can live with that:"

On Oct. 28, Parkside Alexandria, in partnership with Accelerated Marketing Partners of Boston, will offer 30 condominium units at Parkside at Alexandria during a live auction. Most of the other 348 units were sold the traditional way. "Basically, conventional strategies aren't working," said Jon Gollinger, chief executive of Accelerated Marketing Partners, a real estate marketing firm.

Two-bedroom condos that recently sold for $340,000 will go for a minimum of $225,000. Asked how those people who paid market price for their units would feel about the auction, Gollinger said they're better off having a sold-out building.

"If it's lower than what other people have paid, so be it," he said. "That's a decision we've made for better or for worse."

I hope you folks who just took a 33.8% haircut in your condo's market value are as sanguine about it. At least your building is sold out.

One final note. The winning bidder at Fair Lakes asked the question that always kills me [see the end of previously linked post]:

"The price is very reasonable," said Won-Ki Choi, a federal government worker. Then he turned to a Ryland employee. "Don't you think the price is okay?"

1 comment:

Mose said...

The auction isn't what is giving the previous owners a 30% "haircut" on the value of their condos; that has already been done by the market. The lower price at auction is simply confirming what most of them must have suspected was true - that their condos are worth less today than what they paid for them. Since that is true regardless, they might as well have a sold-out building.