Sunday, June 01, 2008

Madrigal Lofts: The Bond Trader Discount™

Announcing the Madrigal Lofts Bond Trader Discount™. I got the idea after reading Saturday's WaPo article on the fine art of lowballing real estate offers:

Falling home prices have unleashed bargain hunters offering to pay well below the price listed by sellers.

These bidders see an opportunity to pay a fair price after years of spiraling home values or to get a good deal from a desperate seller. But sellers might view those offers as annoying or even insulting if they are convinced of their homes' value.

The article told the story of a bond investor [more likely, a trader] who was able to buy a condo at the Madrigal Lofts for $60,000 less than the listed price.

As a bond investor, Matt Watson, 26, said he found the lowballing strategy naturally appealing when he began searching for a home. "The way you make money on bonds is by buying it for a low price and making money on the yield. It is the essence of lowballing -- buy low, sell high," Watson said.

Amazing insights, eh?

Watson's first try failed. He attempted to buy a one-bedroom condominium in a new building in Southeast Washington for $270,000, nearly $60,000 off the list price. The developer was willing to negotiate and lowered the price by about $11,000, but Watson decided to move on when it became apparent that he could not wrangle the price below $300,000.

Next he set his sights on the Madrigal Lofts, in a trendy neighborhood near downtown Washington. The condo he wanted was originally listed at $343,900, including a parking space. Watson signed a contract for $283,900, including the coveted place to park his car. He also got $5,000 in closing-cost help.

But it was not an easy process. It became a part-time job as Watson endured four rounds of counteroffers and negotiations, he said. "You have to look for desperation because with desperation comes a willingness to negotiate," he said.

Essentially, this fellow couldn't afford more than $300,000 and he tried a few places before he found one desperate enough to close a sale that it would sell him a new unit within his price range. It was tough slogging, though - he had to "endure" four torturous rounds of counteroffers and negotiations - but he got the place for 17.5% less than the listed price. A tip of the hat to this intrepid young fellow.

Now that Madrigal Lofts [811 4th St NW, 20001] has opened the door for more lowballed offers - I don't see how they can close the barn door now that the bond trader, er, horse has left - here's some information about the building courtesy of these folks:

Madrigal Lofts is a new 12-story condo in Mt. Vernon. Currently priced from low $300k's (Jr. 1 BR) to mid $800k's (penthouse), but prices were dropped by about 10% in January '08. Sales, by Mayhood, began June, 2005, many units still available. Delivery was delayed when contractor Glen Construction went belly-up, but the first units finally settled in December, 2007. This corner building will have a glass front, balconies, and 10' ceilings. The Mt. Vernon area, 4 blocks from Judiciary Square Metro, was once barren, but once contained as many as 9 construction cranes. Development continues nearby, but the status of vacant lots, where the developer was going to build another condo, is uncertain. The city plans to remake K Street into a commercial boulevard, making this at one point the biggest construction zone in DC (now eclipsed by the ballpark). One-beds start at $371,900, two-beds start at $452,900. Developed by Wilkes Co. & Quadrangle; Designed by Davis, Carter, Scott Ltd.

I'm unsure whether the prices quoted reflect the Madrigal Lofts Bond Trader Discount™. However, since according to the District only 48 of the 259 units have sold, I think some negotiating room remains. Call now - maybe you won't have to go through four torturous rounds of counteroffers and negotiations.


Anonymous said...

My hunch is that Mr Watson bought a unit ending in "22" which all have the JR 1-BR Anerio floorplan. If I'm correct about this then he's embellished his story about how much he shaved off the sales price through bargaining. Just browse your sister site and you'll see that two of these Anerio units previously sold in the 280K range and the one that sold for 310K was on the 12th PH floor. These units are the smallest in the building, the only ones without balconies, lack the elevated loft aspect to the BR, and share walls with Elevator 3 and the trash chute.

I hardly believe that the barn door has been blown open by this revolutionary bondtrader who turned the real estate world on it's head with his patent pending "buy low, sell high" philosophy. Signs point to this being just another purchase at the established price range for a given floor plan. Seems pretty immature on his part to put his ego first by boasting and sensationalizing the facts.

Anonymous said...

He didn't get too good a deal. The unit he bought is the smallest in the building (you can tell by the price). As I understand things, they weren't selling at all.

The developer has publically been running its "Mad Money" discount since Presidents Day, which has seen incentives of $60-75k for most of the units in the building. It's not at all surprising that they'd be willing to offer $60k on the units that are moving the least.

Also, last I heard the building is over 90% sold. About 90-100 contracts have closed and another 140-150 units are under contract. The building has 259 units. Call the sales office and ask, they'll share this info with you.

Keith said...

Thanks for the comments.

The Recorder of Deeds shows about 80 units have sold. In the post, I was referring to sales listed in the District's sales database. Never the twain shall meet...

Connor Murphy said...


I read that article with interest over the weekend. I think you are right about the barn door. The Barn door is WIDE open and hanging on its hinges.

The anonymous posters above sound like they may have a vested interest in this property... So I would not be surprised to find these comments came from within the Madrigal Sales office or an owners condo.

Either way, I can imagine many sales offices accross the district will see potential clients walk into their offices with this article in their back pocket. Expectactions have shifted and this will encourage buyers to be more assertive and demanding. Buyers now 'expect' to get 15-20% off the asking price. This article is the proof that it can be done. Details about the actual condo sold (i.e. trash chute, no balcony, etc...) will be back in the empty barn!

The 'expectations horse' has left the stable...

Anonymous said...

Connor's response really lacks any substance for me. It just seems like wishcasting.

The way I see it is that it is possible to get good deals. But it's certainly not across the board. I see two primary strategies. You can keep an open mind and not lock into any particular property so that your detached and ready to pounce on closeout sales when a builder is trying to move his last couple units. You can also target the *least desirable* units in the building and lowball. A unit may be undesirable due to size, mediocre floorplan, features, view, etc.. Either way you are making some compromise to get those financial gains whether it be on the unit or the location. At these stakes those compromises can certainly be very wise. During the height of the bubble these opportunities weren't presenting themselves because there was more demand than supply. They do exist now.

But I think it's irresponsible to characterize that the majority of units in any building can be negotiated down 15% by merely being persistent. It's not that macro nor is it that simple. I know I've submitted offers 3-5% below list price that have been rejected...

Anonymous said...

I'm a current unit owner in Madrigal and got a pretty decent deal myself buying last year. Of course the deals are even better now due to the market changing. But I actually know Matt and he did get one of the lease desirable units. To each his own and great deal for him. I am going to selfishly note that I do hope the deals aren't to the detriment of current owners. And to date about 116 units have not just sold but conveyed. :-)