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One-percenter problems

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Walking up Tremont Street across from the Boston Common, earlier today, we came across an unusual occurrence, even in this economy: a downtown Boston real estate auction. It was taking place in front of The Grandview, a "luxury" (is there any other kind?) condominium building completed in 2004.

There were four or five people with $10,000 certified bank checks in hand, ready to bid (and also one person who brought a personal check, which is no good in these situations).

After reading some disclosure statements and a description of the property, the guy in charge said the auction would be begin, with a price of (if I remember correctly) $1,018,400.

No one made any move indicating they were interested in making a bid at that price, and then it was over. The representative said that the bank would "probably" buy the property (and, presumably, resell it on the open market, after that).

The public record shows that the (ex-) owner, a real estate investor, purchased the property for $1,325,000 back in 2007, with a mortgage loan of $1,060,000. A second mortgage loan was taken out in May of this year, for another $240,000. Second mortgage holders don't usually get paid back until first mortgage holders are paid off. So, very little chance they'll see their $240,000 again.

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Comments

In a normal auction, the called-out price would drop until it attracted an opening bid, then would go up again until people stopped outbidding each other.

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One million. HAHAHAHAHAHAHA. Boston isn't that nice in this market.

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million dollar condos have sold in Boston. Is this one? Probably not (anymore).

This kind of ties into what I was talking about in the other thread on the seaport. There's lots of demand for housing and apartments in Boston. Demand that would be easy to make money off of for units priced correctly. But for some reason luxury is the name of the game and developers and owners are not building and pricing properties to sell. Our sticky prices are left over from a debt boom. Not many people actually have the ability to pay for them.

At least on the owner / bank side, it's people like the above trying to reclaim as much phantom equity as they can. Seems the banks and owners think they can wait this out.

Developer side, I'm a little perplexed.

Maybe JK can comment. Do they think they can keep building luxury condo's and apartments and demand 2005/06 prices? even increasing supply as sales have been.... lagging. Are there really that many people, with liquid assets, wanting to move to Boston?

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i think the bank knows what they are doing, in this one case. this is prime real estate, there are lot's of million dollar properties downtown, you only get 1000 sf in any of the luxury towers for that price. boston and cambridge markets have not suffered much. from what little information i see, this seems like a great deal, but obviously not great enough for those bidding. try auctioning your house and see what you get, it is hit or miss, and is common to have a high minimum price to ensure you don't sell it for less than you are willing. all a question of taking less now or waiting and possibly taking more. also, some 2 percenter's may be buying these, or they are 1 percenter's vacation home. now if it were 10 million... :)

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The banks are right and this is a great deal! Buy, buy, buy!

Where have we heard that one before.

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At Bwahahaha.
What a quaint term. You should go upstairs and tell your Mom how clever you are.

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Don't lash out on the net because your penis size is 5 times too small.

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... which can be set at anything. In this case, well over $1M.

I think the first mortgage holder is going to be losing money, too.

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The auction reserve (minimum) price is almost always the remainder due on the first mortgage, which in this case was somewhere around $1,015,000, based on my calculations. The bank wants to come out of the deal without any losing any money, so if someone else buys it at that price, they will sit back and wait to get its money.

If no one else makes a bid, the bank buys it at the auction and is then the owner. It will then list it (many times, for more, at least around here). The bank can sometimes get more money because it kicks out the tenants (if any, although cannot do this any longer in MA, from what I understand; you have to wait til the lease is up), and lists it with a traditional real estate agent, who will market it.

I don't deal with foreclosures so I have no idea the intricacies. It just seems a lot of work for little return.

The second mortgage holder was an individual. Somehow, the (ex-) owner was able to convince her to give her $240,000 this year, even as the owner was falling behind in payments. That must have been some sales pitch from the condo owner. And, they must be having some highly intense conversation right now, since the $240,000 will (most likely) never be seen again.

Regarding this building, there have been five sales during the past 24 months. Not a high number, but shows there are buyers. The per-square foot price has been anywhere from ~$800-$1,000. This foreclosed unit has just over 1,000 square feet, and sold for $1,257 per square foot in 2007. No idea what it would go for, today. At $900 per square foot, if it's in decent shape (the photos from 2007 show it has a bad paint job but it has beautiful views of the Boston Common), it would come out to $948,000. Take out the sales commission and you're at $900,000 - about $115,000 less than the outstanding mortgage loan. I bet they list it higher, though, at $1,150,000. (Unit includes a parking space, btw.)

Don't cry for the rich, though. There have been 344 $1,000,000+ sales in Boston in 2011 to date (end of month closings won't show up til next week at the Registry), just a few off last year's 351 total, which was an all-time high.

There were 240 sales in 2009 and 296 in 2008.

There were 2 $10-million+ sales this year in Boston; two times last year's total. Those three sales are the only $10-million+ sales ever reported in our local MLS.

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