An update on the Pier Homes at HarborView
Buyer's remorse being what it is, people sometimes get cold feet after purchasing a home at auction.
The auctioneer who handled the Pier Homes at HarborView sale in Baltimore last month says one of the 18 buyers backed out during the rescission period, which ended last week. One more is in an extended rescission period while both sides work out pricing on some extras for the unit. The remainder are now in a hard-contract period and will lose their sizable deposits if they walk away without closing.
Jon Gollinger, co-founder of Accelerated Marketing Partners, which handled the June 28 auction, said another buyer signed a contract at the development overlooking Baltimore's Inner Harbor after the event.
He called a one-out-of-18 rescission unusually small.
"It’s rather unprecedented for us," he said. "It’s remarkable."
He attributed it to buyers doing their homework in advance, "and I think the other thing it clearly states is that people think they’ve got a good price."
The luxury townhouses were conceived during go-go times but delivered as the housing market soured. Nearly half the 88 units were unsold going into the auction.
The development team ended up putting 18 on the block rather than the 11 originally planned. Winning bidders got them for as much as $1 million off the advertised last asking price.
I say "advertised" because, as a reader pointed out, a few of these units were once on the multiple-listing service with prices lower than the "last asking price" in the marketing materials for the auction. Bidders were told the last asking price for one of the units on Pier Pointe Landing, for instance, was $1,479,000, but it was on the MLS for a time in 2009 at $1,290,000. (It ultimately sold for $637,000.)
Gollinger, who notes that this question also came up at the "practice auction" held for registered bidders the day before the real deal, says the asking prices he provided to interested bidders were the ones the development team gave him. But he argues that it doesn't matter much in the end.
"What I said to the room: ... What difference does the last ask make vs. what you pay?" he said. "It wasn’t last ask that got people into the room. It was the minimum bid."
The development team's answer to the question was that it offered "special deals to incentivize sales" on certain units at certain times, Gollinger added.
Closing dates for the auctioned units range from very soon through Oct. 1, depending on whether the bidders are buying with cash and how many upgrades they want.
"In many cases, people have asked for a lot of extra work on their units," Gollinger said -- from elevators to extra rooms.
The average deposit, including upgrade costs, is "upwards of $75,000," he said. He doubts anyone will walk away now that they're past their rescission period.
As for the remaining units still for sale: "The developer has raised the prices from the auction pricing. Not substantially, but raised the pricing, in some cases as much as 5 percent above auction pricing."
Why? Because the development team is betting that fewer Pier Homes competing with each other -- and the market signals created by active bidding on the auctioned units -- has stabilized the supply-demand seesaw.
Earlier in the month I chatted with Ross Mackesey, sales manager at Long & Foster in Lutherville, to see what he thought the auction would mean for other luxury properties. He has a background in new-home sales.
"I think the jury's out on what effect it has on the [luxury] market," he said. "Because there's no market. The whole reason they did it is because there was no market. If it got people looking, that's good. I would think in that luxury-home market in the city, any transaction is a good transaction."
The trouble is so much supply searching for buyers, Mackesey said.
"People aren't changing lifestyle right now the way they were in the mid-decade," he said. "My experience at the high end in the city, over $1 million: Most of those people were moving from comparable suburban properties -- comparable price-wise. And people aren't doing that in this market. They're just staying put."
The highest price at the Pier Homes auction was $956,000. More than 20 units sold for at least $1 million in earlier years, including several in excess of $2 million, according to state records.
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Comments
I was curious on what they ended up going for. I bet the people who bought the new construction near me for 650K feel like suckers.
Posted by: ironhide | July 21, 2010 9:46 AM
they will feel like an even bigger sucker when they paid over a million for it and they sold for as low as 500k at the auction. can you say, "Underwater for 500k+, Alex".
Posted by: Jack Daniels | July 21, 2010 11:03 AM
Somebody send me an email when the units go to foreclosure!
Posted by: Mike | July 21, 2010 1:58 PM
Any way to confirm or deny if the contract dropped was the college graduation present?
Posted by: Metzger | July 21, 2010 9:17 PM
Metzger, I did wonder about that after the fact (simply because that family was the only one I was able to talk to before I had to rush to meet deadline that day). Alas, I didn't ask when I had the opportunity.
Both father and daughter seemed quite sure they got a good deal at the time.
Posted by: Jamie Smith Hopkins | July 21, 2010 9:45 PM
Wow! Who are these people? Do they buy Art?
Posted by: Greg Fletcher | July 22, 2010 12:28 PM
Greg, you'll be able to find out who bought the units once the deals close. Ownership is a public record.
Posted by: Jamie Smith Hopkins | July 22, 2010 12:34 PM
Thanks Jamie.
Posted by: Greg Fletcher | July 22, 2010 1:00 PM
Actually, my wife and I swooped in and bought the one home that was kicked out of the Auction by the buyer who walked away. We are excited to be moving down there, and we think the location is both outstanding and unique. A thirty second walk, and you are right on the harbor promenade.
The development is now about 75% sold, but the remaining homes have list prices that aren't cheap: $650K and up. But if you want a house with harbor views, high end finishes, a central location, and rock solid concrete and steel construction -- you have to pay some kind of premium.
In the long run, I think these homes will appreciate because after the 88 are gone, buyers won't be able to find any kind of equivalent in the central harbor area.
Moving there will be a big change for us, but we pulled the trigger because we felt the seller had established a solid price floor, loan rates are low, and the location is SUPER SWEET.
Now we get to put our own home on the market, without the benefit of Accelerated Marketing Partners to generate interest.
I look forward to times in Federal Hill, Harbor East, The Landmark Movie Theater, Harborplace, Cross Street Market, biking on the promenade in the morning, and watching July 4 and New Years fireworks from home.
The only reason we are able to move up is because we have kept our jobs throughout the recession, and we feel secure on the employment front. Also, we have equity in our present house and a good credit rating. We also had the cash to make a 25% downpayment.
Posted by: smithbaltimore | July 23, 2010 11:34 PM
Oh, interesting, smithbaltimore. Hope you enjoy your new home!
Posted by: Jamie Smith Hopkins | July 24, 2010 11:29 AM
Jamie,
The home will stretch our budget, but at least I won't be worrying about kitchen and bath upgrades or maintenance issues (all exterior stuff is paid for by the association and the interior stuff is all new.
It was helpful for us to know in advance what to pay for the home as opposed to guessing where prices would go in the auction. Overall, we are happy with the outcome.
On the flip side, we are now sellers in the market for the first time.
Posted by: smithbaltimore | July 28, 2010 11:13 PM
I have been following this story since you wrote about it in the paper in June. It's fascinating how much the Web can impact buyer/seller relations. Great, detailed case study. Thank you for your reporting.
Posted by: Pier Homes at HarborView Auction Observer | August 9, 2010 3:36 PM
Jamie,
I wanted to officially thank you for disclosing my research on the 'last asking prices'. As it seems you have done more research on that yourself thereafter asking for seller's / promoter's opinion on that.
I disagree with the seller/promoter that that kind of information is really not too relevant. Indeed, if you look at the sales brochures they provided as well as the emails that they keep sending, the things that stand out in bold and red color is the 'slash in price' in percentage terms... If you artificially inflate the 'last asking price' the discount which happened to average on the 50% or so seems like a really excellent deal. Instead the real discount as I calculated was more on the 20-25% from the 'real last asking price'.
As consumers we know a good deal usually by the discount (in %) and psychologically I believe that inflating the discount % did motivate many would be buyers. I don't know what the turnout would have been if the discounts would have been on the 20-25% range. Discovering the truth piece by piece. Thank you.
Posted by: Truth Seeker | August 19, 2010 3:41 PM
Hi, Truth Seeker -- thanks for emailing me in the first place. A real estate agent looked every auctioned unit up for me on the multiple list to see what the history revealed, but only a few (two, if memory serves) had been listed.
Some buyers probably only look at the bottom-line asking price and compare it with other real estate options, but I'm sure you're right that some are primarily swayed by price drops and the thought that this ensures they're getting a great deal.
Posted by: Jamie Smith Hopkins | August 19, 2010 3:53 PM