For Sale Sign and No Information on the MLS I am Mystified

Last week I was walking to Trader Joes on Colorado Boulevard and detoured slightly seeing a For Sale sign on a home at the northeast corner of 8th Avenue and Jackson Street in Denver’s Congress Park neighborhood. So what do I immediately do; I pop the address into my Engel and Volkers App and nothing comes up!

Now I am mystified so I put the address within www.REColorado.com our MLS service, again nothing shows up!

Finally I took a picture of the sign, looked up the contact information for the firm and sent an inquiry concerning the listing as per traditional services not to be found.

I did receive the following via email the next morning.

Screen Shot 2018-09-17 at 6.42.12 PM

I am not going to opine on REX Real Estate which proudly boasts they purposely do not upload listings to the MLS as per the following from a trade periodical: a full-service brokerage that eschews the MLS, uses technology to displace traditional agents, and charges home sellers a set 2 percent listing fee. Now I understand why the listing did not show up in any of my go-to searches.

Again I am not disparaging any new firm or start-up. I actually encourage and am intrigued by such businesses; while the real estate trade is somewhat old-school and may need some disruption, how is an issue I prefer not to discuss at present..

Now concerning 800 Jackson Street, the asking is $650,000. Based on the condition and my comparable knowledge, I would put the correct valuation closer to $525-$535,000.

On their site if you scroll down there is an option for comparable’s and it lists three(3) as follows:

747 Cook St:              Sold for $815,000 or $245PSF

823 Monroe St:         Sold for $811,000 or $402 PSF

811 Cook St:              Sold for $781,000 or $311PSF

Thus based on their generated comparable’s this makes 800 Jackson Street look like an absolute bargain at $650,000 or $269 PSF. Yet…..

  • The three comps provided by Rex Real Estate are on better blocks with stronger housing stock and urban fabric
  • Their homes are south of the actual Congress Park.
  • All three homes are in better condition inside and out.
  • All three homes are mid-block where as 800 Jackson Street is on a corner abutting a one-way west-bound arterial and literally ½ block west of commercial development and Colorado Boulevard including a gas station less than 500 feet to the east.

So being a broker you may ask what would I use as a comparable?

I would use 601 Cook Street for the following reasons:

  • Similar neighborhood.
  • Adjacent to 6th Avenue, a one-way arterial east-bound.
  • Similar lot size and design.
  • In better overall condition.

The sales price on 601 Cook: $540,000 or $213 PSF within the last year.

My gut is if or when 800 Jackson Street does in fact sell I believe the sale price will be closer to the low to mid $500’s, this is just my prediction. Now someone may absolutely fall in love with the house, the location the layout and so forth and pay the asking however assuming they may be working with a full-service knowledgeable real estate broker, I assume that broker will provide comparable’s that are more alike and will of course assuming financing order an appraisal.

I will be keeping an eye on this one, just not via the MLS will use Assessors Records.

Of note, next Monday October 1, 2018 I will not be publishing as I will be in Asia. Will post the following week.

 

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Charting the Market in One Property over the Past 5 years the Trend says Caution

Per my past blogs I am not providing the address of the following (I can advise within 1 block of King Soopers and adjacent neighborhood retail) I am using this listing as an indicator of the market and possible predictor of the near future. The residence is a historic 1/2 duplex, part of a grouping of townhomes dating to c. 1908 located in a desirable central Denver neighborhood yet addressed and fronting on a busier one-way Avenue.

With 3 bedrooms, multiple levels, approximately 1,800 SF finished square feet, reserved parking and low HOA/taxes an attractive listing and opportunity for the correct buyer. Personally as a prospective buyer and real estate broker I see challenges from being semi-detached i.e. sharing a common wall to the frontage on a busier roadway to reserved yet uncovered parking but this is the logical side of me.

I decided to look at the history of this listing as I pass it almost daily on my commute from Cherry Creek North to Downtown Denver.

The residence first came on the market as follows listed with a full-service brokerage offering a 2.8% co-op:

  • 7/9/13:          Initial Price:               $360,000
  • 7/9/13:          Price Increase:           $375,000
  • 7/11/13:        Goes Under Contract
  • 8/2/13:          Sold and Closed:        $375,000

The same unit enters the market again with a full-service brokerage offering a 2.8% co-op as follows:

  • 7/13/16:       Initial Price:               $585,000
  • 7/21/16:       Price Reduction:        $574,900
  • 9/11/16:       Listing Expires

Five (5) days later the listing reappears with a different full-service broker and brokerage firm offering a 2.8% co-op yet $35,000 lower asking.

  • 9/16/16:       Initial Price:               $535,000
  • 9/26/16:       Goes Under Contract
  • 11/21/16:     Sold and Closed:        $536,000

Thus the seller who purchased in 8/13 for $375,000 has sold 3 years later for $536,000 or $161,000 gross profit in excess of 40% before commissions, fees and closing costs. Over three (3) years an attractive return coupled with being a nice abode.

Now fast forward to June 2018 or just shy of 18 months after the last purchase. The unit is placed on the market with a fixed fee brokerage and offering a co-op of 2.5%

  • 6/7/18:         Initial Price:               $590,000
  • 6/23/18:       Price Reduction:        $585,000
  • 8/11/18:       Price Reduction:        $575,000
  • 8/30/18:       Listing Expired

If the seller above did sell for $575,000; their gross profit would be $39,000. After the fixed fee commission and the 2.5% co-op to the selling broker AKA the buyer broker their net profit would be approximately $22,000 before closing costs and Title Insurance. Not to shabby for 18 months, basically generating $1,200/month in profit HOWEVER, the unit did not sell.

The unit has been placed back on the market as follows with a full service broker (a firm/broker/team that is quite well-respected and knowledgeable) and a co-op of 2.5%.

  • 9/14/18:       Initial Price:               $575,000

Now let’s assume with the new broker/brokerage and the co-op, let’s assume 5% of the closing purchase price. My gut says the unit will close between $545,000 and $555,000. Let’s see what the net is after commission of 5% sans closing costs and Title Insurance:

  • At $575,000 – 5%($28,750) = $546,250
  • At $567,500 – 5%($28,375) = $539,125
  • At $560,000 – 5%($28,000) = $532,000
  • At $553,500 – 5%($27,675) = $525,825
  • At $545,000 – 5%($27,250) = $517,750

Thus not even considering inflation which is now evident or the Time Value of Money, unless this sellers assuming a 5% commission structure transacts at $565,000 or above a strong possibility of actual net loss over the last 18 months.

I understand the initial listing with a fixed rate brokerage as in a strong sellers market there is this assumption that all full-service brokers due it place in MLS and other distribution channels and wait for the phone to ring. I with 3 decades as a broker can attest this is far from reality, however the perception continues.

Yet consider this, while listed with the fixed price brokerage for three months the seller  I assume was paying on a mortgage, thus those 3 months of payments are not coming back and doubtful much impact towards principal. With the new listing I would not be surprised to see reductions before the end of September.

Granted there may be new prospective buyers who have not seen the listing prior. Yet with continued forecasted interest rate hikes and a general slowing of demand, whether seasonal or I assume more indicative due to a lack of demand I would be surprised if the unit sells at the asking of $575,000.

Again my gut advises the unit will sell for between $545,000 and $555,000 assuming no Fall Surprise in the equity markets; not much more than when sold two years prior and if factoring in closing costs and inflation, an actual monetary loss. Will keep all posted.

 

The Three Condo Buildings That Set the Foundation for The Golden Triangle

For many years the neighborhood known as The Golden Triangle (area south of The Denver Art Museum) mystified urban planners and developers. Located south of downtown the area was a mix of low-rise dated commercial buildings and parking lots that by virtue of location should have always been in demand.

During the last 1990’s into the 2000’s a period similar to the boom at present three (3) high-rises were developed setting the foundation for the neighborhood and its resurgence. Of the three buildings, two centrally located in the neighborhood, a third on its eastern flank. The buildings were conceived and developed by Craig Nassi.

At present the area continues to surge with redevelopment including rental apartments along its Speer Boulevard border, in-fill row houses within the heart of the neighborhood i.e. between Broadway and Speer, south of 12thAvenue and continued activity on the Broadway corridor.

Of the three buildings, which changed the skyline of the neighborhood The Belvedere at 475 W 12th Avenue, was the first to be completed and offered for sale. Conceived and designed based on the aesthetic of elegant pre-war co-ops of Manhattan the finished building includes an opulent lobby, an attended door and exterior design details reminiscent of pre-WWII apartment houses. The Belvedere was consider out of place in the Rocky Mountain West (to date most condo buildings has been developed with a contemporary design) and was followed by The Prado, within one block sharing similar aesthetics and The Beauvallon, a hulking structure built on Lincoln Street with full amenities offering views of Downtown and The Front Range.

Having recently represented a seller in The Belvedere, a sale which commanded the highest per square foot transacted in the building to date I wished to look back on the market over the last year for all three buildings. Due to their design and location, the three buildings are truly unique and have yet to be replicated.

The Belvedere 475 W 12thAvenue (1999)

  • Closed Sales: Seven (7)
  • Size: 900 SF to 2,640 SF
  • Sold: $350,000 – $985,000
  • Average PSF: $385.95*
  • On Sale or Under Contract: Two (2) Avg. $411 PSF
  • *The transaction in which I represented the seller closed at $415 PSF

The Prado: 300 W 11thAvenue (2001)

  • Closed Sales: Six (6)
  • Size: 1,008 SF to 2,096 SF
  • Sold: $375,000 – $900,000
  • Average PSF: $380.32
  • On Sale of Under Contract: Two (4) Avg Asking $403 PSF
  • Of note, two parking spaces for sale asking $60,000 not included in stats above

The Beauvallon 925 Lincoln St (2001)

  • Closed Sales: Nine (9)
  • Size: 769 SF to 2,272 SF
  • Sold: $315,000 – $730,000
  • Average PSF: $374.24.95
  • On Sale of Under Contract: Seven (7) Avg Asking $380 PSF

Please note while the buildings were developed one person, each is unique concerning setting, amenities, views and floor plans. Yet even in the present day in which we are witnessing glass enclosed high-rises penetrating the skyline from Downtown to Cherry Creek, The Belevedere, The Prado and The Beauvallon continue to occupy a unique niche in the marketplace concerning location, design and views and doubtful to be replicated anytime soon. While one rarely uses the term “bespoke” concerning condos, these three buildings fit the definition.

And in the interest of a fair and balanced blog I would be remiss if I did not include the opposing opinion concerning the design of the The Beauvillon as noted in the following article from Westword titled: The Ten Worst 21st-Century Buildings in Downtown Denver.

A Broker Makes a Rational Offer for his Future Residence the Results

My wife and I have been looking for a home (for followers of my blog we sold our primary residence of just shy of 30 years back in April 2017). We have kept our eye on a listing in one of Denver’s most desirable and stable (concerning values over the long-term) neighborhoods. The home we expressed interest in is small (similar houses have been expanded), requires updating to present code including electrical, no garage and the basement shows evidence of past and more recent water damage.  Coupled with all the above information the most recent index by Beracha, Hardin & Johnson Buy vs. Rent Index suggests we would be better of renting than purchasing at present yet as brokers we too sometimes operate on emotion and we are looking longer-term.

While the index does somewhat influence my decision; being a logical broker I conducted my due diligence concerning comparable properties in the same block on the same side of the street. I went back a few years and extrapolated the comparable’s using an inflation calculator to justify our offer.

While I will not disclose the address, the asking based on above grade SF is approximately $625 Per Square Foot (PSF). The comparable properties all have similar lot size and as mentioned on the same side of the street on the same block:

  • Comp 1: Sold – 3/2018:

Sold for $459/PSF Above Grade

Inflation Factor: N/A

-This home is in meticulous shape including the architecturally designed addition on the rear with the expanded kitchen, family room with fireplace, 2-car garage and professionally landscaped front, rear and side.

  • Comp 2: Sold -10/2017

Sold for $417/PSF Above Grade

Inflation Factor: $429 PSF Above Grade

-While I have not seen the inside except from the exterior new lighting, new windows, architect-designed extensions on the rear, garage parking to match. It is a duplex and both sides sold together as one structure. Each 1/2 of the duplex has 3 bedrooms and 2.5 bathrooms, larger than the subject property.

  • Comp 3: Sold – 6/2017

Sold for $532/PSF Above Grade

Inflation Factor: $546 PSF Above Grade

-While used as a pied-a-terre the interior condition is similar. The kitchen was outdated however larger space, has a garage and deep south setback with a lot that is 1,000+ SF larger than subject property.

  • Comp 4: Sold – 7/2015

Sold for $395 PSF

Inflation Factor: $420 PSF Above Grade

The house is very similar to Comp 1 (next door) yet narrower lot and smaller size overall. Excellent design and layout. The rear and upper extension were beautifully designed and executed with functionality i.e. den w/ fireplace, expanded kitchen with breakfast area, 2 car garage made of brick to match the historic urban fabric coupled with a professionally landscaped yard.

Thus concerning the comparable properties using 2018 dollars the prices per square foot above grade range from $420 to $546. While 4 homes do not make a proper statistical average would be $463.50 PSF based on inflation with the $546/PSF sale skewing the average upward do to limited sample size. Of note the Median is $444/PSF.

Many of my peer brokers believe the peak of the market was 6-12 months prior as prices are beginning to slip, inventory is increasing coupled with rising mortgage interest rates.

Based on the $463 PSF average noted the house we made the offer upon should be priced at approximately $625,000 which may even be somewhat aggressive as the comparables are homes that have been extensively renovated or updated and all include alley access garages.

We offered $560 PSF or 20% above the comparable properties identified on a PSF basis.

Our offer was promptly rejected as the seller is asking $625 PSF.

While no fault of the out-of-state seller if /when the residence goes under contract and assuming there is an appraisal there may be a rude awakening. We could have offered full price and use the appraisal and inspection contingencies to eventually close at a lower market oriented price; however that is not our method of operation.

We made a viable offer, provided statistical pricing guidance and was subsequently rejected based on I assume emotion and/or irrational exuberance concerning valuation. I have been incorrect before and the residence may actually sell for asking (of note at present on the market almost two months and one price reduction to date); on this one we like it (we do not love it) however we willing to wait it out or pass altogether as inventory increases and pricing pressures are forecast to be in our (buyers) favor.