Boston Condos for Sale and Apartments for Rent
Boston Real Estate Developers Weigh Pros, Cons Of Condo Auctions
It may have been a good idea to launch the auction format on an industry-wide basis during the hot Boston condo for sale market. But how about now? They are still a good idea because auctions bring transparency and certainty to the home-buying process, which buyers would appreciate and make them more likely to engage. Excerpts from article linked below:
If a Boston condo for sale has been listed for a long time without much interest, it may be overpriced, according to Mr. Lesnock. During the pandemic, heightened demand has created bidding wars among buyers, with some prime properties selling within days of listing. If a residence isn’t getting any traction in one of the hottest real estate markets of the modern era, there’s a problem.
“Why is it not selling? It’s the windiest day on record, why is this kite not flying, right? That’s the way to think about it,” Mr. Lesnock explained.
The auction process also allows more transparency, according to Mr. Pchelintsev. Both buyers and sellers can follow the bids, either at a live auction or, increasingly, online.
“You get a notification on your phone. Someone just made a bid bigger than you, and you go, ‘how dare you?’” he said. “You go on and place a bigger bid and now you’re basically, apart from trying to get this amazing house, you’re also In sort of a little bit of a competition.”
That competition can help drive up the price of the property, according to Randy Haddaway, CEO and founder of Naples, Florida-based Elite Auctions.
“Sellers get more through this process than they would otherwise,” he said. “You get a group of millionaires competing against each other—and none of them are used to losing. They don’t want to walk away and that drives up prices.”
Mr. Lesnock agreed. “If you do [an auction] correctly, it will generate fair market or better prices.
Updated: Boston Real Estate Blog 2022
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Banker & Tradesman columnist Scott Van Voorhis raises the question: Will the auction strategy save Greater Boston’s once-booming luxury condo market? Here are excerpts from Banker & Tradesaman:
The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.
But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.
In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.
….In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.
“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”
Will the auction strategy save Greater Boston’s once-booming luxury condo market?
The jury is still out on that one, but there’s mounting evidence that this seemingly desperate sales tactic is starting to yield some results.
Sales in the Boston area’s luxury condo market, after having ground to a halt in the dark days of last winter, are starting to pick up again at some projects.
And one of the main factors driving the increase is a shift by a growing number of developers to embrace the auction process, contend boosters.
Not everyone, though, is buying into the new tactics, with the developers of some of the area’s biggest new projects so far choosing to stay the course.
In fact, some counter that auctions are far from a cure-all, and traditional sales methods, combined with some timely price drops, can achieve the same results. Berkeley Investments is touting its recent success in selling condos in Boston’s Fort Point Channel neighborhood using more traditional sales tactics, and has even formed a marketing subsidiary to spread the new gospel.
But coming off a period in which sales of high-end condos fell off a cliff, it’s hard to argue against success, even if it has been a hard comedown for some developers from some bubble-year price expectations. For some, the argument can be likened to the age-old Band-Aid dilemma of a little pain at a time, or a lot all at once.
“Do you want to do it in one big shot, or go through the pain of having [multiple] price drops?” asks Thomas Skahen of marketing and research firm PrimeTime Properties, an auction fan himself.
Apparent Auction Success
So far, the numbers appear to back up the auction boosters, not the traditionalists.
The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.
But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.
In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.
Thanks to a successful auction, the 1850 averaged more than three sales a month, while the Bryant recently sold 10 units at auction and another nine afterwards. Combined with previous sales, 30 of the new condo development’s 50 units are now sold out.
A similar story can be found in the suburbs at the Nouvelle at Natick, a new condo high-rise at the Natick Collection.
Once a laughing stock with just a few units sold, the Nouvelle is back in the game, with an auction in October kick starting a stalled sales campaign.
The downtown-style high-rise not far from Route 9 is now more than 50 percent sold, with 113 units in the hands of buyers, compared to just a handful a few months ago.
Desperate Times, Desperate Measures
The skeptics and traditionalists acknowledge the auction strategy’s success in moving units in a rough market. But they say the low selling prices condos are fetching at these auctions should give developers pause.
John Ford, head of Ford Realty brokerage, said the less than $700-per-square-foot that units at the Bryant fetched at auction was hardly impressive for super-luxury Boston units.
While prices of the flurry of Bryant condos sold in the weeks after the auction appear to have broken the $1,000-per-foot market, according to the developers, this still represents a significant discount for two-, three- and four-bedroom units that come with their own private elevators.
The pricing comedown has been even more dramatic at the Nouvelle. Dreams of selling units for well north of $1 million at the high-rise, which towers over the newly revamped and very upscale Natick Collection, are long gone. A penthouse unit that had been on the market for an eye-popping $1.7 million sold at the October auction for a pedestrian $626,000.
In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.
“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”
Opportunity Knocks
In fact, traditionalists like Ford may soon have their own dog to root for in this fight.
No fan of the auction process, Berkeley Investments completely revamped its marketing strategy in a bid to move units at its stylish new FP3 condo project in the Fort Point Channel area.
Berkeley dropped prices, with a number of units available for less than $500,000, while adopting a more targeted marketing strategy that featured winning over key brokers and holding events to highlight the project.
The 92-unit FP3 is now nearing the halfway mark in its sales campaign, having increased the pace to three closings a month.
In fact, Berkeley hopes now to help other local condo developers move units through this more patient, targeted approach, having launched a new venture called ResMark, notes Joe Laurano, the Berkeley executive in charge of the venture.
That’s all nice and fine with Paul Sunshine, president of New York-based Domineum, which recently helped launch the auction and marketing blitz that sold 19 units at the Bryant.
Sunshine contends things should get even slower for downtown Boston condo developers in the months ahead. After all, he argues, he just scooped up most of the available buyers.
“If a developer can wait it out, that’s a perfectly plausible strategy,” he said. “In the meantime, I am happy to take all the buyers.”
