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Gregg Saunders, vice president of retail real estate development at Philips International, had been in no rush to sell a house north of Route 27 in Sagaponack that was built for him and his wife in 1998. The four-bedroom property with a tennis court and pool had been on the market for two years at $2.9 million.
Then last year, he bought a historic home on an acre of land closer to the beach in the same town for $2.45 million.
Saunders said he “didn’t want to be stuck with two homes,” so he cut the price on the first house “dramatically.” It sold in December for $1.75 million.
as told to Bloomberg News, Jan26, 2012
The reality is, the realty market in Manhattan has held significantly better than The Hamptons. We have typically said that “as goes New York, so goes the East End”, however it does not appear to be holding true this time around.
January 27, 2012, 8:14 AM EST, Bloomberg
Why would that be? Could it be:
1- Manhattan has more permanent residences and The Hamptons are more discretionary homes?
2- There are more foreign buyers in Manhattan than The Hamptons because the investment quality of Manhattan real estate is more stable?
3- The Bankers who have fueled both buying here as well as the business of others who end up buying here are being more conservative? ( have you heard the stories about the senior management at Goldman, Chase, etc telling their ranks to “keep a low profile”)
4- Is it that The Hamptons don’t have professional property management companies that can manage real estate investments adequately for investors?
5- When enough properties sell for 60% (or less) of asking price, does that spook big buyers to downsize and play it safe?
6- Could the lack of dependable Market Data make today’s more educated buyers uneasy?
One of the things that keeps values down in Springs is the high taxes and now they are getting thumped again…they just can’t win.
Shouldn’t the Board of Ed try to figure out how to level the taxes between the districts that share the same resources?
A Surprise Tax Increase For Springs
District influx of 37 high school students
By Kate Maier, The East Hampton Star
(October 21, 2010) The 2010-11 Springs School District tax increase has jumped from 5.1 to 9.5 percent as a result of an unanticipated influx of 37 high school students, which amounts to an additional tuition payment of more than $800,000 to the East Hampton School District.
The Springs School District’s attorneys have advised that the tax levy increase is not subject to a public vote because it is tuition related, said Christopher Kelley, the Springs School Board president, at a meeting on Monday night. rest of story here
Many have been trying to put on the best face possible about Hamptons Real Estate for the past couple of years;
“Oh, it’s a little slow, but it will come back” or ” I’m busy, aren’t you?”…yeah, right.
Sure, a handful of agents have done well to ok during this economic downturn and, if getting listings is a measure of success, then some are doing great! But if selling those listings is important (and isn’t it?), then very few are thriving.
Sales are down +50% from the peak and values are down 25-33%, and even as much as 50% on some properties that happened to get caught up in the frenzy of “The Roaring 00″s”. Just recently, B of A sent a value statement from an off site appraisal company to a homeowner stating their property in Sag Harbor was valued at $660,000. In November of 2006, that same property was appraised for $1,200,000. How do I know? That homeowner is me.
The realities of The New Reality are staggering. Many are still in denial about the value of their property. On Long Island as a whole, it appears that about 25% – 1 in 4 – of the listings are priced within 10% of fair market value, which is the same price it was valued at in 2004. In the Hamptons, that figure appears to be even less. The rest of the properties just sit and get stale. many of them don’t even get shown because the asking price is so far off the market value no one wants to see it.
The Ebb & Flow of Hamptons Real Estate
Many of those who had been standing on the sidelines with cash to take advantage of the reduction in values did just that in The Hamptons in late 2009-early 2010 ( flow), but once word got out that sales were brisk, sellers got emboldened and started raising their prices or put their houses on the market for ridiculous prices and buyers backed off (ebb). The uncertainty around the economy and the upcoming elections all contribute to the stalemate and the ebb.
Conventional wisdom would say that once the elections are over and there is a clearer picture of what the make-up of the congress will be, that confidence will start to come back and sales should pick up. Also, word has it that Wall Street Bonuses will be healthy for 2010 and, as they start rolling out in these next few months, that should contribute to brisker sales in Manhattan and The Hamptons as well. That being said, while money is no object to some, many don’t want to be in the position of reaching for a falling knife.
My belief is that Hamptons Real Estate will maintain +or- 5% of 2004 values for the remainder of 2010 & 11, and that we are in for a similar market as the 1990′s when values pretty much held for much of the decade until the banking industry woes worked out and economic and demographic forces came together to create The Roaring 00′s.
That’s not from my crystal ball, that’s from my head and my gut. I threw out my crystal ball in 2008 after it cost me pretty much all I had. Onward and upward…
Some recent articles about The New Reality:
|Hamptons Home Prices Fall as Buyers Seek Budget Retreats: Video
Oct. 21 (Bloomberg) — Home prices in New York’s Hamptons, the beachside resort towns in Long Island swelled by summering Manhattanites, dropped 14 percent …
The Hamptons Home Sales Down 19% Quarter-over Quarter in Q-3
‘Affordable’ Sales Dominate Hamptons Real Estate
|Hamptons Go South
Wall Street Journal
By SHELLY BANJO Even though Hamptons publisher Richard Ekstract dropped the price of his eight-bedroom Bridgehampton mansion to $7.99 million from its …
|Hamptons Home Prices Fall as Buyers Seek Lower-Priced Retreats
By Oshrat Carmiel – Thu Oct 21 04:00:01 GMT 2010 A for sale sign hangs in front of a property inEast Hampton, New York. Photographer: Jin Lee/Bloomberg …
It’s reported that the $50M Corzine to Tepper deal in Sagaponack is being done sans broker.
I can hear the “Aw, shucks” (or something similar) being exclaimed at every bar and pilates class on the East End, not that I have been to either during this wicked allergy season.
So, how much does an agent make on a $50,000,000 transaction? I’m sure many of you imagine MILLIONS!
The reality depends on a several factors:
1- The agreed upon commission between the seller and the listing agent.
Every agent enters a listing presentation aiming for the highest commission they can get the seller to agree to.
6% commission is common in many places, but never guaranteed. Some markets go as high as 7 or 8%. It’s not uncommon for the higher priced home owners to negotiate the commission down to, lets say 4 or 5%.
2- The agreed upon “offer of compensation” between the listing Broker and the Broker that brings the buyer.
In the Hamptons and Manhattan, the commission is typically split 50/50 between the listing Broker and the Broker who brings the buyer. In other areas of Long Island, the listing Broker usually keeps a larger amount of the commission and offers out less than 50% to the Broker that brings the buyer. Why? Greed, and they get away with it. Saps!
3- The “Split” between the agent and the Brokerage they are working for.
Note that the commissions on any transaction are paid to the Brokerage the agent works for. The Brokerage keeps their share and pays out the split to the agent who did the work on the transaction. Most agents start out at 50% (although we hear that one major Brokerage out here has started a new 45% tier) and as they gain experience and increase their gross commissions to the Brokerage, their split increases to, say 70% or greater in some cases. See an interesting chat on Hamptons Brokerage splits here.
4- Was the customer or a client a Referral or are you working on a Team?
It is not uncommon for big clients or customers to be referred by their family members or best friends who have a real estate license. And the referral fee is usually 20 – 25% of the commission your Brokerage earns on the deal. Many are very justifiable and from hard working professionals that have been working with these clients for years, but don’t have the local expertise or connections needed to complete the transaction in an area outside their own market (common with second homes), but when they are “just the result of a phone call”, they can sting a bit.
Regarding teams, with the 24-7 nature of the real estate business today, many professionals have formed teams so someone can always be available to their clients. Often team members share in all commissions that come into the team.
5- Our Dear Uncle Sam
Most Agents are 1099 contractors and pay their own taxes.
Now for the reality
So, take a $50,000,000 sale and apply the above reduction mechanisms to it and I bet the number that spits out is less than you thought it would be!
Best case scenario:
One agent @ 5% commission: $2, 500,000
@ 70% split w Broker: $1,750,000
- 35% US taxes: $1,137,500
Not a bad take!
Listing agent and Selling agent @ 4% comission; $1,000,000 each
@ 65% split w Broker: $650,000
- 35% US Taxes : $422,500
Still enough for a one-bedroom in The Springs, but…
add a referral fee of $25% and split it with a team member and the final commission on that $50M sale is about $160,000.
STILL A GREAT PAYDAY, but less than your imagination led you to believe.
And remember, there were approximately 10 sales of this magnitude in the US in 2008 and there are approximately 1.3M agents in the US.
It ain’t easy folks and I admire any agent who gets the opportunity to be part of a deal of this size. It’s rarely “dumb luck” and often the result of years of hard work, building relationships, planting seeds and weeding the gardens of their business that results in this good fortune.
The sales reported during this period in Jan ’09 were directly impacted by Black September ’08 when Lehman Bro’s died and the financial markets went into their second tailspin in two years, so apply that rock salt to the sales numbers below. Also keep in mind that, here in Suffolk County, it usually takes a month or two for closed sales transactions to make its way through the County recording office and to be publicly reported. so the majority of these reported sales closed in November and most of the deals actually actually came together two to three months earlier than that (August/September). Simply put, today’s reported sales reflect business activity that took place last summer. Nothing like “fresh” data, eh?
East End Sales Statistics ’09 vs ’10
Week Ending 01/09/09 01/08/10
Number of Sales 30 47
Total Dollar Amount $51,852,223 $39,234,870
Median Price $ 642,500 $ 540,000
Average Price $ 1,728,407 $ 834,784
- 10 of the 30 sales were for over $1million in 2009 (33%)
- 7 of the 47 sales were for over $1million in 2010 (15%)
It’s clear that the high-end is quieter and the low end is busier, with those who see price/value reductions of around 30% in two years finally jumping in under $1million.
The lis pendens figures are astounding, compared to last year – over 10 times as many initial filings by lenders on defaulting mortgages. Keep in mind the following:
One- the mortgage companies had a moritorium on new foreclosures last year at this time as they and the government looked for answers on what to do about the crisis and,
Two- “strategic default” was not as fashionable as it is today.
East End Lis Pendens Statistics ’09 vs ’10
Week Ending 01/09/09 01/08/10
Number of Filings 3 32
Total Mortgage Amount $1,565,700 $18,270,479
Median Mortgage $ 500,000 $ 419,100
Average Mortgage $ 521,900 $ 570,952
That’s the numbers! What do you think?
**data from https://www.lirealestatereport.com
WSJ- The government over the past year has slowed the pace of foreclosures through moratoria and the drive to modify mortgage terms to keep more borrowers in their homes. It also has pumped up demand for housing by giving tax credits to many first-time home buyers and by driving down mortgage interest rates. As a result, home prices in some areas have risen in recent months, particularly for homes that appeal to investors and first-time buyers. Bidding wars for the more attractive bank-owned homes have become common.
Is Goldman “Just sayin’?”
see story here
State audit chastises East Hampton Town for no-bid contracts …
By Beth Young The widespread belief that East Hampton’s large budget gap was caused by fiscal mismanagement was confirmed by New York State Comptroller …
At Redfin, we’ve long been opposed to dual agency, where the same agent represents both seller and buyer. This hasn’t always been an easy call because in some ways it’s more efficient. But it’s hard to represent both sides in a negotiation simultaneously, and the big problem is that it encourages the listing agent to market the property selectively to his own clients rather than broadly, to every possible buyer.
see entire post here
August 08, 2009 12:45PM By Candace Taylor – The Real Deal
George Simpson has withdrawn the lawsuit he filed in March against 25 East End real estate firms and brokers, and the Web-based listings exchange system Open RealNet Exchange, or OREX.
Simpson, owner of competing data service Suffolk Research Service, and his wife, Jean, a broker, alleged in the suit that OREX and the brokers who use it violate anti-monopoly laws.
see story here
Pat Amerati at LIRER writes:
Our report about the rise in the median closing price for private homes and condos caused a flurry of questions and requests for further detail. Especially since the increase was the first significant 2nd quarter increase in the past 5 years.
We took the questions on board and drilled down into the data to provide a more detailed report concerning this increase.
See the most recent LIRER 2nd Qtr post here