Biggest Mistakes Real Estate Buyers Make
Biggest Mistakes Real Estate Buyers Make
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Biggest Mistakes Real Estate Buyers Make – How To Avoid Them
Property Spotlight – On the Market
“Bring Your Contractor” – Three Great Renovation Candidates
287 Commonwealth Avenue, unit 4
282 Beacon Street, unit 6
50 Brimmer Street
Well Bought/Well Sold
185 Marlborough Street, unit 3 – Plain Vanilla (in a good way) Older Renovation – Well Sold
What’s Catching Our Eye
Biggest Mistakes Real Estate Buyers Make
When we see real estate transactions where the valuation seems out of line, we do a little digging to see what we may have missed and to get a better understanding of the parties involved in these deals. More often than not, when it comes to transactions with inflated prices, at least one of three common denominators is at play: out of town buyers, dual/designated agency, or a sales agent out of their geographic area of knowledge.
The dirty little secret of real estate brokerage is that brokers and their sales agents won’t stop you from overpaying – they’ll look the other way. Below is a brief look at the three common pitfalls.
Out of Town Buyers – Buyers relocating to Boston from a market outside the greater Boston area are at a huge disadvantage. Generally these buyers work through a corporate relocation firm that will, among other things, refer the buyer to an “experienced sales agent,” and cover most of the expenses related to the move.
Buyers coming into a market like ours, with little or no insight into relative value or the nuances of various neighborhoods, streets, intersections, and buildings, are at an enormous disadvantage. They are completely at the mercy of the sales agent who was assigned the lead because they were the sales agent of the day and just want to get the deal done as quickly as possible.
Dual/Designated Agency – This one is intuitive, but shockingly otherwise highly intelligent people routinely fall into this trap.
Dual Agency occurs when the same sales agent represents both the seller and the buyer in the same transaction, a practice that is illegal in many states, but allowed in Massachusetts.
Designated Agency is the close cousin of dual agency. It occurs when sales agents working for the same broker represent respective sellers and buyers in the same transaction.
Make no mistake, conflicts of interest are at play in most transactions, and it’s our well grounded view that sellers inherently have the upper hand. The mere fact that designated/dual agency conflicts are disclosed does not eliminate the actual conflicts. In a buyer beware state like Massachusetts, the result can be very costly.
Out of Town Sales Agent – This is probably the least understood of the big three. It involves situations where sales agents that are focused on a particular community stumble across someone looking to buy a property in an area where they don’t actively practice. When you’re dealing with independent contractors, where their training programs are geared toward closing sales quickly and the mantra is “fake it ‘til you make it,” this is a recipe for disaster.
The fact that a sales agent may have sold 200 houses in Newton is great, but if they’ve never had a transaction in Boston they’re not going to add much, if any, value if you’re searching for that perfect Beacon Hill condominium.
Property Spotlight
Batterymarch Group is focused on buyer representation, so the highlighted listings are not ours. These are our opinions, so take them with a grain of salt. We’re happy to set up showings of these properties, offer our valuation analysis, and assist with preliminary renovation budgets when needed.
“Bring Your Contractor” – We See Potential Value!
This week we’re highlighting three attractive properties that have been lingering on the market for a while. These are premium, well maintained properties in great locations. So why haven’t they sold?
We chalk that up to a combination of valuation and the fact that they need some imagination and updating – we’re talking beyond “paint and paper.” We’d be happy to set up showings of these properties and walk you through our valuation analysis.
287 Commonwealth Avenue, unit 4 – This 5,263 square foot 6 bedroom Philly-style duplex with three parking spaces is offered at $7.5 million ($1,425/sf) and has been on the market for 135 days.
The key here is to enter into an agreement (at a reasonable price) contingent on getting condominium association approval and permits to divide the units and sell off the upper level with one parking space. You’d end up with a spacious 3,500 +/- square foot unit in a great building.
This is a gigantic apartment by Back Bay standards, frankly it’s too big. Based on the way the unit is laid out we think that dividing it into two separate units is entirely feasible. The resulting two units would be well proportioned and far more liquid.
287 Commonwealth Avenue, unit 4 is listed with Coldwell Banker.
282 Beacon Street, unit 6 – We highlighted unit 6 when it first hit the market last fall (see note here). This 3,200 square foot co-op apartment has 4 bedrooms and two deeded parking spaces. The unit is now offered at $5.25 million ($1,641/sf), down from the $5.79 million initial price last fall.
In our view, properly updating is going to entail modifying the floor plan, and any time you mess with the structure of the building, things get expensive. The building is staffed with a concierge and live-in superintendent, so the monthly fee (including property tax) will run you $9,592 a month. It’s worth pointing out that the stated monthly fee jumped by 25% since the property was listed last fall, a point that should be explored during due diligence.
We think the price is still too high when you factor in renovation costs, high monthly fees, and the “co-op discount.” But if you’re looking for a staffed boutique building and don’t mind taking on a project, this should be on your short list.
282 Beacon Street, unit 6 is listed with Campion & Company.
50 Brimmer Street – This 3,177 square foot 3 bedroom Beacon Hill single family is offered at $4.449 million ($1,400/sf), down from the original asking price of $4.999 million. It’s been on the market for 221 days. We see 3,000 +/- square foot Beacon Hill single family homes as the ideal size, and being located on the flat of the Hill makes this one even better.
50 Brimmer has been under the same ownership for over 20 years and like a lot of these houses, it’s in need of updating. Bringing this house into the 21st century will entail moving the kitchen from the basement to the first level. Yes, we’re talking real money and time for this project.
Readers of our work know that we’re un-apologetically anti-basement. In the current configuration, with the master bedroom on the third floor and the kitchen in the basement, you’ll be trekking up and down three flights of stairs multiple times a day. Moving the kitchen to the first floor not only eliminates a flight of stairs (your knees with thank you), but it gets you out of the dreaded basement. At the right price this could be the ideal Beacon Hill house for someone willing to take on a project.
50 Brimmer Street is listed with Gibson Sotheby’s.
Well Bought/Well Sold
185 Marlborough Street, unit 3 – Plain Vanilla (in a good way) Older Renovation – Well Sold
After 112 days on the market, Unit 3 at 185 Marlborough Street, a 2,078 square foot 3 bedroom with direct elevator access and one parking space has a new owner. The sale price came in at $3.925 million ($1,903/sf), a slight discount to the original asking price of $4.15 million.
185 Marlborough was converted into five condominium units back in 2008. We think it’s a bit of a stretch to label this unit as a 3 bedroom as the third bedroom is more or less an extension of the living room. A “2 bedroom, plus” would be a more appropriate description. Unless you have a real need for a dedicated third bedroom, we prefer this layout as it offers much more flexibility.
This unit is about as plain vanilla as they get, almost boringly so, but that’s part of the appeal. The location is excellent and the rooms are well proportioned, we really like this apartment. But let’s be honest, it’s a 15 year old renovation that’s showing its age. $1,903/sf is way over the top, we’re calling it – Well Sold.
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About Batterymarch Group LLC – Batterymarch Group is an independent full service real estate brokerage and advisory firm focused on the downtown Boston high-end residential market. We represent both sellers and buyers with a sharp focus on valuation. We also offer sub-advisory and owner’s representation services to financial institutions, family offices, and trustees.
About Andrew Haigney – A 25 year Wall Street veteran, Andrew held senior positions at leading global investment banking institutions where he routinely valued and negotiated complex securities transactions on behalf of institutional clients. Andrew has been an outspoken advocate of a universal fiduciary standard. In founding Batterymarch Group, Andrew brings that same discipline and passion to the real estate brokerage.