To sell real estate is to engage in a competition. There are battles within a great war, and unfortunately, casualties are taken and points are tallied. This is not a game between friends; it's a game to the death. Well probably not the death, but it really is a competition. This is something that most people pretend to understand but actually don't. Like algebra. The competition is one where buyers compare and contrast, and in all that comparing and contrasting they uncover their own personal value scale. How exactly does this work? It's like this: You want $300k for your condo and your view is of a dumpster. Another seller of a different condo wants $300k and his view is of the lake. You are in direct competition with that other unit owner and you will likely end up the loser. In this way real estate is a competition, but not the sort of competition that occurs in U-8 soccer, because someone actually wins.
The winner here is the seller who achieves liquidity, that is, the seller who actually sells. The loser? The guy with the dumpster view. It's this sort of comparing that brings us today to the market at Abbey Ridge. Once a remarkable segment of our vacation home market, Abbey Ridge is today as dead as they come. While owners there struggle to understand why liquidity has all but left, and price cut after price cut fail to attract attention, the problem with Abbey Ridge is really quite simple. It all comes down to competition.
The lakefront condo market is slow. Everyone knows this. It will return to some semblance of glory but that coronation has not happened yet. It hasn't even sent out the RSVP's. The lakefront condo market being slow appears to have little affect on the Abbey Ridge, because these are obviously two different segments. But this is where the argument goes awry. Abbey Ridge and the lakefront condo market have been priced quite similarly over the past five years, and though they are different markets they do compete for the same buyer. This is the competition, and it is a competition a kin to a high school basketball game where the halftime score is 2-0. But perhaps that's being unfair. The basketball game is easily more exciting.
Today there are eight units available at Abbey Ridge. The lowest priced unit is at $280k, which seems reasonable. The highest priced unit is at $569k- a number that I'll let you judge internally. The three sales in the past 12 months appear, on the surface, to be quite consistent. The problem with this is that we are not surface dwellers. There are other firms who have that angle cornered. Last July, a three bedroom upper sold for $420k. I sold that unit for $440k in 2005. In November, a two bedroom up front by the harbor sold for $410k. I had sold that unit in 2007 for $510k. The third unit to sell last year, for $418k was a two bedroom with harbor view that had originally sold in 2007 as a bit of a sweetheart inside deal, so we can't view that prior sale comp as a market reality.
Now here comes the hard part of this. Those three sales from 2011 were high. The sales that we'll see in 2012 are going to be lower, some by dramatic levels. Today, two of the available units are bank owned, a third is a potential short sale. These three distressed properties might sell dirt cheap, and if they do they will set buyer expectations to a damaging level. The other available units might find buyers. They might. Any property anywhere has a chance to sell to some buyer somewhere, this is just how real estate is. But if forced to place my bets, I'd encourage any seller right now to be a defensive seller.
The art of the defensive sale is not as popular today as it was a few years ago, but it still matters. To sell defensively is to sell low relative to your competition, betting that the competition will ultimately sell at prices that the current day market views as being too low. It's the cutting to the chase of real estate. It's the setting of a market. It's the delivering of a devastating comp to your neighbors before they deliver their own devastating comp to you. This is not the fun aspect of real estate, but many times the smart move is to lock in a loss sooner rather than to lock in that same loss later.
For buyers, Abbey Ridge is ripe for the picking. The two REO properties are going to sell cheap- heck, they already are cheap. If stealing something at Abbey Ridge sounds like a good idea to you then we should probably have a chat. The market problem that Abbey Ridge is facing is one of direct competition. For a while, buyers thought it a good idea to pay $500k for a unit facing some reeds, even when a similar unit facing the lake was available at the same price. Today, with the lakefront condo market faltering and host to some tremendous values, there is little reason to consider Abbey Ridge at comparable prices. This, combined with likely low REO comps, will push prices down even further even as volume slowly returns.
Abbey Harbor (with Abbey Ridge in the lower left hand corner) courtesy Matt Mason Photography. www.mattmasonphotography.com