Daily Archives: October 14, 2008

Palmer Hill condo’s revisited
Earlier there was a discussion of this project and I admitted that I knew nothing of the builder’s finances but did note that it was the largest project he’d attempted, a yellow light, in my view. This reader’s experience would seem to justify that caution:

I bought pre-construction and pulled out when told that the condos and townhouses that are completed would be delayed over 10-12 months for what they are calling re-design. They are pushing dirt away slowly construction to a crawl to prevent over supply. They had 40+ people committed in early 2008 and that number dropped to 20ish or so once they annouced the delay. They builders hold a 20 year option to finish phase 1, 2 and 3. they can stop construction at anytime. Alot of early investors pulled out after they started offering options as incentives.

So, porceed slowly and carefully, is my advice.

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A reader asks,

This post brings up a question that has been nagging me for a while…does it make sense to put money into a now depreciating asset in anticipation of making it more desirable to sell at a later date? What determines whether or not a house is a “tear down”?

I purchased my house in the early 90’s after it had been completely redone by the previous owners (perhaps making it what you referred to as antediluvian). Luckily, the previous owners were a bit ahead of their time for 1990 and we do have 12 foot ceilings in the family room, playroom, kitchen and master bedroom as well as a double height entry hall. The kitchen is “state of the art 1990 corian” but with the economy lately, I am not going to be updating the kitchen any time soon. I have re-done two of the five bathrooms recently, but I think the others need to be done so the house will show well when it eventually goes on the market. We have put a lot of money into maintenance the past 15 years and built a beautiful pool and have had a lot of landscaping done. Am I crazy to put any more money into my house now that it isn’t worth what it used to be?

Probably – I’ve always thought that any improvements a homeowner makes should be done with an eye towards his own enjoyment of that added feature (like your pool and beautiful landscaping) rather than resale. The law of entropy ensures that whatever you put into a house will age, fall apart, or at least go out of fashion – 10-year-old master bathrooms in trophy homes look positively dated when we agents see them on tour. Of course, the homeowners have been happily splashing away in that whirlpool tub for the preceding decade and, if they weren’t moving, would probably enjoy it for another decade or two without noticing that time had passed them by but buyers see it differently.
So if you want a new kitchen with granite counters and all new appliances and you plan to stick around to enjoy it, go for it. Just don’t count on getting much of your investment back when you move. There are tables out there showing what percentage of the cost of an improvement you can expect to get back upon resale, and all of them are under 100% (and all of them, I assume, don’t figure on your using those improvements long enough to start their deterioration).

If I had a house that I was planning to sell soon I would not put much money into it except to fix obvious structural flaws, like a failed paint job, a rotten porch, a crumbling foundation, whathaveyou (I purposefully mention some big ticket items because these are things that really will hurt your resale value and should be addressed, regardless of expense). I would certainly not waste money on a new kitchen – the would-be buyers probably have different needs and taste than you and updating baths, while nice and which might make your house easier to sell, will not return any gain. I’ve written before of houses I’ve seen that didn’t sell and whose owners were persuaded by their agent to do all these things I’ve just cautioned against. Now they have a house that, overpriced for the neighborhood to begin with, is even more out of whack. Far better to have cut the price $150,000 than to pour that same sum into a sinking ship. Price it right, sell it and move on – you can put your cash into the new house.

What makes a tear down? In happier days, any older house that sat on decent land was quarreled over by builders and first time home buyers alike – picture sea gulls fighting over a fish carcass. Now that the builders are on hiatus there are fewer tear downs and a much better opportunity for young families who can’t afford a mansion to move in, maybe add that new kitchen you so wisely avoided, and live happily ever after. Personally, I like that development; I represent a couple of builders, whom I like and admire, but I also live in this town and I’d be glad to see the return of “normal” families.

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Give my regards to Billy Joel
Realogy shutters its Corcoran branch in Hampton Bays . Things aren’t going swimmingly for Realogy, which owns Sotheby’s, Coldwell Banker, Century 21 and Better Homes & Garden Realty and is in turn owned by Apollo management which is shuttering 317 Linen’s & Things stores. Leon Black, Chairman of Apollo and known in certain circles as “Papa Sotheby’s” is reported to have said, “Oops! But what’s a piddly $1.3 billion mistake – you been following Lehman stock lately?”

It’s estimated that all 17,500 Linen’s employees will lose their jobs. “Oops” indeed.

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So what’s wrong with my house? Nothing!
There’s a house for sale, and I don’t want to embarrass its owner by giving its address, that’s been on the market for well over a year. It was originally priced at just over $6 million and now, a couple of brokers later, it’s down to $4 1/2. Trouble is, I think it’s still too high. The place was built for its current owners nearly 20 years ago and, in terms of style and what today’s buyers are looking for, that’s antediluvian. Tomorrow’s taste may change again but for now, this is little more than a building lot, on a nice, but not great, street. It was crazy to price it at $6 million to begin with and with building lots on Round Hill Road going unsold for $3.5, I doubt this one, in an inferior location, will see much action. Just my opinion, and I certainly wish the seller the best of luck, but somewhere along the line, the market will speak loudly enough for this seller to hear it.

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(Click to enlarge only known photo of Jeffrey Gendell)

Now he tells us: “Mistakes were made.”

Greenwich resident (7.27 acres in RA-2 zone, 5 bedroom, 6 bath brick colonial circa 1936 – ironically enough, that would mean it was built in the last Great Depression) Jeffrey Gendell’s hedge fund, Tontine Associates, is down a wee bit this year: 65%, as of September 30, and possibly a bit more today, say what? He’s certainly made tons of money for himself and his investors over the past 10 years so I’m not going to lose sleep over the possibility that he’ll have to move from that colonial. But I was struck by this quote:

[Gendell’s] fund is named after 17th century Italian banker Lorenzo de Tonti, who invented an annuity where several partners invest and receive annual dividends. As each investor dies off their share is credited to the remaining partners, leaving the last man alive with all the money. The name is a play on Gendell’s desire to be the “last investor standing.”

What do I know? Maybe being 65% down for the year is to be on top of the heap right now and Greenwich is indeed hosting the last money manager still paying his groundskeepers. I never could figure out hedge funds but I feel better about that ignorance now that I know that they couldn’t either.

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16 Beechcroft
Beechcroft (behind North Street’s St. Michael Church) has seen a wave of new construction lately and this spec house was in that wave. Priced at $8.5 million when it came on the market in June, 2007 2008, its builder must have grown tired of waiting: he sold it yesterday for $6.150 million; 28% off. Hope his profit margin was a big one.

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Price reductions!
Some readers tell me they find this topic boring. I think it illustrates two things: the danger of overpricing your house to begin with; and what’s happening to the market. Those who disagree are urged to skip this post and come back later.
42 Richmond Hill Road. original price $15.9 million; as of today, $9.950 – 37.5% off. Remember, if the first price is ridiculous, a huge price reduction is not necessarily an indication of how much the market has dropped. Still, someone must have received a pretty hefty dose of reality out there on Richmond Hill.
45 Baldwin Farms South. Original price last January, $9.750. Today, $6.450; 34% drop.
38 Khakum Woods, land. Original price $8.5, today, $5.5; 35% drop. The pretty house pictured above is an artist’s idea of what a house might look like, if it were built. As it is, you get a foundation only. Considering that the current seller paid $4.8 million for the lot in May, 2005, in a stronger market, I’m not sure that’s enough.

There were another 17 price changes reported today, but these were the most interesting.
Update: Zillow.com
If you believe Zillow, 45 Baldwin Farms should be worth only $4.694 million but if I were the builder I wouldn’t despair: Zillow has him in Glenville, rather than off Round Hill Road, and uses houses on such desireable spots as Thunder Mountain Road to compare value. Bah, humbug. Its possible that in this market their pessimism might just prove out, but I’d be more confident in their calculations if they got the location right.

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ACORN attempts to register Mickey Mouse to vote
ACORN and the Demmerkrats say, “nothing to see here, move along, move along”, but haven’t yet commented (to my knowledge) on this story:Indiana registers give up screening 5,000 ACORN-submitted registrations after the first 2,100 proved bogus. That’s right – every single one. The story omits, by the way, to mention that ACORN works for only one candidate – wonder who that is?
I’ve been posting these stories for awhile now, but here’s a Complete Guide to ACORN’s Fraud.
Of course, as ACORN keeps working, no guide can be complete. For instance, there’s this.

Turns out that “Doodad Pro” and “Good Will” are not the only phony contributors to Barack Obama’s presidential campaign. The New York Times finally bestirred itself to apply some basic investigative journalism attention to the Democratic presidential nominee’s donor list. The Times found nearly 3,000 other questionable donors like “Jgtj Jfggjjfgj” and “Dirty West” after what the paper admitted was just a cursory look at the Illinois senator’s September financial filings. But then Times reporters Michael Luc and Griff Palmer revealed an incredible level of naivety by stating “it is unclear why someone making a political donation would want to enter a false name.”
Unclear? What other motive could there be for using a phony name and a nonexistent address to make multiple small donations using a single credit card than to evade U.S. election laws? Such journalistic gullibility may explain why bloggers have been on this story for months and the Times is only now noticing. The Atlas Shrugged blog first broke the story of such suspicious donors behind Obama back in July after noticing little gems like this in the Illinois senator’s official FEC filings:

Name: Hbkjb, jkbkj
City: Jkbjnj
Works for: Kuman Bank
Occupation: Balanon Jalalan
Amount: $1,077.23

In case you are wondering, there is no such thing as the Kuman Bank. It is difficult to see how the Obama campaign could have mistakenly accepted such an obviously duplicitous donation – and thousands more like it – in good faith. Yet the campaign is now claiming to be the victim of “Internet fraud.”

Then there’s the question of whether foreign nationals are contributing to the Obama campaign. There is more than enough evidence to warrant a full-scale investigation by the Federal Election Commission, including the $32,332.19 that appears to have come from two brothers living in a Hamas-controlled Palestinian refugee camp in Rafah, GA (that’s Gaza, not Georgia). The brothers’ cash is part of a flood of illegal foreign contributions accepted by the Obama campaign. Potentially at issue, according to a complaint filed last week by the Republican National Committee, is as much as half of the $427 million he’s already collected. In any case, a complete FEC audit became an even more urgent matter after MSNBC reported that Obama’s Muslim outreach director quietly met with top Council on American-Islamic Relations (CAIR) officials in an uncharacteristically unpublicized event in Springfield, Virginia on September l5th. The FEC’s primary job is to protect the integrity of our federal election process. With this many red flags flying and barely three week left before election day, there’s no time to lose if voters are to have all the information at hand before casting their ballots.

Obama – New Politics, for a change.

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As usual, great insight and commentary, this time on corporate (and governmental) owning up.
From my favorite blogger,James Lileks

The theme of the conversation was responsibility, and why no one in the current crisis seems willing to own up to this mess. I said that no one could see an advantage to admitting culpability, however small, and if I had thought of it I’d have brought up the Japanese; can’t have a big failure over there without someone sweating, bowing, apologizing, banging his head into the table, generally behaving as though he deserved to be stoned. And those are the showy ones who earn only contempt; it’s the guys who go home and hang themselves that really get a round of applause. It’s almost impossible to imagine that here, what with the diminished likelihood of hosswhipping, or a dispassionate, sustained interlude of public caning. If we interviewed any of the people responsible for this situation and asked them what they planned to do now, we wouldn’t be surprised if they said they were going to Disneyworld.

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