Market Conditions: What Happens When Prices Are Slashed in Your High Rise- Part II: 222 E. Pearson
We’ve already chattered about what happens to original owners in a high rise condo building after an auction when units sell at lowered prices which then sets the bar for prices in the entire building.
Original owners in 222 E. Pearson, otherwise known as Pearson on the Park, in Streeterville are also about to find out what happens when prices are simply slashed.
Crain’s reports that new investors have bought the 30 remaining condo units in the Streeterville conversion high rise after the original developer failed to pay of part of the original loan. The developer handed the units over to the bank in November 2009 which has now sold them.
The group paid about $5.2 million for the unsold condos, or about $173,000 apiece, a price low enough that it can put them back on the market at discounted prices and still turn a profit.
The transaction is a positive sign for the overbuilt downtown condo market, part of what could be a long, painful but necessary process as prices fall after the overexuberance of the last decade. Some downtown developers have unloaded excess inventory by slashing prices or auctioning off condos, and developer foreclosures will play another key role in clearing the market.
For the other unit owners, all 189 of them, who paid higher prices, the situation isn’t as pleasant.
The development group is offering its condos for 25% to 40% below their original prices, says Ted Guarnero, a Baird & Warner agent who has a listing in the tower.
He also lives in a rented two-bedroom condo that the owner bought from Dr. Vish [the original developer] for $421,000 in 2006; he says the new developers are offering a comparable unit for about $320,000.
“I really do believe at these prices that somebody who’s going to live in it two to three years is going to make some money,” Mr. Guarnero says.
But the cuts will hurt existing owners who paid inflated prices for their condos a few years ago only to see their home equity eaten away by falling values. Mr. Guarnero is offering his client’s two-bedroom unit in a so-called short sale, meaning the owner owes more on the property than its $249,900 list price and the lender has agreed to accept less than full payment on the loan.
New investors buy failed condo conversion from PrivateBank [Crain’s Chicago Business, Alby Gallun, Feb 3, 2010]
Sucks for the people who already own them, but were they expecting their condo value to not drop 25-40% like everything else?
“Mr. Guarnero is offering his client’s two-bedroom unit in a so-called short sale, meaning the owner owes more on the property than its $249,900 list price and the lender has agreed to accept less than full payment on the loan.”
If only that’s what it always meant. Anyone have experience with a realtor on a short-sale listing saying “bank’s approved short sale at list price, but if you offer less, you *might* end up in approval-hell”?
Because I think that would be the sensible way to handle short-sales, from the banks’ end (and the listing agent, too)–>pre-approved at the list price, want it for less? offer away, but expect an approval slog.
Does a short sale necessarily mean the bank has agreed to accept the list price (or that the homeowner has even talked to the bank)?
“Does a short sale necessarily mean the bank has agreed to accept the list price (or that the homeowner has even talked to the bank)?”
Generally speaking, not at all. Maybe in this case it does
What the heck…
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T.S.
absolutely AWESOME 🙂
The article didn’t point out what the mix of the 30 units was in terms of 1, 2 and 3 bedroom units. That will play a big role in how profitable this investment will be for the new developers of the project.
Also, this will likely result in more short sales and foreclosures on the other units purchased by buyers before these new discounts.
And, in this building, the view has a big premium since it’s on the park. Many units I’ve seen in the building didn’t face the park – so were pretty dark and did not get great light.
I am wondering how quickly the new investors can sell the units, because they are paying taxes and association fees until they sell them. Maybe they will just auction them off, and start the bidding at cost and see what the market will bring…..
Either way, I would not want to be one of the buyers of 2006-2008.
“The article didn’t point out what the mix of the 30 units was in terms of 1, 2 and 3 bedroom units”
If the property website was accurate, there were only 2s and 3s remaining. Not that many of teh 2s aren’t more like 1+dens, but still.
Site sez: 2 bedrooms from $355,900, 3 bedrooms from $491,000, so a $173k average price is way more than 50% off retail, regardless of unit mix.
Notice how the bankers would rather hold the units and list near retail or turn them over to big investors at massive discounts, but rarely if ever offer the big discounts to individuals.
I could never figure out how these units could command the prices they did after the conversion.
As a rental building prior to conversion, the 1 beds, for instance, were good-sized, but they they make for pretty crammed 2-beds. I am not too surprised by this.
I was scanning the MLS for a client I’m working with in the neighborhood and noticed this property listed in the same building for $1.3 million – 3 bed / 3 bath – quiet possibly one of the most overpriced properties in the neighborhood – especially given the news in this post. Property link: http://www.streetervillehomes.com/chicago-condos-search.html#PropertyID=18868793
Bob said:
“Notice how the bankers would rather hold the units and list near retail or turn them over to big investors at massive discounts, but rarely if ever offer the big discounts to individuals.”
I’m sure someone at the bank got a nice kickback.
Proving that no matter how much the government interfers and wrecks the economy, the free market will be the true indicator
gotta love it
Bob
it makes more sense to sell them all at once
a rip against the bankers is pointless
if you owned 30 units would you sell them and haggle with individuals or all at once and be done with it
Does anyone know the cheapest price 3bd/2ba available facing the park? I think it’s the x02 line.
ja, Here’s the latest activity in the 02 tier:
#202 listed 12/7/09 $575,000 w/pkg
#1702 listed 9/21/09 $629,500 w/pkg
#2202 listed 2/5/10 $524,900 pkg $30,000 add’l
#2302 listed 2/5/10 $549,900 pkg $30,000 add’l
#1802 rented 6/8/09 $2500 w/pkg
#502 rented 8/3/09 $2600 w/pkg
#502 closed 1/23/08 $623,900 w/pkg