A caller describes woes of her underwater condo

(Flickr photo by hamad M)

Call her June.

A mutual friend had put June and me in touch with each other a couple of months ago. She’s has on the market her Manhattan condo, a loft of close to 2,000 square feet that she and her husband had extensively renovated after their purchase a few years ago.

When the couple ran into financial straits, they listed the apartment for approximately $2.2 million about a year ago. That level, June confessed, was against her broker’s recommendation to ask less. Had she followed his advice, the place would be long gone.

Something on the order of 75-100 potential buyers looked at the place, but there were no offers. That number of lookers who didn’t even bid defines a property that is priced too high, and June now appreciates the validity of that axiom.

Meantime, June and her husband reduced the price in sizeable chunks until it is now something under $1.8 million. Three other comparable units in their building recently sold for roughly the $1.7 million.

But my caller explained her problem. Even at $1.7 million, they will suffer a short sale, problems with the lender of their home equity line of credit (HELOC), damage to their credit rating and no discernible way of coming up with the difference between what they believe their loft to be worth and what the market will pay.

“At that price, we won’t make any money,” June told me more than once.

So, the couple wants to rent out the place for as much as $9,000 monthly, they hope, and rent a much smaller residence elsewhere, even if it means moving out of the city.

If you were wondering why prices remain sticky, this graphic account demonstrates the reason. Some sellers want a return on their “investment,” don’t have funds to bring to the settlement table and rue the day they spent so much money on renovations.  They are underwater and . .  . drowning.

Talking with June, I felt really bad but could could offer little in the way of solace. Would whatever rent the couple receives cover all the costs, including wear and tear, on their unit? Would the market recover enough for them to break even an unknown number of years from now? Or should they bite the bullet?

Although any decision they make could prove to be lose-lose, I was inclined to suggest that selling at the time we talked rather than waiting for sunnier days might be the best course.

Easy for me to say.

Tomorrow: Weekly Roundup

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

Malcolm@ServiceYouCanTrust.com
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