During giddy real estate times, developers show a fair amount of patience throughout the sales process, steadily increasing prices as they make additional units available for sale. In less robust times like these, developers are likely to remain as firm as possible on their published sticker price early on even as they deal out concessions on transfer fees, attorney costs, common charges, storage lockers, etc. However, there comes a point when getting out becomes more important than upholding sticker price.
Enter the Developer Unit Dump, in which condos are sold at discounted prices, undercutting earlier buyers, who now have to compete with a dump-comp when they go to sell.
Take, for example, the “A” line of studios at The Brompton at 205 East 85th Street, a condo building that has sold and closed almost all of its units. Last year, 10A closed for $859,034 in April; 9A for $841,756 in May; 16A for $960,937 in June; 15A for $925,285 in August; and 14A for $736,896 in September.
The last sale--likely the result of the initial contract holder walking away and the developer selling the unit for less, plus a nice forfeited deposit--may have been a warm-up for this: On Oct. 1st, 12A, a 552-square-foot studio, closed for $653,644. Back in Nov. 2008, it was listed as in-contract with an asking price of $885,000, so it’s likely that the initial buyer was unwilling or unable to purchase the unit, and the developer used their deposit to limit its loss on a lowball sale.
Bottom line: In the current environment, unless you plan on staying put for a good long time (many recommend seven or more years to increase the likelihood that your purchase will be financially successful, though a ten-year horizon is better if possible), consider buying toward the very end of sales in a building—not necessarily because you’ll get a better price than your neighbors (though there’s always that possibility), but to limit the chance of being kicked in the comps by a developer on its way out.
CompsQueen aims to demystify the vast amount of sales and rental information available to modern observers of the New York City real estate market. Writer-editor A. Ready is a former database designer and complex litigation manager who has been obsessed with NYC real estate for more than two decades.