Bernard Madoff was hauled off to jail last month and may never again see his $7 million Upper East Side penthouse. But the impact of his $65 billion Ponzi scheme on Manhattan real estate will be felt for years to come, as his victims look for ways to sell their spacious lofts and stately townhouses amid the worst housing slump in decades.
They, along with other sellers, will need to seek creative methods of unloading their properties. Strategies that served brokers well during the boom are now all but useless. In the wake of the Sept. 15 Lehman Brothers collapse, mortgages are scarce, jobs are disappearing and buyers are spooked.
“I call Sept. 15 ‘the Real Estate Sept. 11,’” said Jacky Teplitzky, a managing director at Prudential Douglas Elliman. “Everything changed. Valuation changed, marketing techniques changed; the way my team members do business had to change … fast.”
In the new market, developers in particular found that the first round of incentives they offered to buyers — things like free closing costs, gift certificates, and ‘price protection’ programs — did little to assuage uncertainty. Brokers say that gimmicks don’t work and that good, well-priced properties are now the only gold standard.
Still, sellers and brokers have gone back to the drawing board to try every technique to see what sticks. This month, The Real Deal looked at some of those 11th-hour strategies.
Some sellers, for example, are trying a new twist on sealed-bid auctions to quickly make deals. Others are considering property swaps, where they would purchase a potential buyer’s property to free them up for a deal.
Meanwhile, in a move that could change the face of new development marketing in the city, some sponsors are discarding the standard practice of hiring an exclusive sales firm and instead are hiring multiple brokers from different companies.
In addition, developers — who are not only dealing with the 180-degree turn the market has taken, but are also coping with the added challenge of Fannie Mae eliminating mortgage guarantees in condo buildings where fewer than 70 percent of the units have been sold — are also coming up with Hail Mary pricing strategies.
While many are discounting prices right out of the gate, for example, others are starting low and then increasing prices. By offering special low prices to early buyers, they hope to establish a critical mass of buyers — even if it means barely breaking even — before raising prices on round two.
And finally, short-term rentals are becoming increasingly popular as sellers take their homes off the market and developers recognize that they are not going to sell out right away. The hope, of course, is that the economy will improve sooner, rather than later, and that down the road, they can sell, or lock in high-paying, longer-term tenants.
Click the links below to read more on these creative strategies: