Glass Half Full in a High-End Sale
Price was drastically slashed on oceanfront estate,
But, after all, it did sell
By Carissa Katz
(12/31/2008) As home sales and prices fall across the country,
 Doug Kuntz
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a $26.5 million sale on West End Road in East Hampton Village in November is big news, both for what it says about the real estate market’s strengths and what it reveals about its weaknesses.
Even in a rough economy, “if the property has good value, buyers are there,” said Frank Newbold, a senior vice president with Sotheby’s International Realty. Mr. Newbold brokered the sale of the 2.3-acre property from A. Robert Towbin and Irene K. Towbin’s IKT Trust to West End Fun L.L.C.
In the early half of this decade, $26.5 million would have been a price tag for the record books. But today, the real story, said Stuart Epstein, an owner of Devlin McNiff Real Estate in East Hampton, is not that the property sold for such a handsome sum, but “how much he came down off his original asking price.”
The property, with a 1916 house that was one of the first built on the street, and with 220 feet of ocean frontage, was listed in April for $40 million. The sale in November represented a 30-percent price reduction. If that can happen in the village estate section, what does that say about sales elsewhere on the South Fork?
“That’s a big piece of oceanfront property on arguably one of the best streets — not that there are any bad streets on the ocean,” Mr. Epstein said. “It’s like a reset. All pricing is resetting, and we’re in the middle of it and no one knows what anything is worth.”
Mr. Newbold sees things differently. “It’s dangerous to generalize from one sale, to say that if that is down 30 percent everything is down 30 percent. That is not the case at all,” he said.
To some extent, Andrew Saunders, president of the new firm Saunders Associates, agrees. “Forty million dollars was obviously a little ambitious,” Mr. Saunders said. However, when it comes to such properties, “every one of those sales is a one-off sale.”
The Towbin family had owned the house on West End Road for about 35 years. Their children were grown and had left the area, Mr. Newbold said. They did not need to sell the house, but they were ready to. “This was a classic empty nest syndrome.”
To sweeten the deal, the couple who bought the house (they wish to remain anonymous) paid cash for it. “It was good timing on both sides,” Mr. Newbold said.
Had the sale been hers to broker, Judi Desiderio, president of Town and Country Real Estate, said she “would have counseled my seller to come down a lot more [originally]. Don’t leave the price out there at $40 million.”
“What it says is that the next guy who goes to buy something on the ocean, Lily Pond or whatever, that’s what he’s going to have on his mind,” Mr. Epstein said. “Every sale affects every other sale and the same goes for banks when they go to appraise it. This is now the benchmark.”
However, the fact that it did sell, notwithstanding the abundance of bad economic news, points to one of the inherent strengths of South Fork real estate and “confirms what everybody knows is the case: Special pieces of real estate tend to attract buyers,” Mr. Saunders said. “These things tend to come up very infrequently and there is a very dynamic universe of prospective buyers who desire to have that.”
“This is still a very good place to put your money if you’re in it for the long term,” Mr. Newbold said. “What we’ve seen is that the quality houses are pretty much retaining their value. . . . They may be priced a little bit more realistically than a few years ago.”
Ms. Desiderio believes that the West End Road sale is “the beginning of a wave. I think we’re going to see quite a few trades of very high-end properties going at a discount.”
Looking at who has been hurt by the troubles on Wall Street, she said, “through 2009, we’re going to see people who have to sell in all different segments of the market, but an exorbitant amount of people on the higher end for the first time ever. . . . We’re a luxury item for those people on the high end, so they get rid of their luxuries first.”
The problem is not just that houses are selling for less these days, but that they are barely selling at all, Mr. Epstein said. “The market is dead. It’s always very slow between Thanksgiving and New Year’s, but even with that you’re usually having phone calls and showing people things, and rentals are starting to be active.”
This year, he said, “from what I hear, we’re dealing with an eerie silence here. Things go up and down. The activity will return, but no one knows when.”
“The crisis that exists right now is, in part, a crisis of confidence,” Mr. Saunders said. “I will say one thing about Hamptons real estate: It is tangible. People understand it and you can live in it.”
The Bernard L. Madoff scandal, while it further damaged people’s confidence, also “reinforced the idea that tangible assets occupy a more important place in people’s portfolios,” Mr. Saunders said. “I believe people will infer . . . that real estate is an even more important part of people’s holdings.”
The brokers joining his new firm are “very busy with showings,” but people have been hesitant to “pull the trigger,” he said. They wonder, “ ‘Am I trying to catch a falling knife?’ ” he said. “There’s a lot of pent-up demand.”
Devlin McNiff has plenty of people “coming out and looking and getting excited, but invariably, they’re going back home and they don’t make offers,” Mr. Epstein said.
Mr. Newbold said some sellers have decided to take their houses off the market until conditions improve. “Markets hate uncertainty,” he said. And right now, he senses that people are saying, “Who needs a house on the beach in the winter? We’ll wait until spring.”
“I think international buyers will be coming out of the woodwork to buy a slice of heaven,” Ms. Desiderio said.
“It could be that when everything resets, that it will be a more equitable and fair place, as will perhaps all of Suffolk County and all of Nassau,” Mr. Epstein said. That could be very good news for those looking to buy.
“There has not been an opportunity like this for 10 years,” said Ms. Desiderio, who is hoping to buy some property now for her two grown children. “You have to be qualified, but mortgage rates are presumably very attractive,” Mr. Epstein said.