The $400,000 House Makes A Comeback
A bad time to sell, but a good time to buy
By Jennifer Landes
 Jennifer Landes |
(1/24/2008) The hand-written notice on hot pink-colored posterboard at Noyac Road and Rose Avenue in North Sea seems like a relic from a bygone era: “$399,000 house 4 sale . . . take a look, make an offer.” But Bryan Butler, the house’s owner, acknowledged that it is a sign of the times.
“I started out a year and a half ago, priced at $100,000 higher,” he said of his two-bedroom, one-bath cottage just down the road from the sign, which he replaces with slightly different wording and a new color when rain destroys the previous one. “I’m not in any particular rush. I live in the house now, but I’m trying to buy something a little bit bigger.”
It’s been more than three years since realtors in East Hampton and eastern Southampton Towns forecast the extinction of the under-$400,000 house. But, like piping plovers, wild turkeys, eelgrass, and other rare or endangered species here, this class of housing appears to be making a comeback.
Mr. Butler’s one-floor residence without a basement occupies 720 square feet on a ninth of an acre. “The expansion possibilities are limited,” he noted. But the sign has attracted a lot of attention.
“This street is very small. There are not a lot of reasons for people to come down here, but there’s been a lot of people driving by and stopping in front.” He said that his neighbors also have noticed the difference in traffic.
Homeowners on the lower end of the market appear to be among those discovering they must lower their expectations to sell their property. A quick online search for available housing under $400,000 on the South Fork east of Shinnecock Canal spat back 74 matches, although many of the listings were duplicates.
Among them were the Montauk Manor’s one-bedroom and studio condominiums, which start at $185,000. There are about 20 units for sale at the Manor, which has 140 apartments of different sizes. At one time there was a waiting list. As recently as four years ago, five units, on average, were listed and sold every three months.
Jim Sullivan, a licensed real estate salesman at Pospisil Realty in Montauk, said the Manor’s monthly maintenance fee could be a burden for both buyers and sellers. It ranges from $1,000 to $3,000, including an assessment surcharge for general improvements that itself ranges from about $300 to $1,000. The maintenance fee has made renting the apartments a break-even or losing proposition for owners.
Larger condominium units and even houses can be found listed at $425,000. John Brady, an agent for Coldwell Banker with an office in East Hampton who specializes in “short sales” aimed to prevent foreclosures, has a house in Springs listed for $425,000 that he said could go for less. It has three bedrooms and three bathrooms with a full basement on half an acre.
The house was purchased for $520,000 and refinanced at $490,000 last year. Mr. Brady expects offers to come in at $390,000 to $400,000, resulting in a $125,000 loss for the bank. Still, he said, that is far more than the bank would get if the house went to a foreclosure auction, even after the bank pays his and an attorney’s fees.
By knocking on the doors of debtors in foreclosure (who often stop answering the phone), Mr. Brady has managed to secure 12 listings from Manorville to East Hampton. But finding willing sellers is just the beginning. From there, he must negotiate with the bank to find the bottom-line amount it is willing to accept.
“A typical sales listing agreement is four pages long,” he said. “In a short sale it is 65 pages, mostly documentation to justify to the bank why the property is worth less” than the value of the loan.
According to Mr. Brady, the number of foreclosures and pre-foreclosures is rising on the South Fork, and the below-market sale of these properties could affect the rest of the prices in the area.
The high-end housing market is not immune. Mr. Brady said he knew of a $15 million house on Further Lane in East Hampton that was in a state of pre-foreclosure. The more expensive houses, however, are often owned by corporations, which can make a bank’s foreclosure lawsuit more complicated.
Often, people of lesser means take in roommates to help make their payments, but the ensuing crowd can make a house listed at a full-market price seem even less desirable to a potential buyer. Mr. Brady said that a short sale can provide a fresh start for people who cannot make newly converted adjustable-rate payments at double their monthly income, and whose credit rating is at risk.
He predicted that “the Springs market will be hit really, really hard. The guys who rake leaves for a job but said they’re landscape designers for their income at the bank, a lot of them got houses.” They may have a lot of tenants, he said, but their payments are still too high to make.
“Other agents are not so in tune with the market statistics and will say it’s still going up. But guess what? It’s not,” Mr. Brady said. Taking the number of houses listed on a South Fork real estate search engine, and adjusting for duplicates and old listings, he estimated that there were about 600 houses on the market in East Hampton Town, with about 20 sold per month.
“That’s three years of inventory to work through, and it’s creating a declining market,” he said.
Mr. Butler took his North Sea property off the market last spring at $499,000. Since he advertised it again a couple of weeks ago, two agents have added it to their listings, bumping the new, $399,000 price up to $425,000 in the ads to cover their commission. At least one agent has taken a client in to see the house, and Mr. Butler has received some low offers. He is not involved in any exclusive sales agreements.
“If I sell this, I have a couple of houses in mind,” Mr. Butler said. “It’s not a good time to sell, but it’s a good time to buy.”