Two Lakefront Sales

Two Lakefront Sales

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Well, it seems that most of Chicago was scared away from the lake this weekend by that forecast. Thanks a lot, weather personalities. The weekend was rather perfect, with that big, bad snow storm barely dropping 3″ on the Lake Geneva area. A few more inches of snow are forecast this week on Tuesday night, and with the continued cold you will have an opportunity to take advantage of our forever-long Winterfest and come up this weekend. It’ll be great, I promise.

While most stayed home to count their money and watch that miserable football game yesterday, at least two savvy Chicagoans made the trip to the lake on Friday with money in their pockets. There were two lakefront closings on Friday, and while I probably should have been involved in both of them, I was pleased to be in attendance in one of the closing rooms at Chicago Title. The two closings were both fine enough properties, but it shouldn’t come as a surprise that I love the deal I was part of and can only sort of, barely, tolerate the other deal. The details:

My deal was on Oak Birch in Williams Bay, that of an attractive shingle style home with 80+ feet of frontage and a beautiful park running adjacent the property to the North. It was a home that sold in June of 2008 for $2.85MM. In reviewing comps from that year, it’s obvious to me that our market peaked sometime during June of 2008. I helped a terrific family close on that home last week for $1.81MM. That, my friends, is a deal and a half. Past values are not the only indicator of current values, but they sure are a nice guide. The home that we just sold was listed last August for $2.4MM, then was reduced to $2.15MM, which signaled to me that there was a possible deal to be had. I speculated privately to clients that $1.85MM may be an outside possibility on this deal, and when the right buyer stepped forward to seize this opportunity we ended up at $1.81MM. That’s a win in this market, and it’s a win for that family when they realize just how special a summer spent lakeside truly is.

There are market naysayers who will pounce on this sale, and in light of the prior high price and this new low price, they’ll say that real estate is a bad thing. That real estate destroys wealth. That real estate is best rented, never owned. To those I would offer up a remark made by the kind seller of this home. He told us that the property may have been a bad financial decision (as most purchases in 2008 proved to be), but it was the best family decision he ever made. This isn’t an endorsement of the concept of vacation home ownership coming from me, someone who is paid to bring you to these shores. This isn’t a tourism ad, cooed to you over some string music set to Photoshopped scenery. This is an owner, who was in the process of losing a significant sum of money, who said it has all been worth it. I’m not sure what further data points you need. (That owner upgraded lakefront homes, which is why he was a seller of this home.)

The other sale was one that I had an initial shot at, when I found myself at the listing appointment for this parcel of land to the East of Black Point, to the East of the Highlands. This property was nice, but I didn’t think it was nicer than a $2MM sale price. That was my opinion of value, and my opinion was wrong. The property was listed with another, more price-optimistic agent, and that agent reaped the benefits of a hot market when that property closed last week for $2.325MM. I wasn’t far off of my value, but I was 10% light, and that cost me the listing and the ultimate sale. While I represented neither party in the transaction, I’d have to guess the existing home will be torn down in order to make way for a new build. The lot is wide, at 150′, but the large home to the East is somewhat tight to the lot line, meaning the density there may look a touch disproportionate. Then again, I’m the guy who was wrong on the value, so perhaps I’ll be wrong on the outcome as well. Either way, a great sale for the market.

Two sales last week, four more lakefront sales pending at the moment, and undeniable momentum for this lakefront market. To the buyer whom I was lucky to work with on his new lakefront purchase, I’m grateful. Some lakefront buyers are prior Lake Geneva vacation home owners, and some are as this buyer, new. When you purchase a lakefront home here in January, it’s possible to envision a summer playing out on the frozen lake in front of you, but it isn’t all that easy. It takes faith to buy in January on a lake that you’ve never bought on before, and that faith will be rewarded on that first June Saturday that’ll be unlike all the Saturdays that came before.

Photo by Matt Mason Photography.

Two Lakefront Sales

There’s a new commercial on television that features a couple about to board a flight. Just before they step on, a guy carrying flowers rushes up towards them. He’s happy to have caught up with the flight-bound couple. We are meant to believe that he’s wishing to tell the woman that he loves her, that she can’t go off with that guy she’s with, that she has to choose him, instead. But this isn’t what happens. The flower carrier tells the couple that, “you got the house”. Everyone is thrilled! They do a huge group hug, and the commercial is over. This is real estate, brought to you by the National Association of Realtors (NAR). Why the sharp increase in commercials from this trade group? Well because Zillow is trying to destroy them, that’s why.

The commercial is supposed to show you that Realtors, like me, care. We rush to airports and bring flowers, because we care. We do everything we do because we care. This is the message brought to you by one of, if not the, largest trade organizations in these United States. The problem with the message is that it’s entirely and thoroughly wrong. The message tells the consumer that this dorky flower toting Realtor “got” the house for the buyer. This Realtor, without whom nothing in this transaction would have been possible, saved the day. This is why they all hugged. Because the Realtor made it happen. He got them the house. The message is that the getting is the hard part, and it’s the part you hug over. As a point of fact, the getting is the easy part. Anyone can write a contract, and anyone can buy flowers at the airport convenience store. Anyone can get someone a house. The NAR, with tens or hundreds of millions of dollars in income annually, wants the public to believe that the Realtor in the television spot was integral and necessary, because he got the buyer the house.

This, unfortunately, is and has been the message from Realtors to the world. And this message is precisely why Realtors are generally unappreciated and disrespected. If I’m on vacation far away and I meet someone at the pool who requires some conversation of me, I am generally asked what it is that I do for a living. I reply that I’m in real estate, which sounds horrible coming out of my mouth, even though I’ve been in this real estate business for 19 years and have enjoyed at least some level of varying success. When I tell them what I do, I immediately envision their mind snapping to a picture of me driving a Chrysler Sebring convertible that has my name emblazoned on the side. I envision them envisioning me with a name tag on my sport coat, sitting at open houses near the cookie tray. I envision them thinking of me rushing through the airport to tell my customer that they got the house.

The commercial could have been fixed if the agent rushing through the airport were to say this: “I wanted to tell you, we didn’t get the house. Don’t be upset though, because the buyer who did get the house overpaid by 20%, which means they’re suckers and their agent should be ashamed of himself”. If that were the commercial, I would gladly be the actor/agent. If that were the commercial, it would be the first time the real estate industry as a whole actually introduced the world to their importance. The getting of a house isn’t hard, and it doesn’t require an ounce of skill. It requires some general knowledge of a QWERTY keyboard and the ability to remember, or at least write down, one’s username and password. The getting can be done by anyone and doesn’t require a Realtor. It’s the getting at the right price that takes skill, and the failure to promote the actual skill is why Realtors will all end up working in cubicles for Zillow as they process real estate transactions electronically via algorithms.

Along those lines of getting the house, there were two sales this week on the lake. One sale was in Fontana, for a bit under $2.1MM, featuring a shared pier and lakefront easement over the smallish frontage. Nothing further to add. The other sale was on Bonnie Brae, that of the home that sold in 2011 for $2.625MM. The market has appreciated since 2011, as we’ve discussed, but to what extent? Probably 10%. Maybe 15% for some properties, and maybe less than 10% for others. The appreciation that Bonnie Brae just enjoyed? 45%.

I broke the paragraph for emphasis. The buyer certainly “got the house”, but at what cost? Was there anything in the market today that would lead us to believe that we’re up 45%? Was that home, when purchased in 2011, some sort of outstanding value? Well, let’s see what I thought about it at the time:

The pricing strategies aside, the sale doesn’t provide much of a sign for our market moving forward. Some sales are harbingers of things to come, this sale was simply a sale of a nice house on a nice lot at a pretty attractive price.

Sounds like I thought it was okay, but certainly not a steal. I’m not going to bore you with statistics that explain why this sale is an outlier of epic proportions, I’m just going to assume you already und The new price reflects a premium that one buyer thought reasonable, and I suppose it all comes back to the airport Realtor. If all that matters is getting a house, consider the job well done.

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1 Comment

  • Sounds like fun February 3, 2014 at 11:30 am

    So some lakefront properties are being bought at lower prices to leave room for new and or remodeling expenses..

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