The nature of commentary is such that it’s delivered with a general understanding of the facts combined with a heavy dose of opinion, and that opinion is subjective. That’s the basic idea, anyway. When a writer writes about what really happened in Benghazi, the writer is writing based on the known facts while building a bridge between the known facts out of personal opinions. That’s what commentary is. That’s why this blog says, up there at the very top, that I’m here to deliver combative commentary on all things Lake Geneva. Why must the commentary be combative? Because other real estate blogs already had milquetoast commentary covered. With that said, this:
The lakefront sale this week of an REO on Maple Lane in the Birches was a good sale for the market. It was nice because at $1.86MM for 100′ of frontage it followed closely our expected sales range for larger lakefront parcels with tear down, or otherwise impossible structures. $17-19k a front foot is this expected value, and if you’d like more proof of this I’d encourage you to read some archives from last fall where lakefront after lakefront sold and cemented this value range. Prices haven’t changed since last fall, so this price per foot number should be the same now as it was then, and it is. So for that, this is a nice sale.
For everything else, it’s somewhat miserable. This property came to market as REO (Chase, I believe) sometime during the waning days of summer. The property, 100′ of frontage with nearly 2 acres of land (MLS says this, though my calculations based on the MLS measurements show the land to be closer to 1.8 acres), was worth of much attention at the $1.584MM initial listing price. All sorts of buyers flocked to this parcel. The house was mostly bad, with a few redeeming characteristics. Even though the house was salvageable, it was most likely best served with a handful of dumpsters and a skilled demolition man.
For all the initial attention came the reward of offers. Many of them. I wrote one for a client, and there were rumored to have been perhaps five or six or more offers on the table. The bank chose one, and the initial deal progressed. Then, according to local lore, a deed restriction was discovered that prohibited the building site from being moved any closer to the lake than the home currently sat. The home, by the way, sat way, way, way far from the lake. The tunnel effect created by a view looking directly from one side of the narrows to the other was made much worse by the positioning of the house. It was a lakefront home on a beautiful lake that had a view generally relegated to a riverfront home facing the Mississippi.
Once this restriction was found the initial deal was canceled. The buyer that I had interested was no longer interested, and apparently the other buyers that were interested at first also found this to be a detriment. The property returned to the market, and a little bit of time passed. Then, a new offer, perhaps more than one, and the bank chose a new deal. That deal closed this week for $1.86MM. For an REO property. With a river view. And a value impacting deed restriction. In the Birches. With somewhat soggy frontage. AND AN ASKING PRICE OF $1.584MM. Discuss amongst yourselves.
So. What would possess someone to pay $276k over ask on a bank owned property? This is not rhetorical. I’m sincerely asking. I’m asking because I don’t understand the move, at all. Considering other properties are available today that are far superior to this in terms of value and long term desirability, it makes no sense to me. This deal, like a few other deals this year on Geneva, has as much to do with value as a timeshare in Cancun. Which is to say they both would struggle to even define the word.
That’s the commentary portion of today, because I cannot know the details of this deal, nor the motivation of the buyer as I represented neither buyer nor seller. I do know that I discussed this property with several of my own buyers and I pegged a value of $1.5MM, perhaps less. Why buyers buy what they buy I will never know, which is why their personal motivation is none of my business. How a sale fits in to the market is my business, and today from my vantage point a $1.86MM price paid for this parcel an overestimation of value. Will the water in front of this home still be refreshing next summer? Will the sun will warm them on their lakeside deck? Of course. So in that, I suppose every sale remains a good sale. If you’re a JPM shareholder, it’s also a good sale.
Image courtesy Lake Geneva’s own Jeff Johnston.