To describe market conditions it is generally necessary to paint with the broadest brush one can find. Real estate trends and valuations are not unlike employment statistics and death. If you’re employed and many others are not, this is sad but it won’t stop you from going out to dinner on Saturday night. Likewise, if some person dies, and you barely know this person, this too is sad, but it doesn’t mean you won’t go on living. Real estate is like this too. Broad market conditions affect us all, but individual sales only affect those individuals. This is why four homes on your street can sell, but if one of those four wasn’t yours, these sales may have a tendency to make you more bitter than happy for your neighbors. Real estate, like employment and death, seems to be awfully personal.
And so it is, when in search of a value in real estate, broad market trends can indicate where that value might be; where it should be. But broad trends only matter if the individual seller that you identify as the holder of the deed that you wish to wrangle from him is willing to play ball. Perhaps it’s less play ball and more capitulate to seemingly painful price levels, but saying “play ball” just sounds more pure and less hostile. Earlier this fall, a young couple from Chicago took a vacation to a far away shore. They did this as summer turned to fall, and while many of us were barely recovering from a water-based summer of our own, this couple made a very profound observation. It seemed as though their summer had only just started and was now over. No sooner were the sandals introduced as a staple were they hurried away to the back of dark closets. Summer came on a Sunday and leaves were dropping by Friday. Perhaps another vacation next year. That’ll do, right? We’ll cram a summer into one torrid week, and this will suffice. Right?
This question led that couple to Lake Geneva and down driveways and kept them up late at night scouring available inventories and identifying opportunities. They answered that question yesterday with a definitive and rather loud no when they finalized the purchase of their new lakefront estate on Black Point. The price of $3.25MM will save them the rushed week of summer vacation and turn each weekend from May through October into a celebration of bare footed salvation. Their children will now grow up near the water and they will be forever changed. The age old question that haunts city-locked citizens- that boring question that asks which restaurant will be patronized on a Saturday night- has been answered. Dinner next July will be on a white pier, with a setting sun to the west. The only decor needed will consist of several striped towels slung over the back of a chair and life vests scattered over the bow of a boat.
That’s the emotional side of a purchase, and that’s the side that I understand with every ounce of my being. But the other side of this deal is the market impact and the trend that this sale either followed or will set. Thankfully, with a rash of sales this year and the last, the market has clearly established where it is and where it is headed. This property on Black Point sold in 2008 for $4.050MM. In the event that you have forgotten the events that took place over the fall of 2008, I assure you that this was not a great time for real estate. 2009 followed, and with it a sturdy defiance by the Lake Geneva market that this national market shift would ever reach our deciduous shores. By 2010 the defiance lost its resolve, and when last year turned to this one stability had returned to the market as a result of seller’s acceptance of market conditions. We are now late in 2011 and when this Black Point sale closed yesterday to my buyer the price of $3.25MM paid represented a significant and, most likely painful loss.
So did the seller get throttled? Was this a case of the right buyer finding the right seller at just the right time? See, now you’re trying to trick me with these interwoven questions. The first answer is no, the second answer is yes. We’ve discussed at great length the desire in this market place to purchase existing homes over buying and rebuilding. If the value is in the land, then the true value is in finding a suitable home on a great piece of land that can be bought for darn near land value. The buyer achieved this, and there is something to be said for the negotiating ability that we exhibited in this purchase. However, the seller didn’t so much cut and run as most might believe from taking a quick glance at these numbers.
At 165′ of level frontage and nearly 2 acres in overall size, this Black Point parcel was quite impressive. The price paid for each foot of precious frontage was $19,696. This figure is nicely in line with the $18,803 price paid for the Maple Lane lakefront sale that closed last month. Now, if you were to ask me if I’d rather be situated on Black Point with level frontage or near the Birches with elevated frontage, I would politely change the subject. The estate that I sold in September for $3.1MM at Oak Shores closed at $17,222 per front foot, but this price paid was for a home that needed and is now receiving as much as a million dollars worth of improvements. When you consider Black Point needs some tweaking, but nothing a few hundred grand can’t fix, you’ll clearly see the value that was the Black Point sale, but you’ll also see that the price paid was in line with broader lakefront valuations.
For the buyers, the purchase was the easy part. The hard part is now to follow. Lakefront homes are wonderful additions to any wealth portfolio. They look nice on paper and your friends will be impressed. If this is the motivation for buying a lakefront home, then I see no point in pursuing one. However, if the goal is to take a much loved one week lakeside vacation and make it last a lifetime, then the motivation is noble and the rewards immeasurable. To my buyers, I am grateful. To would-be buyers reading this today, there’s a good chance you’re up to bat. And I see some situations right now that find you with a 3-0 count before you’ve even taken your first swing.