I’m writing this morning with a troubled mind. I was fine yesterday. Really. Thoroughly and contentedly fine. My car broke down on the side of Main Street and left me precariously wedged half in a driveway and half on the street, unable to move the car into drive or reverse. Special thanks to the girl who yelled at me for being so positioned, you’re sweet. And then when I was home, things were fine. I took Molly for a walk, and that walk was made pleasant by a single puff of spring that I could feel in the breeze. Molly was good too, and I had proud moments where I counted the addition of Molly into my family as one of the best things I’ve ever done. Shallow really, to think that the addition of a purchased dog is some sort of heightened ideal that I stoically accomplished, but such is the depth of my person.
No, the day was fine. Fine until Josh Altman and his one size too small suit sold a house to someone who hadn’t even seen it and in turn collected a $412k commission. Molly bugged me after that. The air didn’t feel like spring, not in the least bit. And my sleep was troubled. Tortured even. As I sit here this morning on a couch at Panera bread, at this ungodly hour, with the artificial flame of a direct vent fireplace warming my face and nothing else, I shall put Josh Altman behind me. Josh, your girlfriend isn’t really pretty, and I think she only likes you because you’re on TV, and probably a little because of the $412k commission check. Now I feel better.
Yesterday, in the tumult, I closed on lot 3 in the South Shore Club. This is the second parcel I’ve sold in the SSC, and it’s existence of the sale isn’t as meaningful as the amount of the sale. This lot had sold originally from the developer several years ago for $650k. It was foreclosed on last year, and returned to the market as REO a few months ago. The bank apparently turned down offers in the $500k range, and then again in the $375k range, before finally succumbing, in the way that banks are prone to do, to our $300k offer. That’s right, $300k just bought entry into the South Shore Club. The 1020 South Lakeshore sheriff’s sale would do well to have learned from our most recent experience- banks do not intensify their resolve as their ownership progresses, they squirm and wilt faster than young Thomas at a bulls game when the Bulls are stuck on 98 points and time is running out. The kid just wants his free Big Mac, and the bank just wants to stop paying dues and taxes.
The sale hefts further credibility upon my previous comments about the South Shore Club REO sale last fall. I didn’t like the price of that sale, as I didn’t see the value in purchasing a bank owned property for anything but a price that made complete and thorough sense. At $1.75MM, I argued that the sale was at least $250k heavy. My thinking was that the neighboring lot (the lot I just sold yesterday) would ultimately sell in the $300k range, and that a new home could be built, one that would be similar to the REO home, for around $1MM. Even if the new home cost $1.2MM, the all in price would have been $1.5MM. That’s how one arrives upon value when truly dissecting an opportunity, and that’s what I believe was missed with the REO home sale. Now that the lot next door has sold, and it has indeed sold for $300k, the ability of the new buyer to undercut even the REO sale from last fall. A very beautiful home can be built for $1MM, which begs the question- Would you rather be all-in for $1.3MM with a brand new home designed to your whims, or $1.75MM into a four year old home that was built in accordance with some other person’s desires? If you answered the latter, please go sit in the corner for five minutes.
There are times in life, when more is simply unnecessary. When more becomes a burden. There are other times, when more is satisfying in a way that less can only dream of. For all of my preferences for nostalgia tinged walked down leafy shorepaths, and my propensity to gravitate towards dilapidated cottages in stellar locations, there are moments when the South Shore Club and the polish of that stone and slate development appeal to me. And by appeal, I mean captivate and enthrall me and force me into dark moments of selfish reflection and self pity when I allow the belief that I will never, ever, live in such a beautiful development. The South Shore Club is complete, and in its thorough lakefront nature it has similarly captivated the minds of many over its recent history. The development is unique in this market, and unique in the Midwest, and finally, with the help of a few distressed sales, it has become attainable at least twice in the last year.
There are other buyers that would find a South Shore Club bank owned property appealing, this much is not profound. But there is reason to doubt that the REO trickle will continue here, a fact made more obvious by the lack of lis pendens in the development at this moment. If the South Shore Club can plug the quarter sized hole that has let hundreds of thousands of dollars of equity slip out, things could be on the upswing for this development. If you’re a buyer who passed on the $1.75MM REO, and now the $300k vacant lot, I don’t quite know what to tell you. Are there more coming? Possibly, but I’m doubtful. The only hope for vacant land buyers is that the surrounding lots adjust to meet the realities of that devastating $300k comp. If they adjust, there will be more opportunities. If they do not, then this $300k very well may be the absolute bottom of a market that has been in search of one.
To the new buyer of this fantastic piece of property, I’m grateful that I was able to help you with this purchase. I wish you summers of fun and winters of hardwood fires at your new vacation destination, and look forward to seeing you roasting around the lake, burning the association’s gas at an alarming rate. To Josh Altman, your tailor called, he said it’s time to sew a few inches of width into the bank of your suits. To the guy furiously trying to squeeze the last drop of mustard out of a yellow mustard container that you obviously brought from home, onto a sandwich that you also obviously brought from home, I truly hope you get every last quarter teaspoon of mustard out of that thing. Still squeezing.