Downtown Condo Inventory Up Slightly

November 5, 2009 By

While transaction sales volume in downtown Boston has been off year over year, meaning that there are less condos actually selling in 2009 versus that which sold in 2008, what’s happening to inventory?  Inventory represents the supply of choice that buyers have in the marketplace, and given the economics of the situation, can have an impact on prices as well.

While downtown Boston condo inventory began the 2009 calendar year below 2008 levels, it has tracked very closely with numbers from the previous year.  This trend continued up until August of 2009, when inventory levels did not drop off as substantially as in 2008 – August historically represents the month when inventory levels push down through a post summer dip, which typically lasts through the end of September.

Boston Condo Inventory

November 2009 condo inventory is up approximately 12% from the same time period in 2008, yet the average days on market (DOM) that a condo is sitting for sale is virtually the same that was experienced in 2008.  By reading between the lines, despite inventory levels being slightly up, transaction sales volume on a percentage basis is actually down more, thus, the absolute number of new listings hitting the market has decreased year over year.  Nonetheless, choice, at least at the superficial level of number of current listings available for sale, is still quite good for buyers.

Average Days on Market

Downtown Boston neighborhoods considered include: Back Bay, Bay Village, Beacon Hill, Chinatown, Financial District, Leather District, Midtown, North End, Seaport District, South Boston, South End, The Fenway, Theatre District, Waterfront, West End

Filed Under: Boston Condo Statistics

Open House Reminder

November 1, 2009 By

Bostonians have over 350 open houses to choose from today across the downtown neighborhoods, for homes listed anywhere from $219,000 for a South End studio to $3,100,000 for a Back Bay 3 bedroom 2.5 bathroom penthouse.

When planning out your day of touring, ensure that you have taken into account the end of daylight savings time that took place earlier this morning – check the official US time website to sync up your clocks if they have not already done so on their own.

Filed Under: Boston Open Houses

Understanding the HUD-1 Settlement Statement

October 28, 2009 By

What is a HUD-1 Settlement Statement and When is it Used?

The HUD-1 Settlement Statement, which is commonly referred to as the HUD or the Settlement Statement, is a standardized form which provides a line item detail of all of the charges associated with a residential real estate transaction (i.e. a purchase or refinance).

The Real Estate Settlement Procedures Act (commonly known as RESPA) requires the use of the HUD-1 Settlement Statement for transactions involving a federally related mortgage and in which there is a Borrower and a Seller. However, the industry standard is to use the HUD-1 for cash deals and refinances as well.

How is the Settlement Statement Read?

Page 1 of the Settlement Statement identifies the loan type (e.g. FHA, VA, conventional), the Buyer/Borrower, the Lender, the Seller, the Settlement Agent, the property location, and the settlement and disbursement dates. In addition, the first page provides a summary of the transaction with the Buyer’s side of the transaction documented in the left column of the Settlement Statement and the Seller’s side recorded in the right column. If the transaction is a refinance, a summary of the Borrower’s transaction will appear in the left column and the right column will be left blank since there is no Seller.

Page 2 of the Settlement Statement provides a line by line accounting of the various settlement charges with the Buyer’s fees again accounted for in the left column and the Seller’s charges listed in the right column. These settlement charges are grouped by type. For example, Items Required by the Lender to be Paid in Advance (e.g. prepaid interest, mortgage insurance premium, hazard insurance premium) can be found in Section 900 of the Settlement Statement. All of the individual settlement charges are then totaled at Line 1400 of the HUD (titled Total Settlement Charges) and recorded again on Page 1 at Line 103.

Download a sample HUD-1 Settlement Statement (1.34 MB PDF)

Summary of the HUD-1 Settlement Statement

The HUD is a standardized form which provides a line item accounting of the transaction. It is commonly used for both purchases and refinances, although it is only required by RESPA in transactions involving a federally related mortgage and in which there is a Borrower and a Seller.

In preparing for a real estate closing, be sure to review the HUD before arriving at the closing table (presuming of course that time allows for the circulation of the final HUD in advance of closing; in practice this does not always happen as oftentimes there are last minute adjustments). Do not presume that the HUD is perfect. Although the settlement agent should thoroughly review the HUD prior to circulating the final version, it is entirely possible that a mistake was made while entering the data. If you have questions, consult with your attorney and real estate agent. By reviewing the HUD and addressing any issues in advance of the closing, you are setting the stage for a smooth and successful closing.

Filed Under: Buyer Advice

Massachusetts’ Banks Report Card

October 27, 2009 By

While the recession enders cheer positive signs in the stock market hailing the return of the bulls, everyone else seems to be wondering where the jobs are, and real estate industry folks are pointing at the long shadow being cast by the coming wave of commercial real estate problems. While there are no answers to the employment numbers or the stock market, there may be a real estate crystal ball.

It is all about the banks. Banks not only control the reigns to capital and reasonable debt, at a time like this when debt positions are the only positions left in real estate, banks control a whole lot more. In fact recent bank data suggests that institutions are in control of hundreds of billions in real estate. How they handle it will affect us deeply. In this installment we’ll look at the 180 (more or less) local lenders are dealing with in terms of real estate and what to expect next.

Massachusetts’ banks are generally fairing better than the those nationally when it comes to real estate loans. Approximately 2.2% of all the banks in the US are headquartered in MA, while our banks only hold about .44% of the real estate problems. This is a good start. The most recent consolidated bank reports available show that MA banks hold only about $1.27B in problems. A drop in the bucket compared to the $290B+ in whole loan and REO problems with lenders nationally.

It’s not all peaches and cream though. Many things are tracked, but 3 of those things fall into the distressed real estate pipeline, including 90 day late loans, nonaccrual loans, and REO. For each of these three columns we track residential, commercial, construction, and multifamily problems. In nearly all cases, and in almost every category, distressed real estate balances are growing nationally and locally.

Dollar Volume of Distressed Assets at MA Banks

Massachusetts based banks are reporting increased real estate problems.

Massachusetts based banks are reporting increased real estate problems.

Number of Massachusetts Banks with Distressed Assets

More Massachusetts based banks are reporting problems.

More Massachusetts based banks are reporting problems.

Do you notice a pattern?

Let’s ignore the first column for now because 90-Day-Lates are not as good a forecasting tool as non-accrual or non-performing loans. In nearly every category problems are mounting, not just with individual banks but across a greater number of banks.  If a crystal ball exists though, here it is in the numbers.

The hunch is on continued problems across the real estate spectrum, more struggling banks, more struggling property owners and certainly more great deals for those with capital. The next 18-24 months should prove to be very exciting for those prepared.

Filed Under: Lending Markets

Boston W Hotel to Open This Week

October 25, 2009 By

Later this week, on Thursday, October 29, 2009, a long awaited opening event will take place at the Boston W Hotel.  The opening, however, could be characterized as a “soft” opening versus a “grand” opening because there is still work to be done on the building.

The Hotel will open its doors, yet, the Bliss Spa, standard fare at the luxury W brand, as well as the signature bar and nightclub to be called Descent, are not scheduled to open until the spring of 2010.  Hotel management will hold an official “grand” opening event once those amenities are fully operational.

Sawyer Enterprises, the developer behind the Boston W Hotel, has not yet fully built out the signature spa and showcase lounge because it does not currently have $10.4 million in capital to go forward with the construction.  Sawyer is in negotiations with the City of Boston to obtain the additional financing to finish off the hotel, yet the City appears to be apprehensive to extend the financing because Sawyer’s collateral for the funds is the building itself, which has already been extended as collateral to other financiers.

The W will attempt to charge an average room rate of approximately $300 per night, a figure higher than other Boston luxury hotels are securing during times of peak demand.  The 123 luxury residential condos on the upper floors of the building are currently still scheduled for a phased opening in the late 2009 or early 2010 timeframe.

Filed Under: Boston Tagged With:

Bryant Back Bay Condo Auction Results

October 18, 2009 By

Sold. On a crisp fall day at the Colonnade Hotel in Boston’s Back Bay , the second much anticipated downtown Boston condo auction of 2009 took place in front of a group of poised bidders and their real estate professionals.  The market waited patiently for less than an hour to see what the results would show for the first large-scale Back Bay condo auction of the decade.

10 units at the 50-unit Bryant Back Bay high-end condo development on the border of the Back Bay and the South End were released by the developer for sale at auction, and were sold within 45 minutes of the auction commencing.  Bidders, each with a $20,000 certified check in hand, watched the auction process unfold in front of them.  The Bryant Back Bay is the fourth downtown Boston property to go to auction since 2006, following the Folio, Broadluxe, and the 1850 Lofts, and it is the first Back Bay property to partially go to auction this decade.

The development “partially” went to auction because there were approximately 45 units remaining for sale in the building before the auction began, the developer released 10 for sale at the auction event, and intends for the auction to set a market driven price for the remainder of units which will be sold at auction prices, but through a normal sales process.

The price point at which the developer was listing units for sale before the auction began was approximately $980 per square foot.  The auction was coordinated with minimum bids that averaged $597 per square foot.  The auction event itself resulted in the market setting an average price point of $675 per square foot, approximately 30% off original asking prices, and some $300,000 above minimum bid prices.

Download the full Bryant Back Bay Condo Auction Results (PDF 52 KB)

Accelerated Marketing Partners, the firm the Bryant’s developer hired to bring the property to auction, leveraged a similar tactic at the recent Nouvelle at Natick condo auction outside of Boston earlier this month, where they sold 43 units at auction prices, and used the newly established price point to drive further sales of remaining units at the development (see Nouvelle at Natick Condo Auction Results).  The Bryant Back Bay will leverage the auction results as a bell weather for eventually moving remaining units in the building to a sold status.

Colonnade Boston Hotel
Filed Under: Boston Condo Auctions Tagged With: , ,

MA Declaration of Homestead

October 16, 2009 By

In preparing for a recent closing on a refinance, it came to my attention that the Borrower did not have a Declaration of Homestead. A simple fix, but it is surprising how many property owners hold title without the protection afforded by the statute. Under Massachusetts law, an individual may declare a homestead in their principal residence thereby protecting up to $500,000.00 in their home from unsecured creditors (see General Laws of Massachusetts Chapter 188, Section 1).

Example: Joan owns a home, which is her primary residence, and has recorded a Declaration of Homestead. Joan’s credit card company seeks to attach $10,000.00 in credit card debt which Joan contracted for and defaulted on subsequent to the recording of the Declaration of Homestead. The credit card company would be barred from attaching this debt under the statute. It should be noted that Joan is still liable for this debt, but her interest in the property is protected.

Example 2: Dan owns a home, which is his primary residence, and has recorded a Declaration of Homestead. Dan has taken out a second mortgage with his local credit union. Dan then defaults on his second mortgage. In this example, the statute will not protect Dan. The credit union holds a security interest in the property and therefore is a secured creditor who would be exempt.

Summary:

  • A Declaration of Homestead protects the investment in one’s primary residence from the claims of unsecured debts up to a maximum of $500,000.00.
  • The Declaration of Homestead must be filed with the appropriate Registry of Deeds.
  • A Declaration of Homestead will not protect a homeowner from the following: (i) tax assessments, claims and liens; (ii) first and second mortgages; (iii) an execution issued by the Probate Court to enforce a judgment for support; (iv) court judgments based on fraud, mistake, duress, undue influence, or lack of capacity; and (v) debts contracted prior to the recording of the Declaration of Homestead.
Filed Under: Real Estate Law

The Bryant: Why Auction, Why Now?

October 9, 2009 By

Touted as a boutique luxury condo development that offered more expansive floor plans than neighboring buildings, the Bryant Back Bay missed its stride with the buying market and has reverted to an auction event to generate new demand for the some 45 units remaining for sale in the building.

According to LINK (one of Boston’s two MLS systems), 5 unites at the Bryant Back Bay, a 50-unit high-end development on the border of the Back Bay and the South End, have been sold.  These units have an average sales price per square foot of $826, a figure significantly bolstered by the sale of a single penthouse unit at $1,479 per square foot.

On paper, the development has a tremendous amount going for itself.  From a convenient and desirable location to direct elevator access floor-through units.  When construction began in October 2006, the building generated a significant amount of anticipation for sprawling three, and sometimes four, bedroom condos in a new construction Back Bay / South End building.  Yet there were a number of factors that ultimately impacted the Bryant’s ability to drive sales velocity.

The Bryant is a ground-up new construction building, and not unexpectantly, the development pushed out the scheduled occupancy date five times, and in the end, missed its mark of opening by over a year.  Buyers, rightfully so, are hesitant to buy in earlier to a new development, oftentimes signing a purchase and sale agreement months before construction completes, however, if the occupancy date is continuously pushed out, Buyers become even more hesitant to place reservations in a building, tying up personal capital in deposits of anywhere from 5-10% of a unit’s purchase price.  One of the most notable concerns from Buyers was the proximity of the Bryant to the 131 Dartmouth building, and the potential impact it could have on views and light in the Bryant.  If you fast forward to the present, while 131 Dartmouth is immediately visible outside of the Bryant’s bedroom windows, 131 Dartmouth tapers away from the Bryant, and especially in the summer months, this spacing allows light to pour into the back half of units.  Nonetheless, Buyers weren’t able to gain this knowledge first-hand because a model unit was not developed inside the building until late in the Bryant’s sales cycle.  In lieu of a true model unit, potential Buyers visited the sales center adjacent to the Bryant to see a sample kitchen and bath, but unfortunately, could not get a true feel for lighting and flow of an actual unit in the building.

During the latter half of 2007, another luxury condo development, 285 Columbus Lofts, began construction (or more accurately, began redevelopment).  Unfortunately for the Bryant, 285 Columbus Lofts was two doors down the street, and while the two buildings differ on some levels, the property represented direct competition for the Bryant at a lower price point.  It was during the latter half of 2007 and early part of 2008 when the Bryant made its biggest slips.  While the Bryant began pushing out its occupancy date from Spring 2008 to August 2008, 285 Columbus Lofts actually moved their occupancy date up, from June 2008 to May 2008.  And the key here was that 285 Columbus Lofts delivered on their prediction.  This was the first condo development to be delivered on time or ahead of schedule in quite some time.  Price points at 285 Columbus Lofts were lower, and the development was quickly approaching sold out status when it opened its doors to residents in late May 2008.  Nothing should be taken away from 285 Columbus Lofts launching so quickly, and finishing ahead of schedule, but as it relates to the Bryant, 285 Columbus Lofts did have a leg up on the competition by doing a gut rehab project versus a ground up new building construction.

In the spring of 2009, the Bryant was rebranded from the ‘Bryant on Columbus’ to the ‘Bryant Back Bay’, and in conjunction with that, the developers, Vornado Realty Trust and Wasserman Real Estate Capital LLC, switched listing brokerages from Otis & Ahearn to Campion & Company.  The renaming of the development attempted to drive deeper association with the prestige of the Back Bay versus any connotations the development carried sitting on the border of the Back Bay and the South End.  Despite 3 additional units going under agreement relatively quickly following these changes, the shifts still left 90% of the building sitting vacant, and the developers decided to leverage an entirely different strategy to generate cash flow and take out existing debt, an auction.

Accelerated Marketing Partners, led by Jon Gollinger, announced on September 22, 2009 that they would take 10 of the available 45 units from the Bryant Back Bay and auction them off to the highest bidder during an October 17, 2009 auction event.  Gollinger’s thoughts are that rather than drag out the normal listing process, it’s much more effective to sell a bunch of units at once, figure out what the market is willing to pay, and then coordinate prices on any remaining units in the building.  This tactic, of auctioning only a small pool of remaining units in a building followed by trying to sell remaining units post-auction at auction prices (auction pricing without the auction) is a tactic that has been relatively effective for Nouvelle at Natick.  The Nouvelle development recently auctioned off 43 units, and in a week’s time, has sold 17 additional units at prices established at the auction (see Nouvelle at Natick Condo Auction Results).

There will be seven 3-bedroom units and three two-bedroom units auctioned at the Bryant on October 17th, with minimum bid prices ranging from $1,075,000 to $1,475,000 ($476 to $811 per square foot). The appraised value of the Bryant Back Bay condos will be left to lenders, but Buyers can look at average sales price per square foot for the past 6 months in the Back Bay of $746 and the South End of $577 as a very high-level starting point.

Given the legacy of the Bryant Back Bay project, an auction to at least kick start sales velocity for remaining units in the development appears to be the next logical option in the sales process, especially in light of success that the auction sales format has had on other downtown Boston, and metro-Boston, properties.

Filed Under: Back Bay Condos, Boston Tagged With: , ,

Boston Landlord & Investor Group Annual Conference

October 7, 2009 By

On October 14th, 2009, The Boston Landlord and Investor Group, a 2,000+ member strong organization, will hold their annual conference with the theme Investing in Real Estate: How to Proposer in the New Economy.

The free conference aims to provide an informative overview of Boston’s current real estate market, and will assemble four Boston real estate experts that will speak about the local real estate investment market, future real estate trends, and opportunities to invest in Boston.

Guest speakers for the event include:

  • Jeanine Hall, VP of Lending at Citibank
  • Simon Butler, Executive Director at Cushman & Wakefield (Sold in excess of 25,000 apartment rental units valued at more than $3.2 billion)
  • Debi Benoit, Vice President at Coldwell Banker (Sold more than $725 million in real estate and Wellesley’s #1 broker from 2006 through 2008)
  • Terry Hillery, President of Hillery Holding Company (Privately held real estate company with an established track record of successful Boston developments)

The conference will provide an opportunity to learn what local real estate experts are doing, what they think you can do in order to profit in the new real estate economy, and what their predictions are for the future.

When: Wednesday, October 14, 2009 at 6:30 PM
Where: Citibank (1st floor) 491 Boylston St. Boston, MA 02116 (between Clarendon St. and Berkeley St. in Back Bay)

To register for this free event, please RSVP to Matt Martinez at: info [at] landlordandinvestor [dot] com. For more information, please call (617) 448-5550.

Filed Under: Real Estate Investing

Nouvelle at Natick Condo Auction Results

October 5, 2009 By

Over 400 potential Buyers crowded into a standing room only Crowne Plaza Natick Hotel to purchase 43 auction units and 12 additional post auction units at prices between 34% and 64% of their most recent asking prices.

The Nouvelle at Natick condo auction’s goal was to kick start sales at the troubled luxury condo development adjacent to the Natick Collection Mall, and despite the developer, General Growth Properties, not seeing the selling prices they would have liked, the auction brought the occupancy rate in the 215-unit building from 17% to approximately 43%, and more importantly, the market established a consumable price point of approximately $300 per square foot for remaining units.  The lowest purchase price at the auction was $249,000 for a 1 bedroom 1.5 bathroom condo, and the most expensive was $628,000 for a 3 bedroom 2 bathroom penthouse.

General Growth Properties, which has filed for bankruptcy because of the happenings at Nouvelle at Natick, looks to the auction to set a price point as established by the market, and is now poised to re-engage the market through a normal sales process on the remaining units, but at auction prices.  The plan has worked well so far, as 12 additional units, above and beyond the 43 brought to auction, sold yesterday following the auction.

The method will be tested again in the downtown Boston market when the Bryant is taken to auction (see Bryant Back Bay to Auction 10 Luxury Condos) in a similar fashion on October 17th – 10 units in the 50-unit development are slated for auction.  Similar to the Natick auction, the intent is to clear inventory, generate cash flow, and ultimately re-engage the buying market on remaining units (tentatively 35 units will remain for sale following the auction) in the luxury Back Bay / South End development.

Filed Under: Boston Condo Auctions Tagged With:
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