Dan's Papers -January 9, 2009 - Estate of Mind - THE FINE ART OF HOME PRICING

The inventory of homes on the market in the Hamptons is at a record level. Will they ever be sold? When? Will asking prices be swept away in a free fall?

The recent $26.5 million sale of a 2.3 acre oceanfront home on West End Drive in East Hampton is a case in point. Yes $26.5 million is serious money, especially in the post Madoff world of investments, but the fact is that the property was originally listed for $40 million (as of April 2008). Eight months later it sells for $13.5 million less, so what does that tell us?

Lynn Ronchetto, a real estate speculator who owns five properties in four states (all investments), believes at the moment there is a problem with what the owners will sell for and what the buyers will pay.

"I was looking around East Hampton just last week, and quite frankly the prices some people were asking was based on what price they wanted to get and not what the home is worth," she explained. Ronchetto believes many homes that are unrealistically priced will stay on the market forever. Jan Nelson a seasoned broker for Atlantic Beach Reality Group in Montauk, agrees. She predicts 2009 will be, "The year of the whine, as in whining about why won't my home sell." Nelson believes too many homes are overpriced and that no time frame will accomodate that in this climate. A recent study showed the average time it takes to sell a home on Long Island is over 20 months. Nelson said it's much less than that in the Hamptons, perhaps eight months if the home is properly priced.

An owner of an independent East End agency said brokers must do delicate dance to get an exclusive listing while pricing it to move, rather than naming a figure that only the seller wants to hear. A Prudential Douglas Elliman agent in the Sag Harbor office told of a good friend who wanted $3 million for her home. The agent thought it should be listed at $1.75 million at best. "Our friendship has been strained," she said. "She thought I was throwing her under the bus to get a quick sale."

Stuart Epstein of Devlin McNiff discussed the effect of current closings. On that recent East Hampton sale, he was quoted as saying, "Every sale affects every other sale and the same goes for banks when they go to appraise it. This is now the benchmark."

What does all this mean? Investor Ronchetto, who has been trading homes for over 20 years, sees opportunity in this market and is trying to trade up. But with her Midwestern roots and value system, she still hasn't seen anything worth going for. "The homes I have been shown are worth less than my own and are priced higher. People seem convinced this market is not affecting the price they want for their home."

Agent Nelson also was of the mind that, without the right pricing, the timeframe to sell is eternity. "An overpriced home will not sell," she said. On the other end are the insulting offers. An agent told this reporter, "You show someone a home three times and then he makes an offer, practically half of the asking price, and says he can pay cash. These people have no shame."

So what is the right price? Epstein reportedly commented, "It's like a reset. All pricing is resetting, and we're in the middle of it and no one knows what anything is worth."

Frank Newbold a senior vice president with Sotheby's International Realty, speaking of the $26.5 million deal he brokered said in a recent interview, "It's dangerous to generalize from one sale, to say that if that is down 30% everything is down 30%. That is not the case at all."

But the price reduction was a selling factor according to Judi Desiderio, president of Town and Country Real Estate, who said she "would have counseled my seller to come down a lot more [originally]. Don't leave the price out there at $40 million." However Desiderio predicted this sale is "the beginning of a wave. I think we're going to see quite a few trades of very high-end properties going at a discount."

Not all agree. One broker who has closed on some of the largest deals believes the truest trophy properties will always be sold at a premium. "When someone really wants something, they pay happily, it makes them feel good that they can easily pay the price. It's like a gold Rolex with diamonds. If you want one today you pay the price even when gold is up."