I just saw that one of the townhouses we’ve been through is having an open house – 42 Hamilton Terrace. After everything we’ve seen I can honestly say that owner (or broker) is absolutely crazy for the price they’re asking – $995K (it was up at $1.1M when we saw it earlier this year). Let me explain why that’s a crazy price…

To be fair the upside to the property is that it’s a decent width and on a great block – Hamilton Terrace. It also has some incredible original details in it – mostly the fireplaces and baseboards on the ground floor. But there’s so much wrong with the place it’s not even funny – at least when you consider they’re asking a million dollars for it.

The big issue is that it’s falling down. Literally. The extension in the rear where the kitchen used to be is just walls – the floor in the extension has fallen into the floor below. The rest of the building is falling down as well. When we went through it was raining inside the building because snow was melting on the roof. If you know anything about buildings you know the building goes downhill very quickly if the roof is no good. I was literally scared to walk through the building. They have plywood down in some areas ’cause they’re worried people will fall through those parts of the floor. Personally I don’t think it’s safe to go inside that building. If anyone gets hurt I’ll feel really guilty ’cause I was tempted to call 311 and report it as unsafe (but I didn’t).

It’s not the first Harlem townhouse that’s fallen down and it won’t be the last. But right now, in this market, you just don’t pay a million dollars for something that’s falling down.

• 48 Hamilton Terrace a few doors down needs some work, but it’s completely livable and mortgageable and it’s going for $1.25M.
• There’s a place on Stiver’s Row (236 W 139th) that apparently sold for around $425K a few months ago and now they’re trying to flip and asking $699K. Someone started a renovation and didn’t finish, but it’s completely solid and it’s on Striver’s Row.
• Then there’s 506 West 142nd Street, which is a fully renovated, income producing property in move-in condition and it’s asking the same price as 42 Hamilton – $995K. Mind you, the renovation is soulless, the back yard is dark and small, and the block isn’t nearly as good, but compared to one that’s about to fall down on a better block it’s price to sell and 42 Hamilton clearly isn’t.
• And 470 West 148th was just reduced to $999K – it’s perfectly nice 12′ wide townhouse that’s move-in ready, but will need renovation in the not-too-distant future.

Personally I think 42 Hamilton should have a price drop of about a third – to $699K. With a $500K renovation that would put the total cost around $1.2M and it would be in better condition than 48 Hamilton which would compensate the buyer for the hassle of the renovation.

UPDATE: 42 Hamilton Terrace sold on 10/09/2009 for $660K. Am I good or what? Saying they should be asking $699K was exactly on target.

The other townhouse where people seem like they’re stuck two years back in a time warp is 532 West 148th Street. The pictures are amazing, but when you go through the house you realize how little substantive renovation has been done. It’s “shabby chic” in the ’80s sense of the word (before the term referred to a store) when people didn’t have money for renovations so they just make things that were falling apart look pretty. The floors aren’t redone – they’re just whitewashed and varnished. The ceilings aren’t redone – they’re ripped out and there’s exposed beams. Same with the walls – ripped out. What you have left is a shabby chic 3 story loft that’s one big open space plus a work space in the basement – a total bachelor pad. There are almost no walls, no privacy – some of the bathrooms are literally in the middle of the floor with no walls around them. It would have been hot 20 years ago, but now people are looking for genuine renovations – skim coated walls, recessed lighting, floors that are in good condition. The other thing about that property is that it’s 1/2 block off Broadway – not on a prime block.

All of that would be fine if they weren’t asking nearly $2M for the place ($1.895M to be precise). I think the comp for it is 48 Hamilton Terrace @ $1.25M – so they need to drop the price by a third to be in line with their competition. Both 48 Hamilton and 532 W 148 are in similar condition in terms of infrastructure. 48 Hamilton is on a MUCH better block and is landmarked. 532 W 148 has better interior design, but you’re buying the building, not the furnishings. Plus 48 Hamilton has walls and rooms, which most townhouse buyers want, so it’s more desirable.

I did like going through the place though – it showed how much you can do to a townhouse at a reasonable price. If you really don’t want to do expensive structural changes, you can still have a place that’s stylish (though to me shabby chic is pretty dated).

UPDATE: As of 2/16/10, 532 West 148th has now been on the market for over a year and has not sold. They’ve only dropped the asking price to $1.75M. IMHO, the owner might as well take it off the market if he’s not serious about selling.

The Harlem real estate market has always been pretty speculative, but luckily much of the market is pretty realistic about how prices are dropping. There are some incredible bargains out there and a lot of people are quite flexible. We saw one property where the broker (whom we really liked) told us they were about to drop another 17% – and that’s after a price reduction not all that long ago.

But some people are afraid to be realistic. There are a few that are dropping the prices too far ’cause they’re desperate to sell in a bad market. But the problem is that when you drop really low people start thinking that’s what all the prices should be and then prices  really tumble. Hell, we’re sorta playing that game – hoping we can sell our place before that mentality takes hold in our neighborhood and after it takes hold in Harlem.

I’m not saying that most of the places that are livable and mortgageable should drop that much further, but the reality is construction loans are hard to get these days and people who buy places that need construction loans (like 42 Hamilton) should get rock bottom prices to compensate them for doing something that’s pretty risky in a falling market… At least we’re hoping a seller will see it that way when we go to buy a place. I’ve got my eye on a place and as far as I can tell it’s practically a shell. It also needs a one-third price reduction… Hopefully we’ll be able to sell our place and hopefully the seller will be flexible by then… We’ll see. First step is to sell our place… 😉

In defense of the people who’ve over-priced is the fact that the market is rapidly changing and there’s not a lot of data to make informed decisions on. Things were dropping before the stock market went down in September, then only 2 townhouses had deals in Q4 of 2008. That didn’t give people a good idea of what they should be doing. In Q1 they say 10 townhouses have closed, but even that data isn’t all in yet. But the issue is how far do you have to drop in order to be “priced to sell” when almost nothing is selling?