When 1 Cent Makes A $10,000 Difference

I’m baffled… 116 West 131 sold a little over a month ago (7/20/11) and it sold for $1,000,000. I have no clue who the buyer’s real estate agent and lawyer were, but both of them should have their licenses revoked (IMHO). If they had negotiated a price one cent less it would have saved the buyer $10,000. How can two real estate professionals make a mistake like that? Seriously, I don’t get it.

The reason why one cent makes a $10,000 difference is because New York City has a 1% “mansion tax” on properties that sell for $1M or more. So if the sales price had been $999,999.99 the buyer wouldn’t have had to pay the mansion tax, but add a penny and they have to pay $10,000 in tax.

Enough about that… Let’s look at the property as a comp…

Fridge blocking stove in small kitchen

The sellers originally asked $1.495M back in May of 2009. Finally this year they dropped the price to $1.195M and it sold – but even then they had to come down nearly $200,000 – but honestly that’s pretty standard with Harlem townhouses – the asking prices are usually way over where they sell.

The building is 17′ x 48′ x 4 stories (though the lot is 16.67′ wide) so it has roughly 3,200 sq. ft. That means the cost was about $312/sq. ft. The building is a legal 3 family that was renovated in 2003 and got a new boiler in 2008. Overall, it seems to be in good condition.

Bars on windows on ground floor brownstone rentalBut the renovations are just “rental grade” –  small, Home Depot-esque kitchens, etc. My favorite detail is the picture above showing the fridge blocking the stove – not exactly a marvel of architectural ingenuity…

I’m guessing there is a 2 or 3 bedroom duplex over two 1 bedroom (or studio) floor-thru apartments – at least that’s the configuration that would make the most sense. Then again with kitchen configurations like the one in the picture above, there’s a good chance they did a less efficient layout.

Taxes on the property are higher than average, but not outrageous – $5,517 this year and projected to go to $5,755 next year.

It’s a 5 minute walk to the 2/3 at 135th Street. A/B/C/D trains are a fairly long walk – 11 minutes – much of which involves walking past the St. Nicholas Houses.

Besides the lesson of never buying a property for exactly $1M, this sale shows that there are affordable properties out there that don’t require renovation. If your funds are limited now, but you want a property that you can improve later – a property like this is perfect. You live with rental grade details in the short term and when you have the funds you renovate and make things nicer.

One thought on “When 1 Cent Makes A $10,000 Difference

  1. We bought a house for 999,999 – this does not prevent you from paying the mansion tax. The mansion tax is calculated from property cost + closing cost.

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