Today, there are 42 homes for sale in SD County listed over $10,000,000, and we’ve had two sales this year. Hat tip to GW for sending in this article excerpted here:
Real-estate experts estimate that there are about 50 ultra high-end spec houses under construction in the area, from Beverly Hills to Bel-Air and Brentwood.
The unprecedented wave of development has its roots in the heady days of 2014 and 2015, when foreign buyers poured into Los Angeles and luxury markets across the country logged record sales. A couple of local megawatt deals—including the $70 million sale of a Beverly Hills compound to billionaire Minecraft creator Markus Persson in 2014—inspired the construction of bigger and pricier homes, most of which were built as contemporary cubes. Some were built by inexperienced developers; many had price tags north of $20 million.
Now, there are simply too many, and not enough buyers to go around. “It’s created its own monster,” says Stephen Shapiro of Westside Estate Agency. “We have an enormous oversupply of these white boxes. There’s years of inventory out there.”
In this environment, and amid signs that prices are falling, developers and their agents are going to extraordinary lengths to differentiate their listings from the pack. They are throwing themed bashes in lieu of traditional open houses, thinking up gimmicky new amenities and hiring marketing experts to reimagine homes as individual brands with their own names, logos and stories. Some developers are relisting plots of land, hoping to get their money out without sinking more money into construction.
In February, Mr. Niami threw an elaborate party inspired by Dutch artist Hieronymus Bosch’s painting “The Garden of Earthly Delights” in a home he is listing for $39.995 million. Its three levels were organized into heaven, earth and hell, and models in colorful tulle dresses swam in the property’s glass bottomed pool, said Mr. Ali, who organized the party.
There were actors posing as Adam and Eve while hosting a virtual reality game that allowed guests to enter a rendition of the Bosch painting. People drank whiskey infused with the body of a dead cobra, and dancing women dressed in leather, whips and chains. A camel stood at the entrance to greet guests.
In Bel-Air, real-estate brokerage firm the Agency recently threw a “Great Gatsby” themed event to launch a $35.5 million spec house. A female performer in a bedazzled costume hung upside down from a trapeze to pour champagne for guests, while another floated on the pool in a transparent bubble.
Mr. Ali says developers will pay anywhere from $20,000 to hundreds of thousands to throw such events.
In addition to the parties, developers are always on the hunt for creative new amenities. “It’s about the wow factor,” says spec home developer Ramtin Ray Nosrati, whose under-construction mansion in Brentwood includes a secret room for growing and smoking marijuana.
The ventilated room, accessed by hitting a button hidden inside a living room bookcase, will have tinted windows that darken for privacy. The house, slated to ask between $30 million and $40 million, will also come with a budget for an employee to supervise growing and harvesting. Mr. Nosrati compared the amenity to “having your own vineyard.”
Despite all this, price cuts are the order of the day. Bruce Makowsky, a handbag designer-turned-developer who sold the Minecraft property, lowered the price of his latest project, a lavish Bel-Air house with a candy room and a helipad, to $150 million, down from its original $250 million asking price. Mr. Niami slashed the price of a sprawling 20,500-square-foot house known as Opus to $59.995 million, down from $100 million.
Developer Ario Fakheri has chopped the asking price for his Hollywood Hills home with a roughly 300-gallon indoor shark tank to $26.995 million from $35 million.
Sales are still happening: Approximately 11 deals have closed for more than $20 million in Los Angeles so far this year, and a Saudi buyer recently paid $45 million for a spec home built by diamond manufacturer Rafael Zakaria. But buyers know they have the upper hand. “People are making lowball offers,” says Mr. Shapiro of Westside Estate Agency. “They’re not being shy.”
Doug Barnes, the founder of Eyemart Express, sold a contemporary home in Beverly Hills for $34.65 million in April, or nearly 40% off its original $55 million asking price, records show. British restaurateur and Soho House co-owner Richard Caring is listing a home he bought in Beverly Hills for $29.995 million; he paid $33 million for it in 2016, records show.
As for “The One,” the $500 million property was originally slated to come on the market in 2017 but has yet to be listed. The developer blamed construction delays.
I haven’t seen an article yet where the reporter gets the other side of the story, so I’ll address these fallacies below at green paragraphs. Hat tip to all who have sent in this story!
Why should a home seller have to pay for the buyer’s side of the transaction, especially when the buyer’s expenses include negotiating against the seller?
That apparent conflict of interest is at the heart of an escalating legal battle that pits the National Association of Realtors (NAR) against a group of law firms that filed a class-action lawsuit on behalf of home sellers against the NAR and four large national real estate brokers: Realogy, HomeServices of America, RE/MAX and Keller Williams Realty. As of May 22, the Department of Justice joined the fray when it demanded information about residential estate commissions from CoreLogic, a California-based data analysis firm.
JtR – Why? Because it is in the seller’s best interest to offer a bounty/bribe to the buyer agents.
The fight is forcing into the open many of the hidden factors that dictate how realty agents are paid and common practices that make it difficult for home sellers to effectively negotiate the commissions they pay.
It is standard for multiple listing services — data bases owned by realty agents — to require that the entire commission be paid by the home seller. Typically, the commission is 5% to 6% of the sale price of the property. Then, the commission usually is evenly split between the broker representing the seller and the broker representing the buyer.
That means that the seller directly pays for the transaction costs for the other side — even when, as is common, the other side negotiates for a better deal. The net result is that the seller is forced to pay for those working against him or her. The core of the lawsuit is that “the rules are, in effect, anti-competitive,” said Brown. “It’s a very strange way to run a market.”
JtR – The MLS does not require that the entire commission be paid by the home seller. They require that the listing broker offers compensation to the buyer’s agent, and it can be any amount.
The NAR filed to dismiss the lawsuit, partly based on the fact that it supports many types of business models for its members, said Rene Galicia, director of MLS engagement for the NAR. “The MLS doesn’t set commission rates. That’s left up to individual brokers and consumers, depending on the transaction,” he said. “Consumers should look at their level of comfort with real estate and what they want to accomplish. It’s highly competitive right now. Lay out your goals and find which broker will meet your needs.”
The actual commission structure has not been tackled head-on until now, say real estate experts.
JtR – The commission structure gets tackled every day on the street – without pads and helmets! We should do a better job of disclosing how much commission, and why, to all parties.
The split-commission structure causes confusion when sellers try to negotiate how much they will pay, because any reduction must be negotiated with everybody involved, explained Gary Lucido, president of Lucid Realty Inc., a Chicago broker that offers rebates on commissions. For instance, if the seller’s agent agrees to take less money, the buyer’s agent might not agree to a discount.
JtR – The commission isn’t negotiated with everyone involved. The listing agents decide how much they are willing to pay buyer-agents, and then present the commission package to the seller for approval or negotiation. The buyer-side cut comes out of the total commission negotiated between listing agent and seller – the only choice the buyer-agent has is whether they will show the house.
Also, the baseline costs of selling are not always obvious to consumers, said Lucido, which means that home sellers often don’t have the information they need to effectively negotiate. The cost of listing a house in the MLS, which feeds national listing sites such as Trulia and Zillow, is the same regardless of the asking price. A higher-end property might require additional marketing services and associated costs, such as a drone video or a fancy broker’s open house.
But usually, said Lucido, the additional cost of marketing does not justify the richer commission on a higher-end property. That is why, he said, agents are more willing to reduce their commissions on more expensive properties than on those under $200,000: Once the fixed costs are covered, it doesn’t take that much more work to sell an expensive property than a moderately priced property.
JtR – This is the common ploy by discount agents – that it doesn’t cost that much more to sell the higher-end properties. It suggests that all agents offer the same skill set, which is the true issue that needs to be examined – and maybe in court. Because the supply-and-demand of higher-priced homes is in the buyers’ favor, the sellers should hire agents with advanced sales skills and resources.
The class-action lawsuit and DOJ involvement might be enough to bring Americans in line with the rest of the world in terms of how real estate fees are calculated and paid for, said Timothy S. Becker, director of the Kelley A. Bergstrom Real Estate Center at the University of Florida in Gainesville. “The 6% model is ridiculous compared to how real estate is bought and sold in the rest of the world,” said Becker. “The agencies are set up to work for the transaction and for the agents’ own interests, not for consumers.” Real estate commissions around the world vary, but often are as low as 1.5%.
JtR – The media insists on quoting outsiders incessantly on this topic, but never explores further. You pay peanuts, you get monkeys.
It is significant that the class-action lawsuit is brought on behalf of property sellers, because they are the ones who pay the entire cost of the transaction. “The buyers currently don’t pay anything,” said Becker, “There should be a correlation between what you get and what you pay for.”
JtR – If buyers don’t pay anything and, as a result, can choose any agent to represent them, you’d think they would search out the very best. Why don’t they? The internet has made the homes for sale more available to consumers, but has it educated them on the nuances? No, and the industry is to blame. This lawsuit won’t change it, either.
Carved into the earth of a small cove in the US Virgin Islands, this custom residence is stunning, and sustainable! The materials selected for the Island Residence were specifically inspired by the colors and textures of the rock face bluff that extends to the coral beach below. A radial plan encourages residents to interact with each other and their environment.
The camera was rolling today – here are a couple of short home tours with commentary along the way:
We lost a pillar of our industry this week when Mike Evans, broker/owner of Sea Coast Exclusive Properties passed away. He began his brokerage in 1985, and it grew into three offices with 150 agents before he sold it to First Team in January. RIP
If you are thinking about selling your house this year, call me tonight!
Rates are idyllic, and so is the weather which makes for a great combo!
Mortgage rates fell again today, just barely inching to the lowest levels since early 2018. Keep in mind, that factoid is based on an average of multiple lenders. Some of them aren’t quite back to the low rates seen at the end of March. Others had crossed that line several days ago. Either way, the actual NOTE RATE at the top of the average rate quote would be the same then and now. The EFFECTIVE RATE would be just slightly lower due to a small advantage in upfront lender costs.
Relative to market sentiment at the beginning of May, the last 3 weeks have been unexpected. In other words, there was no obvious reason to expect or fear the sort of slide in stocks and yields that we’ve seen since then. But of course, that’s just the sort of thing financial markets like to do! If there’s one overarching reason for the move, it’s the trade war between the US and China. Just when it seems the issue is put to bed, more drama unfolds. In general, trade war drama damages the economic outlook and a weaker economy is generally good for rates.
Buyers are engaged – it looks like about 6% of adults are looking for a home, which is the same as last year. Glad to see the seniors on the move too:
Many people start thinking about a home purchase well in advance of actually engaging in the process of finding a home. In a national poll in the first quarter of 2019, 13% of adults reported planning a home purchase within the next year. Of those prospective buyers, 46% are already actively involved in trying to find a home to buy. The latter finding is not different from a year earlier, when 17% of poll participants were planning a home purchase and 46% of them were actively engaged in the search process.
Senior (56%) and Millennial (50%) buyers are the most likely to have moved beyond just planning to actually start the search process, compared to 41% of Boomers. Geographically, 53% of prospective buyers in the Northeast are actively engaged, compared to 42% in the Midwest.
At least eight businesses in Carlsbad’s downtown Village area have been told they must prepare to move out as their buildings make way for a sleek new restaurant/retail complex.
In what seems to cement the notion that Carlsbad is indeed morphing into Manhattan Beach, the popular Mas Fina Cantina and the Carlsbad Village Art & Antique Mall have been told their days are numbered. Their buildings will either be bulldozed or reformatted to make wake way for an upscale retail center. Their exit date could come as soon as October 2020 but possibly may not arrive until mid 2021 based on permit approvals.
Plans circulating with drawings for a new development called State Street Commons show there are no plans to retain two automotive repair shops, two hair stylists, a yoga center, an insurance office and an apartment complex. All will be displaced by a new complex that fronts the 2700 block of State Street and backs up to Roosevelt Street. Calls to Solana Beach-based Retail Insite who generated the drawings did not return requests for comment.
“I was very unhappy when I heard the news” says Andy Davis, co-owner of the Mas Fina Cantina who says he spent months hearing from customers that his building had date with a bulldozer. Since the 50s the Mas Fina building has been home to an appliance repair store, a laundromat, and an Italian restaurant. Mas Fina arrived in 2000. “My landlord told me: ‘We don’t have any plans, but we’ll let you know if it changes.'”
But the customers kept coming with more details. When Davis heard that the city had actually gotten involved, “I met with them and they told me they had sold the property.”
Davis says he has no animosity against his landlord or the incoming developer. “But I am worried the Village area will lose its charm as everything seems to be getting bigger. I get it that this is happening. My problem is that it is moving a little too fast and all the new designs seem to be similar. It’s all big boxes. There is nothing beautiful about these new buildings. People don’t want Orange County in coastal North County.”
Davis wouldn’t get specific about Mas Fina Cantina’s future, “But you can say we will stay in the Village [at a new location].”
Calls to Karlsbad Realty and the Don Dewhurst family about the sale of the property were not returned.
Meanwhile Bonnie Imperiali, manager of the Carlsbad Village Art & Antique Mall, says she was unclear about specific dates when her 15,000-square-foot collectible bazaar must close or relocate. The mall hosts mini shops for some 100 individual artists and vendors. It has been on State Street for almost 30 years.
The #1 blog is run by a ReMax agent in Massachusetts. The example given is his post on the Top Lies Real Estate Agents Tell Home Sellers to Get a Listing.
He puts open houses on his list, due to the risk of theft, and that any buyer who want to see the home will do it by appointment too, making open houses unnecessary. A couple of realtors objected in his comment section, and he berated them for some reason.
The only time I’ve had a theft at an open house was in 2003 when we lost a Vicodin perscrption in Solana Beach. I’ve done hundreds of open houses since, and never had a problem. The big benefit I experience is having the Fear of Loss kick in with the attendees, which makes them hurry up and make an offer – and usually a better one at that, so they don’t lose it.
The other point was that he put me on the B2B list, suggesting my blog is tailored to agents?
His site, bubbleinfo.com, features more than just real estate blog posts. He frequently talks about the big picture stuff going on in real estate, and brings a refreshing and analytical approach.
I’d love to get feedback on whether the content here is too focused on agents. I think I talk about what agents do in order to help educate consumers, but if it comes off as too much agent stuff, I’d like to know it.
Since the Padres signed a player for $300 million recently, it’s interesting to note that on this day in 1973 they were sold for $12 million, which would have been a record-high price for a MLB franchise!
But the city wouldn’t let the Padres out of the remaining 15 years on their lease, so the buyer cancelled.
The Padres owner, the notorious C. Arnholt Smith, did sell the team to Ray Kroc – and the rest is history.
