I guessed that we’d have 5% more NSDCC sales this year because I expected a surge of delayed sellers who would finally come to market in order to cash in on the record pricing.
But it’s not happening, at least not yet.
The number of NSDCC listings for the first two months of the year is 32% BELOW last year! It means buyers are only going to have a few shots at winning a home.
Here’s what home buyers will have to endure in 2022 to succeed:
Long Waits – Days and weeks will go by without any quality new listings to review. It makes you soft and it’s difficult to keep your chops up.
Coming Soon – Listing agents will tease you by advertising a home for sale, but you can’t see it yet. It’s not always clear when you can see it, and you better not miss the date because…..
Quick Exposure – Once the listing agent is willing to show the house, they will be overcome with the demand, and will likely hit the panic button.
Many will insist that you show them a bank statement and pre-approval letter just to see the house! If you get an appointment, it will be limited to a 15-minute period that is convenient for the listing agent AND be subject to cancellation prematurely because they already took an offer before your scheduled time. Hopefully, you don’t have a job or other responsibilities that limit your scheduling. You will get the feeling it is best to quit your job so you can devote your entire life to home-buying.
No Transparency – If you want to buy it, then just make an offer and you will hear back in a few days.
Over Pay – Not only will you have to pay well over the list price to win, but there won’t be any recent sales to justify any of it. The logic and common sense you usually employ will be your enemy here.
Waiving the Appraisal – What was once an insider trick to improve an offer has turned into a standard on every deal. If you refuse, the listing agents will think you aren’t a serious buyer, and move on.
Shorten the Contingency Periods – You will have 7-10 days to sign off all contingencies. You will need to have a great home inspector on speed dial and who can schedule quickly.
60-Day Free Rentback – Listing agents demand free rentbacks whether the seller needs them or not. Those homes that provide immediate occupancy is a bonus for which buyers will pay extra.
No Repairs – Most buyers are submitting a blank repair-request form with their initial offer.
In spite of all those hurdles, there will still be stiff competition for the quality buys. Once the listing agent has collected enough offers that fit the criteria above, they will then huddle with the sellers in the back room and decide on a winner. This is where having a great agent with a good reputation in the community will pay off. Discount agents, out-of-town agents, buyers who are agents, and agents who don’t look good or don’t smell right are ignored and/or sent to the back of the line.
If you can endure that much and successfully get into escrow, you will be treated with disdain and disrespect that makes you will feel like a suspect, not a valued buyer. The contempt that listing agents have for their prey is palpable – they don’t trust that their initial mistreatment of you will be enough of a lesson, and they will keep it coming because they think that’s their job.
And get this – you will probably lose a few bidding wars before you get up to the desperation level of the other buyers. Oh, you’re not desperate? Then this market probably isn’t for you.
Give it a try and you might get lucky. But if you want a quality home in a good area, then don’t be surprised if the desperation among the competing buyers is higher than you could ever imagine.
And which of the brokers involved gets what for commissions on the sale of The One?
“When you’re talking about deals of this magnitude, everything is negotiable,” said Ron Wynn, a veteran broker working with Compass. “But it always boils down to what it says in the agreement. Some agreements are very clear. Some are murky and that’s why lawyers fight about things.”
Any murkiness on The One–and a parlor game of sorts for luxury agents and brokers around L.A.–starts with the $126 million hammer price for the Bel-Air megamansion, which went bankrupt under spec developer Nile Niami.
Put Concierge Auctions, which handled the March 4 sale, down for a 12 percent fee on the sale–that comes to $15 million.
The buyer is responsible for the fee to the auction house, so the total price for The One could be viewed as $141 million.
The extra obligation is another item to sort out, said Scott Talkov, president and attorney for Talkov Law, which specializes in real estate and bankruptcy litigation, with an expertise in co-ownership disputes.
“Most real estate transactions are not conducted through an auction where a fee is charged on top of a sales price,” said Talkov, who was not involved in the deal for The One. It makes the math confusing, especially for brokers looking for the largest possible commission.”
However the confusion gets settled will mean a significant difference in dollars for the brokers and agents involved.
That cast includes Branden and Rayni Williams of Williams & Williams, and Stuart Vetterick of Hilton & Hyland, They all represented the buyer, apparel mogul Richard Saghian, chief of the Fashion Nova brand.
The Williamses are reportedly involved as listing agents, too, along with Aaron Kirman of Compass.
The agents representing the buyer–the Williamses and Vetterick–are in line for a 1 percent commission, according to terms spelled out by Concierge Auction before the sale and confirmed by court documents filed with the bankruptcy court.
The court documents also indicate that there is another 1 percent commission due to brokers or agents on the seller’s side–the Williamses and Kirman, in this case.
Industry buzz, meanwhile, suggests Branden Williams has been vocal behind closed doors about the commissions being pegged to the $141 million price tag.
Whatever cut the Williamses might have agreed to with Vetterick and Kirman remains private. Assuming, however, that the Williamses bill jointly and are in for a half-percent on each side of the deal, they would have the most reason to press for counting the auction fee toward the total price subject to commission. That math would add $141,000 to the Williamses commission, taking it from $1.26 million to about $1.4 million.
Kirman and Vetterick would each see an additional $70,000 or so if the auction fee counts towards the price subject to commission. The half percent we’re presuming here from each of them would mean an extra $70,000 for each of them, taking their respective cuts from $630,000 at the $126 million price to $700,000 with the auction fee added to hit the $141 million market.
Whatever discussions might be ongoing could be rendered moot by the bankruptcy court, which must sign off on the deal for it to become final.
The bankruptcy court is expected to soon decide whether to approve the sale. It wouldn’t be surprising if some adjustments to the deal were ordered by the court as a condition for approval, said Marc Smith, a partner in Encino-based Krane & Smith, which specializes in business litigation, real estate law and intellectual property.
Smith said he is familiar with The One’s case but not involved in the deal.
“The One has had extensive and well-documented construction problems, creditors’ claims and has a limited market for potential buyers either for residential or even commercial use,” he said.
“Since the property is in bankruptcy and the bankruptcy estate has creditors’ claims to date in excess of $250 million and counting, the bankruptcy court will determine and approve the actual amount of the brokerage commission,” Smith said. “ Of course, the brokerage commission will only be paid if and when a sale is approved and finalized.”
Talkov said reductions in commissions wouldn’t be a surprise.
“Oftentimes it is difficult to figure to out how professionals will be paid because debts exceed assets,” Talkov said. “This is [often] a series of people taking a haircut to make something work.”
Chad Roffers, president of Concierge Auctions, said his outfit earned its fee by increasing the market for the property. It had helped handle interest in sale since the bankruptcy.
“Since the inception of Concierge Auctions, the highest level of luxury auctions have become our hallmark: The One was no exception,” Roffers said. “In only 55 days, we secured a strong field of global interest from America to Europe, Asia, and The Middle East, doing exactly what we do best, finding the most affluent buyers from every pocket of the world.”
The One’s features include five pools, a nightclub, a salon and spa, a 10,000-square-foot sky deck, a 400-foot private outdoor running track and a Dolby Digital theater which offers seating for more than 40 people, according to Concierge.
The pending new owner, Saghian, is expected to use the property as a residence as well as a stage of sorts for the various social media influencers who endorse his Fashion Nova brand–a lineup that includes singer Cardi B. and Megan Thee Stallion, among others.
Jim, with gas prices getting so outrageous do you think more central areas are going to become EVEN more expensive like Clairemont and University City?
No. Gav’s going to take care of you and everyone.
remember back in 2020 when the price of oil per barrel was negative dollars…?!?
ah, fun times.
do you think more central areas are going to become EVEN more expensive like Clairemont and University City?
I have buyers who thought we could get a good buy (under $900,000) in the 92117 six months ago. In tomorrow’s tour of 3 new listings this week, we’re hoping to keep it under $1.5 million. I recommend you to buy the first house you see!