The Seattle Condo Blog

Condo Bulk Buy Press Release:

Realogics Brokerage, LLC. announced their bulk sales program has already generated 20 home sales out of a 30-unit release at two participating developments: The Decatur on First Hill; and Eleven Eleven East Pike on Capitol Hill. Sales volumes exceed $5 million. The two projects previously had no sales in 2009.

The firm announced their bulk sales strategy on September 10 as an alternative to condo auctions, which are becoming increasingly common in the marketplace. Their first project, The Decatur was introduced on September 28 with 21 units released and their second project, Eleven Eleven East Pike was introduced on October 11 with 9 units released. The two properties promoted bulk sale pricing that was (up to) 35 percent and 25 percent off previously listed prices, respectively. Realogics sought to accelerate sales in order to meet the November 30 deadline for first time homebuyer tax credits.

“We’re pleased to have helped our clients find their market value while assisting homebuyers purchase in a quick timeframe,” said Sam Cunningham, Managing Broker and Partner of Realogics Brokerage, LLC, who is handling both bulk sales programs. “Our unique approach has resolved a stalemate between buyers and sellers over price – there wasn’t any dialogue (offers) taking place so there weren’t any sales,” he added. “Our success is a win-win for all parties.”

The bulk sales program first offers homes for reservation so buyers can secure an opportunity to purchase – just as soon as the developer authorizes the sales price. As the buyers were aggregated, a volume sales discount was being negotiated with the developer based on the block of sales to be consummated. The price was set and reservation holders were converted to Purchase and Sale Agreements, either for block closings or individually as required.

The creative sales approach was derived to overcome several challenges that are present in the condo marketplace:

• While demand is present, buyers aren’t buying and sellers aren’t selling where there’s a lack of initiative
• Projects require a minimum number of sales before FHA and Fannie Mae mortgage products are available
• Smaller projects require a vehicle to gain attention with small budgets – collaborative marketing is a solution
• A lack of project sales results in lower unit appraisals, which can face more downward pressure from auctions
• Buyers may be concerned to “buy first” in a building that hasn’t (yet) demonstrated market success

“The irony is that homebuyers remain very interested in these projects so it was never a demand issue,” said Cunningham. “They (buyers) just needed an opportunity to start the negotiation process and had to agree on a fair price. And for their part, our sellers needed to mark to market – but were only willing to do so if it resulted in expedited sales.”

Based on the 20 sales to date, Cunningham estimates buyers purchased at prices that were between 25 and 30 percent off previous list prices, depending on the product. The pending block of sales are also helping unit appraisers by using an inter-building value matrix instead of relying solely on surrounding market comps. Third party comps alone may temporarily suppress unit values given the increased activity of condo auctions and short sales within the marketplace.

“Lenders appreciate real-time demonstrations of market demand for their mortgage asset,” said Jeff Bell, a Mortgage Banker and Partner in Cobalt Mortgage, the preferred lender for The Decatur. “Realogics has illustrated that condo auctions aren’t the only way to spur sales: especially for sensitive communities that are partially occupied.”

Cunningham says both The Decatur and Eleven Eleven East Pike now offer an additional block of 30 units for sale as an encore sales release. And while the recent deadline for homebuyer tax credits was deferred (June 30, 2010 instead of November 30, 2009), sellers remain highly motivated to move unsold product today.

“We’re thrilled with the bulk sales results to date and we look forward to more success ahead,” said Joel Ospovat, the Declarant representative for The Decatur Condominiums. “We’re sitting on standing inventory so to maintain our sales momentum we’re happy to offer the best high-rise condo value in the marketplace.”

Development consultant William Justen of The Justen Company said that he watched condo auctions impact market values just as he completed the Eleven Eleven East Pike condominiums last month. His decision to join in a bulk sales release was to shore up his appraisal values while also seeking to comply with mortgage financing guidelines, he said.

“Unit appraisals and mortgage financing can become a major challenge for projects that are just beginning their sales process these days,” said Justen. “The bulk sales approach helped us calibrate our product for the market so we’re now successfully selling.”

Website: www.CondoBulkBuy.com

Disclaimer: This article is a verbatim reprint of a press release.

It was a busy day for condo related news:

2201 Westlake (office building / Enso Condominium) receives LEED Gold Certification

Adapted from press release.

Characterized by its innovative environmental and sustainable features, the 2201 Westlake development in South Lake Union now represents Seattle’s first mixed-use and high-rise residential project to earn prestigious LEED (Leadership in Energy and Environmental Design) Gold certification from the U.S. Green Building Council.

Developed by Vulcan Real Estate, 2201 Westlake was designed and constructed from the ground up using sustainable development practices. As a LEED Gold-certified project, 2201 Westlake exemplifies sustainable innovations that promote energy and water efficiency, indoor environmental quality, eco-friendly materials selection and alternative transit options as part of a healthier workplace and living environment.

The project’s sustainable features include proximity to public transit, bicycle storage, underfloor heating and cooling systems, use of recycled and rapidly renewable materials, low VOC paint and carpeting, drought tolerant landscaping, the recycling and salvaging of construction waste, plumbing systems that reduce portable water by 35% and an exterior glass curtain wall with low solar heat gain properties.

The Great Hole of Seattle (1 Hotel & Residences) to be filled

Full article from the Seattle Times: Starwood luxury hotel site becomes a parking lot

The pit, on Second Avenue between Pine and Stewart streets, was excavated in mid-2007 for the 1 Hotel & Residences, a proposed 23-story luxury tower. But work on the $200-million hotel and condo project stopped that fall, and the developer later acknowledged it couldn’t get construction financing.

A spokesman for the site’s owner, Connecticut-based Starwood Capital Group, said Monday that the hole should take eight to 10 weeks to fill. A Starwood affiliate applied last week for a city permit to develop a temporary parking lot on the property.

Eleven Eleven East Pike bulk sales

Full article from the Daily Journal of Commerce (subscription required): Kundig-designed lofts: Justen tries bulk sales

The Justen Co. is trying the bulk sales strategy to sell a third of the units at a new condominium project on Capitol Hill, Eleven Eleven East Pike. The project has 27 lofts designed by Seattle-based architect Tom Kundig of Olson Sundberg Kundig Allen Architects, ranging in size from 600 to 1,150 square feet.

Nine units are in the first release. They are between 612 and 793 square feet and are priced between $255,000 and $379,000 in the bulk program. That’s 20 to 25 percent lower than the initial list pricing, according to Dean Jones, president and CEO of Realogics, which is marketing the project.

Under the bulk sales approach, buyers get a volume discount depending on the percentage of homes that are sold within each release. Buyers can join the bulk sale with a refundable deposit of $500 through the end of the month. Units must close by Nov. 30.

Related:
Enso Condo website
Eleven Eleven Condo website

DISCLAIMER: This information is presented to provide an overview of Fannie Mae’s condo guideline changes. For specific information and questions, please consult with your mortgage loan officer.

Recently, TSCB noted two new mortgage fees implemented by Fannie Mae affecting condo buyers — a .75% condo add on fee and a 1.75% additional fee for investors — both applicable to loans with a loan-to-value rate greater than 75%.

Well, there’s more. Effective March 1, 2009, Fannie Mae is implementing condo guideline changes “in light of the current condo market and the need to mitigate risk on condo loans”. Some of these changes may affect a buyer’s ability to obtain conventional condo loans for new and established condos.

A condo project is “established” if 90% of the units have been sold, is complete and the HOA has been turned over to the owners. A condo project is “new” if less than 90% have been sold, is not completed, is subject to phasing or if the HOA has not been turned over to unit owners.

Overview of Fannie Mae condo guideline changes:

• For new construction and newly converted condo developments, 70% of the units must be pre-sold (closed or under contract). This is being increased from 51%.
• No more than 15% of a condo project units can be more than 30 days delinquent on HOA dues. This is an existing guideline that is now being applied to new condo projects. The calculation was also changed from being 15% of HOA fee payments to 15% of total units.
• Fidelity insurance will be required for condos with 20 or more units, ensuring that homeowner association funds are protected. Presently, this requirement applies to new projects and is now being extended to include established condos.
• A requirement that borrowers must now obtain a condo-owners insurance policy unless the master policy provides interior unit coverage; coverage may not be less than 20% of the assessed value. A condo-owners policy, known as an HO-6 policy, covers personal property, personal liability, and the physical unit from the studs and in. Many policies also include special assessment coverage or the option to include a special assessment coverage rider.
• No more than 10% of a project can be owned by a single entity.
• No more than 20% of a project can consist of non-residential space.
• The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.

According to a Fannie Mae, the guidelines can be modified for condo projects on a case-by-case basis. Therefore, these guidelines may not apply to all condo projects.

What effect will the changes have?

The revised guidelines may affect a buyer’s ability to obtain a conventional loan for either a new or established condo if the project does not conform. Most notably, it’ll affect new developments and it’s already having an impact on at least two new projects. Vulcan recently sent a letter to buyers at its Rollin Street Flats project in South Lake Union notifying buyers of the new 70% pre-sold guideline and extending closing until April 15th at the earliest.

As it stands, Vulcan may be unable to close any of the units at Rollin Street unless (1) they continue to extend closing until 70% of the units are under contract, (2) seek modification under a Fannie Mae expedited review process, (3) find a lender willing to hold the loans in their portfolio, or (4) convert the use of the building.

Ruby Condominiums in Eastlake is holding off closings until there are enough sales to qualify under the guidelines…that could be awhile. Ruby is FHA approved so that offers qualified buyers an alternative, though Ruby must have 25 sales under contract before it can begin closing FHA buyers. Its developer, Barrientos, is a major apartment developer as well, so reuse may be an option. In both cases, buyers are left in limbo.

The new guidelines may also apply to other recently completed and/or soon to be completed projects including Enso, Veer Lofts, Equinox, Alex, Duncan Place, Leona, Lakeview Residences, Brix, Eleven Eleven, The Danielle, The Dakota and Marselle — that is unless they’ve been approved for a lower rate under a case-by-case expedited review process. Quite frankly, though, I expect a few of these won’t end up as condos.

If there is a silver lining, it’s for sellers at established condo developments who’ll have reduced competition from new construction developments.

Statement from Vulcan:
Vulcan has informed our buyers of the new Fannie Mae and Freddie Mac regulations because Rollin Street is at a level of pre-sales that is under what is mandated by the new guidelines. As these guidelines affect the ability of our buyers to obtain financing and close on their purchases, we felt it was important to communicate these challenges as soon as possible. We are working to understand the new guidelines and how they will ultimately affect the property and our buyers. We will be communicating what we know about these changes and their impact in the next 2 to 3 weeks.

Veer and Enso are at a higher level of sales and pre-sales respectively and our goal is to continue to close units in those buildings as buyers come to the closing table.

Response from Williams Marketing (per comment below)
As of today [2/20/09], Ruby has partnered with a local lender (Seattle Mortgage) looking to actually lend money! They have committed to close homes now, ie, we are move-in ready with no pre-sale requirement. We are also working with other regional lenders for additional commitments to close homes with no presale requirements. Ruby on Eastlake is both FHA and VA approved, so buyers can take advantage of every financial opportunity to get into new home ownership.

Posting has been revised.

Eleven Eleven East Pike (website) is the first condominium project designed by Tom Kundig, an AIA award winning principle with Seattle-based Olson Sundberg Kundig Allen Architects.

Eleven Eleven East Pike blends modern, even playful elements, with Capitol Hill’s rustic character within the Pike/Pine corridor. Situated half way between Trace Lofts and Monique Lofts, the six-level project will feature just 27 urban condominium homes (14 open one-bedrooms, 12 one-bedrooms and a two-bedroom penthouse).

The homes range in size from 600 to 1,125 square feet, the average being around 700 square feet. Unlike other Kundig designed homes, Eleven Eleven is being offered at a moderate price point, ranging from the mid-$200,000s to the low $500,000s with most between $350,000 and $450,000. The penthouse is being offered in the mid-$800,000s.

Design elements include:

• 9′ ceilings with floor-to-ceiling windows and doors
• Randomly placed peepholes
• In-unit moveable hanging “puzzle” walls
• Custom-built “urban RVs” (moveable multi-purpose storage units) designed by Kundig
• Built Green 3-Star certified
• Roof top terrace

Most units will have unobstructed views, however, the 2nd floor south-end units back to a building approximately 10′ feet away. These particular homes are priced in the $200,000’s and do not have a parking space.

The project is currently under construction with occupancy slated for Fall 2008. Reservations are currently being accepted (bonus: the project is FHA approved). Eleven Eleven is being developed by Anne Michelson, a long-time Capitol Hill business and building owner. Michelson has been an outspoken advocate for preserving the Hill’s cultural and architectural character.