When a Word is a Misnomer – “Auction” of Condos in Chicago’s South Loop Tower
The auction team came last week.
Mostly men, mainly white. Their hands showed the markings of occasional manicures. And they had a propensity to stand with feet splayed, arms crossed, hooking their thumbs in the crook of the opposing arm. Chewing mints as they nodded, always looking away from the person with whom they spoke.
Where they came from, I cannot say. The reason for their arrival was to try to sell off 41 Chicago condo homes at 1400 South Michigan Avenue.
At the end of the day last Sunday, they had succeeded, tickling 40+ condo homes into the sold column in the Chicago real estate market.
When you hear certain words, it’s reasonable to have specific responses. The word “fire” evokes a sense of warmth. Carnivores hear “steak” and salivate. My sons hear “Nick toon” and they celebrate an anticipated cartoon.
“Auction”? The mere suggestion drums up a cavalcade of mental images of getting a good deal. And with this in mind the preview session of the 41 Chicago condo homes for sale last Saturday was wall-to-wall with consumers jotting notes, going from condo to condo from floor to floor and imagining themselves in their new construction high rise home at the best possible price.
At the end of the day Sunday, after the dust had settled and about 45 actual condo homes sold in roughly 90 minutes I knew with certainty that only one consumer had gotten a reasonable deal. My clients.
Sure, there may have been others. But amid the syncopated beat of the steady-voiced auctioneer steering the conversation in upward spirals of dollars being spent, when start bids burst up $100,000 on one bedroom condo homes with the quickness of a sneeze, it seemed that the bulk of participants, would be and actual, were moving quickly toward the point of paying market price.
And market price at an auction is not a good deal in the estimation of The Real Estate Lounge Chicago.
Viewed through the prism of comparison, my clients purchased a 1500+ square foot three bed/two bath condo home with parking at 15% less than similar units (on a square footage basis) had sold for in the past six months in the South Loop. One foreclosed unit with comparable specs sold for approximately the same amount.
The one beds? In the South Loop they are trending toward $225,000. (Bank owned and short sales are more than 10% less in transacted amounts.) And that is where a number of the one beds at the auction crossed the finish line. Slightly smaller one beds offered a slight mitigation, landing near $190,000. Of the seven two beds that sold, four sold at market price, roughly $330,000 (before parking) and three ranged roughly 10% less. The cost of parking was another $35,000 and storage an additional $1,000.
Yikes!
Bottom line is this – folks walked into the gathering last week expecting a good deal. They walked away with half of that. They got a deal.
Who got a good deal was the building and the auctioneers who managed to clear the shelves of inventory in one afternoon. Meanwhile the area features hundreds of one bedroom and two bedroom condo homes that will continue to chase the market amid a gross oversupply of inventory. Prognosis? The passing of time and reduction of pricing.
One last note – what disheartened me last week that most consumers were flying solo. And they didn’t have somebody with them to temper them if the bidding rapidly escalated beyond what was reasonable. At the end of the day a consumer will do what a consumer will do. But in this instance where the setting is essentially fever pitched (it felt like a casino) and a contractual mechanism that veritably establishes an inescapable agreement I would veer more toward having unbiased and professional counsel to help me make my decision.
What appears to be the case overall though, the auction was an unbelievable success for 1400 South Michigan and its auctioneers. In 90 minutes they were able to propel more than 40 Chicago condo homes into the sold column while hundreds and hundreds of units remain languishing on the market in the South Loop.
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You are so right, Tom. Full retail price for a one bed in South Loop is $225,000 (down from $250,000 to $300,000 at the peak) and $190,000 is full retail for smaller units, or units with defects (no view, odd plan, etc.) Geez, those auction prices are ridiculous.