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Extreme Re-Sales in Back Bay

Here is the latest installment of Bates By the Numbers, a weekly feature by broker David Bates that drills down into the Hub's housing market to uncover those trends you would not otherwise see. This week, he explores the fates of short-term owners in Back Bay. (Last week, he divined the reasons for Boston's fast-paced condo market.)

Back Bay real estate ownership for the long term is a financial no-brainer, but what about for the short-term? What if, unfortunately, you closed on your condo the week before you found out that you were being transferred? Could you sell without making your next move the poor house? Or what if shortly after cramming all your belongings in to your one-bedroom, the doctor dropped the news that your family was expanding? Could you make your condo purchase, a quick layover, in route to the acquisition of your dream home?

Ordinary buyers are told that residential real estate is not financially structured for short-term ownership. Yet, the need to quickly re-sell may happen more than you think. Want proof? Just review the title for 121 Beacon Street, #1. That condo sold in 2003, '04, '05 and '06. Or consider the MLS history of 308 Commonwealth Avenue, #D, which sold five times in 97 months.

What happened to Back Bay buyers who through a change of circumstances quickly became Back Bay sellers? I reviewed 11 years of Back Bay re-sales to try to find out, identifying more than 200 Back Bay condos which sold and then re-sold less than two years later.

I was surprised to discover that 82 percent of the re-sales sold for not less, but more. In fact, over two-thirds re-sold for at least 5 percent more than the buyers' recent purchase price. Although this analysis is strictly based upon sales prices and does not take into account closing costs or whether upgrades were made after the purchase, it's extremely happy news—that's because one of the biggest concerns for would-be buyers is whether they would have the ability to resell quickly and effectively if their life situation necessitated it. For Back Bay buyers, the numbers show the answer is overwhelmingly "Yes."

If the majority of quick re-sales made money, why did some lose money? Certainly, some of the quick re-sales lost money as a result of over-paying, but the biggest losers seemed to have little to do with the choice of a particular condominium or building and everything to do with timing. Take the circumstances surrounding 227 Marlborough Street, #9. When the buyer closed on this "stunning, renovated penthouse duplex" on Sept. 15, 2008, the Dow closed at 11,532. The day the owner put it back on the market, June 25, 2009, the Dow closed at 8,472. The financial world had changed and so had the value of his condominium, which closed for 18 percent lower than the last purchase price.

My favorite quick re-sale, however, like the majority of quick re-sales, has nothing to do with losses. Buyers closed on a unit in the Mandarin Oriental in December 2011 for $5.36 million. Yet, the buyers, a couple, preferred the additional 3,000 square feet offered by another condo in the same illustrious building. So, on Jan. 27, 2012, they put their recently closed condo back on the market and simultaneously put the larger unit under agreement. On Feb. 9, their condo sold for $5.575 million, $200,000 more than the couple had paid. And on Feb. 10, they closed on their new condo for $10.3 million. That's one extreme re-sale!
· Our Bates By the Numbers archive [Curbed Boston]

Mandarin Oriental, Boston

776 Boylston Street, Boston, MA 02199