With one week until the Sabine auction, it is clear that many potential buyers are considering participating in the sale. With starting bids as low as $85,000, bargain hunters will inevitably emerge looking for a great deal. The big question, however, is what is the right price for a Sabine unit.
For a few reasons, valuation of the Sabine units is particularly difficult. First, the building has had real problems with noise complaints, elevator issues, and a tenant lawsuit. The developers claim that the issues have been fixed but the history will still impact the value. A building is a brand, it is part of your identity, and the Sabine brand is damaged.
Second, not a single Sabine unit was transacted on the MLS in 2009. Not one. The most recent comparables are 5 transactions from mid-2008. These show an average price per square foot of $256 for one bedroom units (2 sales) and $352 for two bedroom units (3 sales) — an unusually large difference between unit types. Since these prices were during the market peak and since they predate the buildings problems, they are just about useless.
Third, the Sabine is a condo conversion project and not a new development. This greatly restricts the comparable units that can be considered in a real analysis. Essentially, it leaves Brazos Place as the primary point of comparison. Since Brazos place also went to auction, it may be a good indicator of where the auction prices will land. But the Brazos Place auction was held during tougher times and the building did not have the problems that have plagued the Sabine. One other possible comparable is the Brown building, but we have seen very few recent MLS transactions.
So, while those are the problems, we had to start somewhere and here is the analysis: we used three valuation methods:
(1) We looked at condo conversion sales on MLS in Brazos Place and the Brown Building over the last 4 months. During this period, the average price was $271 / square feet for transacted units.
(2) We looked at the Brazos Place auction which resulted in an average price of $281 / SF (although not really relevant, the average discount was 29%).
(3) Peak MLS sale price by floor plan from early 2008. Useful information but in no way indicative of the value today.
See the full analysis: