Luxury Two-Bedroom Fetches $225K LessDecember 12, 2019
As we outlined in September, having sold for $2.425 million in April of 2016 (with 35 percent down and a below average 2.848 percent interest rate on a $1.58 million loan), the two-bedroom unit #22E in the LUMINA tower at 338 Main Street returned to the market priced at $2.488 million this past June, was reduced to $2.438 million in July and then lowered to $2.388 million at the end of August.
In addition to two bedrooms, the 1,382-square-foot unit features two full bathrooms; sweeping views of the Bay, Bridge and city below; and a transferable valet space in the garage.
And the resale of 338 Main Street #D22E, which was purchased as a second, non-income producing, home back in 2016, has now closed escrow with a contact price of $2.2 million, down 9.3 percent ($225K) since the second quarter of 2016 on an apples-to-apples versus “median price” basis.
Comments from Plugged-In Readers
Internet research (Googling) indicates that the person who bought this unit in 2016 passed away August 23, 2019 and owned other real estate assets. Could have been a 1031 money-park despite the no-rental rider if the idea was to re-fi at some point in the future. Or just lie. The IRS doesn’t really check loan riders, AFAIK. It’s unfortunate the heirs suffered a loss, but also helps to explain the price capitulation. On with the grave-dancing, bears(!) I guess…
And yes, the pricing does indicate the market dropping, no dispute on that point.
That part of town is sterile and lifeless. No ground floor retail except bars and restaurants. Nothing you’d call a “neighborhood”.
You’ve got to be kidding.
There’s a market downstairs and the waterfront is two blocks away.
The Ferry Building/farmers market, Market Street, museums, Yerba Buena, Metreon, Union Square, South Park and ballpark are all walking distances away.
This neighborhood is amazing with 2nd street also only a few blocks away. And now that they are going to build the new park (old transbay temp bus site) its just going to get better.
The park that you cited looks interesting. But that is not the old temporary bus terminal, you are mixing up two different proposed parks.
[Editor’s Note: The incorrect citing/link was actually our fault and has since been corrected.]
I’ll take sterile and lifeless over staph infections and zombies.
Hater Hater pants on fire. And I don’t even live on the East side.
Not a tax or estate planning expert, but if the above is correct, and the heirs got the unit upon the death of the person who bought it in 2016, then they get a step-up in basis applied to the cost of property as of this past August, no?
It would presumably be a step-down in basis as the value of the asset has diminished below the cost paid by the deceased.
Estates are assessed at current market value for tax purposes and heirs get the then-current value as basis.
Yep, that’s what I meant. And so on the sale of the property the heirs can walk away with the $2.2 million, minus the transaction costs, tax free.
“…so on the sale of the property the heirs can walk away with the $2.2 million, minus the transaction costs, tax free.”
Don’t forget about the mortgage! Sold at a loss so there wouldn’t have been a taxable gain, regardless, and the net proceeds from the sale would have been less than the down payment in 2016.
None of you (but particularly Brahma) know what you are talking about. If a unit is bought for $2.4M and sold for $2.2M, it means that there was a LOSS not a GAIN. So there is no capital gains tax to pay. Saying that the heirs walk away with the money “tax-free” is technically true but there is no point to the comment. If you buy something that goes down in value, and you lose money on it, you’re worse off, but there is of course not gain to be taxable.
Well, I thought I allowed for that, because it was posed as a question to the commenters in the thread. The point to the comment is that I made some implicit assumptions and concluded that the loss wasn’t suffered by the heirs, of course there was a capital loss. Shouldn’t have brought up the step up or step down in the basis.
Michael says there’s a mortgage to consider. Well, the seller’s death preceded the closing, so I assumed, perhaps incorrectly, that the seller’s Life insurance paid off that balance prior to or upon the sale (by covering the difference). I also assumed that the lack of an existing mortgage encumbrance is what made the sellers more likely to accept a lower selling price rather than waiting to get a better (higher-priced) offer. Both of those assumptions could have been false.
If the executor of the deceased owner’s estate had to show up at the closing with a check because the sales amount didn’t cover the outstanding debt, and that amount came directly out of whatever the heirs would have inherited, then yeah, I’d agree with the first comment that it’s “unfortunate the heirs suffered a loss.”
The article mentions a use-limiting second home loan rider, so one can presume that a note and deed of trust exist. Loans don’t disappear when someone dies any more than assets do. When the heirs sold this condo, they (through escrow at closing) would have had to pay off the existing loan to release the deed of trust securing the note and convey clear title to the property to the new owners.
The loss would have been an emotional one, of the family member (assuming heirs are family) and also a financial loss compared to the cost that the deceased paid for the asset.
Estate taxes are due from heirs if the value of an estate exceeds some limit (I think something like $5.5mm or something currently) Your mileage may vary depending on the sophistication of your tax planning. So, the heirs could have owed estate taxes or not, depending on the composition of the other assets in the estate. It may or may not have been a “tax free” sale.
As for the “tax-free” nature of the conveyance of the assets under the estate tax ceiling, this is simply the way our system works. 1031 exchanges are good for deferring capital gains taxes owed, but the best way to eliminate them is simply to die. Of course the step up in basis also applies to more fungible assets like stocks and bonds, so there’s nothing special about real estate in this respect. The underlying theme is that is if one is able to accumulate assets throughout her lifetime, she should be able to direct those assets to parties she deems deserving of them.
Are you simply incensed about the concept of inheritance? Should all of one’s assets simply get turned over Donald, Nancy, Gavin, and London when one dies?
No there is no “step-up” in basis, there is simply a taxable loss that is not deductible.
Had the unit gone up from $2.4M to $2.8M and been sold right after the owner’s death, then yes the $400K gain would have been tax-free, because upon death the basis is stepped-up to the FMV on the date of death.
Does anyone build “non-luxury” condos here?
David Baker does, with some version of your tax dollars.
It still sold for nearly $1,600 / sq.ft. All it means is that it was way overpriced initially.
It was actually priced, and sold, relative to the market and other 650 units in the development back in 2016, the sales of which became comps for other units in the surrounding buildings and neighborhood. And so on, and so forth.
Not true…Lumina was priced much higher per square foot than other units in South Beach and Mission bay when it was released.
And when it was released, it was the newest building, with the best amenities, on the block.
Regardless, if the units had been “over priced” for the market at the time, either relative to other offerings or even in the absolute, they wouldn’t have sold.
And when units did sell, they became comps for the sale of other units in the building and surrounding area. And so on, and so forth.
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