In today’s market, if you know how to approach a condo developer’s broker, you can purchase off-market properties at potentially great discounts while also getting closing costs paid.
In this post, we’ll provide some background on Marketproof Pro and how you can use it to buy off-market NYC condos.
What is shadow inventory?
‘Shadow inventory’ are off-market condos that have been constructed and are legally available for sale by the building’s developer but that have not been listed publicly for sale.
For example, a new condo building with 100 units comes on the market and 10 are listed for sale. The remaining 90 units are the shadow inventory.
Marketproof tracks shadow inventory through government disclosures that developers are required to make.
Why do developers keep units off-market in shadow inventory?
A developer’s typical marketing practice is to list a few properties at a time. For example, if there are 30 one-bedrooms in the 100 unit building, one or two of each layout may be listed at any one time. The developer’s goal is to focus marketing resources on a few units, and — most of all — to create the perception of scarcity.
But the complete inventory has always been available to people who know how to access it and Marketproof Pro makes it available to you.
How does shadow inventory benefit developers?
Short answer: not as much as it used to.
Condos are financed through loans that give a developer time to build and sell the units. Generally, a developer’s lender will hold the condo units as collateral while they are being sold. If the units don’t sell fast enough, the loan is often replaced by what’s called a ‘condo inventory‘ loan that gives a developer more time to sell.
With this kind of financing available, a developer can hold the units in the shadow inventory. So long as the potential benefit of holding the units is greater than the cost of carrying the loan, a developer will hold rather than sell.
However, if your purchase represents a better opportunity than holding, why wouldn’t a developer sell to you?
How much shadow inventory is there?
Off-market shadow inventory has been growing since 2018. As of September 2020, there are more than 11,000 condos in the shadow inventory, valued at more than $40B. This is 7 years of inventory. And, of course, new buildings are coming on the market all the time.
Of all the condos built since 2018, more than 60% are currently unsold.
Marketproof analysis
With so much inventory available, developers are competing with each other more than ever to move the unsold inventory. And lenders are itching to get their loans paid down. The risk of holding is becoming greater than the benefit of selling — to you!
How does Marketproof Pro access the shadow inventory?
Before developers can sell condos to you, they must submit a legal document called an offering plan to New York State. The offering plan includes key information about all the units, such as bedrooms, bathrooms, size, sale price, common charges, projected taxes, and much more. Marketproof uses advanced computer algorithms to extract and organize information from offering plans. Our trained analysts also review and vet the information.
Marketproof tracks which units are listed and sold, and which are in the shadow inventory.
We are currently tracking 100s new development buildings as well as 100s more buildings still being built (and 2000+ that are already sold). On Marketproof Pro you get access to all of this information.
Marketproof Pro
Marketproof Pro combines property data, ownership records, market analytics, and AI-powered marketing tools in one place. Search buildings and addresses, look up owners, track sales trends, and create branded reports.
