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One interesting story comes from Riviera Beach, a Florida resort just North of West Palm Beach. It is a pretty small place built around a harbor on the Atlantic Ocean and with a very nice beach. Wikipedia reports that it “is predominantly an African American city” and “consistently has crime rates well in excess of the United States average and is also notable for its high levels of poverty”.
But, as it sometimes happens in other very poor cities or neighborhoods, Riviera Beach became the target for massive redevelopment so to create areas of very expensive real estate with the objective of eventually turning the whole market around. One of these developers was Cornerstone Group from Hollywood that created a whole gated community called Marsh Harbor with 402 units and various amenities like a fitness center, lighted tennis court, swimming pool and heated spa.
They were selling these townhomes for as much as $ 310,000 in 2007, now these same townhomes are worth between $55,000 and $75,000, according to the County Property Appraiser and to the current listing prices of the many shortsales in the community, and they are very difficult to sell. So Cornerstone Development will auction off 64 of these townhomes on March 13. The first 20 of these townhomes will be sold “absolute” to the highest bidder regardless of price, at the highest discount possible, as a push to get rid of the remaining inventory. The remaining ones will be sold to the highest bidder, with prices subject to approval by the seller.
It is the exact same concept as used for major stores: where you have low cost products that are being offered at a loss so to get people through the store and getting them to purchase other more profitable merchandise. One would never expect to see the concept applied to real estate, but times are changing and any marketing tactic goes, apparently.