Yahoo Finance Triangle homes were listed at 25% below market value, with a catch. Did they sell?
Less than a year ago, a little-known New York-based real estate startup launched in the Triangle.
Called Groundly, it was piloting a land-lease program that listed properties — ranging from $514,000 to $1.7 million in sought-after suburbs — at 25% below market value.
But there was a catch: the land wasn’t included.
Buyers would own the houses, but the seller, using a 99-year ground lease, retained the land they sat on. The concept, the company said, made homeownership “more attainable and affordable.”
Did anyone take them up on it?
Short answer: No.
“Not to my knowledge,” said listing agent Charles Franklin, a Realtor with Durham-based West and Woodall Real Estate. He wouldn’t speculate why.
Around the same time, Groundly also launched in the greater Nashville area.
The company has not responded to requests for comment.
Ground leases as a financing product
While ground leases are not new, they’re uncommon in the residential market, Realtors say. But in recent years, as inflation, rising mortgage rates and high home prices keep homeownership out of reach for many, they emerged as an alternative home-financing solution.
Last August, Groundly kicked off its program. Under the business name Groundly Home Owner LLC, it closed on six properties scattered across the Triangle, tax records show. A few months later, it relisted most of the houses for below market rates with ground leases.
Take, for example, a brand-new 1,760-square-foot modern farmhouse on Nassau Street, just minutes from downtown Durham. Last October, the three-bedroom, three-bathroom home listed at $355,000 after Groundly purchased it for $500,000 on Aug. 7.
At the time, Groundly’s terms meant future owners would pay ground rent on top of mortgage payments, starting at $613 per month and increasing 2% every year.
After 55 years, they would have the option to purchase the land for $1, but conditions applied.
Today, after multiple price changes, the house has been relisted — with no ground lease — for $525,000. It was listed in May. As of June 29, it remains on the market.
Among Groundly’s other listings:
A custom-built 5,081-square-foot craftsman on Collins Drive in Raleigh’s North Hills, which listed last Sept. 21 for $1.27 million with initial monthly ground rent starting at $2,295. On Jan. 24, the listing was removed and relisted on March 14 with no ground lease for $1.8 million. The price dropped to $1.775 million on April 24. It remains for sale as of June 29.
A four-bedroom, three-bathroom traditional home in Chapel Hill’s Lake Hogans neighborhood, which listed last Sept. 28 for $505,000 with initial monthly ground rent starting at $976. On Jan. 23, the listing was removed and relisted with no ground lease for $700,000. The price dropped to $675,000 on April 25. It remains for sale as of June 29.
A four-bedroom, four-bathroom traditional house in Durham’s Brightleaf district, which listed last Nov. 3 for $575,000. On Jan. 24, the listing was removed and relisted on March 28 with no ground lease for $580,000. The price jumped to $650,000 on May 31. It remains for sale as of June 29.
The N&O reported that Groundly had expected to list a total of six properties under the same conditions.
Two other houses had been purchased: 3 Moss Creek Ct. in Durham, bought for $770,000 on Aug. 31; and 202 Calderon Dr. in Chapel Hill’s Southern Village, bought for $915,000 on Aug. 15. Both were relisted at similar market values months later.
The Durham home, now listed for $775,000, is now pending sale. The Chapel Hill home sold for $920,000 on May 1.
What they experts say
When Groundly first launched, local Realtors and lenders urged caution. Now, they say, they’re not surprised it hasn’t taken off.
“I could see the ground-lease concept working if it was part of a planned neighborhood, and all the houses were the same,” said Samantha Greaves, a broker with RED Collective | COMPASS in Durham. “However, as an outlier, it doesn’t work.”
Nate Haines is a senior loan officer with Chapel Hill-based Robby Oakes Mortgage Team. He said he saw “red flags” when Groundly launched with its annual 2% lease hikes.
He believes buyers, guided by their agents, are becoming more savvy. “The Triangle market tends to draw buyers who are adept at research and data crunching,” he said. “Buyers [are] hesitant when they see anything that either feels stacked against their favor, or out of place.”
NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com