True Gotham

Those who are regular readers of TrueGotham know that this blog was born out of the necessity in my mind to dispel the used-car salesman persona of real estate agents.  Before I go further I want to say that I'm sure that there are a great deal of honest and ethical used-car salesman but I use that industry because...well...you know exactly why.  I must also state that for the most part, the agents whom I have worked with recently have been of a higher ethical and professional caliber than I have seen over the past 17 years in the industry.  The bar is definitely being raised thanks in part to a much more savvy and demanding consumer.  That said, it only takes one bad apple to spoil the bunch and oh boy are there some apples out there that are just rotten to the core.  The following example is precisely why some members of the public continue to distrust our profession.

Recently, a friend of mine who has been a top producing real estate agent for more than 20 years in the Manhattan real estate market had an experience with one such worm-infested, pesticide laden, poor excuse for an apple.  She is representing a seller who has been a long time friend and who's children are friends with her children, etc.  They treat each other like sisters.  Due to some current financial changes, these people are selling their current home to move into one of the top public school districts in Manhattan. 

On a recent Sunday, the husband visited an open house being conducted by one of this agent's colleagues.  Immediately upon exiting the open house, the husband contacted his wife who reached out to her friend the agent to get comps and discuss the property.  This agent immediately reached out to her colleague who was representing the seller to get additional information on the property including an understanding of what comps were used to price the home.  Here's the rub.  Instead of having the common courtesy, which MOST OF US DO, to reply to his colleague with the information requested, he contacted the client directly suggesting that if they worked with him directly they would have a better chance of procuring the apartment.  My friend then explained to her friend that based on this agent's disgusting behavior, she would probably be best served by dealing directly with this sleazeball and she would coach her friend from the sidelines and forgo any commission...at least for now.

Now I know that many buyers out there feel like this is indeed the norm but I'm here to tell you that in my 17 years in the industry, it's NOT.  With almost every property that I have sold in the past there has appeared the direct buyer who points out that s/he is not working with a broker as if that would give them an advantage over another bidder.  Here's why that "advantage" doesn't actually exist.

The buyer often believes that by going directly to the seller's agent that they can either capitalize on the agent's greed to collect the entire 6% (not out of the question unfortunately) or they have leverage to negotiate the price by a percentage of the agent's commission (not likely particularly if you're happen to be dealing with that greedy agent).  The problem lies in the fact that given the small percentage of deals that are done directly with no buyer's agent, there is less of a chance that the seller's agent will reduce the commission.  They would rather seize the opportunity to capitalize on the direct buyer.  In the boom market of the past decade where multiple offers were the norm, being a direct buyer may have given you some sort of advantage.  But in today's market of marathon negotiations, it makes much more sense to have an advocate on your side negotiating on your behalf.

Back to our scenario...on the rare occasion when you find yourself dealing with a greedy seller's agent like this, the most important factor to consider is whether or not you trust your agent (representing you as a buyer) to do what is in your best interest which could unfortunately (for your agent) even be to step out of the transaction.  It's times like these where you will see the true character of a real estate agent.  I'm very pleased to say that the buyer's insistence on having her friend represent her in this transaction paid off and they are on the road to a successful purchase. 

As for the uncooperative, self-serving seller's agent, his reputation is becoming more tainted on a daily basis and I suspect that as the industry learns more about how he does business, his deal flow will begin to slow.  We can only hope.  By the way, not surprisingly, he does a greater number of direct deals than the norm.

Lastly, if you're a seller and curious about the agent's reputation whom you decide to hire, ask them what percentage of deals they do directly with no buyer's agent.  If they answer more than 25%, you may want to further question them as I believe about 90% of transactions take place with each side being represented by their own respective agent.  

And the reason this all matters is because you don't want an agent like this to convince you to accept less money from a direct buyer in an effort to line their own pockets. 

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

Readers of TrueGotham know exactly how I feel about transparency and I do believe that the real estate industry as a whole is getting much better at accurately representing property to the prospective buying public.  Yet I continue to be baffled by blatant misrepresentation of properties by some of my colleagues.  I just returned this morning from viewing a home with my most favorite buyers.  These buyers are quite particular about their future apartment and nothing is more important to them on the priority list than views.  The views must be awe-inspiring of either the city or water and they need to be somewhat protected (quite a challenge in Manhattan but possible). Because of their insistence on drop dead views, we make it our business to confirm with seller's agents that our clients won't be dissappointed.   In this particular instance, the seller's agent confirmed that the views were open from all rooms and that the only reason the blinds were drawn in the photos was because the windows hadn't been cleaned.

Fast forward to our appointment this morning.  Imagine our surprise and displeasure as we entered this $3M home only to be met with sweeping views of a red brick wall.  No joke!  The entire living room faces a brick wall.  Now why would the agent boldly lie about the views of this home when we clearly expressed the importance of views?  IMHO, he's scared!  The market has slowed to a snail's pace and in order to get bodies into this apartment, this agent has obviously resorted to misrepresenting the home.  In addition to "shady" photos (shades drawn), the agent has chosen to verbally misrepresent the home in hopes that someone will fall in love with it despite the lack of views.  Perhaps someone will, but it won't be my clients nor anyone seeking a home with stellar views so why waste everyone's time.

Tactics such as these are frustrating to the majority of those in my industry who, in an effort to make an inefficient process more-so, take the time to qualify a property as appropriate for a buyer based on their priority list.  Of course the buyers themselves are equally frustrated with situations such as this and it only serves to reinforce the distrust that many have for real estate agents. 

So to those of you who think you're going to fool someone into purchasing a property by misrepresenting it, do us and yourselves a favor.  Represent the home exactly as it is!  It will make your job much easier and much more efficient and it may even help to garner some trust among a buying public who believes little of what we say anyway.

Posted By Douglas Heddings | Permalink | 3 Comments | Email This

After selling Manhattan real estate for 16 years, there is very little that shocks me.  But in this day and age and in a city that is supposedly one of the most progressive in the world, Fair Housing violations continue to baffle me.  Check this out...

We are in the process of selling a property as a pied a terre to a very affluent woman for whom this purchase is as insignificant as buying a pair of shoes.  That's funny...do women ever make an "insignificant" shoe purchase?  So perhaps that is a bad analogy but you get my drift I hope.  She lives out of state and she and her life-partner will use the apartment when visiting Manhattan instead of dropping a fortune on a hotel.  Yes, I said life-partner, so what?  I will tell you so what...

After a request last week to provide reference letters for the partner (not that unusual except that this is a condo and the partner isn't on the contract), we received a call yesterday from the managing agent of the building requesting a copy of the couple's marriage certificate.  WHAAAAAAAT?!?  Does this not wreak of discrimination?  In 16 years, I have never once been asked by a Board, either co-op or condo, for a couple's marriage certificate.  In fact, i have sold many properties to engaged and married couples (opposite and same sex marriages) where only one person was listed as the buyer and no one asked for a marriage certificate.  Why?  Because it is absolutely illegal!

In this particular instance, the seller, after speaking with her attorney, immediately called management for further elucidation of this request and learned that it wasn't the Board at all but an agent working for the management company who made this request.  Fortunately the request was rescinded and the agent reprimanded but this could have opened a very big can of worms for this building and it's owners. 

As I stated above, I have never heard of this before so it is very much a case of man bites dog.  That said, it is evidence that there has not been enough emphasis put on educating certain members of the real estate community about Fair Housing Laws.  Perhaps co-op and condo boards should consider mandatory fair Housing law education for their management staff and Board members.  Otherwise, they may end up with a very large red line item on there balance sheet that represents a lien or loss of a law suit.  Something that is so easily prevented.

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Not long ago there was a time when agents for buyers had great difficulty scheduling appointments with seller's agents as property lasted only days on the market.  In fact, as an agent who has represented predominantly sellers for my entire career, I long for the days when I dictated when people could view a property and would often be able to demand that people see property only on specific days at certain hours.  It was the most optimal way to create a buzz about a property by having multiple people in an apartment at the same time discussing where they would put their furniture. 

On the flip side, I remember the many appointment requests on behalf of buyers whom I represented that were answered with replies such as "I can only show at 10:30AM on Thursdays darling...I'm not taking the train down from Greenwich any other time" or  "if your buyers want to see it, I'm showing from 4-5PM on Tuesday and 12-1:30PM on Sunday and then we will go to highest, best and final offers over the asking price." 

Such confidence that everyone (me included) had that the properties that they represented would not only sell but would do so quickly and at prices beyond the ask.  Today the market is different.  If someone calls my team for an appointment to view one of my exclusive properties, we do everything in our power to accommodate them at their convenience.  In a market with more inventory and fewer buyers, it is imperative that when someone wants to see your home, they are accommodated because there is NO GUARANTEE that they will come back around if they don't get to see it the first time.  Fewer buyers have more choices and you want all of those buyers to view your home.  They won't buy it if they don't see it.

The current Manhattan real estate market has brought about a shift in broker/agent psychology and behavior and many agents are playing nice again.   Now when someone calls to view one of my properties they get in when they want.   Conversely, when I or a member of my team calls another seller's agent for an appointment the replies now sound more like this:  "We would love to show it to you at your convenience, you just let us know what works for you."  And even when a request is made for a last minute appointment we often hear "I can have someone meet you there in an hour with no problem...let me get right back to you to confirm."

As someone who has been entrenched in the Manhattan real estate market for 16 years, I much prefer the current serene interaction with my colleagues than the fervent and tumultuous one of the housing boom (don't get me wrong...I'm not suggesting for one moment that I didn't LOVE the housing boom and this isn't a piece on market conditions).  I do think however that we should all try to remember how much healthier it is to be kind to one another the next time the we have such a frenzied housing market.  I know...there will likely be plenty of time to prepare for that.

Posted By Douglas Heddings | Permalink | 3 Comments | Email This

The Carnival of Real Estate #93 is up at Phoenix Real Estate Guy.  Check it out.

I'm quite busy so hoping to post later on the Algodon Mansion and Vinas del Golf projects in Argentina but it may have to wait until tomorrow.

Posted By Douglas Heddings | Permalink | 1 Comments | Email This

Selling your investment property with a tenant in place can present some challenges that many property owners don't anticipate.  Recently, my real estate business has seen quite an increase in the number of investors who are seeking to sell their properties with tenants in place.  My best guess as to the reason behind this phenomenon is that these particular investors believe that now (not 3 months from now) is the best time to attempt to procure a buyer.  That said, it is imperative for sellers to consider the following when attempting to sell with a tenant in place:

• Is your current tenant paying a fair market rent?-Most buyers aren't interested in purchasing an apartment that they can't move into but if you are lucky enough to find an investor, a market rent tenant will make your property more appealing. (2 of our recent owners are renting for values way below market)
• Does your tenant have a lease?-I know this seems like a silly question but you would be surprised at the number of renters out there who are renting on a verbal "month to month" basis.  The attorneys whom I work with the most have indicated to me that it can be more difficult to vacate a "month to month" tenant with no lease than one who has a lease with a definitive end date.  (1 of our owners has no written lease agreement outlining terms of "month to month" arrangement and tenant will not allow access to the unit...another has such an agreement and tenant is still manipulating the terms to hinder showing and sale).
• Does your current lease allow you to request that your tenant vacate within a certain period of time?-Some standard leases include a clause that allows an owner to give a tenant 30 days notice to vacate in order to sell the unit.  In my experience, that clause is most often stricken from the lease.
• Does your current lease provide for showings prior to the tenant vacating the property?-It's also VERY difficult (nearly impossible...it does happen) to sell a property without showing it to a prospective purchaser. 
• Do you have a signed, written agreement (in addition to a lease) with your current tenant outlining showing times and date to vacate once a sales contract is executed?-Make sure you have access and any agreement you have is clearly stated in writing and signed by all parties.  As stated above, even a written agreement doesn't necessarily protect you from a tenant making a sale nearly impossible.
• Have compassion for tenant's position-In addition to having a clear understanding with your tenant as to the future of the property, you must also make sure you hire a real estate professional with compassion for the tenant's position. Scheduling of appointments and correspondence with the tenant needs to be handled delicately.
• Know that your 'easy-going" tenant can become Mr. Hyde at any moment-They either fear that they are going to be or they actually are being displaced and likely before they thought they would.  As warm and kind as your tenant may be now, trust me when I say that can change in a flash.  All the more reason to have everything in writing.

Some are fortunate enough to have a cooperative tenant and others not so.  If you are among the latter, be patient as you may find yourself simply waiting for that "nice" tenant of yours to move out before you can sell.

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There is no telling yet from actual numbers as to which direction the Manhattan real estate market is heading but with inventory increasing in some areas and volume down from the same period last year, some believe we are in a stabilization phase and perhaps preparing for a decline.  That said, top producing real estate agents seem to be quite busy as marketing and selling a home in today's market requires experience that transcends simply picking any price, sending out some postcards, and waiting for multiple bids.  Dottie Herman, CEO of Prudential Douglas Elliman was recently quoted regarding pricing property in the Hampton's:

If you don't price it properly you're going to sit...Price matters in this market. You're dealing with more inventory so there are more choices for buyers. Sometimes people will look at houses and if it's not priced right it will help sell someone else's who is.

Those who regularly read TrueGotham know my feelings about accurate pricing no matter how the market is behaving, but when buyers have more inventory to choose from, accurate pricing becomes even more of a priority.

In addition to proper pricing, here are some important factors to consider when selling in today's real estate market:

1. Hire a "genuine" real estate professional with experience and knowledge:  By genuine I don't mean properly licensed (that's obvious).  I am talking about someone whom a buyer will trust and believe.  Don't hire a "buy now, real estate prices always go up" kind of agent. Remember that the prospective purchaser is forming an opinion of your property through the representation by your agent.  Don't let an agent make a bad first impression.  It's an uphill battle if a buyer doesn't believe what your agent is "selling."
2. Seek both quality and quantity through transparency:   Make sure that you are pleased with how your property is being represented to both the public and the brokerage community.  It should be displayed as beautifully as possible without misleading a buyer.  This will insure that buyers who take the time to visit your home will be pleased and not negatively surprised (ex.  Don't be afraid to highlight how quiet the place is despite the lack view...a prospective purchaser who expects a view and discovers none is NOT going to buy your home.)
3. Change your marketing strategy:  What works during a housing boom doesn't always work in a more "normal" or declining market.  Don't be afraid to suggest "out of the box" marketing ideas to your agent.  Discuss the marketing strategy regularly and determine whether changes need to be implemented.
4. Know your competition:  Make sure your agent is informed of comparable properties that are currently on the market and that s/he can support the reasons for your price.
5. Prepare your home for the market:  It doesn't hurt to visit comparable properties at open houses to see how your property is perceived in the marketplace.  Touch up paint and declutter at minimum and consider staging if you and your agent believe it will help.
6. Be patient:  Over the past decade, properties have sold moments after hitting the market despite inexperienced agents and/or ridiculous pricing.  The buying frenzy, although still occurring for some well-priced properties, is less common and patience is a necessity in today's marketplace.
7. Don't be stubborn (too patient):  Trust that your real estate professional has a firm grasp of market conditions and listen carefully when they suggest marketing changes or price adjustments.  Don't get caught chasing the market down by resisting the lowering of your price.  The best strategy to insure an efficient sale is to adjust your price ahead of the competition.

Those are just some things to consider if you're a seller in today's real estate market.  All of this said, there is no more important factor than trusting the real estate professional that you hire.  If you don't have faith that they know what they are doing, you may just get bitten in the asking price.

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

I frequently receive emails from TG readers who have had both positive and negative experiences with real estate agents.  The following comes from a reader who felt like he and his wife were duped during the negotiation process by an agent who, from his accounts, seem to put her interest ahead of both her seller and this prospective purchaser.  Don't take my word for it.  read and decide for yourself:

My wife and I made a bid of $780k on an apartment on 74th Street that was listed for $799k. She (the seller's agent) told us that wouldn't do it and we needed to offer the asking price. I asked her what the owners' counter-offer was and she said that if we offered the asking price we would get the apartment. I asked my question again and was given the same answer. I firmly believe that our offer was never conveyed to the owners since this was all occurring on the phone in one conversation.

Around this time we got rid of the broker we were working with because she was basically showing us $1.2 million condos on 90th and York, which we couldn't afford and were in neighborhoods we didn't want to live in (bad listener).  She seemed quite inexperienced and was so frazzled by the seller's agent that I was more or less dealing with the seller's agent directly anyway.

About 10 days later the seller's agent called me at work and said that there was a "slight glitch" with the apartment.  She thought they had an offer of $800k for the apartment and it turns out that the offer was really $780k, so she wanted to know if we were still interested in the apartment. I told her that we were and that our previous offer had actually been $780k, but we would offer $782k.   She immediately told me that the asking price would get us the apartment. I asked her why she didn't give our offer to the owners and see what they said first.  She refused and said we should consider offering the asking price if we wanted the apartment.

We really liked the apartment and felt that our bid was fair based on comps that we did. I had to do all of the comp work because the broker we got rid of said she wasn't sure what a good comp would be (again a good reason to not work with her anymore). I called the seller's agent back the next day and said that we could go to $792k. We wanted this apartment, but we didn't want to overpay more than was necessary.  The seller's agent again said that the asking price would get us the apartment. I suggested that she actually go to the owners and give them our offer before saying that and we would listen to their counter-offer.  She again said that the asking price would get us the apartment.  At this point, I told her that I thought she was full of "it" and that she was using us for leverage and had no intention of actually giving any of our bids to the owners.

The apartment ended up being sold for $780k to the original people that we had been bidding against 3 weeks earlier. The seller's agent let slip that she was representing the other buyer too which shows that she was more interested in a $780k sale that was all hers than a $792k sale that she had to split with our broker who wasn't even involved in the negotiation process. She had also previously suggested to me that the owners might be more flexible if we just worked with her because other brokers would "just get in the way".

I was absolutely disgusted by the way we were treated and used by her.  We ended up buying an apartment on 56th Street for $675k that we put another $45k into renovating. We did like the apartment on 74th Street more and were willing to pay a fair and reasonable amount for it, but we never really had a chance because the playing field wasn't level as the seller's agent kept saying to us, "If you want to be in the game you have to offer the asking price."

I cannot put into words, even now, the anger that I feel for allowing this agent to get away with treating us this way.  She was clearly manipulating the system for her own gain without any care for how she was treating the people involved in the transaction. Her fee was all that mattered to her.

This has certainly given me a specific view of brokers in NYC. I know that they are all not like this agent, but there are enough that are like her out there. I appreciate all of your work to give the industry more transparency. I am a partner in a recruiting firm, so I know quite well how much a person's reputation can help or hurt a process. In my 11 years in this field I have never met someone so devious in their negotiating tactics as this particular agent. She was so brazen in her deception and incompetence that she told me she was doing it (as stated above).

Now of course we don't have the agent's account of what happened (and I'm sure it is VERY different), but the most important factor in my mind is the perception that this particular consumer walks away with regarding the real estate profession.  I can't stress enough how important that I believe it is to have a competent agent working for you whether you are buying or selling a home.  And always be mindful that although a seller's agent (more than 80% of my personal business is representing sellers) has a fiduciary responsibility to their seller, it is not unheard of for an agent to get in their own way and put their interest ahead of even the seller's.  I still maintain that the direct deal should die and that both sides of a transaction should be represented by a competent real estate agent (PODCAST).  Until this happens, there is just too much temptation for agents to consider their bottom line first.

Posted By Douglas Heddings | Permalink | 4 Comments | Email This

Discrimination in today's day and age will always continue to surprise me.  But as a real estate professional and father of a 6 year old son and 4 year old daughter, it is almost unbelievable that agents are out there telling prospective renters that a landlord isn't interested in renting to people with kids.   Andy Newman of The New York Times reveals that a Couple’s Suit Accuses Real Estate Firm of Bias Against Children.  First let's be mindful that a lawsuit in itself means nothing and that all parties remain innocent until proven guilty but should this instance prove to be true then I feel very strongly that the landlord and any agent involved should be punished.

The apartment sounded beautiful: a converted carriage house on a quiet lane in Brooklyn Heights, with a deck. Jamie Katz and Lisa Nocera were excited.

There was only one catch: Dr. Nocera, an emergency-medicine physician, was expecting. The broker...would not show them the apartment because the owners did not want to rent to a family with children, the couple said.

A year later, in 2007, now with baby in tow, the couple were shown an apartment in a brownstone in Park Slope, perhaps the city’s most child-centric neighborhood. They loved it. They passed a credit check.

Then the broker called with bad news. There was a problem with lead paint; the owner would not rent to families with children, they said.

Mr. Katz and Dr. Nocera thought something was amiss.

A few weeks later in Brooklyn Heights, same story: Sorry, lead paint, no kids. “I immediately knew something was definitely wrong,” Dr. Nocera said.

When the agent named in the lawsuit was asked about this she responded by saying:

"I would have said it was not kid-friendly based on there being lead paint issues.  Wouldn’t that be a good enough reason?” In fact, the federal Fair Housing Act outlaws doing anything to discourage someone from renting an apartment based on family status, whether by steering the potential renter away or by outright refusal to rent. So do state and city human-rights laws.

And although I have come across these types of misinformed and misguided agents in the past it had been quite some time...until last week. 

I'm representing the seller of a condo in the West Village who currently has a tenant in place.  In an effort to facilitate the sale as well as a smooth transition for the tenant, I and my team have been trying to locate a suitable rental.  The past week has reminded me why I left the rental business almost 14 years ago...it's the MOST inefficient marketplace in the world IMHO!  That's an entirely other topic.  Back to discrimination.  Last week, we reached out to an agent representing a landlord in the West Village to inquire about the property.  She provided few additional details other than what was in her vague online description.  The kicker was when she heard that the couple had two children she said, "the landlord lives downstairs and isn't going to want children running above her head" and hung up the phone. 

Many years ago when I was immersed in the Manhattan rental market, it was not so rare to have a landlord boldly state that they wanted no couples with children, "kids" in their 20's, or even attorneys.  God forbid you rent to an attorney.  That by the way always made me ponder the question of why an honest landlord would be afraid of an attorney?  Again, another topic for another day.

Obviously, there are still real estate agents out there who don't understand the Fair Housing Act and perhaps there are even a few (I really don't think too many in today's marketplace) who just don't care.  Educating these agents is imperative and I know that many if not all of the large firms in the city have had mandatory seminars as recent as this past winter to discuss just this topic.  Perhaps some of the attendees were busy on their Blackberrys when they discussed steering and discrimination? 

Time for another mandatory seminar perhaps?

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I must apologize for the light postings lately and the lack of original content but today's Manhattan real estate marketplace is requiring more effort and energy per deal than anytime in the past decade.  Don't misunderstand me here...I'm not bellyaching...just providing some insight as to why posting quantity and quality have suffered. 

So today again I provide you with links to some interesting topics around the real estate (and pot...yes marijuana) blogosphere:

• From Zillowblog comes Hey! Don’t Take My HELOC! which reveals the recent practice of banks freezing homeowner's lines of credit.
• Also from Zillowblog comes Owning vs. Renting a Home.  Check out the analysis.
• From the New York Observer (via Curbed) comes Manhattan-ifest Destiny revealing the recent phenomenon of more people moving from Manhattan and Brooklyn to LA than vice versa.
• A couple of weeks back, Jeff Byles of the New York Times penned Taking Back the Streets.  If you missed it, check out the possibilities for making New York a greener and more liveable space.
• From RealtyBaron comes“My current Realtor raised her commission…from 6 to 7%. Can i do better?”
• "Lady in Dublin believed the realtors, believed the media, and believed in the "housing ladder". And she's lost $100,000 already, and counting" (via HousingPanic)
• And finally, totally unrelated to real estate except that the NAR seems to be smokin' something (via Matrix), check this out from BoingBoing...Kids' book about pot: "It's Just a Plant" which suggests that it's OK for adults to break the law if they choose but children shouldn't...nice lesson...can't wait to teach THAT to my kids.

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Manhattan is full of BIG egos.  Some would say that many of those egos help to pump life into the heart of this incredible metropolis.  Perhaps there is an element of truth to that but a big real estate agent ego can be an obstacle to selling your home.  Here's what I mean:

• An agent prices your home:  A big ego prevents them from seeing that they may have priced it wrong.
• An agent markets your home:  A big ego prevents said agent from diverting themselves from their typical marketing strategy because "they know best."
• An agent negotiates offers on your home:  The big ego reinforces their pricing and marketing strategy resulting in clouded judgment during negotiations (ex. an offer comes in "too low" in the selling agent's mind and they take it personally thereby convincing a seller not to counter or worse yet, to ignore the offer altogether).
• An agent facilitates a contract signing for the sale of your home:  A big ego here can be the kiss of death.  With so many parties involved in a Manhattan real estate transaction, there just isn't any room for another big ego.  Often 2 real estate agents, 2 real estate attorneys, and a property manager or closing agent are in some way involved in the process prior to contract signing.  If just one of these parties has the false sense that they are "the" (not "a") key player in the process then you've got trouble. 

The impetus for this post is a recent experience I had with one of my colleagues.  In this particular instance what I believe she and her seller perceived as being patience ultimately boiled down to the agent's ego IMHO.  First, she was insulted by my buyer's offer of only 5% below the asking price and stated that her seller would not counter.  In addition, she provided no guidance except to state that we needed to offer the asking price or better to procure the apartment.  Almost one month later, the apartment is still available and my buyer's offer of 5% below the asking price is shaky at best.  Who can blame the buyer for now thinking that perhaps there 5% underbid is too high? 

It remains to be seen how exactly this agent's ego will effect her seller's wallet or if the seller will even know how much money they may have left on the table.  There is one thing for certain...in a market with such low inventory for this type of space, the price of this property is wrong.  The bad news for the seller and their very proud real estate agent is that the perceived value of the property is only going in one direction the longer it sits on the market...and it ain't up!

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Transcript of a phone call that just took place in my office with a seller's agent representing a new exclusive property:

Jennifer (from my team): Hi, this is Jennifer Breu from Doug Heddings office at Prudential Douglas Elliman.  We noticed your new exclusive on your web page and our client would like to know what floor it is on.

Agent:  It will be ready for co-broke tomorrow.  For now the information you have will have to suffice. (It's listed as her exclusive on her website)

Jennifer:  You can't share with me what floor it is on?

Agent: I have someone on the other line, this will have to do...click

Most of my colleagues and I play nice but occasionally you stumble across an agent who has their head so far up their ___ that they lose touch of the service they are supposed to be providing their seller.  Do you think for one moment that her seller would approve of her unwillingness to disclose the apartment number to a prospective purchaser.  What's the point?  She's having an open house on Sunday and says the apartment info will be forthcoming tomorrow.  It takes less than 2 seconds to state an apartment number and for the life of me I can't fathom why an agent wouldn't share that info.  Perhaps she's just having a bad day but something tells me that this particular agent  is just generally uncooperative to the rest of us in the industry. 

So why in the world would a seller hire someone like this and pay them a hefty commission to be an obstacle to the sale of their property?  NO CLUE!

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I continue to be incredibly busy and apologize for the weak number of posts this week.  It has been unavoidable as ech day has been busier than the previous.  So as many of my readers know, when I'm swamped, I often like to offer some links to stories that I find intriguing or just plain fun.  So here goes:

• Bradley Hope of The New York Sun shares a "new Web site that allows New Yorkers to monitor everything happening on their block, from restaurant inspections and building violations to missed connections posted on Craigslist and news mentions."  Check out Everyblock.com.
• Harry Macklowe is ceding control of 7 of his midtown office buildings to his bank (via WSJ).
• From The Real Deal comes Broker Predictions 2008.
• Super Bowl Homes on the Market in Mass, NJ, and Arizona. (via Real Estate Journal)
• My friends Joe and Rudy at Sellsius have a great piece on How a Real Estate Broker Can Lower Your Property Taxes
• The brilliant Pat Kitano at Transparent RE brings us The New Investment Banking Paradigm
• And if you need a reminder of how poorly the market is doing outside of Manhattan, check out More on Homeowners Walking Away from Calculated Risk and America's Hardest-Hit Foreclosure Spots from Forbes.com.  It's ugly out there!
• And I must ADD this fun piece from both Boing Boing via Kottke: Frozen Grand Central is from Improv Everywhere...what a stunt...check out the video where 207 people freeze for 5 minutes in Grand Central.

Be back Monday with a continued update on our current market conditions including a report on weekend activity and a short term projection of where everything seems to be heading in the world of Manhattan residential real estate.

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I just had the bittersweet experience of receiving a phone call from an on-site sales agent and colleague informing me that one of my prospective buyers just reached out to her to try to "strike a better deal without me."  The experience is sweet because the on-site had the courtesy to inform me of this client's attempt at circumventing me.  And if you don't understand the bitter part, well then, I will explain.

My client, a grandmother of 7 and the mother/ mother-in law of a couple whom I have assisted with both a sale and a purchase in the past several years called me the week after Christmas to discuss her and her husband's desire to purchase a one bedroom Manhattan condo as a pied a terre.  She spends a considerable amount of time visiting 5 of her grandchildren who are both in New York and New Jersey and thought it was time to stop throwing money away in hotels all of the time.  So after she informed me the dates that she would be able to view properties, I did a comprehensive search of all one bedroom condos between $750,000 and $1.5M and emailed them to her.  She quickly responded with a list of those she would like to see and all were below $1M (this is significant for later part of the story).  We scheduled a full day of viewing (of course I hired a car and driver) this past Friday and visited only the properties that she wanted to see in the areas that she specified.   One of the new developments resonated with her so she called her husband to discuss an offer with me.  After nailing down the details of the offer, I dropped her off to meet her daughter.  As she exited the car she stated what a successful day she felt that we had and that she was very excited about making the offer.

That happened this past Friday.  On Saturday morning, I received a call from her suggesting that she thought she may have "miscommunicated" with me and she was concerned that she wasn't seeing more properties on Saturday and Sunday.  When i explained to her that we saw everything available in her specified areas and at her price point, she indicated that she could spend up to $1.5M and that she would open up her areas to most of Manhattan.  No problem.  I and my team members did another exhaustive search and successfully gained access to another dozen or so properties for her to view over the weekend and this morning.  Nothing that she saw over the weekend tickled her fancy as much as the new development project that she bid on Friday and I received a message this morning that she wanted to cancel our appointments for today and "thank you very much."  Nothing was asked or mentioned about her bid...hmmmmm???

So back to the bittersweet phone call.  The on-site agent for the new development that we bid on just called me to inform me that this buyer just contacted her and said that she "may buy a larger apartment from the developer if he will reduce the price by my commission." Now I couldn't be more serious or honest when I say that this behavior doesn't shock me at all but what shocks me is that it came from this particular buyer (she even hugged and kissed the on-site agent before we left on Friday...she is a sweet grandmother!) 

I share stories like this with my readers not only to vent but to shed additional light on the incredible distrust that continues to exist between real estate agents and their buyers (it goes both ways).   I operate my business with the highest level of integrity and I'm hopeful that my buyers will do the same.  Perhaps it's naive but incidents like this will not change the way that I do business.  They will however keep me mindful of the fact that seller representation in the real estate industry is more trusting and profitable.  If you have the fortune of working with a seller who trusts you and will follow your professional guidance, you are much more likely to close that transaction than those with buyers who distrust and therefore run around like loose cannons. 

Property remains king!  As some anecdotal proof of that...at least 3 properties that I'm aware of that had open houses this weekend are seeing multiple bidders going to a highest, best and final offer.

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With 2008 upon us, many are making predictions about the direction of the economy and more specifically the health and well-being of the Manhattan real estate market.  In lieu of specific predictions, here are some current links that may shed some light on what may lie ahead on both the national and local housing fronts:

• First check out Monthly Mortgage rate Resets 2007-2016 via The Consumerist
• And Ticking time bombs known as "adjustable rate mortgages" via Hot Property
• But wait!!!  Real estate agents expected to collect $55 billion in commissions this year also via Hot Property
• Suprisingly Weak Jobs Report Fuels Recession Talk via UrbanDigs.
• And I'm sure everyone read this already: Apartment Prices in Manhattan Defy National Real Estate Slide via Christine Haughney of The New York Times.  Just how long will Manhattan buck national trends?

And here are a couple of links just for fun:

• From The Realestalker comes the list of famous who have purchased at 15CPW (via Curbed).
• And for my colleagues courtesy of ActiveRain comes 10 MUST Read Blogs for the Modern Real Estate Professional
• And check out Apartment Therapy's hot posts for some great tips and advice on personalizing your home.

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With all of the talk still going on regarding the bill to force Co-op Boards to disclose their reasons for rejecting applicants, I couldn't resist passing along this question posed by The Anti-Discrimination Center via Curbed:

REJECTIONVILLE—And now, a note on the eternal struggle for co-op board transparency: "The Anti-Discrimination Center has been working to pass a law, 'Intro 119,' that would require co-ops to provide their reasons for rejection when they turn down an applicant. Over 40 civil rights and allied organizations and a majority of the City Council already support the bill, yet those who want to maintain a system of privilege and exclusion are fighting desperately against it. They have thus far succeeded in having City Council Speaker Chris Quinn keep the bill bottled up without a hearing. In order to underline the importance of this issue, we need to hear from people who have been turned down by co-ops. Please email us at center@antibiaslaw.com."

Check out the comment string at Curbed.  As we already know, many fear lawsuits but "thou doth protest too much!"  If Co-op Boards are rejecting people for legitimate reasons like financial insolvency and not because they are disabled or homosexual, then I'm not sure from where this fear comes.  Certainly Board members would have to have Directors and Officers insurance but if they behave with integrity, they should be somewhat immune to lawsuits.  Of course there may be a frivolous lawsuit here or there but I personally don't believe it would reach epidemic proportions.

A regular reader of mine, newbie, suggested regular "spot" audits of Boards to insure that they are keeping books and behaving appropriately regarding applicant review.  Not a bad idea at all IMHO.

In the meantime, we continue to live with the Co-op structure as it is and for the most part, "it ain't all that bad!"  That said, a colleague of mine just had a buyer of his turned down in a Co-op who has a reputation for discriminating against the disabled (they lost a law suit about 11 years ago to someone who proved that the building feared that they would cost them money in the form of modifying the building to suit the applicant.).  My colleague's applicant was collecting ample tax-free disability income and after an all cash purchase had more than the purchase price of the apartment in his regular checking account (I don't know why?).  There is absolutely NO WAY that this Co-op Board could have come up with any reason to reject this buyer other than his disability and that my friends is precisely why I support this bill. 

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Just got off the phone with the police department regarding the Open House Larceny that happened on Sunday.  The officer with whom I spoke commended me for posting the pictures and alerting the industry but wanted me to be clear that this was not a "robbery (use of force) but a larceny (no use of force).  Glad to be able to clear that up.

For now, I will have no further comment on this story.

UPDATE:  If you recognize these women call Crime Stoppers at 800-577-TIPS.  All calls are anonymous.

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Good news, bad news.  The good is that we FINALLY have the surveillance video from the Open House that was robbed this past  Sunday.  The bad news is that they aren't nearly as clear as we had hoped but they are good enough to alert the industry and the public to this duo of thieves who have apparently hit at least (probably more) 5 open houses since October 21st.  Note the brunette fixing her wig in the elevator.  My agent who caught them in the act is almost certain that the brunette is a man in drag.  The blonde was a bit smarter than her partner as she was careful to not show too much of her face on the video.  She seems to be a real woman too. 

Here are the pics and they are being circulated around my industry and to the public in an effort to thwart any future robberies and possibly capture these dregs.

  The duo together entering the elevator.

The adjustment of the WIG!

 Entering the building

Best pic of the blond.

We are still reviewing more images but this is a start.  As we capture more images and are able to "clean them up" and perhaps enlarge them we will post as available.

To my colleagues and the public,

First and foremost, it appears that this couple has pulled this off numerous times over the past month.  Having said that, this is by no means a reason to be overly anxious or suspicious as most of those I have spoken to in the industry have never heard of this happening before.  I'm not a detective at all but it appears that this is an isolated incident of serial robbers taking advantage of the open house market.  Open houses remain one of the primary sources for buyers and i will at NO TIME suggest that people discontinue having them.  They remain the most powerful tool to sell most apartments!

I am suggesting that all of us be a bit more diligent about keeping our eyes on those that attend our open houses and that sellers LOCK UP valuables such as cameras, iPods, cell phones, jewelry, medication, credit cards and other small "stashable" items of value.  For a great list of what homeowners should do to prepare and protect themselves, visit my colleague Peter Comitini's blog.

Here's to these thieves being captured!

UPDATE: If you recognize these women call Crime Stoppers at 800-577-TIPS. All calls are anonymous.

UPDATE:  Not just caught on camera but "caught" as in apprehended!  On Saturday, 11/24 the duo was apprehended and charged.

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Yesterday, Sunday, 11/12, one of my Upper West Side properties was robbed during an open house. My agent caught one of the 2 women in the act and when confronted the 2 women panicked, dropped most but not all of what they had stolen and dashed out of the building. One of the women ran into the bathroom when caught, relieved herself, cleaned herself with a bath towel, threw it in the bath tub and ran out of the apartment pushing past my agent and suggesting she would sue him if he touched her.

Upon inspection of the apartment by both the police and the sellers, merchandise (jewelry, etc) and prescription narcotics (with other people’s names) from other Upper West Side robberies was found stashed around the apartment. It appears that when they were caught, they panicked and began leaving this merchandise so that it wouldn’t be discovered on them should the police catch them. So it is likely that someone else was victimized yesterday and may not even know it yet.  They haven’t yet been caught but we have very clear video of these two women on building security cameras. To that end, I will be providing all of you with these images upon receipt so that sellers and their agents can be aware at your future open houses.  I will also be providing a contact number for the precinct that responded to the scene.

In addition to this just being a disgusting experience, the thieves did get away with the seller's diamond eternity engagement ring and another heirloom ring that her grandmother had left her.  It's a violation that no one should have to experience but fortunately no one was hurt.

UPDATE: If you recognize these women call Crime Stoppers at 800-577-TIPS. All calls are anonymous.

UPDATE:  On Saturday evening, 11/24, the duo was apprehended and charged.

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From Curbed comes this post on Real Estate Agents Happy/Sad About School Grades.  Erin Einhorn and Brian Kates of The Daily News report School report cards may have effect in real estate market.

Homeowners and real estate agents are bracing for the fallout from the city's decision to give letter grades for the first time to all public schools.

Several schools long-considered to be among the best - so much so that they affect property values - earned less than stellar grades, and parents are "flipping out," said Marci Rosa, a former PTA co-president at Public School 261 in Brooklyn.

Remember the recent uproar in interpreting Fair Housing Laws?  Well attorneys throughout the city have been advising brokers and their agents to steer clear of talking about school districts and the "caliber" of specific schools.  Maybe this is why?  I know one thing and that is that since I've been told to leave this information out of my marketing pieces, I point all of my clients with children to the Inside Schools website.  It's an excellent resource and let's parents judge for themselves whether or not a school is the right place for their family.   Or you could trust the grades that the city has just handed down to all of the schools by searching here for your school (via The Daily News).

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The beauty of having my own real estate blog is that when I get an urge to vent...well...I vent.  Now I will preface the following rant by saying that in my 16 years in the Manhattan real estate business, I have never seen such a large percentage of competent, knowledgeable, and professional real estate agents than those who make up the current agent pool.  That said, there is still some "weeding" that needs to be done and gaging by the incessant hiring that the big firms continue to practice, it will be up to the consumer to "pull the weeds."

What am I talking about?  How's this for starters all based on my personal interactions with seller's agents over just the past 30 days:

• Selling agents representing property on the Internet without photos, floor plan, or video and irritated when asked for photos or floor plans.
• Selling agents unfamiliar with building policies, financials, amenities, and/or Board practices and irritated when asked questions regarding these topics.
• Selling agents taking overpriced property only to procure buyers whom they can steer towards other properties.  These agents are often irritated by sellers questioning their marketing strategy and overall activity.
• Selling agents unable to provide complete information regarding their sellers and their attorney to facilitate a contract (this info should be at agent's fingertips when an offer is accepted to insure an expeditious transaction).  The agent should also have copies of financials for the building, the offering plan and all amendments, and a purchase application.  Again, this particular agent was irritated by our multiple requests for information over several days stating simply, "this is how I work." Does the seller know "how you work?"  I would bet not.
• Selling agents unavailable to show their exclusive listings. This requires some elucidation...so here goes...obviously there are times when a seller doesn't want their place shown and often there are also times when an agent has conflicting appointments and can't accommodate everyone.  Understood.  But how about the agent who lives in Connecticut (why they are selling Manhattan real estate is another topic?) and doesn't want to have to "take an early train in the city to show at 10:30AM."  And guess what?  She became irritated when we persisted in getting a late morning appointment. 
• And the penultimate...the selling agent who doesn't return phone calls...for days...or EVER?  I wonder if they communicate with their sellers at all.

Anyway, these are just some examples of the dregs of my industry whom I have been forced to try to work with recently.  Fortunately, and as I previously stated, these circumstances are not the norm but I'm certain that each of the sellers involved with these agents is completely unaware of the obstacle that their agent has become in the selling of the property.  If you're one of these agents, (you're obviously not because you're reading this) BEWARE.  Sellers are going to continue to demand more from you. So shape up or be weeded out.

So what should a seller do?  Give a little listen to this podcast from June 2006 for my take on selling your Manhattan apartment.  The advice is timeless and it's less than 20 minutes long.

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Last week in our 4th episode of TGTV's 5 part series on Square Feet we delved further into understanding why consumers can't seem to get an accurate approximation of square footage for the properties that they are seeing.

In our final episode of this 5 part series our panel discusses possible regulation of methodology and approximation of square footage with suggestions on just who should police those responsible for overstating and how they could go about doing so.  Check it out:

As I stated last week, I could do weekly episodes on this topic forever (or at least until the problem went away) but I'm eager to move on to other interesting content.  The surprising conclusion that I have drawn from this eye-opening series is that the methods of measuring are already relatively standard (with the exception of new development condos) and the discrepancies in stated square footage almost always come from me and my colleagues. 

The first step to correcting these gross inaccuracies is to hold accountable those who overstate square footage by a certain amount (do we say +-5%?).  I believe that all real estate agents should be mandated to have their properties measured by an "approved" entity (licensed architect, floorplan illustrator, appraiser).  Furthermore, they should be required to share that precise measurement with the consumer.  In time, I believe you would see fewer discrepancies and more honesty surrounding stated square footage. 

Exaggerating square footage isn't salesmanship, it's lying.

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Broker/Buyer Incentives Surfacing?

I'm sitting in my office right now listening to the live broadcast of our weekly business meeting.  I couldn't resist blogging about something I just heard.  Avonova, one of the latest condo conversions on the Upper West Side located at 81st and Broadway is launching a new program offering broker and buyer incentives for upcoming sales.  Buyers will receive a $10,000 gift certificate towards the purchase of California Closets and their agents will receive a full 4% commission and an additional $2500 American Express gift card at closing.  The reason I share is that incentives are rarely seen in a hot market where demand outweighs supply.  Perhaps this is a sign that the Fall market isn't providing the demand that sellers and developers had hoped for.  This time last year many Wall Streeters began shopping for apartments that they would buy with their January/February bonus money.  Not so much this year...so far.  Perhaps this incentive is just an isolated incident or perhaps it's a sign of things to come?  Only time will tell.

UPDATE:  Just received email from The Atelier offering a trip to St. Thomas ("airfare included"...that's a good thing) to the agent who sells the most units between now and December 31st.

More Square Footage B.S.

As most of my readers know, I'm on a mission to try to solve the problem of square footage inaccuracies.  Check out TrueGotham television (TGTV) for our 5 part series discussing methodology, accountability, and policing.  Episode 5 airs this Thursday. 

The impetus for the TGTV series was both buyer and broker frustration.  Many of my readers are as "mad as hell and they just aren't gonna take it anymore!"  (Network)

A reader of TrueGotham who also was a recent bidder on a property of mine just sent me this floor plan of an Eastside property that is being marketed as 800sf! 

By my calculations (and I'm being VERY generous) I get approximately 560sf.  They are overstating the number my more than 40%!!! 

Anybody out there see how this space is 800sf? 

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Adam Lisberg of The Daily News wrote today that the Buildings Dept. vows crackdown on unscrupulous builders.  Sounds like an excellent idea to me as it seems like everyone and their brother thinks they are an investor/developer these days.  I can't tell you how many phone calls I have received from friends and family asking me to find them a "deal" somewhere so that they can either convert, build, or renovate and flip the project.  99% of these people have absolutely ZERO experience with projects of this type.  They all have one thing in common though and that is that they believe you don't need experience to make money in this real estate market.  Unfortunately, that has been true up until now but who wants to buy from an investor/developer who has no proven track record?  Check out what the Buildings Dept. is finding now that they are actually delving into the inner workings of some of these projects.

Buildings Commissioner Patricia Lancaster said a special excavation task force has issued stop-work orders on 167 sites - more than 20% of the ones it inspected - and a team now visits sites to ensure the orders are followed.

She said the department also is cracking down on architects and engineers who build illegal eyesores by abusing their right to certify their own plans.

When the Buildings Department audited 155 of those plans, it found problems with 80% of them.

As someone who has watched projects from beginning to end with fascination at their seemingly shoddy construction, this really doesn't surprise me.  I also don't pretend that I'm any sort of expert on construction but I can see the difference between a project completed by Extell or Related versus Joe Schmoe who builds 10 units in the form of an upside down "L" over an existing tenement building. 

The desire to capitalize on the booming Manhattan real estate market has unfortunately brought out the worst in some people as they have cut corners and bent rules and regulations to suit their wallets.  No big surprise here.  What is rather disconcerting to me is that the Buildings Dept. is only now taking an active role in policing these projects. What happens to all of those who bought property in these projects already built by "unscrupulous builders?" What is the Buildings Dept going to do to those builders and for those who were taken advantage of by purchasing in those buildings?

Now that the housing boom is over in much of the country and slowing significantly in our back yard (my opinion of course...I must still say that inventory remains ridiculously low and many of my buyers remain frustrated that they can't find a home...the difference is that these buyers are patient), it seems that various agencies are ready to go after the "sleazy" who profited during this time.  Check out Jonathan Miller's post today at Matrix regarding the Federal government's plan to create oversight of the mortgage broker industry.  Nice timing!  What were these agencies doing when all of this fraud and unscrupulous behavior was taking place?  I just don't get it!

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Last week on TGTV we discussed the various methods by which square footage can be measure with an emphasis on the liberties that developers sometimes take in adding common areas, etc to an apartment's stated square footage.  Don Meade also shared that he has been asked by real estate agents to provide a measurement from outside walls which would obviously yield a higher number than measuring the interior perimeter.

Check out this week's episode as we travel further down the path of who seems to be responsible for the overstating of square footage as we determined that the physical measurement (at least by our panel) was calculated using very similar methods of measuring the exact same interior space.  There does seem to be some confusion however on exactly what is defined as gross living area (click the link for the Google search and check out the definitions and some of the forums for appraisers who even question the definition)  Gross living area for a house seems to be different than gross living area of an apartment...

On the final episode of this TGTV series on Square Feet we will explore ways in which to hold accountable those who grossly overstate square footage in the real estate industry.  It's a shame I can't do another 25 episodes on square feet because this issue has a lot of holes and loose ends that definitely need to be addressed and tied up.  Will do a little bit of that next week. 

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In last week's episode of TGTV, our panel of experts shared the results of measuring a property and we suprisingly saw that each of them came up with numbers relatively close to one another.   It appears that each of them measured the property the exact same way by calculating "interior perimeter"...hmmmm?   Can you say "standardization?" 

In this episode, you will hear our panel discuss more reasons for the lack of standardization across the market with a particular focus this week on new development projects and what factors contribute to stated square feet in these projects.  Don Meade also touches briefly on real estate agent "wants and needs" in terms of square foot calculations.

This comment after last week's episode from Justin Patwin, a Los Angeles based Architect, sheds some light on one way to "police" the standardization of stated square footage:

I am an architect from L.A. who has extensive experience in what are A.R.O. (Adaptive Reuse Ordinance) projects in our city. Those are existing historic buildings that have been retrofitted to accommodate residential "lofts". We have this conversation with our clients constantly due to lawsuits so I am interested to see how NYC handles this issue, because a buyer will always measure differently from a developer. Developers (and their architects) use a method that begins with how the City Planning Dept. and Building and Safety assess how large a potential project can be (known as F.A.R.- Floor Area Ratio). Developers then turn around and charge buyers for whatever they build to the extent the law allows(with mark-up of course). Typically in L.A., we measure from center to center of the demising walls (walls that divide units), and include the exterior wall and the corridor wall. If there is a stair, then the opening for that stair is not included as well as any other floor penetrations. Other than that columns, interior walls, etc. are included...

...The one thing that would really alleviate the guess work is if BOMA were to create a standard for residential condos which right now they do not have. Do you plan to address this specific issue? Great that you are tackling this subject and I like that you have a few different professionals however I would have a developer too since the architect does not represent their point of view.

Would have been nice to have a developer on the panel but it appears that in NYC we would have had to poll several developers and their architects to get a sense of how each  calculates square footage.

Tune in next week for more as we explore accountability as it relates to overstating of square footage.

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Here we go again with another New York Magazine Triple Assessment from OpenHouseNYC.  I like to watch these segments in their entirety and venture my own guess before the actaul list price is disclosed.  My guess was $599,000.00.  Now you try:

In our partner segment with New York Magazine, Open House NYC host, George Oliphant meets Jhoanna Robledo, editor of NY Mag’s Real Estate Section for a new video version of the ever popular Triple Assessment.

To refresh your memory, Triple Assessment is an appraisal from three different brokers on what they believe is the proper price of an apartment recently listed on the market. In this edition, Jhoanna invites a triumvirate of brokers to 305 West 86th Street to guess the value of a 1 bedroom/1 bathroom apartment steps from Riverside Park.

The apartment has a great location, but no views. It needs little work, but isn’t large. It has high ceilings, but is there a lower ceiling on the price? What do the brokers think?

Jhoanna solicits guesses from Toni Haber of Douglas Elliman, Eric Rath of Bellmarc Realty and John Gasdaska of Corcoran. As a special bonus, our very own George Oliphant tries his hand at the exercise and hazards his own guess.

Who comes closest? What’s the actual price? You’ll have to watch the video to find out…

Note the HUGE price spread here and more often than not a seller will choose the agent who gives them a higher price which is often detrimental to the sale of the property.  I'm also surprised that they don't discuss monthly maintenance charges for the property. Even more surprising are the high prices suggested for an apartment with no view to speak of despite its condition.  I used to live next door at 309 West 86th Street and a quick look at neighborhood comps would have shown some less expensive options with more desireable views.  Oh well, yet another argument to get multiple pricing opinions and don't always believe what you want to. 

Case in point:  Yesterday I received yet another call from a seller who I met several months ago.  He and his wife were not pleased with my pricing opinion then (too low) but now that they have wasted several months with another agent, they have decided that they should hire me.  The problem is that the property may in fact be worth even less than it was several months back.  Underpricing is a much more effective way to see what the market will bear.  Overpricing is the kiss of death...ALWAYS!  Making the wrong decision here may have bitten them in the asking price.

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In last week's pilot episode of TrueGotham TV we met our expert panel,  Jonathan Miller from RadarLogic and Miller Samuel Appraisers, Yungie Hahn from H2 Architects, and Don Meade from Quality Floor Plans, and saw exactly how they go about measuring property.  Surprisingly, each of our experts used similar methods of measurement and measured only the interior perimeter of the property.  Why is that surprising?  Because if they all measure the same interior space, why can't the consumer ever get an accurate quote for square footage?  Check out this week's episode to see what each of our experts calculated to be the square footage of this property and learn more about their methodology.

Tune in next Thursday for more of our panel discussion including why our experts think this is such a frustrating topic for consumers.

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Something definitely happened over the weekend for my team and our business as the phones are ringing off the hook, offers are being negotiated, and one buyer is unfortunately losing a bidding war.  Anecdotal of course but I'm incredibly busy right now so check out the 62nd Carnival of Real Estate at vflyerblog.com.

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Couldn't resist sharing this exclusive Casey Serin update from my favorite bubble blog HousingPANIC.  For those who already forgot about this guy, he's the one who started iamfacingforeclosure.com and stupidly blogged about all of his lies and deception to the banks so that he could secure mortgages to buy investment properties. 

I hope this message is taken as sincere. I have no more reasons to
"spin" anything...

I'm working a stable consulting job for an experienced entrepreneur.
Consulting is a generic term which means I'm doing whatever needs to
be done. The best part is I have a slice of ownership in the venture.
So its the best of both worlds - the stability of a 9-5 with weekly
paychecks while still giving me lots of flexibility, a chance to build
something and share in the profits. Very much a blessing. So I'm
getting back on my feet financially, though very slowly.

Trying hard, REALLY hard, to not get distracted too much by "pie in
the sky" stuff and my temptation to go back online and in media.
Turning down the Dr. Phil show recently was a very tough one! I have
to remember that it was the online/media over-exposure that was the
"last straw" in my marriage breakup, amongst many other things.

Its obvious that I cared much more about my "fame" and potential sweet
deals/opportunities that might come as a result, than the concerns of
my wife and our unity. Also there was that hand-written promise I
made to her to shut down the blog, get a job and lay low for 2 years
or more. I want to keep that promise, even if I never get back with
her. It's the right thing to do and will teach me to honor my word.

And yes my wife and I are still separated, unfortunately. I am
learning some really really hard lessons about how fragile
relationships really are. As I'm sitting here all alone typing this
email at 4:48am (all nighter), I'm thinking back to a time when she
was right here by my side. Man, how stupid I was to ruin such a great
thing! Now I can only work on making things right in my life and pray
that God gives me another chance with her.

As you've seen, I sold the blog for 50K - huge thanks to Aaron Krowne
of www.ml-implode.com. I finally did the right thing (though
reluctantly at first) by paying off all the debt that was in my wife's
name as well as most of our private loans. It was really my own debt.
She trusted me with her credit to use for the real estate deals.
What did I do? I ruined it and broke her trust (not the first time
unfortunately).

Paying off that debt took a little over 40k. Plus there were a couple
of previous "partners" that I had to pay to make things right -- more
painful lessons on promising too many things to people and not keeping
those promises. The attorney fees to undo some of those entangling
relationships took a big chunk. G kept the Jetta so I also bought a
cheap used car for myself for 3K. So that's where that 50 grand went.
All gone, but for a good purpose.

Not sure what I'm gonna do about the approx 500K of debt still in my
name. That figure includes both credit cards, deficiencies on
mortgages and a private loan. Its just an estimate as I won't know
until all my bank-owned properties get sold. My desire is still to
find a way to pay back "every dirty penny", but I also have to be
realistic. I am considering Chapter 13 bankruptcy. It forces lenders
into a repayment plan and I can start cracking away at it. But I'm
not sure yet if that's the right plan. Too much things are still up
in the air. We'll see.

As far as FBI and "mortgage fraud "investigation goes, I don't have
any news. Last I heard they still have a file on me and perhaps
they're just taking their sweet time. I do have a defense attorney
and plenty of proof to show I did not have any criminal intent and had
plenty of reliance on professionals.

Of course I made some bad business and ethical decisions with the
loans. Then I was naive enough to blog about it in vivid detail and
let people blow it out of proportion. It was fueled my idealistic
desire to help others by sharing my experience of what "not to do". I
sure hope my story helped some people, both those facing foreclosure
and especially newbie investors to be more careful.

I am not excusing my behavior and am ready to do whatever I can to
"right the wrongs", like attempt to pay off the debt. All I know is I
have to continue doing the right thing and let the "chips fall where
they may". Living in fear is not going to do me any good.

Man, do I wish I didn't have to go through all this crap but I was
blinded by my reckless pursuit of financial success. It was
definitely fun and adventurous at the time (like the Australia trip),
brought me some great contacts and relationships, etc. In the end it
was much more harm than good. Loosing my wife that is.

Having said that... I'm not giving up on my dreams of financial
success. God gave me those desires for a reason. Instead I am even
more determined to pursue it but in a safer way - even if takes
longer. Biggest thing is I must put my loved ones first. For it is
because of them, my family and friends, that I want to become
financially independent. I'm looking forward to that day when I can
share my abundance with them. But in the mean time I have plenty of
non-financial abundance I can share - love, caring, quality time, etc.

About 3 weeks ago my 25th birthday came and went. I did not
accomplish my goal of 5K/mo passive income - a goal I set 7 years
earlier. I'm OK with that. The truly tough part was not being with
The One whom I really wanted to share that special moment with. I
guess we take for granted the things that truly matter
(relationships), until they're taken from us.

Anyway... this is the last the online world will hear from me for a
long long time. All in all, the past year has been some of the
craziest times of my life. That's for sure. I thank both the haterz
and the supporterz. Everybody played a role.

In closing, I will say my favorite line.... "Its all good!" I'm
still an optimist but (hopefully) getting wiser through painful
lessons and many lonely nights.

Casey Serin

He continues to be the poster boy of all that went wrong during the national housing fiasco.  It still baffles me that he has gone unpunished by authorities particularly as he provided a detailed log of his activities on the internet...a real genius. 

Turns out their were rumors that he was going to become a real estate agent but thankfully that didn't happen and now he claims to be a "consultant."  Are you kidding me?  That's scares the hell out of me!  For what he is providing consulting services?  Perhaps it's how to bling out your orange jumpsuit. 

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If you're a regular reader of TrueGotham, there's no secret to how I feel about discrepancies in square footage and the lack of standardization of measurement (or is there?) in the marketplace.  Buyer frustration permeates the market as prospective purchasers continue to ask, "why can't we get an accurate quote of square footage?"

In our inaugural episode of TrueGotham Television (TGTV), we explore the methodology of measuring square footage.   Jonathan Miller from RadarLogic and Miller Samuel Appraisers, Yungie Hahn from H2 Architects, and Don Meade from Quality Floor Plans join me to share their methods for calculating and their thoughts on square footage inaccuracies.

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Making sense of the state of the market in Manhattan has proven to be a daily challenge.  Talk of Wall Street layoffs and meager bonuses, the current credit crunch, and Fed attempts to buoy the economy are just some of the topics to consider when trying to determine our state of the market.  So what is the current state of the market?  A undercurrent of anxiety pervades buyers, sellers and real estate agents as we all await Wall Street bonus numbers and any indication of a shift in inventory.  Transactions continue to take place with regularity as long as property is priced appropriately, which brings me to the topic of this post.

One thing I'm noticing as I peruse the listings database is that almost all of the property that is coming on the market at ridiculously high prices is being handled by agents with fewer than two years experience in the real estate industry.  As I have written recently, realistic pricing is perhaps the most important factor in determining whether or not your apartment will sell in any market much less one so full of uncertainty.  So my frustration mounts as sellers with unrealistic expectations continue to find agents to represent their over priced property. 

It's no surprise to me that their are a plethora of real estate agents who will take an exclusive right to sell a property at any price.  Particularly suspect are the newer agents who so desperately need business that they will accept the overpriced property just to have something on their web page and a means to generate buyer leads for other properties.  What does surprise me here is that sellers would ignore concrete comparable sales data and select an agent who tells them whatever it is they want to hear regarding price.  It happens all the time but I guess I thought that most sellers could see through this type of sales tactic.  Remember the story of the agent who secretly laughed at the seller who fell for her overpricing technique? 

So how many sellers have to learn the hard way that the overpricing of their property is often an act of desperation by a novice or even unethical agent to procure buyers and exposure for the agent at the expense of the seller's property sitting on the market?  Seller beware. 

For some tips on pricing  your home check out The Art of Pricing Property.

And remember sellers, make your agent come up with an asking price before suggesting to them what you think it's worth.  Don't do their job for them...make them prove their expertise and pay close attention to how they generated the suggested list price. 

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Friday's post has generated a bit of buzz regarding seller's expectations in softer real estate markets.  Coincidentally, Austan Goolsbee wrote A Reality Check for Home Sellers for The New York Times this weekend.  So why do seller's often choose to ignore basic market indicators when selling property in a softening market?  It's a puzzle even for economists.

Classical economics can’t explain this behavior. That’s because people who refuse to sell their houses for less than they paid for them are violating a cardinal rule of the market: stuff is worth what it’s worth. It doesn’t matter what you paid for it. But when Professor Mayer and his co-author, David Genesove, a professor of economics at the Hebrew University in Jerusalem, studied the Boston condominium market in the 1990s — scene of one of the biggest real estate busts in recent American memory — the actual patterns of human behavior did not seem to follow the standard rules at all.

From 1989 to 1992, prices in Boston fell sharply, with condominium prices dropping as much as 40 percent. For a great many of those who bought condominiums during that period, selling could be done only at a significant loss. And, basically, many people refused to sell. 

Certainly my anecdote from Friday was not meant to instill panic, nor do I believe that this is the intent of the New York Times piece.  Having said that, it's abundantly clear that those who want to sell in a soft or stagnant real estate market can't ignore what's going on around them.  So for the seller that I wrote about on Friday who thinks he will sell for 20% more than the other 8 overpriced apartments in his building, pay attention to this:

What is to be done? Well, if you are holding out for an above-market price to recoup your losses, perhaps you would do well to hear the advice that Professor Mayer gives his own family members.

“If you want to sell your house then you list it at the market price and you sell it,” he said. “If you don’t really want to sell then don’t put it on the market. But don’t say you want to sell and then set the price so high that you spend the year cleaning up every morning, having people walk through your living room and look in your medicine cabinets and reject you. That’s just painful — and expensive.”

His research offers a simple lesson for everyone out there waiting for a high price to push them back into the black: Get real.

It's quite simple.  Pay attention to what is actually selling and going to contract and take note of the prices of property that remain on the market.  If you don't like what you see, evaluate whether or not you really want or need to sell.

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At the end of the day yesterday I received a phone call from the son of prospective sellers who own a luxury one bedroom condominium on the Upper West Side of Manhattan.  This is precisely the phone call that I and my colleagues are most happy to receive...at least that's been the case for the past 10 years.  This call was a bit worrisome however.

The owners (their son actually) of the property contacted me because I am currently selling a similar property in their building.  They were excited by the video tour that I was using to represent that property and encouraged further when I informed them that the apartment was currently in contract and likely to close in the next couple of weeks.  All seemed well as our conversation progressed and we discussed recent sales in the building, current signed contracts, and similar apartments that were actively being marketed in the building by other real estate agents.  All was well until I shared the price at which I thought this seller could actually sell their apartment.  My price opinion was met with stone cold silence.  "Hello...hello, you still there?" I said.  "I'm here...uh...um...my parents were thinking of a much higher number."

No kidding!!!  Here's the important info that I provided when completing my comparative market analysis to come up with my pricing opinion (btw...he insisted on me doing this over the phone which I never like to do):

• 15 similar one bedroom apartments have sold in the building since January with an average price per square foot of $1,142.
• 1 similar one bedroom (on a lower floor) is in contract (I'm the seller's agent) for $1,139/sf.
• 8 other similar one bedrooms remain on the market for months at an average asking price of $1,331/sf.
• This seller's apartment is 847sf.

I also felt it imperative to explain to this prospective seller that:

• Because the location of their building is in very close proximity to several new development projects, their is an inventory issue: more inventory for the lux condo buyer to choose from in this specific area than others in the city.
• The 8 similar one bedrooms in the building at $1,331/sf are creating a building specific inventory issue aside from what exists outside of the building.
• Lastly, the majority of "flippers" in this particular project are barely breaking even and many are losing thousands of dollars.

Again I was met with deaf ears as this gentleman proceeded to explain to me why his parent's believed that their apartment was worth $1,416/sf or more than 20% more than everything else that has recently sold or gone into contract in the building.  This gave me a flashback!  Circa 1992.

Back in 1992 when I began in the real estate industry, sellers often called our offices begging us to market their properties.  Often times...not always...but often, we would suggest ways in which they could market the homes on their own so we wouldn't get "stuck" marketing an overpriced property for up to 2 years.  That's right...I said 2 years!  It wasn't unusual to have an exclusive on a property for 1 year at a time and to still be marketing an apartment 20-24 months after your initial conversation with a seller.  Buyers were hard to find and thus they were golden.  Sellers were a dime a dozen and those who had unrealistic expectations outnumbered the realists.  A solid, qualified buyer was what every agent sought.  They were our life-line.  Back to 2007.

For the past 10 years, buyers have been treated like second class citizens (I'm guilty too!) as property was KING and if you had an exclusive right to sell a property, you were just about guaranteed to earn your commission.  So perhaps now you can see why the conversation that I had with this potential seller yesterday scares me.  At $995,000, this seller could actually procure a buyer (possibly more than 1) and sell at $1,174/sf or more which is still better than the average of what has recently sold.  He wanted me to take the exclusive right to sell at $1.2M or $1,416/sf.   No thanks.  My response to his request to list his apartment 20% too high:

"With all due respect, I'm sure you will find an agent out there who will be more than happy to market your apartment at that price.  In fact, there are 8 such agents who are actively marketing other overpriced apartments in your building.  If, however, you decide you really want to sell the place, call me and we'll discuss price again.  If you choose to list at $1.2M, my guess is that you may be calling me next year.  My next guess is that my market analysis next year won't be a whole lot different than the one I just provided.  It could be a little better...it could be a lot worse.  Feel free to touch base with me at anytime if you have further questions.  Best of luck!"

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Not enough time to come up with anything original today.  Busy trying to finally get the TrueGotham TV pilot shot (looks like it's FINALLY happening next Friday) and of course I have to tend to my sellers who are ready to sell and buyers who still eagerly await some opening up of inventory.  So here are some links over the past couple of weeks that you may find interesting:

• Credit card debt increasing...AGAIN (via Calculated Risk)
• If you're not reading UrbanDigs.com, you absolutely should be!  Just check out these 2 recent posts from my friend Noah:
  1. Does Investor Psychology Matter?...uh...yes!!!
  2. NAR: Mortgage Disruptions At Work
• More on psychology and some from Jonathan Miller's Matrix
• And according to Miller, Manhattan apartment sales are on record pace (via The Real Deal)
• From Tuesday's NY Post comes word of a lawsuit against fashion designer Cynthia Rowley for selling her 1BR as a 3BR.  Who's accountable here?
• Not experiencing this at all but here's a claim from The Real Deal that buyers are shunning units that need TLC
• Zillow success story from the RealEstateJournal.com
• It's a bird, it's a plane...no...it's Congress...taking up the mortgage markets...a little too late (via WSJ Online)
• From Zillow blog comes Do Open Houses Help Sell Your Home?  Someone thinks they don't in the rest of the country but the answer is a resounding YES in Manhattan if your property is under $2M.
• And lastly, from BoingBoing.com comes the Homeless World Cup...this is amazing!!!

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I'm still on vacation but dabbling on the computer this AM as the rain continues to come down...the kids and I did have a nice swim in the rain though.  Anyway, I just received this email from a TrueGotham reader specificaly asking if i would post it so here it is:

Dear True Gotham,
I had a really intriguing encounter with an NYC broker recently, and I have a few questions that I would like to bounce by the NYC scene.

Recently, I was working with a broker to purchase a CO-OP. The CO-OP exists in one of the few areas of Manhattan that you can still find a reasonable deal. The unit was a 1 Bedroom being sold for the same price as other one bedroom units in the building.

While we were working with the broker to prepare the application, there were a few instances where we submitted it, and the boards screener bounced it back to us. One of these instances was due to the fact that I am a small business owner, so –she wanted to see a letter from a CPA stating my current years salary.

After all of this, we ended up losing the place. "Word on the street" was that the board did not find us financially fit, which doesn't make any sense since we were able to put 20% down, have some money left over in our bank account and our combined income on a yearly basis exceeds 50% of the cost of the unit. … Whatever. It wasn't meant to be.

The wife and I were lucky enough to find a better place, for less money less than two weeks later. I contacted the broker from the first place and kindly requested that all of my paperwork be returned to me so I could repurpose it for my new application. I got the paperwork 24 hours later.

This is where things got a little strange. In addition to all of my paperwork I found something odd. I found a copy of the letter that my CPA put together stating my 2007 salary and bonus had the company logo, company name, and my name blanked out.

My CPA and I confronted the broker, only to receive a response of "I don't know why this was done, I really don't remember. But I ASSURE YOU that it was done in your best interest."

Our lawyers are now drafting all sorts of legal documents to just receive legal assurance that the CPA's signature will not be used for any reason at all by anyone within the company.

I could imagine plenty of illicit reasons why this could have been done…. A nice salary… a CPA's signature That's the easy part.

Can anyone come up with any LEGITIMATE reason that this could be done?

Has anyone else had a similar experience?

I think it's a bit odd that the CPA letter was tampered with either before or after submission to the Co-op Board.  As far as a LEGITIMATE reason for this being done, I would supect their could only be one.  Assuming the letter was very well written, it is not atypical for a real estate agent to white out the names, signature, and letterhead only to provide the letter as a sample letter for future buyers.  Perhaps this agent indeed made this letter part of his "sample package" for his future clients and didn't keep an original copy.  When you asked for your paperwork he provided what he had? 

Any TG readers have any experiences or advice?

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First I want to apologize for the light postings this week.  Some exciting things going on behind the scenes here that are taking up a great deal of my time.  That said, here are some links that I found interesting in perusing the RSS feeds this morning:

• Some front lines evidence of the Collateral Damage of the current mortgage market meltdown (via Clearing Title blog)
• Mortgage brokers beware...many banks don't want your sub prime business anymore (via Calculated Risk)
• The New York Post reports on the closing of American Home Mortgage TODAY as well as the immenent bankruptcy of Accredited Home Lenders
• From Crain's (7/27/07...don't know how I missed this but better late than never) comes a report on the expected surge of NYC foreclosures (primarily outside of Manhattan)
  • Three of the hardest hit neighborhoods are in Brooklyn, according to NEDAP: Bedford Stuyvesant, Flatbush and East New York. Two are in Queens: Rochdale and Jamaica.
• With all of this negative news regarding the housing market and mortgage meltdown, what is a "desperate" agent to do?  Real Blogging shares some advice in recent posts:
  • Disciplines of a Champion
  • Don't Whine...RESIGN! 
  • Working through the tough times shows true greatness
• And ending on a positive note...Foreign Buyers Scoop Up Real Estate in the U.S. (via Real EstateJournal.com).  One of the primary reasons Manhattan real estate has remained strong.

"And that's about all I have to say about that!"...Forrest Gump

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It's almost always the real estate agent who gets the bad press when a deal goes awry.  Sometimes it is absolutely warranted and other times it is the case that people just feel they have to blame someone and me and my colleagues are often the easiest target.  We see it all the time at the closing table when someone jokingly (not always a joke) suggests reducing the broker's commission when an appliance isn't working or the floor was damaged during the exodus.  Whatever the case, my colleagues and I are somehow perceived as the path of least resistance when it comes to coughing up dough to close a deal.  For the record, I'm not too receptive to this tactic, particularly at the closing table. 

For the past week I have been dealing with a character who is just the kind of person to dodge any accountability in a transaction and erroneously come after the broker's commission.  How do I know this?  It's exactly what he attempted to do last night.  Some background...Last week, I received multiple offers for a 3BR apartment on which I am representing the sellers.   This particular buyer's agent had difficulty communicating effectively the terms of his client's offer.  After a great deal of unsuccessful communication, it appeared that we had nearly reached an agreement to sell the property at the asking price to said buyer.  The only hitch appeared to be that the buyer's were asking for the purchase to be contingent on the sale of their current apartment...NOT happening.  Because of the inexperience of their agent and his inability to communicate, I and my sellers were unclear as to exactly what the buyer's were asking.  I reluctantly suggested that perhaps a clearer channel of communication would be each parties respective attorneys.  My seller agreed, but this buyer balked and asked that he be allowed to speak directly to my seller.  I was incredibly reluctant to allow this but that ultimately is NOT my decision so I relayed the suggestion to my seller who agreed to be contacted directly by the buyer.  After providing the buyer's agent with my seller's contact number, the buyer's agent responded by saying that his client thought that the seller should call him...ridiculous games in my opinion, but I again relayed the suggestion and my seller said ok.  My seller then called the buyer directly at which time the buyer indicated to my seller that he made his offer only in an attempt to somehow connect directly with the seller and cut the brokers out of the transaction.  He was reducing his offer by half the commission and that was his final offer.  My seller said "thanks, but no thanks" and hung up.  I'm unaware of this ever happening to me in the entire 15 years that I have been in the business but have heard stories like this from my colleagues.  That's not entirely true...this kind of thing happened frequently when i started in the rental business in 1992...so sleazy...hence my leap to sales.

So having shared this story, I still believe (perhaps naively) that the largest percentage of buyers come from a place of integrity.  But it is buyers like this that feed the "buyers are liars" sentiment that pervades my industry. 

So how do we work together in cases where some or none of the parties trust one another?  Very gently and all too frequently with a very suspicious under current.  This is just the type of behavior that perpetuates distrust throughout the real estate industry.  And what do you know, the agent isn't always to blame.

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Back on Monday.  Here's a recent post that is something I'm passionate about.  BTW...I have a solution for the square footage fiasco and will share on the first episode of TGTV...stay tuned.

Jonathan Miller's latest Three Cents Worth graph was posted Friday at Curbed.  And the graph shows that condos have decreased in size and co-ops have increased in size over the past 10 years.

Whaaaaaaat?  OK, I get the fact that the size gap between co-ops and condos seems to have decreased over the past ten years but how in G*d's name have co-ops increased in size?   I will tell you how.  Let's not forget that almost every new conversion and new development is condo so the co-op inventory we are talking about is unchanged.  My 1200sf co-op that I bought (and sold) 10 years ago is now 1400sf? 

All too often, the unfortunate answer is a resounding "YES!"  Again we are talking about an unregulated system of quoting or as my profession likes to say, "approximating" square footage (check out the pitfalls of price per square foot).  This chart is more proof that as time passes, the "approximate" square footage of many co-ops is trending higher.  Jonathan Miller attributes some of the skewing of data to the high end co-op sales of the past ten years.  Perhaps, but I think it is more a result of overstating square footage.  I have witnessed  the "puberty" of apartments in most listing databases:  The fledgling 1BR that has gone from 620sf to a handsome 750sf "spacious home,"  and the Classic 7 room on West End Avenue that "sprouted" a few years back from a measly 2000sf to a robust 2400sf.

The Attorney General's office makes some effort to regulate stated condo square footage but makes no effort to do the same for co-ops.  Puzzling to me.  Until some sort of regulation is set in place for co-op square footage, growth will continue until one day that now 2400sf apartment will become a 3000sf star NBA center!

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Still away and back on Monday but here's a post that ran March 5th of this year that stirred things up a bit.

Respected blogger and real estate agent Noah Rosenblatt tells the story of his experience recently with one of the unethical agents in our industry on his award winning blog Urban Digs.

Surprise, surprise!  An unethical agent in our profession. Noah and I have discussed this on numerous occasions and  we're on the same page as far as exposing this type of stuff.  He doesn't name the agent or "her" company because it becomes a legal issue and opens us up for possible liability if we do so.

• Perhaps this agent is savvy and knowingly delayed, lied, and manipulated the situation to benefit her.
• Perhaps, she followed directions of her seller thus lying, delaying, and manipulating on the seller's behalf.
• Perhaps she's just an absolute moron...oh...no "perhaps" here.

The unfortunate part is that we will never know her motivation and can only speculate. That said, there is no question that she mishandled this process and was incredibly deceptive. I would also guess that she was protecting what likely was a direct deal that yielded her double the commission.  All the more reason for restructuring the way we do business in Manhattan.

Once again I am proposing that ALL direct deals should be abolished and the Department of State should require each party (buyer and seller) to have separate representation with each agent receiving half of the commission.  Way too much gray area and room for temptation as it is currently structured.  It also breeds horrible mistrust within the industry.  NO MORE DIRECT DEALS!  BTW, 95% of my business is representing sellers and I feel very strongly that a buyer should have their own representation in a transaction.  It would create more trust in the industry and fewer stories like this one.

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Happy 4th!  Back Monday the 9th but here's a post that originally appeared January 29th of this year.

True Gotham was born to help clean up the reputation of the real estate industry by giving the consumer insight into the inner workings of the industry and some of the tactics that agents use to "seal the deal." The big idea is to be honest and open, which in the long run might to inspire the idea that there are professionals in this line work with integrity. There is a right way to do things, and I know for a fact that there are plenty of professionals doing things that exact way.

So imagine my surprise and disappointment when I read the Sunday New York Times and stumbled upon Vivian S. Toy's article "Agent Angst." I wasn't surprised or disappointed by the article itself because it is an old story and one that continues to be told but I would have jumped at the opportunity to speak with Ms. Toy regarding the industry, it's self-policing, and the "used car salesman" stigma that many of us are trying to dispel. 

After all, I cover this topic daily and it remains the mission of True Gotham.  Toy writes:

A Harris poll conducted last year that ranked occupations in terms of prestige placed real estate brokers at the very bottom of a list of 23 professions. (Firefighters and doctors were at the top.)

Brokers themselves seem well aware that their business isn’t always held in very high regard. The National Association of Realtors has an advertising campaign called “Someone You Can Trust,” which stresses that Realtors are subject to mandatory ethics training. “Not many professionals can claim that on their resume,” the ads read.

I have written about this Harris poll on True Gotham, most recently in a post about agent self-esteem.  And the NAR ads suggesting that Realtors are "someone you can trust" seem to make an attempt at addressing our "bottom of the barrel" and "scumbag" reputation that is voiced on a daily basis on other blogs like Curbed and Patrick.net. 

Now if Ms. Toy had contacted me for my views on this subject, here is what I would have added:

• Although the Real Estate Board of New York is making great strides at monitoring and policing the industry, membership is voluntary and those who do not belong to this organization are not subject to its rules.
• Most New York City real estate agents are not Realtors.
• Rumor has it that the Department of State is incredibly lax about fining or disciplining agents who exhibit unethical behavior.
• I have also had a colleague "manufacture" other offers in an effort to get my buyers to raise their bid on an apartment.
• I believe that most buyers who feel taken advantage of are too embarassed to report it to the Department of State or simply feel like they should have been more aware of the possibility that they were being mislead or lied to (ex. I myself was once told by a colleague that I could install a washer/dryer in an apartment that my wife and I were buying when the building policy was NO washer/dryers.  This colleague worked in the same office as me and I was beyond embarrassed that I took her word for it.)
• The industry does seem to be improving but their is still much more room for improvement.
• And all of this said, the best way to select an agent for representation is through a referral from someone you trust. I have many more thoughts on choosing a good agent.
  

Finally, Ms. Toy seemingly polled some of my colleagues to come up with the following tips which I agree are useful in selcting an agent:

QUALIFICATIONS Make sure the agent is licensed. In New York City, to ensure an agent has access to all available property listings, check to see that he or she is a member of the Real Estate Board of New York. In New York State, you can check the Department of State’s Web site to see if the agent has had any licensing violations. In New Jersey, go to the Real Estate Commission’s Web site, and in Connecticut, the Department of Consumer Protection’s site.

EXPERIENCE Check real estate agents’ Web sites for lists of recent sales or ask for printed lists. These can give you an idea of the kind of experience an agent has and specific areas of expertise.

REFERRALS Ask friends and relatives for recommendations, because good brokers tend to get most of their business by word of mouth. But even a broker who comes highly recommended may have some weaknesses. Ask the recommender about any broker shortcomings, so that you can work around them.

CHEMISTRY Just in case negotiations get rough, you want to be comfortable with your agent’s personal style because he or she may have to bring you news you don’t want to hear. So think about whether you want someone who will take control and be blunt or someone who will hang back or pamper you a bit. Be prepared to move on if your personalities don’t click.

TYPES OF AGREEMENTS Although there are various types of agreements between buyers, sellers and brokerages, two are common.

When you choose a broker to sell your house or apartment, you will have to sign a contract giving the broker the exclusive rights to list it for a set length of time. So make sure you and the broker get along before you sign.

If you are buying, you don’t need to sign an agreement to have a buyer’s broker represent you. Or you can work with the seller’s broker. As helpful as they may be, you need to remember that the first loyalty of sellers’ brokers is to their clients, not you.

I would add that Ms. Toy missed a very important group of people in her story: real estate bloggers.  People like Kevin Boer of 3 Oceans Real Estate, Noah Rosenblatt of Urban Digs, and Pat Kitano of Transparent Real Estate are raising the bar in the industry by holding it accountable and making the real estate transaction less of a guessing game for the consumer. It's a new, and potentially very important, resource.

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

Reminder that I'm away this week...this post originally appeared June 26th of last year but the same holds true today.

Everywhere you go in the online real estate world, there's something about cooling markets, normalization, air coming out of bubbles... whatever you want to call it. Like this, for instance.

Even those who have been most steadfast (insisting through cheesey grins that for the better part of a decade that it has always been an amazing time to buy) are finally starting to acknowledge the market isn't white-hot any more.

What about all those people who bought at high prices in the last few months, convinced the market was strong and getting stronger? What about those who didn't sell in the still-strong market last fall? What about those who paid top dollar for condominiums that they haven't even moved into yet, and might not be worth as much today?

Those are the people who might have been better served by less cheerleading and more honesty.

As part of my regular marketing campaign, I send out postcards and e-postcards with specific market information and predictions. Some of my colleagues hate it--and you'd better believe they complain.

Last September, I sent out a postcard that asked "Are You Prepared for a Falling Real Estate Market?" and continued with five very important questions for sellers--questioning their mortgage product, whether or not they were too heavily leveraged in real estate, and more.

The wrath came down big time. I was told by my friends in the industry at competing firms that their offices were littered with my postcards and the sentiment across the industry was that I should be silenced. My manager even received an irate call from a competing firm's manager demanding that I cease mailing these postcards.

The real estate market, at that time, was essentially a big ATM for brokers and agents. It was a big machine that spat out money, and nobody wanted that to change. The idea that the market might cool down at some point was scary to all those counting on the party lasting forever.

But we all knew it wouldn't last forever. My thought is that if I could be the open-minded one, the one not blinded by the cash, the one to correctly advise my clients when the foot would be easing off the accelerator, then my clients would have an advantage, and they'd thank me in the long run with repeat business and referrals.

My timing looks prophetic now--hardly anyone was talking about a slowdown then (when there was still time to take meaningful action in a strong market) and now everyone is--but it wasn't the result of any economics genius. I only looked at the same basic market data that everyone else sees, stuff like inventory, time on market, interest rates, attendance at open houses, etc., and called it like I saw it. I guess a lot of my competitors just didn't want to see it.

I believe new internet tools and other market forces are shifting the industry so that more and more brokers will have to earn their keep not as a gateway to listings, but as a trusted advisers. Guides through the jungle if you will. That is an important job, and one that I take very seriously. As the real estate industry evolves, so too will the real estate professional. A more realistic approach to market conditions, combined with a more honesty in sales (that is not an oxymoron), will make for a more efficient and sophisticated real estate market that is long overdue for an overhaul. If we do this right, our clients will love us for it--and when your clients love you, you're always in a strong position.

Posted By Douglas Heddings | Permalink | 1 Comments | Email This

Originally posted June 15, 2006.

This is precisely why I think this blog is a necessity.

Yesterday someone said that she just took an exclusive listing from a seller and she was laughing that it would NEVER sell as it was exceedingly overpriced and had a high maintenance.

She elucidated that she priced it very high to appease the seller, knowing it wouldn't sell. Why would she do that? As she explained, it was a way for her to get in contact with buyers who might be interested in other properties.

I have also recently discovered that some of my colleagues are writing false names on open house registries under the auspices that they want "to show people how to sign in." Give me a break! The deception is purely a vehicle to make it appear that more people have attended the open house than actually have.

This absolutely enrages me!

If I thought that pointing this out would result in even a slap on the wrist by the Department of State, I would gladly name names. But in my 15 years in the industry, I have seen and heard much worse, and very seldom does anyone get in the slightest trouble.

I still believe that the majority of professionals in my industry operate with a high level of integrity, but a few bad seeds like this continue to support public fears and distrust of real estate agents.

Sellers and buyers both beware:

Sellers: PLEASE interview three or more agents before signing an exclusive agreement and always get a written market analysis to support pricing and review it with the agent who provides it. Also, try to separate what you want to hear from reality and current market conditions. There are brokers out there who will do whatever it takes to get you to sign on the dotted line with nothing more in mind than their best interest.
Buyers: The best advice I can give is to find a broker who provides a real service, with a wealth of experience, to guide you through not only the search, but most importantly, the bidding and negotiating process.

More tips by scrolling through the Tips & Advice category.

Contrary to what many believe, there are some extraordinarily sound real estate professionals out there who truly have your best interest in mind in the hope that your experience with them will help to grow their businesses in a positive direction.

Posted By Henry Abbott | Permalink | 4 Comments | Email This

The buzz across the Manhattan real estate market is Vivian S. Toy's article in The New York Times Questions Your Broker Can’t Answer, which addresses Fair Housing Laws and the very recent push by brokerages to make sure that their agents are complying with these laws.  Jonathan Miller has posted about it on his blog Matrix.  The Property Grunt chimes in too.  Even The Real Deal couldn't resist passing along the link that covers this controversial topic.  Well I couldn't resist either because the interpretation of these laws has indeed surprised me and many of my colleagues.

The strict interpretation of fair-housing laws prohibits brokers from providing information about people that could be construed as discriminatory in any of 14 protected categories. The categories include familiar ones like race, religion, sex and disabilities and less well-known ones like familial status, marital status, citizenship and occupation.

The challenge for those in my industry is not the obvious discriminatory categories like race, religion, sex, etc. but those like marital status and occupation do present a challenge.  The reason for this is almost solely due to the co-op housing market.  Part of the reason that Manhattan sellers hire a real estate professional is to help them navigate the co-op Board approval process and until some co-op Boards become more accountable for their  discriminatory actions, this navigation is nearly impossible.  Let me elucidate.

I happen to know of several buildings who boldly discriminate based on age, profession, and one that even takes issue with prospective purchasers who are pregnant because the Board assumes that the mother will not go back to work thus forgoing her income...LUDICROUS!!!!  Having said that, I MUST present all prospective purchasers to this Board despite my knowledge of their discriminatory practices even though I know that any of the candidates mentioned aboved will surely be rejected by the Board of Directors.  Can you say "waste of time?" 

“In my mind, it’s so restrictive it takes away part of the job that the public has relied on brokers to do,” Ms. Kleier said. “To be able to tell them: Is this building a place where I’m going to be comfortable? Or if my kids run through the lobby, am I going to be looked at cross-eyed?”

Brokers are often hired for their expertise in a specific neighborhood or building, and not being able to share certain information will make a broker’s job that much harder, she said.

Mr. Garfinkel said that Ms. Kleier is certainly not alone in her apprehension. “A lot of brokers are concerned about the push-back from customers who feel that, ‘You’re my broker — why aren’t you helping me and answering my questions?’ ” he said.

Again, the only way to remedy this situation is to somehow stop the co-op Boards from discriminating.  I sincerely believe that most of my colleagues follow Fair Housing laws to a tee particularly since this latest push by brokerages to point out every letter of the law.  I personally no longer (yes, my entire industry asked these questions of everyone in the very recent past) ask my client's their profession, marital status, or blood line :-D  Keep in mind however that as agents, we often spend large amounts of time with our clients who often share information with us solely as a result of conversation and a comfort level (perhaps a friendship) that develops over time.  Disclosing any of this information during the course of the transaction is what is to be avoided. 

An example of what not to do as a real estate agent:

Yesterday, my wife and I traveled out to Boerum Hill, Brooklyn to take a look at an investment property.  I immediately let the agent know that I was a broker but I was not looking to receive any part of the commission.  Within 30 seconds the agent said the following:

• "The people who live in the projects live in the best apartments they have ever lived in."  Quite presumptious a statement no?
• "If they 'misbehave' they will be evicted and that's a 'great deterrent' for the neighborhood."  My jaw was hanging open at this point.
• He also shared the public school information telling us that we would have to apply to get into the "better of the 2 schools."  I'm sure he would have shared why one was "better" if we asked but I was afraid to hear what would come out of his mouth.

Obviously, he hasn't been briefed on Fair Housing Laws and I suspect he's going to get himself in a lot of trouble hopefully sooner rather than later.

In the meantime, we in the real estate industry ask fewer questions and let buyers make up their own minds about where they should live.  Go figure...a buyer making their own call...what a novel idea!

Posted By Douglas Heddings | Permalink | 6 Comments | Email This

The next time you get very excited about the presentation of a property on a web site I would recommend calling the listing agent and asking one very simple question:

Was the property photographed with a wide-angle or fish-eye lens?

Being in the industry, there is hardly a moment where I'm not looking for a better place for my family to call home.  Don't get me wrong, we love our current apartment, the views and light, the building amenities, etc.  It has a lot going for it so it would take something special to make us move.  That something would likely be more space and a garden or terrace.  You see, my 6 year old son constantly informs us that he wants to live in the country.  He suggests that the "smells, colors, and air are nicer in the country."  Hard to argue with that.  Having said that, I'm constantly on the lookout for a townhouse or part of a townhouse that would provide the space my family is accustomed too with the added perk of some outdoor space for my son's garden :-D  His bedroom is becoming a jungle of plants and herbs (none of which you can smoke of course).

Yesterday a property came across my desk that piqued my interest.  A three bedroom townhouse garden duplex that looked quite appealing on line and boasted a whopping 2500 square feet of living space plus a south facing garden.  Both my wife and I (she absolutely loves our current home and rarely gets excited about listings I send her) were intrigued and scheduled an appointment to view this property today.   Can you say "DISAPPOINTING?"  None of the rooms were even close to how they appeared in the photographs as the photographer obviously shot all rooms with a wide-angle or fish-eye lens.  This is precisely why buyer's distrust everything that they see on line and why they suspect that we're lying whenever our lips are moving.  The tell tale comment came from my very own wife who detected my frustration and said, "isn't that your job as the agent to make the place look as good as you can?"  More frustration set in as I reminded her that our job is indeed to assist in presenting a property in the best light possible but in a transparent fashion that manages a prospective buyer's expectations.  There is nothing more frustrating than going to see an apartment that you are excited about and it being a huge disappointment because it was misrepresented.  I see this happen with my buyers all the time.

So the next time you're all jacked up about a property you see on line, call the agent and ask them if you can actually see "that" apartment or are they going to show you something that merely resembles those gorgeous wide-angle photos their displaying on their web page?  I suspect more often than not, you're going to see the latter.  Yet another stong argument for video!

Posted By Douglas Heddings | Permalink | 8 Comments | Email This

I just had coffee with a client of mine who recently purchased a FSBO and wanted to thank me in person.  Although I consulted with him throughout the entire transaction, helped him comprise his Board materials, and coached him for his interview and various other parts of his purchase, I did so for no commission.  I had shown this client multiple apartments and after losing a bidding war for an apartment, we both noticed that a shareholder in the building was selling his own apartment.  After confirming that the shareholder didn't want to work with agents, we set the wheels in motion for him to purchase the apartment directly from the seller.  The seller was made aware that I would be involved in the background to insure a smooth transaction but again I would require no commission.  I tell this story because I have seen many of my colleagues ignore FSBO listings for their clients for fear that no commission will be earned.  Who can blame them right?  Wrong.  Our responsibility to our clients is to make sure that they are privy to ALL properties that may fit their criteria, regardless of our payday.  It's that simple.  On the rare occasion that this happens (this is only the 2nd time in my 15 years), it is entirely worth the lost commission to develop trust with our public.  

This brings me to the question of integrity and how exhibiting it is a winning proposition every time!  A few days ago , I showed a new client (a writer who actually came to me via this blog) a property that both she and her husband seemed to like very much.  I have visited their current apartment with over 60 feet of bookshelves and although agreed with them that this apartment was very nice, didn't think that the apartment would look anything like it's current state with all of their books.  When I shared this insight with the seller's agent (90% of the time I am the seller's agent) he was noticeably upset and asked why I would talk my clients out of an apartment that they seemingly liked?  He then asked me what kind of salesman I was?  Need I explain?  For a split second I actually thought maybe I did something wrong but then quickly realized that this is precisely why my clients work with me:  TRUST.

Their is absolutely no question in my mind that if I chose to be a more aggressive "salesman," my commissions would increase in the short term.  I just have to be mindful that the way I do business allows me to sleep at night and feel good about the service that I provide to all of my clients.  If it sounds a bit like I'm trying to convince myself of this, your dead on.  When deals fall apart, the tendency is to question what YOU could have done to make them happen.  The unfortunate answer is often to compromise one's integrity.  An unfortunately I believe that this compromise happens all too often in my industry.  For me, it just isn't an option.    

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

No surprise that Casey Serin, poster child for the housing bust, finally had to get a job (via Consumerist).  If you've followed his laughable antics as an unsuccessful flipper on his blog IAMFACINGFORECLOSURE.com, then you will likely be as thrilled as I am to hear that it's done!  No more BS from this criminal. 

Surprise surprise surprise, his next venture is rumored to be that of a real estate agent.  From criminal to Realtor.   Perfect!  Just what we need in a profession that struggles daily to dispel the used car salesman stereotype.  I just don't understand why the barrier to entry remains so incredibly low in a profession responsible for handling most people's largest asset? 

Unfortunately, those who choose to work with Casey won't likely be privy to his lying, cheating, and scheming ways that should land him in jail.   How many more are out there just like him who lack any sense of integrity?  Unfortunately, still too many and as evidenced by Casey's jump to real estate, the ranks of the dishonest continue to grow.

My advice:  GOOGLE!!!  Check out your agent before you even meet them you may be quite surprised at what you find.

Posted By Douglas Heddings | Permalink | 4 Comments | Email This

I just returned from my vacation to an Inbox loaded with thousands of emails.  The following is just one of the many mass emails that I receive regularly recommending services in exchange for a referral fee.

hi everyone ..
i just wanted to pass this on to all brokers . i have had such great raves from my clients when they have used "blah blah" MOVING ANd STORAGE.. they are fabulous!!! .. they are pleasant and work fast and are quite helpful with all the moving needs.. i recomend them highly !!!!!!.. my family used them as well and were sooooo happy with their efficancy and help all along the way ... call so and so at 212-555-5555 and tell her i sent you .. she is very helpful ..
my best..  

Seems like a helpful gesture for this agents colleagues but upon reading the email string that she sent along with this, I realized that she is getting paid (no problem with that except from whose pocket is the payment coming):

Hi so and so (the agent who sent the above email),

I was very glad to hear that another one of your referrals was happy with our services. We really appreciate your confidence in us and will continue to insure your clients are well taken care of. You should receive your check in a day or two. (hmmmm?)

As you know, we pay commissions/referral fees for all moves referred to us by agents and have enjoyed a mutually beneficial relationship with many ...of your... agents for years already.

As a suggestion, email me or call our office if you want us to call someone directly, or if possible, keep a list of who you referred so we can insure all are credited to your name… Commission checks go out to the agents within a week of the completion of the move.

As you know, we don’t advertise a lot. Most of our customers are referred to us or are repeat clients. We are proud of and emphasize our Better Business Bureau record which continues to be excellent.

Check out our website or our discount packing supplies site which will give you some additional information. As FYI, I also provide referral fees to agents who bring in other agents!! It’s an easy way to make extra money.

Please don’t hesitate to contact me with any questions you may have or special requests your clients may have.

I have a huge problem with referral fees being paid for such services, particularly because most clients are absolutely unaware that such fees are being paid.  And let's face it, the money has to come from somewhere and I speculate that it is coming indirectly from the client's pocket.  Unfortunate to say the least.  This particular agent is also receiving referral fees from this moving company for each agent that she refers to them.  She may very well believe that this company is the best moving and storage company in New York, but the fact that she receives payment for saying so makes her "testimonial" much less meaningful. 

Advice to Buyers and Sellers receiving referrals from their real estate agents:

• ask the agent if they are compensated by referring your business
• if so, how much and why?
• ask the agent if they have used the services of the company to which they are referring you?
• I would steer clear of any referral that would generate financial gain for your agent
• ask them if they are willing to pass the "kickback" to you in the form of savings

And finally, as far as moving and storage companies go in the greater New York Metropolitan area, there is none better in my humble opinion than Steinway Moving and Storage and I get ABSOLUTELY nothing for saying so except the comfort that those who use Steinway are very well taking care of.

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

From the True gotham Archives (be back on Monday):

Last week all of the big players in New York City released third quarter numbers.

Although I have discussed the varying results in these reports, let me take a moment to put a spotlight on one number in particular: price per square foot. I'd bet every agent and buyer out in this history of the Manhattan marketplace has been frustrated and discouraged by the ridiculous variance in reported square footage of apartments across the city, particularly co-ops.

Why is that? There are various reasons. While condominium offering plans state unit square footage (and great liberties are often taken when doing so), co-op offering plans do not. That leaves the reporting of square footage to sellers and their agents. See a conflict here? There have been more times than not where I have been preparing a market analysis for a prospective seller and have come across three or four different square footage numbers for the exact same apartment. Almost always, the number is increasing over time.

A hypothetical partment 12D at 123 Big Apple Lane may have been listed at 1,400 square feet in 1993 and is now for sale and estimated at 1600. Oh let’s not forget that all of us in the industry “approximate” square footage which is why these discrepancies exist. That said, if apartment 12D has “grown” by 200 sf, this is going to affect the price per square foot numbers. People are almost always paying more per square foot than they think they are. Let’s say our example 12D is $1,000,000. At 1400sf it is selling for $714/sf and at 1600sf it would appear to be selling for $625/sf.

I am not for one minute suggesting that these discrepancies are entirely intentional, nor am I suggesting that they sometimes aren’t. This is just another example of the gross inefficiencies that taint our market.

I have two suggestions (one immediate and another longer term) to help remedy this situation: First, I would suggest that buyers not focus too much on price per square foot numbers when comparing co-ops and I would highly recommend acting with trepidation when doing so with condominiums. They're just not reliable numbers--so why use them as a basis for one of the most important decisions of your life?

If it is very important to you, measure yourself or hire the same person to measure units that you are comparing. If an architect, a developer, an appraiser, a contractor, and a real estate agent all measured square footage, you would undoubtedly end up with four different numbers. But at least you'd have something closer to reality. Just choose the same person to measure all units.

My other suggestion to remedy this problem over the long term would be to have an independent entity "certify" square footage. Obviously a daunting task, but perhaps a lucrative one if this one particular entity could bring uniformity to an inefficient marketplace. I know of companies who have created massive databases of NYC property including such things as building photos, amenities, and financial data. Perhaps one of these companies could begin the task of offering to measure "real" square footage for a fee to give credibility to the agent and seller listing the property. Over time, hopefully this would catch on and with the insistence of buyers, we would have more accurate numbers to reflect property size and real value. I can see it now…our sample property above would be represented as 123 Big Apple Lane, 12D, 1475rsf (“real” square feet).

Posted By Douglas Heddings | Permalink | 8 Comments | Email This

From the True Gotham Archives (yes I'm still away and back on Monday):

Bloodhound Blog, (which is based in Arizona) has a very interesting debate about dual agency--that is, when an agent represents both buyer and seller in a transaction. This is from Greg Swann's latest post on the topic:

I have not heard what I consider to be a persuasively-valid argument in support of Dual Agency. Counting Our Lady Ardell in a comment, we have three testaments to personal integrity, and these I do not dispute.

But: So what?

The question is not: Can very trustworthy people effect Dual Agency in a way that occasions no overt objections from their clients? Surely this is possible.

The question is, rather: What policy should obtain in the absence of a presumptive angelitude?

The question is: Taking account that a certain percentage of licensees will be stupid, untrained, avaricious, uninformed or openly larcenous, what policy best protects the interests of the consumer — the alleged justification for our licenses?

Manhattan doesn't really have buyer agency agreements, so the formal dual agency disclosure agreement doesn't exist either--leaving room for frequent conflicts of interest.

Many sellers don't ask their agent if they are representing both sides of a transaction and this is a very important thing to know. 99% of my transactions are two agent transactions where another agent brings a buyer to a property that I represent. And although I have successfully represented both buyer and seller in the othee one percent of my transactions, I often recommend that a buyer seek representation from another agent to allay any concerns about my fiduciary responsibility to the seller.

Integrity must always win in these situations. Rather than risk the perception of distrust on either side, it is much easier to involve an agent on the buyer side. I am a firm believer that the industry should put stops in place to prevent agents from representing both sides of a transaction to protect consumers. Again, not because all lack the integrity to handle this situation, but because too many do. I would gladly welcome a system that required representation on both sides of all transactions.

Posted By Douglas Heddings | Permalink | 5 Comments | Email This

From the TrueGotham archives:

I'm furiously committed to the idea that expert, ethical, and talented brokers and agents are tremendously valuable to clients. But there's no point in pretending that every broker and agent is. In fact, so many people out there have had bad experiences with (alleged) real estate professionals, that making the case they are all good, in my mind, only serves to undermine the credibility of the speaker.

What are the things shoddy agents do to hurt the reputation of the industry? Just for fun, we brainstormed some lists.

Some ways agents burn bridges with buyers:

• Steer buyers away or towards property based on what's best for the broker's bottom line, whether it's commission, price, broker's own listing, a building the broker is involved with, a coop board that will be easy for the broker to deal with, etc.
• Railroading buyers to close against their best interests,  for instance, by not disclosing other apartments in the same building that are for sale.
• Not disclosing financial information that is important but not yet made known to the general public.
• Not disclosing dual agency, typically by showing a buyer their own listing and not telling them they are representing the seller.
• Falsely stating number of rooms and square footage. One common version of this: calling an alcove studio a "one bedroom" just because someone added a wall.
• Steering clients here or there based on sexuality, race, social status.
• Discounting valid buyer concerns that can cause more work, and potentially lost commissions, for the agent.
  

• Providing a false or inaccurate comparative market analysis, typically to make the seller feel false hope (and warm fuzzies toward that friendly agent) about their property.
• Overpricing as a way to win exclusive listings.
• Not presenting all offers--even though it's against the law, I know of cases in which agents have withheld offers that would earn reduced commissions for the agent.
• Inflating the number of showings, the feedback, and the marketing of the property to make the agent look busier than he or she really is.
• Steering the seller towards one offer over another for no valid reason except for the agent's personal gain.
• A broker who is not knowledgeable about the listing.
• Taking on a seller's (usually overpriced) listing merely to lure buyers who can be redirected to other properties.
• Withholding information that might be valuable to the seller, but could delay or prevent a signed contract.
• Neglecting possible purchasers at open houses for whatever reason.
• Being negative about the property.
• Discounting valid seller concerns that can cause more work, and potentially lost commissions, for the agent.

Posted By Douglas Heddings | Permalink | 11 Comments | Email This

I must say that despite the many issues that I have with the "wild west" type of atmosphere often found in the real estate industry, even I was surprised to read this recent Jen Benepe article from The Real Deal regarding mortgage broker kickbacks to real estate agents.  My surprise seems warranted as most of this behavior seems to be occurring in the outer boroughs, but still amazing to me.

Kickbacks from mortgage brokers are the payments that real estate brokers demand before they refer their buyers to the mortgage broker for a mortgage, after or even before the client has decided to buy the property. Those requests are illegal, but they are rising because of the slackening demand in mortgages across the region, said some in the industry.

Eric Barron, president of the Barron Mortgage Group, said real estate brokers approach him demanding a 1 percentage point fee for referring their customers, an amount that they claim is less than the 2 percentage points they charge other mortgage brokers. The problem, he claimed, is worse outside of Manhattan and farther out in Brooklyn, as well as in Queens, the Bronx and Staten Island, where home buyers tend to be less well educated about borrowing and business is scarcer all along the real estate food chain.

I can say without hesitation that I have never seen anything like this in my 15 years in the industry.  I have however seen mortgage brokers offer savings to my clients if I decided to refer them for loans.  One such mortgage broker has agreed to pay all bank fees for my clients and another has agreed to go a step further and pay those fees plus refund $500 at the closing to the client.  But that's all I have ever seen.  To think that real estate agents are actually demanding illegal kickbacks that would ultimately affect the cost of their buyer's loan is disgusting. 

Once made, the kickbacks are added to the bottom line points that the client ends up paying, and can increase a buyer's mortgage interest rate by 1 to 2 percentage points, said experts. The practice has the same negative effect that sub prime lending does, driving up the cost of borrowing to consumers. 

It reminds me of when I started in the rental business in 1992 and landlords required "key money" from tenants to secure a rent controlled or rent stabilized apartment.  Not the same thing at all, but equally as disgusting.  Worse yet, this practice is most prevalent in areas with large percentages of immigrants.

Experts say that the incidence of kickback requests increases in neighborhoods with more immigrants, who may not be aware of the illegality of the practice. Indian and Pakistani neighborhoods of Queens, Hispanic home buyers throughout the city, and other ethnic groups are more vulnerable to the system of bribery and unfair market control. The problem magnifies among African-American home buyers, who are sometimes also magnets for sub prime and predatory loans, where higher rates make it easier to mask additional points.

It seems that the big players in the mortgage business are much less likely to partake in this type of activity.

Other mortgage brokers agreed about the prevalence of kickbacks. One who works for a large company and spoke off the record said that kickback demands from real estate brokers was "rampant" in the outer boroughs.

Because he works for a national company, he is unable to operate in those areas, he said, because the risk for a large public company is too great.

Advice to Buyers: 

• Consider a big company when obtaining a mortgage and always get more than one quote on rates and fees. 
• Use the competitive mortgage environment to your advantage by seeking multiple rate and fee quotes. 
• Be certain that nothing is happening behind the scenes to inflate the cost of your loan by reading all documentation including your Good Faith Estimate prior to signing anything.
• Make sure you are working with a real estate agent whom you trust won't jeopardize the cost of your loan for their own benefit. 
• If your real estate agent refers you to a mortgage broker, ask for more s/he to refer more than one and consider getting a quote from a mortgage broker from a separate source (i.e. friend or colleague) as well.

Posted By Douglas Heddings | Permalink | 1 Comments | Email This

Being that the Dirty Real Estate Tricks segment of TrueGotham gets the most visits per day and people stay on the site the longest when they are reading them, I couldn't resist sharing the following "multi-level marketing" licensing "course" being offered by Nouveau Riche University. (via Cockeyed.com).  It seems that Nouveau Riche University which is totally unaccredited by anyone is offering to take thousands dollars from wannabe "apprentice" real estate investors to "teach" them how to get rich in real estate.   Ok.  So another company is making promises about how much money you can make as a real estate "professional" by overpaying them for information that is already available to anyone who's interested in learning "the game."  It sucks but big deal.  Shame on those who actually pay this company for their classes.  And people are evidently signing up as cockeyed reports:

The recorded voice on the other end sounded serious, but didn't identify herself. The message invited me to become a successful real estate investor, and let me know that I could do just one or two deals per year and exceed my current annual income.

She continued that their program focuses on six main areas:
find, fund, fix it up, tenant, manage and sell.

She used "tenant" as a verb, meaning "secure a tenant".

She was looking to build a team, and was looking for someone who was "coachable", "teachable", could follow instructions, and was available for a group interview on September 2nd.

I didn't go to the group interview, but subsequent calls revealed the name and nature of this enterprise. "Nouveau Riche University" was signing up students. Real estate students.

That said, this is further evidence that the real estate industry is perceived by many as an easy way to earn easy money.   For those who actually believe that, get your real estate license and give it a shot.  Or don't even bother with the license.  Perhaps you, like Casey Serin, can figure out how to defraud the banking system and dig yourself into a deep financial abyss.  You have got to check this out.  Mr. Serin purchased 8 properties in 8 months with no money down and now may face jail time for admitted mortgage fraud.  Check out "Why Should I Go To Jail for Mortgage Fraud?" on his blog I am Facing Foreclosure.com.  Casey Serin is alleging on his blog that what he did was "gray area" that he believed most in the industry practiced.  Today's entry on his blog informs his readers that he found attorneys who have given him the green light to leverage some more.  Is this guy for real?  Unfortunately yes!  Reminds me of the guy who called me to boast that he had manufactured a multiple bid situation on his own home and 6 months later became a real estate agent.

I just had to add this from Housing Panic granting insight to how our brains determine that we should become investors.

Posted By Douglas Heddings | Permalink | 110 Comments | Email This

Last night, I received this email from Steven Spinola, the President of REBNY:

Dear Member:

Last Sunday the New York Times Real Estate section printed an article, Agents of Angst, which heavily criticized the residential real estate industry in its opening paragraphs. Detailing the experiences of one woman whose search for an apartment left a bad taste in her mouth, the article led the reader to believe that these occurrences are not the exception in real estate dealings but the norm.

I have written a letter to the editor, attached below, expressing my frustration in the paper's perpetuating these myths and cited the Department of State's handful of complaints as well as our own stringent Code of Ethics as examples of how seriously we take our roles. While we are all too aware of the stereotypes real estate brokers face, we also know how hard you work to satisfy your clients. An article suggesting otherwise is disrespectful to you, the real estate industry as a whole and just plain irresponsible.  

Sincerely,

Steven Spinola

***

Dear Editor;

After reading your recent article Agents of Angst, I was very disappointed to see that your article took one or two bad experiences from two people and misrepresented them as common occurrences in the real estate industry. While I’m not suggesting these unfortunate events didn’t occur, they are certainly not the norm in real estate practice as your article suggests. In 2006, there were only 206 complaints brought to the Department of State by real estate clients in the entire borough of Manhattan. And as noted, the Department has received fewer and fewer complaints statewide each year. In addition, REBNY puts forth its own strict code of ethics, which clarifies licensees' responsibilities to both their colleagues and to the public. If an alleged violation occurs, REBNY immediately handles it by voluntary mediation or binding arbitration. However few and far between, stories of unethical brokers are disappointing – disappointing to the public, disappointing to me and most importantly disappointing to my members, who have to work even harder to clean up the reputation of their industry. New York City real estate agents know the false stereotypes they must overcome, but if the Department’s dwindling list of complaints is any indication, they’re doing a good job of it.

Steven Spinola

President

Real Estate Board of New York

Now I absolutely appreciate Mr. Spinola's efforts on behalf of his organization's members. I am actually one of them.  Don't get me wrong, I think REBNY does some wonderful things for the industry and although they are in essence a "self-policing" organization, they do mostly succeed in getting their members to "play nice."  Their code of ethics is also an excellent benchmark to keep members "ethical."  And for the most part, the quality of agents who are REBNY members is superior to those who aren't.

That said, I would bet that it wasn't incredibly difficult for Vivian S. Toy of The New York Times to find examples of unethical behavior in the real estate industry.  I think it's a larger problem than Mr. Spinola wants to admit.  Perhaps he actually believes that because only 206 people filed complaints with the Department of State, the "problem" is insignificant?  I happen to think 206 complaints are significant primarily because I am of the opinion (I stress opinion here) that most people who feel duped don't report the incident because they are embarrassed or feel that nothing will be done to "make things right."   Furthermore, the "false stereotypes" that Mr. Spinola refers to aren't necessarily "false" at all.   There are indeed some bad seeds out there as I have encountered them myself.  I know one person in particular who has changed his name 3 times because of licensing violations, not the least of which was steering.   He is still a practicing agent with a very large firm.  The very structure of the industry fosters opportunities for unethical behavior as I have written about before.  It is imperative that I state here that the majority of people I have met in this industry are seemingly honest and well-intentioned professionals who make every effort to maintain integrity.  And I think the article that Ms. Toy penned elucidates just that by describing the successes that the duped customer had when they found a better agent.

In closing, I believe that articles such as these are imperative in keeping the industry on its toes in remaining accountable for the actions of its "members."  And let's not forget that as good of a job as REBNY does in overseeing its members, a very large percentage of licensed agents aren't members of REBNY and therefore aren't obligated to follow any of its rules.  I would agree with Mr. Spinola that the industry is improving its reputation but I think the Department of State has to play a larger role in policing the industry and holding unethical agents accountable for their actions. 

Posted By Douglas Heddings | Permalink | 4 Comments | Email This

I'm insanely busy right now as the market continues to defy odds.  I find myself in the midst of a 2nd "highest, best and final" scenario on behalf of my sellers in as many weeks and it appears that this property will also sell for a number above the asking price.  So here are some interesting reads for the day and I will be back tomorrow with some interesting original content:

• Check this piece out from the New York Times...New York hostile to pedestrians?
•  Via Inman, 60 minutes is doing a real estate expose  featuring companies like Redfin who aim to change the rules of the industry.
• 22,000 new rent vouchers to be handed out to help low income New Yorkers stay in New York!
• According to the New York Times, 35 years ago was the best time to buy a house.  
• The first "attendant free" robogarage is set to open in Chinatown!
• Not ALL realtors are liars and cheats.  I told all of you that!!!
• Zestimates say SF and LA have more million dollar homes than NYC. Could it be?  I'm not yet confident in Zillow or their "zestimates" particularly because there are so few NYC properties even listed on Zillow and something that I listed at $1,995,000 had a zestmated value of under $200,000 last time I checked.  Zillow has a long way to go still.
• And last but definitely not least, you have to check out this video from Housing Panic (via Euro Pacific Capital) featuring David Lereah of the NAR and Neal Cavuto of Fox vs. Peter Schiff who thinks the housing market (which market I ask because there is NO "national" market) will burst and collapse by 50-70%... WHAT? I'm not a big fan of any of these characters but perhaps reality will fall somehwhere in the middle?

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

I am a first time homebuyer. I went to an Open House in Brooklyn and really liked the apartment I saw. I offered the full asking price for the unit. The broker got back to me and said he spoke with the seller and said it's a go and even recommended some lawyers for me to use. But I discovered that the following Sunday he held another Open House with a HIGHER asking price! I was never notified of this. While this isn't illegal I certainly find it to be highly unethical and certainly not a practice recommended by REBNY. What should I do? Please keep in mind that nothing has been signed but I do have e-mails of correspondence.

The Property Grunt has an interesting response with a lot of insight.

My two cents: it’s a sleazy move to accept an offer and then advertise another open house at a higher price. But, unfortunately it's not illegal in New York.

You see, in the rest of the country, binders are used to “lock up” a deal so that these antics are less likely to happen. In New York, there is no legally binding deal until a contract is fully executed (signed by all parties and escrow deposit actually deposited). The lack of binders paired with greedy sellers and agents creates an atmoshere for this type of behavior that can sour a lot of buyers on the whole experience.

For the record, if the agent in this instance was indeed thinking that they had a “direct” deal with no buyer’s agent, it is much more likely that the seller insisted on the price increase and the agent was afraid to notify their “direct” buyer about this for fear of pissing them off and losing that big commission. All too often, agents let that commission dictate their behavior in a transaction. A simple phone call to the buyer explaining that the seller was insisting on another open house at a higher price may have simply lit a fire under the buyer to get the contract signed ASAP. My bet is that the phone call wasn’t made because the agent didn’t want to jeopardize the precious direct deal and both sides of the commission.

Of course, the agent could have also strongly suggested to the seller that this behavior could and may very well result in the current buyer walking away from the deal.

All of that said, all of this B.S. is all too often part of New York City real estate transactions. And as one of the commenters stated, it is possible that the next transaction would have a element of sleaze, incompetence, or unethical behavior as well. It sucks! But, as “blahblahblah” posted on the Curbed site, if you love the apartment, forget about how big of an asshole the seller and/or the agent may be and sign that contract ASAP. Also insist that the seller sign and return the contract by a specific deadline (24 -48 hours). Complete your board application, go to your interview, and move in. The shenanigans that you had to go through will mean absolutely nothing to you once you have moved into your new home and only you can guaranty that you will NEVER have to deal with that agent or seller again.

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• Property Grunt: Craig's List is working with the government to bust bad listings and bad brokers!
• Change is in the air for MLS systems all over place.
• Cheap, nice, new condos in other cities.
• Jonathan Miller with thoughts on the super high end of the market. For his own psychological reasons, he is convincing himself that their owners are super unhappy.
• Some big rent increases are reported at Stuyvesant Town.
• The Carnival of Real Estate.

Posted By Henry Abbott | Permalink | 0 Comments | Email This

"This is the prettiest house on the street." When you, the seller's agent, say that to a prospective buyer, they realize you're giving them your opinion. They can also quite easily check it out for themselves. What you've just done is puff the property. Puffing is exaggerating the virtues of benefits of a property. It isn't illegal, and it's done all the time.

On the other hand, if you say property values are going to go up 10 percent a year for the next few years, you seem to be stating a fact, but the buyer has no way to check it out, because no one can predict the future. As the agent, you're perceived to be the expert and customers have every reason to believe you. However, if you're wrong, you could be in trouble. Worse yet is an outright false statement that you know is wrong. "No, sir, there are no plans to extend the six lane road past your house." In the courts, which is where you may end up, your actions in either of these examples can be interpreted as fraud or an intentional misrepresentation to sell the property.

Posted By Henry Abbott | Permalink | 0 Comments | Email This

Petition
REBNY RLS PUBLIC WEB PORTAL

Whereas REBNY is organized to represent the best interests of its Member firms, and,

Whereas the proposed RLS Public Web Portal appears to serve only the interests of the largest Member firms, and

Whereas the decision to embark on this project was neither transparent nor democratic, therefore

We the undersigned REBNY Residential Broker Members hereby demand that the Board immediately cease plans to implement this Portal and instead seek further discussions with the members, after which the proposed plan would be approved or rejected by a majority vote of all Member firms.

Posted By Douglas Heddings | Permalink | 6 Comments | Email This

"The real estate industry is being attacked by non-real estate, cyberspace carpetbaggers who are working to become the first point of contact for buyers and sellers. It is more important than ever that we weave a bigger web on the web to attract more consumers to Realtors."

Posted By Douglas Heddings | Permalink | 3 Comments | Email This

For buyers, the BEST situation to submit a low-ball offer is when:

1. Seller has reduced the price for 3rd time
2. Seller reduced price two times within 4 weeks
3. Property has been on the market for at least 4 months
4. You show up to OH and apartment is empty with no names on sign in sheet
5. You find out that seller bought 5+ years ago
6. Imperfections are cosmetic NOT permanent

The WORST time to submit a low-ball offer is when:

1. Seller has not reduced asking price yet
2. Apartment is less than 4 weeks on market
3. OH and/or showings are crowded

• A “one time” low ball offer, as recommened by Urban Digs, is almost never taken seriously by a seller in my experience. It gives the appearance that the buyer is in the marketplace “fishing” for a steal and no seller wants to feel like they have been taken advantage of. I would recommend making a lower initial offer and leaving room for negotiation so that the seller has the sense (perhaps falsely) that they aren’t being screwed.
• When the seller purchased the apartment is not as relevant as their current situation and current market conditions. How much money they are making on the sale need not be a concern for buyers, and sellers often resent the buyer who presents an offer based on “what the seller paid X number of years ago.” Why and when they are moving is much more relevant.
• Basing a low ball offer on recent price drops is not wise in my opinion. Often a seller is more reluctant to negotiate further when they have already reduced their price multiple times. Again, I’m not suggesting that they shouldn’t negotiate further, but my experience is that sellers often respond by saying that they just reduced their price and want to see how it is received by the market (they feel like it’s new to the market at this new price).
• Open house traffic is not always a good measure of interest. I have taken buyers to open houses in which 50 people attended and no offers were submitted (by the way, often very difficult to get the honest feedback from the seller’s broker regarding “interest.”) I have also seen open houses where the one person who attended paid the asking price. Last winter, I had two open houses in the same building on a Sunday of mixed sleet and freezing rain. The same two people attended both. Each bought one of the apartments. Certainly not the norm, but it happens.

Posted By Douglas Heddings | Permalink | 1 Comments | Email This

• "The easiest way to reset DOM is to sign with a new real estate broker. But if a client is happy with our service, why should we lose the business and force them to go somewhere else just to reset the clock? As long as the client knows what's happening, and you have the paperwork to back it up, there's no ethical issue at all. In fact, if you know the practice works, not recommending to a client could be an ethical violation."
• "Unfortunately perfectly fine homes are overlooked because of days on market. It could be argued that this practice keeps these homes from being excluded by this stat. Also, MLSs allow it so it must be ethical. If they had a problem they could change it."
• "It is a violation in every MLS I am familiar with. Furthermore the more you mess with the data in the MLS the more fire power the DOJ, and others have to call for further regulation."
• "I can't believe some of the comments on this. Some of you actually think that it is an acceptable "strategy"? If others do it, so should you?!? If you worked at a grocery store, would you change the "sell by" date on the milk so you wouldn't have to throw it out? And then you wonder why real estate agents are near the bottom of the list on consumer confidence and respect. Please, please find another career."

Posted By Douglas Heddings | Permalink | 3 Comments | Email This

Until the culture of hard salesmanship disappears altogether, fraud will continue to exist because fraud also places a higher value on money than fair and honest transactions.

The peculiar structure of the real estate brokerage business also contributes to a culture that enables fraud to occur without repercussions. The necessity for close cooperation among competitors makes finger-pointing, tattling and ratting out either outright fraudsters or practitioners who push the envelope of ethical and legal practices potentially risky and destructive to one's own career. The perceived need to do business with these shady operators protects them from the consequences of their dicey behavior.

Real estate is by no means unique in this respect, as similar "codes of silence" exist to the detriment of other professions (e.g., law enforcement) as well. Yet in real estate, a reputation of being an honest broker and a stickler for ethics can alienate competitors whose cooperation is vital to success. Sadly, doing what's right can chase away more business than it attracts.

Posted By Douglas Heddings | Permalink | 9 Comments | Email This

Sunday’s Real Estate section of The New York Times wonders whether it's a conflict of interest to have a real estate agent, who sells property in a building, also serving on that co-op's board of directors?

Posted By Douglas Heddings | Permalink | 3 Comments | Email This

• Doug's boss, Prudential Douglas Elliman honcho Dottie Herman is talking about transparency in the industry. She talked about similar stuff a few years ago. Doug swears he has nothing to gain by raving about her, says this: "The primary reason that I work for Prudential Douglas Elliman is because Dottie Herman runs the show. I think she is incredibly wise and a visionary in the industry. Her track record proves that. She is constantly servicing her number one client: her agents. The training and support that she provides to those who want it is unparalleled in the industry. She is also constantly reminding agents that we must continue to reinvent our ways of doing business as the landscape of the industry changes. Information will no longer be king. True knowledge and SERVICE must be provided as information is becoming available to anyone who wants it. You must know what to do with the information once you have it."
• A rare optimistic look at prices.
• Borrowers tell stories of life on the wrong end of creative mortgage products.
• Fun to dig through the archives of Infamous New York Real Estate.
• Cheating your broker, from The New York Times (link inspired somewhat by some bad goings on earlier this week).
• Banish the thought: Comparing what your dollars will get you in New Jersey compared to New York City.

Posted By Henry Abbott | Permalink | 0 Comments | Email This

Check this out. Most extreme dirty real estate tricks I have ever heard of, and frankly, I have never even heard of anything like this in the U.S.

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

I have been friends with Douglas Heddings for years. And it's a great thing to be friends with a good Manhattan broker--because if you need to make a big decision about buying and selling, you can call him for free advice.

It occurs to me that, thanks to the magic of podcast technology, I can now call him ask those same questions, record it, and make it available to the world.

So here it is. If you were a friend of Doug's, and you were considering selling your apartment, this podcast is what he would tell you.

Some of the topics he covers:

• How to tell whether or not it's time for you to sell.
• Why you shouldn't hire the broker who tells you a bunch of good news.
• A whole bunch of ways the wrong broker can cause you trouble, and a whole bunch of ways to find the right broker.
• The best question to ask when you're interviewing brokers.
• Two documents to get your broker to sign before you sign an exclusive contract with a broker.

Click here to listen to the whole thing. (It's under twenty minutes.)

Posted By Henry Abbott | Permalink | 0 Comments | Email This

Patrick.net is planning a career change, to become a "realtwhore."

I know, I know… you're probably thinking: "Hey, isn't this the same guy who takes cheap shots at Realtwhores® every chance he gets? Isn't this the same guy who posts article after article about Realtwhore® deceit and trickery? Isn't this the guy who routinely characterizes the NAR/MLS as a monopoly and quasi-mafia crime syndicate?"

Well… yes, yes and emphatically YES !!! But despite my personal feelings about Realtwhores®, I'm willing to set all this aside for a very important reason: 6%.

Yes, if I become my own Realtwhore®, I don't have to worry about the inherent conflicts of interest, routine misdirection, lies and thievery that comes part and parcel of being represented by one of California's finest (unless I decide to rip off myself, that is)!

Yes, I can see the humor. But still, I'm continually amazed at the number of real estate industry haters. Much like stockbrokers from 80's (like Gordan Gekko from Wall Street) and again with the tech bubble of the late 90's, there are always people who love to see successful people face conflict and failure.

It's really no different from the masses of people snatching up tabloids recounting Tom Cruise's latest tribulations. People love seeing others in pain. I think it makes them feel better about themselves.

That said, Patrick.net's post and the long trail of comments are evidence that blogs like TrueGotham.com are an absolute necessity for changing common perception of real estate agents/brokers or as Patrick puts it "realtwhores."

I bet this guy is a renter. He should call me when he's ready to buy. I can hook him up with college educated people, many of whom have MBA's and Master's degrees. They'd certainly prove him wrong about our profession, and you definitely won't find any of them trolling dark alleyways in tattered fishnets looking for buyers.

Posted By Douglas Heddings | Permalink | 0 Comments | Email This

My blog is making me a bit schizophrenic. One day I'm praising the industry, defending its honor, and disposing of the "sleazy used car salesman" reputation. The next I'm waxing about "unscrupulous" brokers and their dirty tricks.

Unfortunately, today I address the latter.

On a recent "date night" (if you have kids you know what I mean) my wife and I noticed some advertisements around town for a boutique real estate firm, which I won't name, that called itself the "Premier Real Estate Firm in Manhattan." Intrigued, I double-checked the meaning of "premier." Here's what Merriam-Webster had to say:

Main Entry: pre*mier
Pronunciation: pri-'mir, -'myir, -'mE-r; 'prE-", 'pre-"
Function: adjective
Etymology: Middle English primier, from Middle French premier first, chief, from Latin primarius of the first rank—more at PRIMARY
1: first in position, rank, or importance
2: first in time: EARLIEST

I've been working as a New York City as real estate agent or broker for nearly 15 years. I can tell you that this boutique is not first in position, rank, nor importance (I don't see a definition that includes "first in self-importance"). Why does it seem that firms city-wide can make this claim with no ramifications? Where is truth in advertising? All sizzle and no steak!

Here's my challenge to all the "premiers" of real estate. Put your money where your mouth is and prove it! Let's see numbers, facts, evidence. If you can do it, congratulations! You're premier. If not, park a few junkers in front of your office, string up some red, white, and blue plastic flags, and start shouting "our low, low prices can't be beat!"

For the record, I believe I work for the "premier" real estate firm in Manhattan: Prudential Douglas Elliman. I'd be more than happy to backup that claim anytime.

Posted By Douglas Heddings | Permalink | 2 Comments | Email This

When you are making your millions in real estate, there will always be risk. And even when you have made enough to retire happily, there will never be a shortage of reptiles eager to prove a point by taking you down. Consider the case of Ronald Bergeron, as told by the Associated Press:

A real estate tycoon who owns a nature preserve tried to show off for visitors by jumping on an alligator's back for a ride, but the reptile bit his hand and dragged him into 15 feet of water.

The 8-foot alligator let go of Ronald Bergeron, 62, after witnesses pulled its tail.

He suffered a shattered pinky, a broken ring finger and puncture wounds in his palm.

The multimillionaire developer was injured Sunday while giving a tour of his preserve to weekend guests who had made large donations to the Boys & Girls Club. It wasn't the first time he'd tried the stunt.

"I always tell them I'm going to wrestle an alligator," Bergeron said Wednesday. "It's part of my Florida cracker culture. My grandfather was a game warden in the Everglades, and I grew up around alligators."

He said he usually rides the alligator for a minute before letting it go.

Posted By Henry Abbott | Permalink | 0 Comments | Email This

Have you ever read something and wondered, is this real? Timothy Ellis of the Seattle Bubble had exactly this reaction to a recent email he received. Quite frankly, Timothy wasn't the only one astonished by what "Mr. F" had to say about the real estate bubble:

Regardless of what happens with the bubble the longer you wait to purchase a home the harder it will become. The only time I would agree that it would be appropriate to wait would be if you feel the bubble will burst and prices/values will fall.

Nothing in anyones crystal ball says anything about values falling in the Northwest, the primary reason being supply and demand. Here in (Mr. F's) County our market is cooling. Even at that if we only have a 10% appreciation this year it is still great news for homeowners. So my recomendation would be to buy now not later. In not buying now you are loosing appreciation and tax writeoffs. As I tell most new buyers, just get on the up escalator! Once there at least what you currently own is appreciating at the same value as most of the homes around you so it will be easier when you are ready to sell and buy the next one.

If you ask me, this is a perfect example of a novice real estate agent believing his own hype; also a perfect indicator of the low barrier to entry in our industry nationwide. The best argument for buying "right now" is that prices are becoming more negotiable than they have been in about 7 years, and interest rates remain low. As far as the idea of real estate being a speculative investment, I am of the belief that it is a shelter first. History has proven that over time, it will appreciate, but history has also proven that people who buy at the peak of a market and are forced to sell in the short term can lose their shirts in the process (i.e. late 80's-early 90's). That said buyers are as savvy as they have ever been and to suggest "buy now" is insulting. I believe that they have the ability to weigh their own financial situation, including tax advantages and mortgage products, with their housing needs to determine if a purchase is a viable option.

Via Bubble Meter.

Posted By Douglas Heddings | Permalink | 2 Comments | Email This

In the latest episode of the TrueGotham podcast, we delve into one of New York's favorite topics: unscruplous real estate brokers.

The episode is a little more than eight minutes long, and covers a lot of ground. Here's an excerpt, about how selfish or desperate brokers (The New York Times reportedly recently that the vast majority of New York brokers have no listings) can cost sellers major time and money:

Often, a broker will have multiple offers on a property, and before they present all of these offers to you, they will go through those offers and they'll say "which one of these is going to make me the most money?" And that's the offer that they're going to push on you as hard as they can. And that offer may not be in your best interest.

You may have someone who comes in and says "I'll pay you two million dollars, cash. I've worked at JP Morgan Chase for the last 10 years, I'm a senior vice-president, I'm a managing director, I'll close whenever you want." And then you have someone else over here, a struggling artist, God bless them, but they're not making a lot of money, they need a mortgage contingency, they have to get financing and the contract has to be contingent on that... if the broker stands to make a six percent commission with that person, and only a three percent commission with the other person because they're working with a broker--I'm not saying all brokers, but many brokers are going to steer you toward that six percent person.

And it's not in your best interest. It's only in the broker's best interest. And three months, six months down the road when you've gone through a board process, you know, you've been trying to get this person approved by a co-op board and you get a rejection, you've lost three to four months of income, or expenses that you've been putting out, and worse yet, now your apartment has been on the market for four months.

Statistics show that the longer an apartment has been on the market, the less its going to sell for. So you've lost money. And there's nothing you can do to salvage that.

Listen to the whole episode by clicking here.

Posted By Henry Abbott | Permalink | 8 Comments | Email This

The blog Bubble Markets Inventory Tracking shows how brokers take listings that have been on the market for a while and re-list them to make them look new and more appealing.

We're lucky in New York that this doesn't happen here at nearly the rate it does elsewhere. My only experience with this in the New York market is when a listing is conveyed from one exclusive broker to another. Often times the new exclusive broker will have the old listing removed from the system to give the appearance that the property is new to the market.

(Have I ever done this? Once in a blue moon--and merely to make clear that I'm newly representing it. I have always let people know that it was on the market with another broker prior to my taking over.)

That said, I'll make this promise right now: I will never again engage in this practice, as I absolutely see the deception involved.

An even greater ramification of this practice is that it skews the "days on market" numbers (i.e. If 3 brokers have a property for 6 months each and the last broker makes the listing "new," it will appear that the property sold after 6 months when in fact it was on the market for 18 months.)

I challenge everyone in my industry to make the same promise, and to abolish this practice. By all means let people know that your representation of said property is new. But let's not pretend it's a new listing.

Posted By Henry Abbott | Permalink | 0 Comments | Email This

With properties spending more time on the market, many brokers have convinced sellers to increase commissions to as much as 9%. Rather than lower the asking price, they are hoping to increase the number of showings by the brokerage industry and ultimately sell the apartment for an excellent price.

Many of my friends, family and clients have asked me for my thoughts on this subject.

I recently represented a high-end property in which we needed to find a buyer with a vision for the property's potential. After five months on the market, the seller and I decided that an 8% commission may just rescusitate this apartment and incentivise brokers to bring a new pool of buyers to see the space.

The result was INCREDIBLE. Some brokers who had previously shown the space at a 6% commission and had nothing positive to say were suddenly transformed into the "ultimate salesperson" within only remarkably positive things to say about a property in which NOTHING had changed but the amount of money the broker would procure. I was stunned at this behavior. I must add that most brokers didn't change their views on the space, but enough did that I became discouraged by their behavior.

Ultimately, the seller and I decided to lower the price and pass savings onto the prospective purchaser. We sold the apartment immediately upon lowering the price. So as convincing as these brokers attempted to be when they stood the reap the rewards of an 8% commission, none of them were able to effect a sale. A reduction in price did the trick.

Moral of the story: "don't get bitten in the asking price." Now more than ever, the price at which you begin marketing a property is the most important factor when selling, followed by a solid marketing plan, and savvy negotiations.

Posted By Douglas Heddings | Permalink | 2 Comments | Email This

The Wall Street Journal Online is reporting on the erosion of Realtors' hold on home listings.

This may come as a surprise: I am excited about the changes that are taking place in my industry and welcome the competition.

Let me explain. There is absolutely no denying that the face of the industry is changing and Google and Craigslist are not pioneers, in fact, many would say that they are a bit late to the party.

That said, I absolutely believe that real estate agents better be prepared to bring a lot more to the table in their attempts to solicit business. The playing field is going to become more even and the marketing savvy and negotiating skills that a broker bring to the transaction will become increasingly important, as will the ability to accurately price a property.

Having access to data is not the ultimate solution for sellers who wish to take on the process on their own. It will help, but nothing can substitute for the experience of a professional who knows how to interpret and what to do with the data available to her/him.

Now for the "sleaze factor..."
Google, Craig's List and the like will probably mean more people will list their properties themselves, as FSBOs (For Sale By Owners). That trend will almost certainly force a bit of a shakeout among real estate professionals.

From James R. Hagerty's article in the Journal:

Shoppers can't rely on agents to tell them about for-sale-by-owner offerings, because agents often don't earn commissions for introducing buyers to these properties and find such transactions more difficult to complete. Agents also may fail to tell potential buyers about homes being sold through discount brokers.

My take on this is that it is far better to show or make buyers aware of ALL available listings (including FSBO's) than it is to risk betraying a client's trust.

Over the last 14 years, I have assisted many buyers with their purchase of FSBO's--from coaching them on offers to preparing co-op board applications--with only the prospect of their future business as payment. When a lot of good properties are on FSBO listing services, and those that will combine FSBOs with broker listings, brokers who avoid them will be hurt or put out of business... I say BRING IT ON! The industry could use it.

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Word behind-the-scenes at Prudential Douglas Elliman is that you better be the lookout for small agencies poaching exclusive listings.

There are reports of listings by competing agencies for properties that are under exclusive listing agreements with Pruduntial Douglas Elliman. In some cases they are said to have even taken the photos from our company website, while even calling their faux listings "exclusive."

The Department of State should be policing this type of activity, yet we hear of these violations going unpunished all the time.

This is precisely where the "sleazy used car salesman" stereotype comes from.

How can you be sure the property of your dreams isn't poached from another agency? Google the property. If it turns up as an exclusive on multiple sites, somebody is not telling the truth, and it's time to ask your broker if it really is their listing.

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There's a little spat brewing at 275 Water Street. It started with this news from Curbed in January:

The views from the South Street Seaport-area apartments at 275 Water Street are pretty sweet... sweet enough to price this two-bedroom loft at $1.2 million. But as a Curbed reader points out, it's caveat emptor:

What none of the brokers will tell you is that these apartments won't have views for long.

Now at Felix Salmon there's news of some people who are pretty pissed off at one broker in particular for not warning them about new developements that could destroy the water view. The post ends like this:

So maybe the first thing you should do if you're worried about a vanishing view isn't look at Property Shark: it's look at the broker. If it's Jon Phillips of Halstead, run away.

I must say that I'm not surpirised at the "alleged" dishonesty of a broker to line his pockets with cash. I am greatly surprised, however, and disturbed that the accused is Jon Philips. I have worked with Jon who I believe to be one of the more knowledgeable brokers in the industry. He and his wife were a pleasure to work with and incredibly forthcoming with information during our transaction together where I represented the buyer; also on Water Street.

That said, my standard response when a client asks about development possibilities surrounding a property that I'm representing is that there are no guarantees that zoning won't change, and that a building can be built anywhere in the city.

Of course, I would always let a client know if I was privy to information regarding a project in the pipeline.

The unfortunate part of this story to me is that many sellers specifically seek out brokers who will withold information and sell their property for the highest price at any cost, even if it means compromising integrity. When it's cash vs. integrity, all too often cash seems to win.

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Henry Abbott: Now this thing here, True Gotham, this a crazy thing to do for someone in your position…because you're essentially in sales, but you're dishing some dirt here and telling people the truth about how real estate works around these parts. Why are you doing this?

Douglas Heddings: Because as real estate brokers, we fight the used car salesman stigma every single day… and as I said before, I believe the stereotypes don't come from space. There is some validity to these things, and I would like to see bar raised even higher.

This is dangerous, there could be repercussions. There could be repercussions from my own company. I don't know how its going to be perceived by the rest of the industry.

But I think it's a necessity.

I think it's important people feel comfortable and confident with whatever broker they're working with, and I would like to see some of the distrust that people have, and the disdain that people have for real estate brokers dissipate. I'd like to see that go away. And I think if they see the inner workings of the real estate industry from a broker and his team who are full of integrity, with the utmost honesty, they'll see things that enable them to make the right choices and decisions when it comes to buy or sell.

Listen to more of this interview.

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