True Gotham

Our very own Dan Shlufman has some excellent ideas for attorneys regarding the latest RESPA changes to help facilitate smoother transactions.  Not a bad read for the consumer either:

As most of us are aware, as of January 1, 2010, the new Real Estate Settlement and Procedures Act (“New RESPA”) went into effect.   As it only affects loans that are originated after said date, and closings normally take 6-8 weeks in New York (and often 12 or more for coops and condos in Manhattan), few if any transactions have closed under the New RESPA. 

This is fortunate since the major changes detailed below will have the affect of changing the timing and, in many cases, the occurrence of closings.  As a result, to mitigate this on residential real estate transactions, I strongly recommend that we make some changes to our practices on these transactions and specifically modify our closing procedures with respect to the HUD-1 Settlement Statement (“HUD-1”).   

The intent of the New RESPA was to improve consumer protection.  To effectuate this, lenders and mortgage brokers are required to provide more accurate Good Faith Estimates (“GFEs”) to buyers.  The effect on closings is that the charges listed on the HUD-1 will now be required to track those disclosed on the GFE.. 

Certain charges will not be permitted to change at all on the HUD-1 from those disclosed on the GFE.  These are broker and lender charges such as origination fees, application/processing fees and underwriting fees.  In addition, inexplicably (as many of these have nothing to do with a loan and, even those that do are set by state and local statute), government transfer fees are included as well. In New York, the mortgage tax is included as it should be.  However, so I believe, are the Mansion Tax and the Peconic Bay Tax. Both of these are sizable amounts and might not be known to an out-of-state broker or lender causing a closing issue if they are not disclosed on the GFE!

The second class of charges is those that may vary in the aggregate by no more than 10% over the amounts disclosed on the GFE.  These charges are lender required settlement services such as bank attorney fees, title insurance and government recording charges.  This limit does not apply if the borrower or, presumably, borrower’s attorney selects its own provider for any of these services.

The final class of charges is those that may vary (without limit or tolerance levels) from the GFE and are for escrow reserves (i.e. homeowner’s insurance and real estate taxes); daily interest charges and homeowners insurance itself.  In addition, if the interest rate is not locked at the time of application, the origination fees can vary until such time as the rate is locked when a new GFE will need to be delivered.

To make sure that we are best serving our clients and also to provide for quick and smooth closings, I suggest that all we do the following on all new transactions:

1. Review the GFE:   Have the client send this to you and check to make sure that all usual loan charges are listed (and that unusual ones are not).  Confirm that the mortgage tax and appropriate transfer taxes are listed properly.  If not, let the client and mortgage broker/lender know this as soon as possible so this can be corrected.

2. Title Charges:  Once a contract is signed and prior to ordering a title insurance report (unless your practice is to order it at that time as opposed to when the mortgage commitment is issued as many attorneys do), request a written, binding list of all title charges (including recording fees).  The title companies are all aware of New RESPA and most of them are willing to do this.  Once you receive these charges, forward them to the client’s mortgage broker or lender to include in the GFE.

3. HUD-1: The most important change is with respect to the HUD-1 which has been traditionally an after-thought and completed at the closing.  This can no longer be the case since a lender will refuse to fund a loan if these charges don’t match those on the GFE.  At a minimum this will cause a delay in the closing if the lender’s in-house closer (i.e not bank attorney) is unfamiliar with NY practices.  In the extreme, it can cause an adjournment of the closing if the issues cannot be satisfactorily reconciled quickly.

To avoid this, the HUD-1 needs to be completed, reviewed and finalized by all parties 1-2 days prior to the closing.  To accomplish this, attorneys will need to provide the bank attorney with all charges including managing agent fees, real estate agent commissions, title costs (which they should have from the beginning of the transaction), adjustments, etc. once the closing is scheduled.  They must also insist that a final HUD-1 be provided to them at least 1 day prior to the closing for review.  My recent experience has been that bank attorneys understand this and are willing to comply.

If this occurs, the bank attorney will be able to obtain approval on the HUD-1 prior to the closing. This will not only avoid delays, but speed up the timing of closings.  In the case of a problem, it will get resolved prior to the closing. If it does not, then the closing will get adjourned prior to its occurrence saving all parties time and aggravation.

I believe if we adopt these few, relatively minor changes, we will be able to easily adapt to the New RESPA and continue to protect our clients’ best interests.

Posted By Daniel Shlufman | Permalink | 0 Comments | Email This

PRICED TO SELL...MOTIVATED SELLER...NOW THE PRICE IS RIGHT...OWNER SAYS SELL

You can probably guess where I'm going with this before you even finish reading this sentence but here are my thoughts on these ridiculous mantras that are spewed all over my inbox on a daily basis:

• PRICED TO SELL-isn't this the point always?  To sell I mean?  How else would you price something.  How about this one...PRICED TO SIT ON THE MARKET FOREVER
• MOTIVATED SELLER-one would hope that a seller is at least somewhat motivated when they decide to sell their home but just how motivated is relative.  The irony here for me has always been that when you make an offer to one of these 'motivated-type" sellers, you find out immediately that they aren't quite as motivated as you had imagined.  I like this one...UNREALISTIC SELLER HOPES TO FIND STUPID BUYER
• NOW THE PRICE IS RIGHT-This one actually came in today and was the impetus for this post.  It made me laugh out loud.  The price is right when you have offers and a place sells not just because you say so.  Trust me, I always think the asking price I set is right and that is definitely NOT the case all of the time.  In fact, I have a 4800sf townhouse in Washington Heights that is asking the absolute "RIGHT" price of $1,500,000 (it started out at the absolute "RIGHT" price of $2.495M with another broker 2 years ago) and although we are close to a bid, it still seems that we have missed the "RIGHT" price.
• OWNER SAYS SELL-this is often paired with BRING ALL OFFERS.   Now I don't know about anyone else but ALL of my owners have said "sell."  ALL of them!  Not one has said to me, "hey Doug, please market our home for sale but whatever you do, DON'T sell it!"

I know that you get my point here so why then are so many still using these antiquated sales slogans to try to pique interest?  I have my theories of which the primary is that most people will beat a dead horse until way after they realize there's no pulse.  Innovation and change are rarely embraced and my 18 years of experience in the Manhattan real estate market have served as evidence of that.  Still no official MLS in Manhattan; no standard measure of square footage; listings data still perceived as proprietary; and the industry remains one that puts it's own interests before the consumer more frequently than not.

But change is coming and it's coming fast!  The DOJ continues to investigate the real estate industry, more players are entering the listings business and trying to streamline the process for consumers and just recently I met with someone who is so incredibly well funded and who hopes to change the entire way that the industry operates.  And let us not forget about Google who in my humble opinion is going to redefine our industry and how we do business in about 3-5 years.

Embrace the change my friends...it's coming!

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

No surprise that reading the "Big 3" Manhattan real estate market reports for Q4 2009 is giving many, including me, a headache.

Check them out for yourself:

1. Elliman
2. Corcoran
3. Halstead

All 3 of these firms have done an excellent job of comprising and interpreting data but which data set is accurate?  And why are the data sets so different in a market that has made information much more transparent?  And lastly, but perhaps most importantly, what does this mean for you the buyer or seller?

I'm not even going to attempt to answer the first 2 questions because I have been asking them for years.  But question  number 3 is near and dear to my heart as many know that I am NOT a fan of averages or generalizations particularly when it comes to hyper local housing market(s).

The best advice that I can give to all of those out there trying to make sense of these numbers is to be very careful not to strictly apply increases or decreases in median or average prices to any specific home that you are selling or buying.  Use these numbers as VERY loose guidelines that basically indicate a few things:  

1. Inventory is down
2. Prices are down
3. Sales activity is up

That's about all you can take away here.  And Happy New Year everyone!!!

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

I realize that you wouldn't know from the lack of postings here, but TrueGotham is not dead!  As most of you know, I left my former firm and brought the Heddings Property Group to Charles Rutenberg Realty back in June.  It's no surprise that the move has added a plethora of new responsibilities to my job description and since my clients always come first, the blog has had to take a back seat for a short time.  

Our team continues to grow and we have been incredibly busy with a Manhattan real estate market that remains challenging but not impossible to navigate.  After a slow start to 2009, the summer and fall months have kept us all on our toes.  With 7 quality professionals (and growing) currently on our team and a commitment to a level of service unparalleled in the industry, we are enjoying the process of helping buyers and sellers navigate a terribly confusing real estate landscape more than ever before.  Incidentally, I interviewed or spoke with 75 people in an effort to fill the final 2 desks in our Westside office and further expansion is in the works.

Next month we will be opening a Hampton's branch of The Heddings Property Group at Charles Rutenberg Realty located in Southampton and by June we anticipate the opening of a downtown Manhattan office in the Union Square area.    

The ranks of Rutenberg continue to grow as well with over 300 agents creating the 6th largest brokerage in Manhattan in only 3 short years (colleagues please feel free to call me to discuss the many reasons why you too should join the Rutenberg team).  

As cutting edge technology makes its way through the big brand bureaucracy, we continue to syndicate and share listing information globally in over 30 languages.  We are rolling out a buy side tool any day now that will streamline the search process and bring with it a transparency of which most are afraid.   And we have created a real estate broker business model that truly focuses on the best interest of the client by aligning the interests of all team members with that of each and every buyer or seller.

So you see that we are very busy trying to make the real estate buying and selling process a smooth and more efficient experience for those who matter most: the buyers and sellers!                                                                                            

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Chris Thorman at SoftwareAdvice.com sent me his latest post this AM:  Own to Rent: Breaking Down Fannie Mae’s Deed for Lease Program.  That's correct, the title reads "Own to Rent," not at all the rent to own scenario of which so many are already familiar.

The Federal National Mortgage Association, more commonly known as Fannie Mae, recently announced a new program designed to keep mortgage-challenged borrowers in their homes. The Deed for Lease (D4L) program allows qualified borrowers to relinquish the deed to their property and rent their home at the market rate for 12 months.

Chris's breakdown of exactly how this program works is excellent and thorough.  Imagine paying rent to your bank with no possibility of upside in equity after you once "owned" your home.  Ugh!

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

 The impetus for this post is a question that was recently asked of me from one of my sellers.  They are in the early stages of selling their Manhattan co-op and have simultaneously bid on a house outside of the city.  The seller wanted to know precisely when we will have confirmation that her current apartment is sold to give her confidence in proceeding with their purchase.

The answer:  You will know your apartment is sold when you have walked away from the closing table with certified checks and the buyer has left with the keys.

To further elucidate this point, here is a step by step guide of what to expect from the point a contract is sent to a buyer's attorney until that glorious day at the closing table.  And don't forget to review your closing costs early on in the process so you have no surprises.

1. A contract is sent to the buyer's attorney from the seller's attorney from a boiler plate form with attached suggested riders
2. The buyer's attorney does their due diligence for their client which consists of but is not limited to reading of the Co-op Board minutes, reviewing the building financial statements, offering plan, proprietary lease, and house rules.
3. The buyer's attorney then marks up the contract with suggested changes and it goes back and forth until both attorneys agree on language.
4. Once the contract is finalized, the buyer will sign and provide a 10% deposit check to be delivered to and deposited in your atty's escrow account until closing.
5. The seller will then sign the contract.
6. Once the contract is fully executed (signed by all parties), it is delivered to the buyer and they have typically 30 days to submit their application to the Board with their mortgage commitment letter.
7. The seller's real estate agent reviews the board application and almost always has to request additional documentation or changes which takes approximately 1-5 business days.  
8. Multiple copies of the application are made by the real estate agent and delivered to the managing agent.
9. The managing agent then takes 1-2 weeks to "process" the application running credit reports, etc and then they disseminate to Board members.
10. Board members then review the purchase application and all supporting documentation to determine if they will interview.  Members may choose to review and give their opinions via email, they may require a discussion to take place at a set monthly meeting time, or they may decide to review packages together on an as needed basis.
11. Assuming they find the application acceptable, a notice of interview date can come anywhere from 1 week to month after Board receives package from management (this is where a seller can reach out to board to kindly request them to expedite the process).
12. Board interviews buyers
13. Typically approved within 1-3 business days but some buildings take longer.
14. Closing is then scheduled to take place approximately 10-14 days after approval or as stated in the contract (most Manhattan deals NEVER close on the date specified in the contract).

Lastly, it is imperative to mention that banks are also slowing the process considerably these days with tighter lending standards.

So realistically, one should expect a closing of a Manhattan co-op to take approximately 2-4 months from the time a contract is sent out. Having said that, things like holidays, vacations of Board members and other pressing business that a Board may have to address are all factors that can lead to further delays.

Hopefully this will help to manage the expectations of all who are venturing into the sale or purchase of a Manhattan co-op.

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

 I had the pleasure of joining Tracy and Chris on the Noon edition of FoxBusiness.com Live today to discuss recent housing numbers that continue to confuse.

August home sales up 1% and September sales down 3.6% when an anticipated uptick of 2.6% was expected.  It is all very confusing and I still maintain that these macro numbers are incredibly inaccurate when discussing a specific region and even more so when discussing a specific property.  Perhaps these numbers can be useful in determining overall national trends but those trends mean very little to the individual homeowner who is my number one priority.

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Not soon enough for me, but it seems that the Manhattan real estate market is becoming less of a paper wasteland.  Finally managing agents and co-op/condo boards are taking into consideration the ridiculous amount of paper that is being wasted in the application and home sales process.  

In the past 2 weeks, we have had multiple attorneys thank us for sending them offering plans, financial statements, and purchase applications in electronic format.  But we've been doing that for a long time.  More exciting than our paperless efforts are those like this.  At least one building that we know of is requesting applications, which can often be hundreds of pages of tax returns and supporting financial documents, on CD.  I' don't know for sure but 5 reusable CDs seems like a smarter option than more than 1000 pieces of paper.  Other buildings are also adopting more green policies by developing websites for prospective purchasers to retrieve documentation as well as submitting those completed applications in electronic format to board members for their perusal.

Anyone who has attended a closing or sold property in Manhattan knows that we are a long way from even putting a dent in the amount of paper that is wasted in a real estate transaction.  And for what...so the bank can store this paper in a warehouse in Iowa only to tell you that they have lost it when it comes time to sell again thereby charging you more money to make more paper copies of those that they lost.

Kudos to all of the agents, their brokers, property managers and building boards who have reduced their paper usage exponentially.  For those who haven't, shame on you.

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I was contemplating NOT chiming in on the big company's 3Q Manhattan residential real estate market reports, but alas I must give my two cents.  Never has the answer to the "how's the market?" question been so complicated.  It is all relative of course and if you compare the the 3rd quarter 2009 to the first half of 2009, then yes the news is good and the market is much busier.  But despite a few stats that show some YoY increases, like sales volume of 2BR apartments, the market is nothing like it had been for the past decade and that's not necessarily a bad thing for everyone as a correction albeit fast and steep was absolutely necessary.

Check out this snapshot from Curbed of the numbers from Elliman, Corcoran, and Halstead/Brown Harris Stevens (same owners):

Average sale price

1) Elliman: $1.323M - Down 10% from last year, up 0.8% from last quarter
2) Corcoran: $1.282M - Down 16% from last year, down 11% from last quarter
3) Halstead/Brown Harris Stevens: $1.274 million - Down 13% from last year, flat over last quarter

Median sale price

1) Elliman: $850,000 - Down 8.4% from last year, up 1.7% from last quarter
2) Corcoran: $799,000 - Down 18% from last year, down 4% from last quarter
3) Halstead/BHS: $781,000 - Down 14% from last year, down 1.7% from last quarter

Number of sales

1) Elliman: Down 16% from last year, up 45.6% from last quarter
2) Corcoran: Down 38% from last year, up 16% from last quarter
3) Halstead/BHS: Down 25% from last year

Here we go again!!!  How can the biggest players in the Manhattan real estate market come up with such differing reports of what has happened in the marketplace (big emphasis on "has")?  I still have never received an explanation for this that made any sense.

All of this said, I think it is very fair to say that the deep and rapid price decline that happened over the last 18 months has slowed.  Activity for me and all of my colleagues has definitely picked up as sellers have accepted market conditions and some buyers feel that now is the time to grab their piece of the Big Apple.  

So where is the market heading?  That is the billion (let's say trillion) dollar question and I still believe that we may see another 10% decrease in prices before we stabilize for a period of a few years.  If I'm wrong, it will only mean that the economy has become healthier more quickly than anticipated, banks are more freely lending (uh oh), and a huge influx of cash will pump up prices again. That sounds a bit eerily familiar no? 

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

As far as who is more realistic in terms of their expectations in today's Manhattan real estate market, the scale has definitely tipped toward sellers.  Before you get all crazy on me, here me out. I'm not AT ALL suggesting that it is a seller's market...because it's not.   That said, it also is NOT the buyer's market that many believe it to be.

With prices down between 10 and 40% from peak levels across the city, buyers are again sweeping in to snatch up what appear to be bargains relative to the recent housing boom.  But navigating today's real estate market has become incredibly confusing for buyer's and their agents as media reports trumpet that "now may be the time to buy."  That may indeed be the case for some but the major obstacle that I'm observing today is the misinformed buyer.

Most sellers and their agents have already adjusted asking prices to reflect recent depreciation.  Of course some are still delusional but it seems to me that asking prices are down almost the same 10-40% from peak levels.  Buyers bidding another 20% below these already adjusted prices are experiencing overwhelming frustration at the inability to negotiate with sellers.   Few are successful and most can't understand why their ultra low offers aren't being at least countered.

It has never been more important than it is today to analyze an apartment's price and how it compares to peak pricing levels as well as recent sales and contract signings.  If a property is priced properly based on recent market depreciation, an ultra low bid is likely to be met with silence from the other end. 

The recent increase in sales volume is largely in part to more reasonable sellers finding sophisticated buyers who recognize a property's value relative to the recent boom.  Although I personally think we are likely to see another 5-10% decline in prices before stabilization and sideways movement for a few years after that, a psychological bottom is being explored. Anecdotal evidence is showing that aggressively well priced properties are receiving multiple bids which may indicate that we are nearing the "bottom."  Just last week a buyer of mine had an offer accepted only to be gazumped by another bidder a day later.  That property had languished on the market for 6 months.  Once the price reached what buyer's perceived as "bargain level" (20% below the original ask and 35% below peak pricing) the sellers received 3 bids in 2 days.  

So despite the fact that we have witnessed one of the most rapid price declines in housing market history, buyers must take into consideration that many sellers have finally accepted this fact and adjusted prices accordingly.  That said, buyers need to do their homework and bid appropriately if they want to own a piece of the Big Apple.  

Posted By Douglas Heddings | Permalink | 23 Comments | Email This

A colleague of mine recently received a phone call from a seller whom he is representing with a disturbing question.  His home is currently in contract with a prospective purchaser and he asked, "Should I reach out to my co-op board and ask them to turn down this buyer?"  For those outside of Manhattan, 75% of NYC housing is co-operative in which a Board of Directors must approve any prospective owner/shareholder.  

My guess is that the impetus for this question is the plethora of media reports that we have reached the "bottom" of the housing market.  These reports are also laced with hopeful pearls that we may be nearing a recovery.  Yes we indeed had a very busy month of June and July here in the Manhattan real estate market after a sluggish start to 2009. That said, volume is still half of what it was same time last year.

This particular seller is not unlike many in today's real estate market place who are reeling from the pain of selling their homes at a significantly lower price than what they paid just 3, 2 or even 1 short year ago.  I get it as I wanted to sell my family's 3BR condo in the Spring of 2008 when I would have likely received more than 20% more than what I could sell our home for today.  I was fortunate enough to not have to sell and since I would have likely invested the equity aggressively in the stock market, it was probably a wise decision.

Another seller of mine called last week expressing the desire to sell the apartment that he bought 2 years ago because he is spending less time in the city than he was in the past.  His response to my pricing opinion was a very simple "ouch!"  

For each of these sellers, the decisions they made to sell their homes in a softer real estate market were born from motivations specific to each of them.  Both have left Manhattan for housing markets that are more greatly depressed and although the sell/buy trade from Manhattan to their new more rural locations seems like a win, the sting of losing hundreds of thousands of dollars in just 2 short years is numbing.  But both are forging ahead and continuing on with their lives.

Of the 14 transactions on which I am currently working, 7 of those sellers are leaving the city for housing markets in which they can parlay their Manhattan dollars into a palace.  Hopefully that palace will take away some of the pain of their recent NYC real estate losses.  As for the others, they are moving from one part of the island to another in an effort to swap neighborhoods and capitalize on the reduction in prices.

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

What are the banks doing with all of our bailout money?  Getting fat and making the borrowing process miserable even for those with stellar credit, great jobs, and high liquidity.  

A current buyer of mine is supposed to be closing this coming Friday on a $1.7M condo in a new development project that is almost entirely sold.  She could pay cash for the property but decided to take out a small loan for some tax relief.  

Last week we found out that her lender, Wells Fargo is being hamstrung by Fannie Mae.  Fannie Mae is insisting on reviewing the condominium's operating budget which is not typically made available for review.  The building's financial statements which have been delivered to the lender show a healthy reserve fund in excess of $1.2M and an operating profit (many buildings run at a deficit).  Fannie has decided that unless the managing agent will supply a letter attesting that the operating profit will be transferred to the reserve fund, they will NOT fund the loan.  Here's what Wells Fargo must comply with according to Fannie Mae:

• Lenders must review the homeowners’ association budget (the actual budget for established projects or the projected budget for new projects) for all projects except two-unit to four-unit projects. This review must determine that the budget is adequate (i.e., it includes allocations for line items pertinent to the type of condominium), provides for the funding of replacement reserves for capital expenditures and deferred maintenance (at least 10 percent of the budget), and provides adequate funding for insurance deductible amounts. 

We are being told that no exception can be made to this policy therefore Wells Fargo is not permitted to fund this loan through Fannie Mae.  So a buyer putting more than $1M down on the purchase of a $1.7M home finds herself without a mortgage and possibly unable to close this week.  

I ask you this...If this buyer isn't approved for a loan, where is all of that TARP money?

My buyer wants some TARP!

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

Everyone has an opinion on what added value the real estate agent brings (or doesn't) to the real estate transaction.  For the purpose of this blog post, let's assume that a seller is fortunate enough to find an agent who s/he believes will bring real value to the home selling process.  If one agent brings value, a team of agents working on your behalf increases that value exponentially.  Bear with me here.

In today's real estate market where financing restrictions and unemployment have thinned the pool of qualified buyers, it has never been more important to make sure that any prospective buyer sees your home when they want to see it.  I have personally called agents to schedule appointments to show their exclusive properties and been told "Honey, I'm not taking the train from Greenwich that early in the morning.  You will have to show it at a later time?"  That specific appointment request was for 10:30AM for a vacant apartment.  Not a terribly over the top request.  That buyer never saw that property and eventually purchased something else while that home languished on the market for months.  It is not uncommon these days for buyers to have 5-10 properties to see that meet their criteria for their new home and if they see 9 of those 10, they just may NOT make it back to yours if your agent can't accommodate their schedules.

The example above is not the norm.  Most agents are incredibly accommodating when it comes to showing property, particularly in a market where transaction volume has dropped so drastically from the same period last year.  That said, one person can't be in multiple places at the same time. I know that sounds ridiculous and obvious but assume that your agent has 5 or 6 exclusive properties that they are showing at any given time (some have as many as 20 or more).  It is not unlikely that appointment requests will be made for 2 or more of those properties at the same time. If the agent is unsuccessful in manipulating schedules to insure that all appointments are made and all prospective buyers see your home then you may have lost an opportunity to actually sell your home.  The buyer may very well see something else and NEVER circle back to your home.

The solution to this scheduling problem is not rocket science but rather a team approach to assisting sellers with the home sale and accommodating ALL prospective buyers for the property. Most of the more successful agents in Manhattan have built very professional teams around them. The reason that they are still so successful in today's slower real estate market is not simply because of their experience but also because they can show multiple properties at any given time thanks to the support that they receive from their teams.

The team approach to selling real estate insures that your property gets the 24/7 attention that it requires.  In addition to the availability of multiple agents to show your property, a seller also benefits by having multiple professionals (led by the team leader/top producer) come together regularly to design advertising and marketing strategies that best suit your property.  And the team leader is ALWAYS the person spearheading all marketing efforts and negotiations.

The landscape of the real estate market continues to change in dramatic ways and the days of the single agent servicing multiple sellers is behind us.  For sellers who want to insure that every single prospective purchaser sees their home, they must hire a successful real estate team.  And don't forget, you must also let them show your property when they need to show it.  But that is an entirely other blog post.

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

In this TrueGotham video blog I discuss the current Manhattan residential real estate market. Although June was a very busy month in terms of transactions, one month does not a recovery make. And what will Wall Streeters do with 2009 bonuses?  Check it out:

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

Well here it is.  My first post for The Wall Street Journal.  Check it out.

BTW...this was just one of the plethora of reasons that I sought independence from the corporate environment in which I was working for the freedom of Charles Rutenberg Realty.

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I wish that I could say that I sold my house in Bridgehampton in April of 2006 because I was so savvy and knew it was the peak of the market.  Such is NOT the case at all but I was very lucky with my timing.

Let's begin with the Prudential Douglas Elliman Hamptons North Fork Market Report.  

From this report comes the following clip from CNBC (via CurbedHamptons).  Prices down 42% South of the Highway where the most lux of the lux is found.  Note that the agent points out how incredibly busy the month of June was and we experienced the same in Manhattan.  That said, one month of increased activity after a brutal year does not a recovery make.  

And check out this Manhattan vs. Hamptons comparison from Matrix's Jonathan Miller.

My 2 cents...I think prices may slide another 10% in Manhattan, possibly more in the Hamptons, before we see the bottom as interest rates creep up and buyers watch to see more signs of economic recovery. (BTW...a $1M mortgage at 5.75% and a $900K mortgage at 6.75% yield the same monthly payment).  Don't expect Wall Streeters to throw their bonus money around like they did in the past.  In early 2010, they will look for deals in both Manhattan and the Hamptons and their timing may be perfect. But hey, that's just one guy's opinion.

We shall see.

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

The traditional broker better rethink the ways in which they do business or suffer extinction.  The business model is suffering and despite the facade that all is well in residential real estate, I'm here to tell you that isn't the case at all.

First let's define 'traditional brokerage:"

• A real estate company that focuses on it's brand more than the consumer.
• A real estate company that is highly leveraged with office space and expensive leases.
• A real estate company that hires agents blindly creating a revolving door that can damage the brand on which they are spending so much money.
• The real estate company that continues to make promises to it's agents that it can't deliver due to corporate bureacracy.
• The real estate company that decreases dollars spent on the consumer in an effort to maintain profit due to high overhead.
• The real estate company who is "trapped in the box" with no ability to truly see "outside of it."
• The real estate company that defends a 6% commission while providing less service than it did 10 years ago.
• The real estate company that claims to embrace change all the while avoiding it like the plague.
• The real estate company that talks the talk but resists walking the walk.

I think you get the picture here.

I can't and won't speak to ALL the traditional brokerages in Manhattan.  That said, the traditional brokerage that I believe to be doing the best job of keeping abreast of what technology has to offer while maintaining their focus on the consumer is The Halstead Property Company.

My hats off to Clark Halstead and Diane Ramirez for "getting it!"  They understand that the consumer is demanding a more transparent industry.  They understand that our job is no longer to be providers of data but rather to help the consumer navigate that information and make smart decisions when buying or selling real estate.  They understand the power of technology as they embrace the agent blog (ex. Noah Rosenblatt's UrbanDigs), the video tour with ProperTV and maintain a powerful presence on social marketing sites like Twitter and Facebook.

So for the rest of the brokerage community out there...take a good hard look at Halstead.  As far as the big companies go, they are without a doubt the one that understands the direction in which this industry is heading and the leaders in implementing all that technology has to offer.  All of this in an effort to better serve those who matter most...consumers!

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Greg Cooper is a former radio personaility turned real estate agent in Carmel, Indiana.  So what does he have to do with Manhattan real estate?  Check out his commentary on "The Market" and se more of Greg at http://www.gregcooper.tv:

That about sums it up and i couldn't agree with Greg more.  Whether you are selling real estate in manhattan, Carmel, Indiana or Timbuktu, the market is what someone is willing to pay for your home...nothing more, nothing less.

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The Manhattan real estate transaction is ANTI-GREEN!  It is archaic!  It is wasteful!  It is insane how much paper is wasted in one single real estate transaction in a day when scanners and digital images are so readily available and prevalent.

In order to understand my complaint here I must first give a little bit of background to the Manhattan cooperative housing market.  If your a non-Manhattan resident, continue reading.  If you live here and are familiar with co-ops, go directly to the next paragraph.  The primary Wikipedia definition of a cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise[1].   In New York City, when purchasing a co-op, one is buying shares in a corporation and the right to sign a proprietary lease to live in a property with rules completely determined and governed by a Board of Directors.  The Board of Directors is generally made up of between 5 and 9 people who are appointed via election to conduct the corporation's business including the review and approval, or not, of prospective shareholders (apartment buyers).  Unlike a condominium, a shareholder does not own real property and thus must obtain approval from the Board of Directors if they wish to renovate, refinance, or rent the home to someone (sublet).  Here is where the absolute waste of paper comes in.

Each member of the Board of Directors must review a prospective purchaser's application.  This application is comprised of detailed personal and financial information including several month's of bank/brokerage statements for every one of the purchaser's accounts, business, personal, employment, and housing reference letters, at least two years of income tax returns with all schedules and a variety of miscellaneous documents and forms that are required as part of the contract or by the Co-op Board themselves.  Assuming an average of 6 people on the co-op board and a low estimate of 200 pages per copy, we're talking about 1200 sheets, almost 3 reams of paper that are being disseminated to each and every Board for each and every co-op sale in New York City.   

The impetus for this post is a very easy solution that has already been implemented by the Board of Directors at 20 West 77th Street.  Make one copy of an application and all supporting documents, scan it, and disseminate it to Board members over a password protected web site. Not only would this save on paper but it would insure that the sensitive information that is contained in these documents doesn't fall into the wrong hands and create identity theft issues.

So why aren't more managing agents and/or Boards embracing this policy?  No reason at all in my opinion except that they haven't thought of it.  It would save money and time for not only real estate agents, but managing agents and co-op Boards as well.  And let''s not forget how many trees it would save too!

In an age where technology offers an efficiency never before seen in the real estate world, it amazes me that so many still choose to practice archaic methods.  

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The lack of an MLS (multiple listing service) in Manhattan has been the source of heated debate for years.  It continues to be a major topic of conversation as more and more websites pop-up both locally and nationally that aggregate listings information from multiple if not all databases.  

Until recently, if a buyer was interested in searching for a new home in Manhattan, they were forced to peruse a plethora of individual real estate broker web sites or they could turn to The New York Times on line as the best aggregator of property listings.  

Well those days are long gone as sites like Property Shark and StreetEasy have really taken hold in the Manhattan real estate market.  No longer can the brokerage community hold information hostage and since all co-op sales are being recorded now (back to June 2003), many of these sites provide tools that allow the consumer to do their own market analysis of property values including the search of sales history in and around specific addresses, as well as building and neighborhood information.

So if you are a buyer in today's real estate market, stop the madness of searching individual broker websites for property as none of those individual sites can provide a complete database of available property.  At best you will see less than 50% of what is currently available.  Spend your valuable time more efficiently and take your pick of StreetEasy or PropertyShark as your one stop shop for all Manhattan listings data.  The sites are so complete at this time that many agents and brokers choose them over their own internal listings systems.

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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. 

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I'm honored to have been asked to host the Carnival of Real Estate again this week and I am pleased to say that there were a lot of great submissions to peruse.  I had hoped to come up with some clever theme for this week's Carnival but alas my brain is fried from all the goings on related to opening my new Heddings Property Group office.  

With that said, given the emotional roller coaster that so many in this country are "riding" right now, I have decided that this week's submissions will be categorized in a range of emotions.  Not necessarily those with which I'm currently familiar (a few perhaps) but let us begin with...

HOSTILITY

• From Marlow Harris of 360Digest comes Whack-A-Mole? No, Whack-An-Agent which humorously reminds us of just how hostile people can be towards real estate professionals.

DESPAIR

• Another Extreme Makeover unhappy ending as a Kentucky Family Decides to Sell Their Extreme Makeover Home from Diane Tuman at ZillowBlog.

HOPE

• Yes there is hope on the mortgage front: Home Loan/Mortgage Resources Blog shows up twice this week with Home Mortgage Refinance: The Making Home Affordable Plan May Help from Bradley Marmer and Steps To Lower The Interest Paid On Your Mortgage from Graham McKenzie.

WONDER

• Of course I believe that everyone should have a roof over their head but this is precisely the type of lending that got us into this mess in the first place no?  Check out Where To Get A Bad Credit Loan Mortgage from Mortgages Explained Blog

HAPPINESS

• Money definitely can't buy you happiness but fiscal responsibility can't hurt.  If you haven't read SectorMatic Money Journal's 7 Keys to Financial Survival, well then, you don't know Jack Schmidt!

RAGE

• I chose rage here because the mere mention of Bidding War enrages oh so many and immediately conjures up feelings of distrust, anxiety and the like.  Lauren Mitchell from Toronto's Living In the Neighbourhood brings us Toronto Real Estate Bidding Wars Return. Check Out Lauren’s Top 10 Buyer Beware List.  I can share anecdotally that I have clients moving back to NYC from Toronto and they have confirmed that the Toronto market  has hit bottom and bidding wars have indeed returned!  Grrrrrrrr...are you angry?

FRUSTRATION

• Is government meddling in capital markets really the answer to all of this country's financial woes?  Many think not and Jay Thompson, ThePhoenixRealEstateGuy suggests perhaps the government should just practice a laissez-faire policy in How the Government can Fix the “Foreclosure Crisis” 

CURIOSITY

• Are people really trying to present different personas on social marketing sites?  Drew Meyers at GeekEstateBlog brings us Personal Business, Business Personality, and Social Media  in which he discusses Notorious Rob's (aka Rob Hahn whom I recently met on a Social Networking Panel) interview of Todd Carpenter of NAR.  Todd shares a quote from his friend Kit Mueller who says that having separate personal and business profiles on-line is akin to "showing up at a cocktail party twice. Once in your suit, then in a Hawaiian shirt"  I agree that social marketing is just that...SOCIAL and often personal.

And last but definitely not least is something I am all too familiar with when it comes blogging on a daily basis...,

DESIRE

• From Jim Cronin's Real Estate Tomato comes How Does Teresa Boardman Post Every Day To Her Real Estate Blog?  I'm printing this one and keeping it on desk in an effort to pick up the posts again here at TrueGotham.

So that's it everyone.  Thanks to all who submitted posts and I apologize to those whose submissions I was unable to post.  

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In this TrueGotham video blog I discuss my departure from Prudential Douglas Elliman to open a new office for The Heddings Property Group at Charles Rutenberg Realty. Exciting times and incredibly invigorating but moving smoothly thus far.  I also briefly touch on current Manhattan real estate market conditions, the discovery of a blog snafu and share some exciting news regarding the Wall Street Journal.  Check it out: 

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Jonathan Miller, appraiser extraordinaire, is indeed a Chart Master as evidenced by these beautiful works that illustrate Absorption Rate by Price and Neighborhood.  For those unfamiliar, the absorption rate is defined as the number of months it would take to sell current listing inventory at the current sales pace. 

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Here is the first of what i hope will be many quick video snapshots of the Manhattan real estate market and what is going on in and around the NYC real estate world.  Be gentle as it is my first attempt at this. 

Today's video blog topics:

• Is Coldwell Banker shuttering its NYC offices?
• Memorial day Weekend is a slow time for real estate.
• A short sale delays a closing.

Check it out:

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If you're considering hiring a real estate professional to market and sell your home in today's challenging environment, may I strongly suggest hiring a team as opposed to an individual.  An increase in inventory paired with a decrease in the pool of buyers has resulted in a slower spring market than most have grown accustomed to. 

All of that said, it has never been more important to have multiple agents available to physically show properties precisely when prospective purchasers want to see them.  Here is just one example of how a multi-member team benefits a seller:

Buyer calls for an appointment for 10:30AM on Friday:

Individual agent:  "I have another appointment at that time so can you do 3PM?"

Buyer's agent: "Sorry I only have the client in the morning."

Result:  With more inventory to peruse in today's market place there is a very good chance that this buyer will find something else without ever seeing your home.

Solution (TEAM APPROACH):  "Of course we can show at 10:30AM on Friday.  You will be meeting so and so from our team and their cell phone number is blah.  They will see you then."

It really is THAT simple!  More bodies, more availability to show and SELL your home.  In a market where buyers have more choices, you absolutely want to make sure that your property is among the pool of those from which they are choosing.  If they can't see it, you can't sell it.

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The spring residential real estate market is in full swing albeit quieter than the same time last year.  In addition to less volume, there is one major impediment to deals getting done in today's marketplace.  That obstacle is price.  Although most sellers have accepted that the market has declined between 20 and 40% from peak levels (depending on the neighborhood), buyers are seeking greater discounts in an effort to hedge the possibility of further price depreciation.  The result of this gap in psychology is preventing price discovery in the market.

Anecdotaly I have seen at least 3 transactions in the recent weeks where buyers and sellers were separated by as little as 2-4% of the asking price with neither side willing to budge.  And so far, both sides are holding their ground even unwilling to split the difference.  In an effort to make a deal, buyers are asking sellers for items like stereo systems, flat screen TVs and furniture to be included in the sale.  Some sellers are agreeing to such concessions while others stand firm patiently waiting for a better deal to come along.

So while some deals are being made and others remain in a stalemate, we seem to be at least nearing price discovery.  Until that time, let the marathon negotiations continue.  Never a dull moment in Manhattan residential real estate.

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A lot going on behind the scenes here at TrueGotham and stay tuned for some very exciting news.  In the meantime, in an effort to stay connected to my readers, here's a quick snapshot of my current business:

• Buyer traffic has increased-36 people at open house in West Village.
• Number of bids has increased-2 unacceptable bids on property listed for 4 months, 3 bids over ask on West Village condo, 1 bid each being negotiated on 2 other properties listed for 3 months and 1 month.  Others expected on listings of 6 and 7 months old.
• Negotiations are still analogous to running a marathon with deals taking longer to finalize as both sides change terms as the process plays out.
• Price discovery may be nearing as the psychological gap between buyers and sellers narrows.  2 recent buyers lost "their special home"  to higher bids while in lengthy negotiations.
• I know this is contradictory but asking prices remain all over the map with some factoring in a 20-30% negotiating cushion and others pricing more appropriately for today's market.

That's what I'm seeing.  No spin...just facts.  Volume and prices remain down YoY and it's anyone's guess as to when the market will begin to stabilize.  Inventory seems to have stopped it's climb for now which may indicate the imminent stabilization of prices. 

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You can assume that when I haven't blogged for a week or more that I'm either on vacation (not this time), bummed out about the current market (not that either), or so darn busy that I just don't have time to blog.  The latter is absolutely the case as I'm currently negotiating bids for 2 buyers and accepting bids and working on contract signings for 5 other properties on behalf of my sellers.

I'm still contemplating taking the leap to video blogging which I believe would be more efficient so stay tuned as I gain the courage to show my face once again on TrueGotham.

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Regular readers of TrueGotham know all too well my irritation at the mis-quoting of square footage.  I even did a 5 Part Web TV series to address just that topic.  It has unfortunately been determined that measuring square footage is not an exact science and coming up with an accurate measure of a property seems to be nearly impossible.  So imagine my incredible dismay this week when a seller and I exchanged the following emails:

ME:

Just received square footage back from floor plan drafter and he measured at 1095sf. From where did 1350sf number come? Big difference and I can’t market at 1350 when measured at 1095. Just want you to know that I will be listing at approximately 1100sf

SELLER:

The 1300 sf number was taken simply from past listings for the "e" line in the building. They are all supposed to be identical. Its possible that people were including the sf of the balcony...The "m" lines is supposed to be marginally smaller than the "e" line, and don't have a balcony. There are 3 currently on the market, listed at between 1250-1300 sf. We either overlooked something, or everyone else in the building is lying.

ME:

Probably the latter but I will investigate further.  I am willing to not list sf and inform those who ask that other E lines are listed between 1250 and 1300sf but I can't market as 1300sf. Make sense?

SELLER:

Unfortunately, that doesn't really address my concern. The way we see things, the unit's biggest selling point is the space you get for the price (but it's NOT as much "space" as he wants to claim!). Listing a number that is below its actual equivalents undercuts us, and not listing the sf seems to defeat the whole purpose. I realize that brokers will understand what is going on, and inform people appropriately, but everyone I know does their own research as well. I know I did, and space was the first thing I looked at. (He should have done more thorough homework and he would have known he purchased 1095sf and not 1350 as it was marketed)

Can you at least call your colleagues who are listing similar units and ask why they feel comfortable listing at 1250-1300 sf? To be perfectly honest, this may very well be a deal breaker for us. (Most of my colleagues don't intentionally lie about sf . Some simply state the last number at which the property was marketed whether accurate or not)

ME:

I think that you should proceed with someone else as this just doesn't feel right to me. I'm sorry but I will not mis-quote square footage regardless of whether my colleagues will.

SELLER:

Douglas,

We were not asking you to misquote anything. (Really?!?! Seems he wants me to market his home as being 200sf larger than it is.)  We simply don't understand why your guy's numbers are so radically different than everyone else's (because we actually measured!) I am not saying they are right and you are wrong, I am simply trying to wrap my head around how the two methods could come up with such different calculations. Its not like we are talking about fly-by-night brokerages here, its Sotheby's, Corcoran, Bellmarc. Its even people at your own agency. (My point EXACTLY!!!) That said it seems that this is not something you are really interested in doing, and that you haven't been since your initial response on the 9th. That being the case, I agree its best we all go our separate ways.

Thank you for your time.

So that's that.  I'm not going to be representing these sellers with the sale of their 1100sf apartment because I won't lie and market it as 1300sf.  BTW...that is a 200sf difference!!!  That is a 10 x 20 foot room!!!  How can I look someone in the face and tell them that another 10 x 20 foot room exists but they just can't see it.  It's a magical room that the human eye can't see but we have to charge for. 

This is ludicrous and worse yet they will absolutely find someone to market this apartment as being 1300sf.  BUYER BEWARE!

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Had a blast on FoxBusinessLive today with anchors Connel McShane and Jenna Lee and IRA/401K guru Hugh Bromma, the CEO of the Entrust Group  Our discussion covered current conditions in housing markets nationwide, the confusion that everyone is experiencing from mixed messages in the media, market direction, and selling/buying options. 

 If you care to see the first half of the interview, here is the entire hour show. My segment starts at 23:45 into the show.

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Although there are still a very small percentage of owners who attempt to sell their own properties, those who are have become more savvy and sophiisticated in their efforts.  The owners of a 2BR/2BTH apartment in Lincoln Towers on the Upper West Side have designed their own website, BestHomeInTheWorld.com, that includes more information about their home than anyone could possibly imagine.  Complete with co-op board requirements and a link to the managing agent's website where one can find the purchase application, these sellers have left no stone unturned.  The owners are also offering a brand new Toyota Prius or a $25,000 cash back incentive to the buyers of ther home as well as a $5000 finders fee for anyone who sends them a buyer.  They have even embraced the power of video.  Check this out:

I'm going to resist any critique of the video or the website and simply commend them on an excellent marketing effort and wish them the very best of luck!

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The following data represents Prudential Douglas Elliman CONTRACTS SIGNED for all of New york City for the weeks ending 3-6-2009 through 4-3-2009:

Average Sales Price: 1,029,091
Median Sales Price: $666,250

%Discount from Last Asking Price: 9.70%
%Discount From Original Asking Price: 19%

Range of Sales: $160,000-$10,100,000

• <$500,000 31%
• $500K - $1MM 34% (65% Sold Below $1MM)
• $1MM - 2MM 22%
• $2MM - $3MM 8%
• $3MM - $5MM 4%
• >$5MM 1%

Transactions Sold ABOVE Asking Price: 2%
Transactions Sold AT Asking Price: 7% (9% Sold @ Ask or Above Ask)
Tans actions Sold BELOW Asking Price: 91%

Ownership:

• Cooperatives 59%
• Condominiums 40%
• Townhouses 1%

Regional Breakdown:

• East Side 28%
• West Side 23%
• Downtown 24%
• Midtown 10%
• Brooklyn 14%
• Harlem 1%
• Queens 0%
• Bronx 0%

Total Days on Market to Contract Signed:

• Average 173
• Median 137

Total Days on Market to C/S Since Last Ask Price:

• Average 81
• Median 55

Active Listings in Manhattan Market Qty:  up .005%

So here are the trends:

• Median sales price has decreased to $666,000 from $785,000
• Average sales price decreased to $1,029,000 from $1,086,000
• Discount from Last Asking Price stable at 9.7% from 9.5
• Discount from Original Asking Price slight increase to 19% from 17%
• Transactions sold at ask or above stable at 9%
• Majority of transactions, 65%, are under $1Million
• Median number of days on market to C/S since last ask stable at 55 days from 53 days

Transaction Trend:  The number of transactions on a monthly basis has been increasing since November. March’s transactions are up 24% over February’s transactions.

These numbers are exclusively those of Prudential Douglas Elliman but definitely serve to shed some light on what is going on in the current Manhattan real estate market.

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With all the negative press that the Manhattan real estate market is getting these days and a veritable stalemate occurring between buyers and sellers, Manhattan property owners are shifting their perspectives on how to best sell their homes in a challenging market.  Most are no longer interested in pricing their homes at unattainable levels and are much more receptive to aggressive pricing that gives buyers a perception of value. 

The shift has happened to such a degree that some sellers are even arguing with their agents who suggest high asking prices.  Just this week I had a seller suggest an asking price of more than 10% lower than I originally projected.  I generally have a reputation of pricing correctly but of course I sometimes get it wrong.  But it has been 15 or more years since I have had a seller tell me that they wanted to list at a much lower number than I had suggested.

With market dynamics remaining confusing at best, sellers are now getting on board and trying to appeal to an apprehensive buying pool by attractively pricing their homes.  These sellers will likely be just that:  SELLERS.

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Well better late than never.  Here is a list of links to all of the Q1 2009 Manhattan Residential real estate reports and absolutely no surprises.  Volume has dropped by more than half and median prices of resales are down 20% or more   But don't take my word for it, read for yourself:

• Prudential Douglas Elliman Report
• The Corcoran Report
• The Halstead Report
• The Brown Harris Stevens Report

I have also included some links to commentary on these reports of which the very best in my opinion comes from my colleague and friend Noah Rosenblatt at UrbanDigs.  Check out the way the press just eats this stuff up:

• Apartments Sell for Less if They Are Sold at All (New York Times)
• Manhattan Real-Estate Market Skids as Sales Slump (Wall Street Journal)

And there is plenty more if you check out:

• Curbed Roundtable: April State O' the Market Report (Curbed)

And lastly, check out Noah's commentary on how the media's portrayal of the "market falling off a cliff" couldn't be more inaccurate as the decline started as early as late 2007:

• Media Begins Manhattan 'Plunge' Effect (UrbanDigs)

Noah and I have been discussing with each other and in the open forum of one another's blogs that it would likely be 1Q 2009 before we would see hard number evidence of what many of us knew was happening since at least summer 2008.

Now for a bit of my own commentary:

• First of all, although the press would have you believe that the market has come to a complete stand still, it has not. 
• Volume pales in comparison to year's past but buying and selling of Manhattan real estate continues.  (We have 6 props in contract and are off to a better start than 2008). 
• To sell a home in this market, you must price well to grant buyer's perceived value. 
• Agents who have no experience with soft markets are pulling their hair out in frustration over the inability to get a deal done.
• More agents will leave the industry over the coming months and years as the "easy money" of the past decade is no more. 
• Prices will likely soften some more before they stabilize which is why sellers need to be ahead of the curve.  Most whom I speak with understand this and are pricing accordingly.  That said, no deal is easy these days as buyers continue to be anxious and patient.

And finally to steal a line from Noah's post:

Savvy buyers will be called 'vultures' and 'bottom fishers' for expecting a deal, and many will fail to see that this is simply a market where buyer and seller are simply not on the same page. Its tough on everyone involved in the transaction - the buyer that wants the deal, the seller that wants their price, and the broker that wants their commission.

I would only add that "vulture" and "bottom fisher" no longer have a negative connotation but may instead indicate what the "market value" is for a specific home. 

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Last Spring, I attempted to convince my wife that we should sell our 3BR condo on the Upper West Side, bank a nice profit, and move to a rental.  She couldn't be persuaded and pointed out that we didn't need to sell and that moving with our then 7 and 4 year old would be more hassle than it was worth.  You see, we love our neighborhood and our building.  Our kids are phenomenal swimmers because of the pool in the building and the children's playroom, basketball court, and yoga studio are better than having a suburban basement.  So we ultrimately decided that we would stay until the kids go to college in about 10 years. 

In September, the week before the Lehman Brothers collapse, I convinced my wife that cashing out might be a good idea regardless of the inconvenience of moving.  She "bought" my logic and agreed to list our home.  Since we weren't very motivated (she not at all), we listed the apartment at an aggressively high price thinking that maybe someone would want to live in the building so much that they would "overpay."  I even told my neighbor who was interested that she and her husband would be overpaying but we would be willing to sell if they were OK with that.  They are still in their 2BR on our floor but decided against the purchase of our place...no surprise.

Well Lehman went under, the Manhattan real estate market came to a stand still in the 4th quarter of 2008 and we again decided that we would stay in our very comfortable home for another 10 years or so.  Which brings me to the present.  Just yesterday a colleague reached out to me to ask if I would consider selling to his clients who are determined to live in my building.  I told him that for the asking price from last Fall, we would sell.  His clients declined our generous offer for them to overpay for our home...go figure. 

Today, I struggle with putting our apartment back on the market with the thought that someone may indeed come along and pay our asking price just to be in the building.  I'm delusional I know but I'm wondering what the harm is in marketing the apartment at a non-negotiable price and only showing to those who understand that.

The harm comes in that I would NEVER advise a client/seller of mine to do this in today's market as it is a pure waste of time.  Testing the waters today is silly as buyers are anxious and more savvy now than any time in the past.   So why the double-standard?  Why do I feel like it is OK to market my place at a ridiculous asking price when I would never accept the same from one of my sellers?  I don't!  There is no double-standard and we're not selling our apartment.

That said, if you or a friend/client wants a 3BR/2BTH condo in the Bromley on 83rd and Broadway and has money to burn, drop me a line :-)

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

The current Manhattan residential real estate market couldn't possibly be more confusing.  I'm not just talking about buyers either.  All the players in the game are trying to make some sense of the market as a whole.  Here's what I'm seeing that is making the heads spin of buyers, sellers, bankers, appraisers, real estate agents, and attorneys:

• No rhyme or reason to pricing:  It has become increasingly more difficult to compare properties in today's market place as sellers and their agents all have different perspectives of where the market is and where it is going.  Prices are all over the map with some properties priced higher than they would have been last summer and others priced as much as 40% below last summer's values.
• Perception of "value" varies:  Each buyer is coming to the table with their own perception of what value would be in today's market. Some appreciate a well priced home and others continue to shake their heads with confusion not being able to make sense of  or compare the 10 or so properties that they have viewed.
• Uncertainty over market direction:  No one can deny that the market has declined significantly and it remains challenging at best to determine if and how much further prices will drop before we see a stabilization. 
• Confused agents unintentionally hindering the transaction process:  There is no doubt that real estate agents want to sell the property that they represent.  That said, in trying to make sense of current market conditions, the advice to be patient can often bite us in the behind later in the process.  It is a fact that more often than not, the best offers come early in the marketing process so when an agent advises a seller to not counter an offer in an effort to keep dialogue going, they could very well be doing that seller a major disservice. If an asking price is off the charts, an offer of 20-30% below should be countered IMHO.
• Seller motivation varies:  We still have sellers out there who insist they "don't have to move" and are willing to be patient in waiting for "their price."  The problem is that the buyers are also waiting for "their price" which is causing a bit of a stalemate in many cases.  No seller wants to be perceived as desperate and no buyer wants to feel that they have over-paid in a soft market.

These are just some of the factors that are contributing to the confusion that is today's Manhattan real estate market.  Making sense of it is no easy task and requires a greater commitment to diligence and research than I have seen in my 17 years selling Manhattan real estate.

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Unlike the Manhattan real estate market of the past decade, many of today's transactions include mortgage contingencies for buyers.  And until last week, it had been quite a long time indeed since I had a buyer request an extension to obtain a mortgage commitment from a bank.  The typical 30 day period granted in most contracts to get a mortgage wasn't enough for 2 separate buyers last week as one buyer's agent called our office pleading for an extra day (received that commitment yesterday) and the other asked for another 2 weeks (still waiting on their bank).  Obviously this makes sellers uneasy in such a shaky market but it seems to be a result of multiple factors:

• Banks are "allegedly" inundated with refinance applications with interest rates at historical lows (for loan amounts below FHA guidelines).
• Banks have also seen an increase in new purchase applications as a result of the same low interest rates as well as the fact that buyers are often encouraged by "price-chopped" deals they see in the market place.
• Underwriting guidelines are much more strict than in the past with an increase in liquidity and income requirements as well as credit scores.
• Banks are also checking and re-checking buyer information throughout the lending process all the way up to the closing day (ex. employment verifications being done 24-48 hours prior to closing).
• Mortgages are not only more difficult to obtain, but there are also fewer banks providing them.

It has always been important, but never as much as it is in today's market to determine a buyer's qualifications prior to accepting a bid and going into contract.  But don't sweat the delays as they are par for the course in this bizarre lending world.

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I'm absolutely embarrassed that I have not blogged since February 25 and this is without a doubt the longest dry spell since this blog's inception.  No coincidence that it is also the most challenging market that I have seen in my almost 17 years and I think complicated market dynamics are the root cause of my blogger's apathy.  I have chosen not to add to the doom and gloom media reports of a crashing real estate market although with prices down in some areas as much as 40% in such a short period of time, I'm also not going to pretend that all is rosy.

The focus of TrueGotham has been and will always be on integrity and maintaining an honest voice that is broadcast from the trenches of the Manhattan real estate market.  That said, here is what is happening in my business right now.

• Marathon Negotiations:  Buyers and sellers are playing a game of cat and mouse to see how far each side can push the other in relation to bending on terms.  A meeting of the minds can take weeks and even a month and a contract signing may take even longer with attorneys often suggesting term changes that have already been agreed upon by the parties involved.  Creative terms are getting deals done...stubbornness is not.
• Value is Key:  Buyers are willing to step up and purchase in today's market only if they truly perceive value.  Many are putting down large chunks of cash in order to take advantage of historically low mortgage rates for the remainder of the purchase price within FHA guidelines.
• Sellers are Listening:  We have reached a point in the real estate market where the seeming majority of sellers are willing to price aggressively out of the gate or make big price adjustments within weeks of bringing to market.
• No Deal is a Deal Until Closing:   Co-op boards seem to be more discriminating of employment and financial status for obvious reasons and banks are taking FOREVER to generate commitment letters and loans because both the refi and new purchase markets are flooded due to low rates.
• Testing the Market is a Waste of Time:  Pricing remains the single most important factor in determining whether or not a home sells.  For those with inflated asking prices hoping for the "right buyer" to come along, "stop wasting your time."  Also consider the occasional case where an agent just wants your home to generate buyers for other properties.  Most of us are in the business of selling homes, not listing them.

So that's what I'm experiencing right now.  So basically ,the time, effort, and energy required to sell Manhattan real estate (for me) is inversely proportional to the desire to blog.  But I promise to try harder in the coming weeks.

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As media reports continue to swirl about our struggling economy paired with the likelihood that it is going to get worse before it gets better, some prospective, yet reluctant purchasers continue to circle Manhattan real estate just watching asking prices adjust downward.  Case in point:  A buyer with whom I have been working recently bid $3,000,000 on a property asking almost $3,800,000 only to be laughed at by the seller's agent who likely persuaded the seller to ignore this all cash bid.  Not even a counter offer.

That was about 6-8 weeks ago and that same apartment is now asking less than our original cash bid of $3,000,000.  This would seem like great news for the buyer but for many who have had their eyes on specific properties just waiting to pounce, the psychological barrier of significant price drops is only serving to push them further from pulling the trigger.  Now this buyer is thinking of bidding $2,500,000 or less which also isn't likely to be well-received by the seller and is much more likely to prevent the seller from taking seriously any bid that my buyer puts forward in the future.  Unfortunately, all too often, the bidding process becomes a p*ssing contest and emotions are evoked that make a business transaction a personal war of sorts. 

I have written many times here on TrueGotham about how important proper pricing is to selling a home but I can't express it's importance enough when you are in a soft or declining market.  A seller who takes an offer personally or is insulted by a bid needs to step back for a moment and evaluate "real" market conditions and what is actually going to contract in today's residential real estate market place.  For example, the above seller may have come back to the buyer with a counter offer of $3.5M and settled at a sales price of something in the $3.2M range.  Certainly they would have been better off than their current ask of under $3,000,000. 

Of course hindsight is 20/20 but my point again is that NO OFFER should be totally ignored in today's market.  That said, even if a seller chooses not to counter an ultra-low bid, they need to digest the bid and appreciate that the market is speaking to them.  Perhaps a re-evaluation of asking price would then come sooner than later resulting in a higher final sales price than those who choose to totally ignore  the "bottom fishing" bid.

So what about the buyers who continue to watch asking prices for some properties fall?  When do these "bottom fishers" reel in the big one?  I don't believe there is an easy answer to this question as each buyer has a different financial picture, priority list, as well as time-line for ownership.  I think each buyer must evaluate their comfort level making a purchase in today's market based on their current living situation and the amount of time they intend to live in the new home.  And one can't overlook the comparison of property values from peak to now.  If I told my buyer last year that a bid of $3,000,000 would yield him a home asking $3,800,000, he would have snapped that place up so fast.  Now the speculation that the same apartment may be worth $2.5M or less in the coming months is a psychological barrier to him buying his "nearly perfect" home. 

My point is when does the bottom fisher stop bottom fishing?  Will they continue to underbid properties as prices decline never willing to pay the price at which a rattled seller is willing to sell?  Will they ever buy something or will they wait until they perceive that the market is actually at it's bottom?  Only time will tell but as many wait for a perceived market bottom, others are buying homes for themselves and their families that they plan on enjoying for many years to come.  For each buyer the "jumping in" threshold is different and for buyers and sellers alike, there is always hope that patience and persistence will pay off. 

And to answer the question posed by the title of this blog...it is a rare event indeed where a buyer's perfect property is owned by a seller willing to take a bottom fishing bid...but not impossible.

Posted By Douglas Heddings | Permalink | 18 Comments | Email This

One year ago in January of 2008 and for the 10 years prior to that, my business consisted of representing approximately 95% sellers of which about half were employed on Wall Street.  It's no secret that Wall Street dynamics have changed drastically in the past year and so too has the make-up of my business. 

This year, I have no Wall Street buyers who are ready to "pull the trigger" and only 2 of the 11 Manhattan properties that I'm currently representing for sale are owned by Wall Street professionals.  Both are still employed and although one had a rough year, neither are desperate sellers at this time.  Most of my friends, family and previous clients whom earn their living on The Street are in a holding pattern to see how things shake out this year.

Not surprisingly, I am also working with more buyers (about 30% of my biz vs. the 5% of the past decade) but not nearly as many as I would like as many wait on the sidelines to see how the market shakes out in the coming months.  That said, more buyers have indeed entered the fray over the past few weeks.  So just who is buying Manhattan Real Estate TODAY? 

To illustrate the change in buyer and seller profiles I'm talking about, here is a breakdown of the buyers and sellers that I'm assisting in TODAY's real estate market:

SELLERS

• 2 Estate Sales
• Private Equity
• Marketing
• Trader
• 3 Attorneys
• Entrepreneur
• Information Technology
• Sales

Buyers

• 2 Writers
• VP of Communications
• Tax Consultant
• Media
• Software Developer

Although I have listed 11 sellers and 6 buyers, 2 buyers are purchasing my exclusive properties so the ratio is 11 sellers to 4 buyers right now.   Last year, I was working with almost exclusively Wall Street buyers and most (75%) of the sellers whom I represented also hailed from Wall Street.  As you see above this year is markedly different.

That is what is going on in my business right now and I would love to hear from buyers, sellers and my colleagues regarding what you are seeing in TODAY's Manhattan real estate market?

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Don't hate me because I'm busy!

With 9 active properties for sale, 5 properties in contract and 2 pending contracts, these days are quite busy for me and my team.  I can just hear the comments now accusing me of 'broker-speak" and "spin" which is why I was momentarily reluctant to post just how busy I am right now.  But since I never hesitated in the past to report declining prices, increased inventory, or challenging market conditions, here goes...

Buyer traffic over the past two weeks has increased exponentially as if someone has turned on the once dripping Manhattan real estate faucet again.  Of course as always, this is anecdotal but many of the agents whom I meet at property showings are experiencing the same increase in volume over the past couple of weeks.  And it isn't just an increase in traffic volume, but an increase in deal volume as well.  Here are a few things that I am seeing that may be cause for this phenomenon:

• Increased Credit Availability:  Despite all the talk of how no mortgage money is available, several of my buyers and buyers of properties that I am representing are being offered 75% and even 80% financing from banks like Wells Fargo and Chase.
• More Realistic Asking Prices:  Properties that have been adjusted to levels that make more sense based on current market conditions are seeing the most traffic and the greatest number of offers. 
• Reasonable Sellers:  Most sellers to whom I speak these days DO NOT have their heads in the clouds.  They have more reasonable expectations regarding sales prices and are much more willing to price right out of the gate and/or negotiate to a level that gives buyers that perception of value for which they have been looking.
• Savvy Buyers:  Most buyers to whom I speak are very knowledgeable of market inventory including recently sold comps.  If they perceive a property as being priced properly for today's marketplace, they will bid appropriately.  If not, they will bid what they perceive the place is worth with less concern about insulting a seller.

Could it be an Obama induced Dead Cat Bounce? Perhaps, but it is definitely a bounce...in activity that is.

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Adapt or Die!  It is truly that simple.  I have been writing here for months now about how challenging the current real estate market has become and just yesterday after a lengthy and intelligent conversation with my friend and fellow blogger, Noah Rosenblatt of UrbanDigs, it dawned on both of us that those who are fighting against market forces whether agents, sellers, or even buyers are experiencing significantly more challenges than those who are adapting to current market conditions.  I have noticed in my own business that since I have accepted that I am no longer an order-taker as I often was in the past decade, but more of a mediator, I'm experiencing fewer "challenges." 

Relative to the last decade, there is no denying that we are in a new era of real estate sales, marketing and negotiation.  Having said that,  we're not in completely uncharted waters here.  Most recently, the market of the late 80's and early 90's presented a similar set of challenges where inventory and time on market rose and buyers and sales prices descended.  Again, I'm not trying at all to downplay the severity of what is going on locally on Wall Street, the nation, or the world.  In many ways, we just can't compare this time to the late 80's/early 90's.  But in some ways we can and having sold Manhattan real estate since 1992, here is my personal experience with both from the perspective of buyer's, seller's and agents:

Buyers:  Trying to guess the bottom of the market?  Good luck.  There will absolutely be a small percentage of you who successfully buy at the bottom.  There always are and there were those who "stole" apartments back in the early 90's (mind you I remember people saying to me that they would never pay $500K for a Classic 6).  That said, determine your wants, needs, and time line for home ownership.  Do you have to move?  Do you want to move to a larger space?  To a new neighborhood?  How long do you plan to reside in this new home?  Calculate what you can reasonably afford and take advantage of increased inventory with the understanding that only a small percentage of sellers are going to entertain ultra low offers.  It is just psychologically too painful for most to sell at a loss and although some may indeed be in that situation, you will find that most will chase prices down before selling at a large discount up front or they simply won't sell.  Remember that your home is not a liquid asset but a place to hang your hat, perhaps raise a family, and prevent more shelter from the elements than a cardboard box.  No one is going to talk you into moving...the market is what it is and if you want to move, you'll move.  If not, stay put.

Sellers:  Determine your motivation.  If you don't have to or want to move anytime in the next few years then don't.  These markets are not the time to "test the waters" because buyers are leery and fearful of catching a falling knife.  My experience has been that in order to sell in a market that is perceived to be declining, you must price ahead of the downward curve in order to give a buyer the perception of value.  Fight this buyer psychology and you lose money...I promise.  (Example:  seller received bid last Spring for $1.85M on an ask of $1.995M and said "no way, we will wait for our asking price"...that same apartment is now receiving bids in the $1.2M range).  Also be mindful that if you are trading up or across a market for larger space or change of location, you may actually benefit from a declining market.  Find a real estate agent whom you trust with a proven track record and follow their lead.

Agents:  Don't compromise your integrity or be short-sighted by focusing on a single transaction.  If we treat our clients like family who may sometimes need some 'tough love" then we are doing them a greater service than simply promising them the world when we aren't at all certain we can deliver.  Do your homework and cooperate with your colleagues so that you have the best information to provide your sellers and prospective buyers.  We all need to cooperate and share contract prices on things that haven't closed or making sense of this market will remain a difficult task indeed.  Buyers and sellers alike look to us to help them make sense of a very confusing marketplace and it is in their best interest  to have us accurately analyze and interpret CURRENT housing data in a way that helps them make an informed decision, even if that decision is not to buy or sell. 

So what I'm saying here is that once the parties involved (buyers/sellers/agents) accept the new market dynamics and embrace reality, the market will no longer seem so challenging but more like a normal housing market where offers are made, negotiations take place, and homes change ownership.  We're not there yet but the path doesn't have to be such a complicated one.

Acceptance is the key!

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

For those agents/brokers out there who are thinking about starting there own real estate blog; think long and hard before you take the leap.  Evidenced by my lack of posts as of late (the last all the way back on January 6), the ability to blog in a complex and difficult to navigate market is almost an impossibility.  There just has been no free time to spout my opinions about what is going on or the facts about a very bizarre market place.  I'm a broker who blogs (not a blogger who occasionaly sells an aparrtment) and serving my clients remains my number one priority.  That said, here's a brief snapshot of what is going on in my business right now (anecdotal of course):

1. Since the first week of January, I have brought 4 new properties to market for a total of 10 that I am exclusively representing at this time.  I am pricing ALL new properties at levels of approximately 25% below sales prices of same or similar units this past summer (2008) resulting in a significant increase in buyer traffic.
2. 2 contracts were signed just before the holidays and 3 have been signed in the past week.
3. More "toe dippers" are testing the waters to determine if they are ready to buy.
4. 2 of my buyers who were on the sidelines have entered the "looking" fray again and are liking what they are seeing in terms of prices versus last year.
5. Appointment requests for our exclusive properties have seen an exponential uptick since pre-holiday market.

It will be interesting to see how things play out in the coming weeks and months but most of my colleagues are experiencing an increase in activity that I can only attribute to more realistic sellers paired with some easing in the credit markets.  Cash still remains king and there are some incredible deals to be had for the fortunate buyer who is able to find multiple properties that suit their needs.

Posted By Douglas Heddings | Permalink | 14 Comments | Email This

Once upon a time, in a town known as Gotham, property owners reveled in a housing boom that saw ultra low inventory and a plethora of "well-qualified" buyers (thanks to lax lending standards).  Buyers found this environment to be incredibly daunting and downright frustrating as they almost always were just one of many bidders vying for the opportunity to own their piece of the Big Apple.  Can you imagine what it was like for these agitated buyers when they would have to bid over the asking price only to discover that someone more eager and qualified was willing to pay even more?  It seems like only yesterday that this was the case...oh...it was! 

But now things are different.  The past decade was challenging to say the least for prospective buyers of Manhattan real estate, but today is a new day and a different era in the New York City real estate market and requires a shift in psychology for buyers and sellers alike.  Back in the peak of the housing boom, buyers often feared that if they didn't pay the asking price or better that they would not only miss out on the opportunity of buying that particular home but they also feared that they may insult the seller.  On the other hand, sellers were often insulted by and in a position to scoff at low offers all the while knowing that someone would come along and pay their price...or more!  Which brings me to my point: 

The days of insulting bids are over.

In today's real estate market, both buyers and sellers must be mindful of changed market dynamics.  Buyers are no longer afraid to submit what were once deemed insulting offers sometimes as low as 20-30% below asking prices.  And sellers are no longer ignoring these once insulting offers.  The Manhattan real estate market has moved closer to one of normalcy where offers are made, countered by sellers, and negotiated to a level that is mutually acceptable.  The negotiation process no longer happens within 24-48 hours and almost never includes sealed bids or bidding wars.  Although many sellers are still selling for considerable profits, higher inventory and patience have become kings for buyers. 

So I leave you with this:

Buyers: Don't worry about insulting someone with a low offer.  Due diligence regarding comps and market conditions is key.  Make your offer and defend it with hard data.  You must also remember to be reasonable (bidding $2M for a place asking $6M will get you nowhere whether or not you think it is overpriced)

Sellers: Consider all offers as serious and don't take low offers personally.  Imagine yourself buying property in today's market to help take the sting out of low offers.  Also have hard data at your fingertips to support your asking price but also be reasonable (ignoring a bid of 20% below your asking price may come back to bite you later).  Keep lines of communication open when negotiating in an effort to effect a deal.

Posted By Douglas Heddings | Permalink | 17 Comments | Email This

I have written here, quite infrequently as of late, about how difficult it has been to blog because of the amount of time and energy that each and every transaction demands in today's residential market place.  That said, there are some things that I'm seeing which further elucidate current market dynamics.

One change that I'm experiencing, which is a huge shift from conditions of the past decade are bidding wars.  Now before you start screaming at me that I'm full of you know what, I'm talking about bidding wars orchestrated by buyers.  I have been on both ends of this phenomenon lately and here is how it goes:

• As Seller's Rep:  I have a property that I'm representing that received a bid about one month ago.  The seller countered but not to the prospective purchaser's liking.  While attempting to negotiate a fair price, another similar unit came on the market in the same building.  Needless to say, the prospective buyer immediately informed us that he was bidding on that unit also.  This morning I received a phone call from that buyer stating that he "wants to hear from each seller with their very best/bottom price before end of day Tuesday at which time he will decide which unit to purchase."  Who woulda thunk it?...a buyer with leverage.  Oh how things they are a changin'! 
• As Buyer's Rep:  I recently submitted 3 bids on behalf of a buyer fully disclosing to all agents that three bids were being submitted.  The offers were made with an expiration time of 5PM the same day they were made.  The buyer received an accepted offer of $1,300,000 on a property asking $1,795,000. 

Now this may sound incredibly optimistic for buyers who are considering taking the plunge into home ownership here in Manhattan.  But not so fast!  There are 2 major factors that determine the success of the bidding process in today's real estate market:

• Seller Motivation:  Although there are very few sellers in this market who are testing to see what they can get for their homes, there are many who just don't want to accept how much the market dynamics have changed in the past 6 months.  Sellers who can appreciate the shift in market psychology are much more likely to entertain low but "reasonable" bids making them also more likely to actually sell.
• Seller Agent Expertise:  Unfortunately, some agents can't handle the pain of being the bearer of bad news and do their sellers a disservice by giving them false hope that a better offer will come along.  This is almost never intentional in my opinion but something happens in the communication that leads sellers to believe that they should wait for something better.  Often times, the first offers are the best and something better may never arrive.

With all of that, as inventory is likely to increase further, the buyer with more than one property option is indeed sitting in the cat bird seat...unless of course the sellers or the agents of all of those options have their heads buried in the sand.

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Numerous friends, family, and regular readers of TrueGotham have been asking why so few blog posts.  My answer:  I'm trying to stay positive and that has been a very difficult task indeed.  I will not compromise my integrity.  So rather than spew a lot of hot air about the health of our local real estate market, I have felt uninspired as I am working exponentially harder for significantly less reward.  My job as a real estate broker has always been as consultant and often confidant and these days I am more frequently the bearer of bad news. 

So as my days are filled with making low offers on behalf of buyers and negotiating low offers on behalf of sellers, I have lacked the energy to blog.  I'm not in the mood these days to beat a dead horse.

Tomorrow morning I am heading out of town for the holidays and leaving the business behind in the hands of my team for 9 days in an effort to recharge and rejuvenate.  I won't be blogging while I'm away but I will of course be available to my clients should they need to call on me.

I will be back blogging again after the 1st.  In the meantime, a very happy holiday and a healthy and prosperous New Year to everyone.

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

My friend Noah at UrbanDigs wrote an excellent piece today on the Buyer/Seller Disconnect (a MUST read for both buyers and sellers in today's market!) and I couldn't resist sharing my 2 cents.  So after a lengthy comment on his blog post, I decided to make that comment a post of my own here on TG.  So here it is:

Having lived through and more importantly brokered through the painful market in the early 90's where homes took 2 or more years to sell and sellers were discouraged from given exclusives, I would like to make a couple of points about current market conditions:

1. Buyers with nerves of steel are getting some awesome deals right now and those who sit back and try to time the bottom of the market...well...good luck to them. I have signed contracts on 4 properties over the last 3 weeks. Asking price of $1.795M sold to my buyer for $1.3M. Asking price last year of almost $5M ($1M overpriced and should have sold last year for $3.7M) selling to my buyers for under $2.5M. One of my sellers who said he would never sell for less than $625K has a signed contract at $575K (as I say to my kids, "he's a good listener").  Another seller is awaiting delivery of signed contract after a 3 week negotiation almost 20% below an already attractive ask. All of these deals are being partially financed (between 50 and 80% borrowed money) at very competitive rates from savings banks or portfolio lenders. CORRECTION...one of these deals is an all cash transaction.

2. I think that a seller's agent who isn't drinking the kool aid and actually provides the service of pricing ahead of the downward curve is a HUGE asset in this market. Just received an email yesterday from a seller's agent informing me that the property has been reduced by 6%...I asked her what planet she was living on as the offer my buyer made 2 months ago at 20% below ask should have been countered and is no longer on the table. ALL bids must be analyzed and taken seriously if a seller really wants to sell. I have no desire to work with sellers who won't listen to current market conditions.

3. There WILL be a price point at which more buyers come back to the market and the smart ones will do so before the lemmings. Credit will ease up eventually and further price depreciation (IMHO) will make buying Manhattan real estate almost irresistible (unless they don't have a job which is a very real possibility).  Maybe this is just wishful thinking.  We shall see.

4. I believe that prices are down 20-25% from peak levels for deals that are actually getting done "today."  What sold last month and certainly what sold 6 months to a year ago is absolutely irrelevant in today's marketplace.

All of that said, buyer anxiety remains high (seller anxiety is peaking too) and I'm seeing buyers who receive accepted offers back out or attempt to renegotiate questioning whether they should have offered less. It will take a strong constitution for brokers, sellers and buyers alike to get through this real estate battleground but I'm seeing (anecdotal of course) some amazing deals getting done. It is ironic that everyone wants to buy a home or a stock (they should not be compared IMHO) when the value is climbing but everyone runs as values dip to attractive buy levels.

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Real Estate Connect NYC 2009 is just around the corner (January 7-9th) and I'm pleased to be speaking on a panel as part of the Digital Video Summit.  My panel, 5 Killer Uses for Real Estate Video, will address production, use, and most importantly ways to profit from real estate video?

For more on Real Estate Connect, here is a personal invitation from Brad Inman:

Hope to see you there!

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I have just received notification from Dan Shlufman that the Fed cash infusion just caused 30 yr fixed rate loans to drop to 5.375%. He suggests that those buying or refinancing act fast since this is unprecedented and may go away quickly.  If you currently have a rate over 6%, now is the time to refinance.  Here is Dan's offer for TrueGotham readers:

URGENT-HUGE RATE DROP IN INTEREST RATES

Yesterday’s infusion of cash into the banks by the Federal Reserve has resulted in an immediate drop of almost 1% in the interest rate on 30 year fixed rate loans. As of this moment (which may change at any time due to market volatility), interest rates on a loan of up to $417,700 are 5.375%! This is the lowest they have been since 2005 and almost the lowest on record. If you have a loan of this amount or less and a rate of 6% or greater, it makes sense to consider refinancing. As this may not last long, I suggest that people act fast and LOCK the rate. Do NOT wait and see if rates will go lower. Though they might, these huge drops tend to be short-lived and only last a few days.

As a service to True Gotham readers, and to protect the lowest rates, we will offer anyone who does a loan with us a free floatdown if they lock a rate and rates fall by another .25% after they have done so. This is a huge opportunity and the first good economic news in a long time!

You can reach Dan directly at www.fcmc.net or calling 973-574-0900.

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It has become increasingly more difficult for me to post blog entries as current market conditions are keeping me quite busy.  I'm not suggesting for one moment that I'm doing more business than I was in the recent past rather that the transactions on which I'm working are taking considerably more effort and energy.  From buyers wanting to renegotiate prices and terms on accepted offers to frustrated sellers unwilling to accept that market conditions have changed, the challenges of today's Manhattan real estate market abound.

That said, deals are being done but often not before an intense and lengthy negotiation process.  What used to take as little as 24 hours (in those insane multiple bid days) can now take weeks before a contract is inked.  And if a seller is fortunate enough to have a second bidder come along during that process, they must be incredibly careful and sensitive with their current buyer or often times they may end up with no deal at all.  Many buyers are actually spooked by  the presence of a second bidder and would rather not get involved with a multiple bid situation.  Everyone is trying to figure out when the current anxiety will subside and transaction volume will increase but until then it takes a well-informed buyer AND seller to reach a meeting of the minds.

In the meantime, many of the deals on which I am working are either all cash transactions or less than 50% financing.  What surprises most of the people I speak to is that financing at competitive rates is still readily available to qualified buyers from savings banks and portfolio lenders.  "Qualified" these days has taken on new meaning as income and liquidity requirements as well as credit ratings have increased, but mortgages are available and so are some amazing deals.  All of that said, although we are currently experiencing a challenging real estate market and it may not be the right time to buy for everyone, there are some incredible opportunities to purchase Manhattan property at very attractive prices.  It's only a matter of time before more buyers realize this fact and the market once again becomes competitive.

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The 3rd Quarter Hampton and North Fork Overview has been released by Prudential Douglas Elliman and Miller Samuel.

Highlights: The Hamptons/North Fork market continued to show weakness this quarter as evidenced by the decline in price indicators and number of sales, as inventory, days on market and listing discount expanded. While median sales price showed a decline of 17.3% off the record set last year at this time, median sales price was 1.6% higher than the same period two years ago. Price indicators by quintiles show declines in all segments but are roughly similar to those seen two years ago. Median sales price south of the highway was above the same period last year while the median sales price to the north continues to decline. There were fewer sales this quarter as compared with last year at this time as the continuing issues with credit and an economic slowdown impact demand. However, the rate of decline for number of sales was less than the pace seen in Manhattan, Brooklyn and Queens this quarter.

The following is more specific information by market area:

Hamptons/North Fork (Overall)

- Median sales price was $729,000 this quarter, down 17.3% from the prior year quarter amount of $882,000.
- Listing Inventory increased 11.3% to 1,991 units from the prior year quarter amount of 1,788 units.
- Number of sales decreased 16.9% to 355 units from 427 units in the prior year quarter.

Hamptons Market

- Median sales price was $830,000 this quarter, down 19.4% from the prior year quarter amount of $1,030,000.
- Listing Inventory increased 9.8% to 1,561 units from the prior year quarter amount of 1,422 units.
- Number of sales decreased 28.8% to 257 units from 361 units in the prior year quarter.

- Median sales price of all quintiles showed declines from the prior year quarter.
- Median sales prices “south of the highway” (rt 27) saw a 17.5% gain to $1,100,000 from the same period last year.

North Fork Market

- Median sales price was $575,000 this quarter, up 10% from the prior year quarter amount of $522,500.
- Listing Inventory increased 17.3% to 430 units from the prior year quarter amount of 367 units.
- Number of sales increased 48.5% to 98 units from 66 units in the prior year quarter.

- Median sales price of the first four quintiles showed increases from the prior year quarter, while the upper quintile posted a 3.3% decline.

Luxury Market (upper 10%)

- Median sales price was $4,800,000 this quarter, down 26.7% from the prior year quarter amount of $6,550,000.
- Listing Inventory increased 45.6% to 511 units from the prior year quarter amount of 351 units.
- Sagaponack had the highest average sales price at $13,000,000 but was only based on two sales. Luxury property sales were more evenly distributed this quarter.

Condo Market

- Median sales price increased 5.2% to $478,000 this quarter from the prior year quarter amount of $454,202.
- Listing Inventory fell 20% to 64 units from the prior year quarter amount of 80 units.
- Number of sales increased 43.8% to 23 units from 16 units in the prior year quarter.

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I'm two-faced!  That's right, I said it.  But now let me explain. 

In today's very bizarre world of Manhattan real estate where everyone is trying to make sense of the market's conditions and direction, I am finding myself sending mixed messages depending on whom I'm representing in a transaction.  

For my sellers, I am careful to price their homes fairly for today's marketplace and I arm myself with the comps and the documentation to support those asking prices.  So when a colleague or prospective bidder submits a bid of 30-50% below the asking price (yes as much as 50% below ask) with a grocery list of reasons why they think their bid is "solid," I'm finding it both aggravating and frustrating.  That said, current market conditions often require that these bids are considered for counter offers.  The irony here is that I am also at times that irritating low bidding agent.

For my buyers, I provide in depth analysis of current market conditions including comps, perception of market health and direction, as well as consideration of a buyer's level of qualification to purchase.  In some cases, this analysis results in me submitting bids as much as 30% below asking prices on behalf of my buyers.  

So navigating today's Manhattan real estate market is indeed challenging.  The role of the real estate agent has become even more important as both a defender of price and/or offers and an interpreter of a home's value based on current market conditions.  So although it appears that I may be sending mixed messages, the single message is very clear: each specific property negotiation requires independent analysis. 

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Oh what a difference a few weeks makes...

On September 29th I posted Making Sense of Manhattan Real Estate and described how incredibly busy I was on the day the Bailout Package was originally rejected.  Well it has been 3 weeks, the Bailout Plan was approved, the stock market is experiencing volatility not seen since the Great Depression, and although I remain busy, I feel that it would be misleading of me to not update those "deals" that I was working on 3 weeks ago.  So here goes:

• Accepted offer for 148 West 23rd Street, 11H.  UPDATE:  This deal has fallen through as Doctor is not confident that he can sell his current studio for enough money to make the move.
• Multiple offers being negotiated for 88 Jane Street, 3W after 3 days on market.  UPDATE:  Only one of the multiple offers remains and it is too low for the seller to consider.  A counter was submitted however and many buyers continue to hover and watch.
• 35 people showed for open house yesterday at 215 West 75th Street, 9C after 10% price drop and offers expected today. Price indeed overcomes all objections!  UPDATE:  Contract finally going out today after unbelievably extensive negotiating points and contingencies.  Should be signed tomorrow.
• Phones ringing with appointment requests for other exclusive properties that I'm representing.  UPDATE:  This is indeed still the case and activity seems to be picking up a bit of steam but with fewer offers being submitted.  Prospective buyers are circling and being patient.  Negotiations are taking place but at a pace much more palatable to buyers than in the past decade.
• Appointments being scheduled for buyer property tours later in the week.  UPDATE:  One of these buyers has an accepted offer and should be signing a contract in the next couple of days.  Another is bidding on something today.  The rest continue to wait for the "right" property at the "right" price to hit the market.

So today's Manhattan real estate market is not without its challenges mostly due to tight credit and buyer psychology.  The real estate agent's job has become increasingly more tedious and time consuming in an effort to bring a meeting of the minds during such a period of uncertainty.  Those who can stomach the turmoil and make sense of what is going on for their clients will become an even greater asset to their clients and the buying/selling process.

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Well, the big 3 have released their Manhattan Market reports this morning and here they are:

1. Prudential Douglas Elliman
2. Halstead
3. Corcoran

Again, we would assume the same data sets but the results are not exactly in line.  Prices were (past tense) up from same quarter last year but down from the previous quarter of this year.

I'm much more interested in seeing the 4Q 2008 and 1Q 2009 reports which would grant much more insight into the degree of softening that is currently underway in our residential housing market.

For an excellent analysis of the reports, check out UrbanDigs.

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It's no secret that buyer psychology has shifted to a more cautious perspective in light of the recent economic developments.  Although I remain busy, I must state that selling real estate in today's market is often more difficult than pulling teeth.  That said, I'm not sure that "I want to be a dentist."

Here are 4 obstacles that I'm facing in today's Manhattan real estate marketplace:

• Qualified Buyers:  This definition has changed significantly as buyers who want to borrow must put more money down, have more money left in reserves after purchase, and must have a higher income (not bonus) than in the past.  Some of the offers we are receiving are from purchasers who are no longer qualified.
• Asking Prices:  Asking prices are still all over the map from unreasonable to very aggressive and/or fair.  Despite how aggressively a home may be priced, most buyers remain reluctant to bid the asking price even when the home is priced below current market value.
• Multiple Bidders:  In today's market, more often than not, I'm finding that buyers would prefer to drop out of a multiple bid situation than consider over paying for a property.  Each offer must be negotiated individually and take into consideration all factors including most importantly, the ability to actually close on the purchase.
• Co-op Boards:  The challenges of finding a 'qualified buyer" don't stop at the financing level as the presentation to the co-op board must provide a level detailed insight into the prospective shareholder that gives the Board a level of comfort that the candidate will remain gainfully employed and be able to afford any future projects that a building may have to take on.

These factors all contribute to a negotiation process that requires experience and finesse.  More focus must be directed at qualifying each prospective purchaser as well as providing market data supporting asking prices.  It is indeed a more challenging environment in which to sell real estate.

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The Bailout plan has been rejected (via WSJ) and it's no surprise that the stock market has plummeted on the news.  So why am I still so busy?  I can't answer that except by updating my current transaction activity (by current, I mean last 48 hours):

• Accepted offer for 148 West 23rd Street, 11H
• Multiple offers being negotiated for 88 Jane Street, 3W after 3 days on market
• 35 people showed for open house yesterday at 215 West 75th Street, 9C after 10% price drop and offers expected today.  Price indeed overcomes all objections!
• Phones ringing with appointment requests for other exclusive properties that I'm representing.
• Appointments being scheduled for buyer property tours later in the week.

This is truly the most bizarre environment that I have experienced in my 16 years in the Manhattan real estate industry.  I know for certain that I will likely be attacked for reporting how busy I am but it is what it is.

I leave you with the most frequent comment from open house visitors who attended my 5 open houses yesterday:

• "We don't care what is going on, we need a place to live."

So with that, I'm going to make hay...and stash it in my mattress!

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Thanks to my friend and colleague Peter Comitini for designing this poll.

The poll is being posted here, at UrbanDigs and at Comitini.com.

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If you're selling your home in a declining market, you have 4 options to consider if your home is not selling:

1. Aggressive Pricing:  Pricing the property aggressively below competition will drive home the perception of value to prospective purchasers.
2. Rent:  If you are fortunate enough to own a condo or a co-op with a liberal sublet policy, determine if renting makes financial sense.  Consider the time horizon of how long you will be allowed to sublet and where you believe the market may be when that time expires.
3. Wait:  A seller may decide to take their home off the market and wait for the market to improve.  The big question here is just how long will one have to wait for the market to stabilize.
4. Foreclosure:  No elucidation necessary.

As prices soften in the Manhattan real estate market, sellers must evaluate their current living situation including their financial positions to determine just which of the 4 options above is most appealing to them.

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Sent to me this morning from a friend on Wall Street is this design for the new US dollar bill:

The five dollar bill is of Lincoln's backside!

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In the past week, I have received a few emails and comments from readers questioning my credibility purely because I refused to panic and spew negativity here on TrueGotham.  I think my track record speaks for itself so I'm not going to spend any time defending my views.  Panic and fear tend to hinder progress and action so I will continue to keep away from a doom and gloom perspective and do my best to highlight conditions in today's marketplace that may provide opportunities for my clients.  That said, as always, I will continue to provide a snapshot of reality and exactly what is going on in my industry (no sugar coating).

The 1000 point gain in the stock market over the past couple of days seems to indicate some level of confidence in the government's plans to soften the blow dealt by this current credit crisis.  Although many believe we're only in the 4th inning, this unprecedented time is being handled in an unprecedented manner.  The ramifications to our local housing market have yet to be seen as offers continue to be submitted and contracts continue to be signed this week.  Anecdotally,  I had a contract signed on Monday by an architect and yesterday a very solid offer on another property from a doctor was submitted and is being negotiated as I type this. 

As I've stated earlier in the week, there is no doubt whatsoever that the turmoil on Wall Street and specifically all of the layoffs and the changing face of the investment banking industry will have an impact on Manhattan real estate and perhaps even the quality of life in our city.  But let's not forget that despite the thinning pool of buyers from the Wall Street sector, local residents still need a place to live.  The profiles of the buying pool are definitely changing but architects, doctors, attorneys, ad execs, entrepreneurs, entertainers, athletes, and the like are still choosing to make Manhattan their home. Here's just a snapshot of my clients who are buying and selling in today's marketplace:

SELLERS 

• Pied a terre owners of a 2BR seeking a larger space to spend more time in the city.
• California professors also seeking a larger place in the city.
• Architect selling to find a new project to renovate.
• Family selling for bigger space for room to expand.
• Recently engaged couple moving to a larger space to start a family.
• Executor of an estate cashing out
• Executrix of an estate selling the family home
• Third executor of an estate (just realized that I'm representing 3 estates right now...very odd)
• Landlord who wants to get out of the landlord business and cash out.
• Couple who purchased neighbors apartment and decided not to combine.

BUYERS

• Architect who has sold a townhouse and is downsizing.
• Freelance writer moving to larger space.
• British family moving to US seeking large townhouse on West Side park block.
• Entrepreneur paying $2700/night for hotel room seeking place to permanently hang his hat.
• Writer and publisher seeking a larger space with views.
• Attorney and record producer seeking larger space for family.
• 2 attorneys seeking larger space for family.
• College professor moving from Greenwich.

And that is precisely why I remain busy and continue to choose to stay positive about people's desire to continue on with their lives and make Manhattan their home.

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158 year old Lehman Brothers has declared bankruptcy.  Merrill Lynch has been scooped up in the nick of time by Bank of America.  AIG is also talking bankruptcy.  And who can forget Bear Sterns?  All of the fallout from Greenspan's "easy money" mortgage days is finally going to have an effect on the Manhattan real estate market.  But I'm choosing not to panic for a multitude of reasons:

• Inventory MAY increase:  My friends and family (and I have a lot of them) on Wall Street won't likely be moving anytime soon as they hunker down for the remainder of this storm.  That said, some of the unfortunate unemployed will likely sell which could cause a much needed bump in inventory. 
• Buying pool continues to thin:  There is no doubt in my mind that with local layoffs at Lehman alone projected at over 10,000, there will be fewer buyers to snap up properties in all price points.  That said, note that the duplex penthouse at The Stanhope sold this weekend for $47.5M (via Curbed).   For qualified buyers, there will be some great opportunities (I'm not talking huge discounts here).
• Market psychology more shaky:  Even those who aren't directly effected by the fire sale on Wall Street are going to be more nervous about jumping into the market.  I think this will mean that trustworthy real estate professionals are going to be more sought after than ever before.
• Prices may soften further:  Depending on geographical location and apartment size, we will likely see additional price softening again, providing more buying opportunities. 

So for those of you who earn your living selling residential real estate in Manhattan, take a deep breath and understand that opportunities are going to present themselves over the next 6-12 months and believe it or not, Manhattan will continue to be a sought after place to live by people from all over the country and the world.  But it's going to be a wild ride!

ATTENTION SELLERS: Do you want to be ahead of the curve or behind it?  It's your call.  If you are considering a price adjustment, now is the time and be aggressive.  There are plenty of cash rich buyers on the sidelines just waiting for buying opportunities, but they want perceived value.

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It is my opinion that given the prices of New York City residential real estate, this takeover will have more psychological than direct economic impact on our market.  That said, it will most certainly have a more direct effect on some Manhattan owners as evidenced by the following question from Robert H and answer from our own mortgage specialist, Dan Shlufman:

Q.  I read the following story on CNN today and I was wondering if I could get your opinion? CNN states that the "bailout of mortgage giants should result in lower mortgage costs and make credit more available. But lending standards will stay tight and risky borrowers will still pay extra fees."

A.  It is impossible to know what the rates will be on 30 year fixed rate loans in the future. It is likely that the rates will go down since they are being kept artificially high at this moment due to a lack of liquidity in the bond markets (i.e. not enough activity). However, since so many factors other than Fannie/Freddie affect these things (e.g. inflation, world events, jobless claims, etc), it is irresponsible for CNN to report or any reputable analyst to predict a number for these loans.

Seems that more is to be revealed and no one is qualified to predict exactly what all of this will mean.  Stay tuned...

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When I entered the Manhattan real estate market 16 years ago this week, I was greatly attracted to the personal and emotional elements of the residential real estate transaction.  And over the past 16 years, I have seen the market ebb and flow with emotion playing different roles in the sales transaction.  Of course, sellers are often emotional about "letting go" of their current home as it may be the first home that they owned, the place where they met their current spouse/partner, or the roof under which they have raised their family and built so many memories (both good and bad).  In the past decade, buyers were also subject to the effects of emotional engagement as they searched for a home and they still are but much less so.

It is my experience lately that more and more buyers are thinking with their wallets instead of their hearts.  The current mortgage market, media reports of housing declines across the country, and the desire to avoid buying at what some think may be the peak of a market (we're past the peak in my opinion) are all important factors that buyers are considering when proceeding with the purchase of their future home.  Buyers want perceived value more today than they have in the past 10 years which is often frustrating for sellers who receive low ball offers on the properties to which they are so emotionally attached.  The perceptions of buyers and sellers are not only very different but also have absolutely nothing to do with one another.

What this all means of course is that in today's real estate market, a seller, more than ever, must try to remove their emotions from the sales process.  The buyers have already done so in most cases and are less frequently competing with other buyers for a home.  I coach my current sellers to do the following when marketing their homes and fielding offers:

• Price according to recently sold properties and those already in contract:  Don't put too much weight in the prices of currently available homes as they aren't as relevant to your home's value unless you're considering aggressive pricing.
• Consider aggressive pricing:  If there is a similar home on the market in your building, perhaps on a lower floor, consider pricing your home below that home's asking price to increase perceived value.
• Don't take low offers personally:  There are a multitude of buyers out there with a "sky is falling" mentality (it's not) who are making extraordinarily low offers as much as 25-30% below the asking price.  They are NOT trying to insult the seller but rather subscribe to a specific set of beliefs about market direction that greatly influences their bidding strategy. by the way, in my 16 years, with the exception of foreclosures, I have yet to see a seller agree with a buyer's assessment of a property's value.
• Consider what offers are saying about the market:  Again, don't take low offers personally but also don't ignore them particularly if you receive multiple low offers.
• Be Patient:  Unless you absolutely must sell in a specific time frame, understand that it may very well take more time than you had hoped to sell your home.  It will likely sell but manage your expectations by frequently communicating with your agent.

Perception of value is obviously subjective.  That said, if a seller is able to remove emotion from the marketing and negotiation process, they are more likely to appeal to a buyer's desire for value than the seller who hangs onto why their home is so special to them.  Everyone can respect an appreciate a seller's attachment to their home but in today's market, buyers just want you to "show them the value."

And a message to buyers:  it's highly unlikely that you are going to "steal" a home from someone in today's Manhattan real estate market.  Offers of 25-30% below ask, particularly when a home is fairly priced, are generally a waste of everyone's time.

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In today's tighter lending environment, I'm consistently amazed at the number of buyers showing up to see my exclusive properties who have yet to speak with a lending institution or mortgage broker regarding their mortgage needs.  I'm equally amazed at how many of these same buyers are completely unaware of how lending standards have changed as well as what options are still available to them in the current mortgage market.  Here are just a few ways in which lending standards have changed:

• LTV (loan to value)/ Down payment Amounts:  Although many are still qualified for 80 and even 90% financing, some who qualified for these products last year would be expected to put more money down enabling only 70% or even 60% financing.
• DTI (debt to income ratio): This is the ratio of your debt payments to your pre-tax income.  Prior to the "credit crisis," there were stories of people with DTI as high as 87%...yes that's right...87% of their income was going to service debt.  That particular person had significant liquid assets but the DTI was extremely high.  Now many banks (not all mind you, which is all the more reason to do your homework) subscribe to the 33/38 rule.  Housing payments can't be more than 33% of your pre-tax income and overall debt can't be greater than 38% of pre-tax income.  Again, many mortgage professionals still have access to loans with much higher DTI's (ex. someone in our office had a client qualify with 60% DTI last week).
• Reserve Requirements:  Every bank has different requirements for liquid assets post closing but almost ALL have increased those requirements. For example, some banks may require 6, 12, or 24 months of housing debt payments in the bank post closing while others may require as much as 25% of the loan amount in liquid assets.  

These are just some examples of how lending standards have become more strict in the past year but this is by no means an illustration of the current environment for all buyers.  Financing is indeed possible and the following may be surprising news to some:

• Savings Banks and Portfolio Lenders (loans to $3M):  Unlike the major national banking institutions, these lenders aren't dependent on a secondary mortgage market (they aren't reselling your loan). Because of this, many of these banks are offering more competitive rates.  So don't simply rely on your current banking relationship...shop around and consider a mortgage specialist to help you do so.
• Jumbo Conforming Loans (loans between $417K and $729,050) and Conforming Loans (loans less than or equal to $417,000):  Many buyers still qualify for loans of up to 90% in these 2 categories despite income and credit scores.

If you require a mortgage in order to purchase a home, follow that old Boy Scout motto and BE PREPARED:

1. Before you go out looking at homes and get your heart set on that beauty you may visit, get a referral for an exceptional mortgage broker who has a knowledge of what is truly available in today's lending environment.. 
2. If it's too late and you have already visited the home of your dreams, don't settle for that single rate quote from your bank. 
3. Strongly consider a mortgage broker/banker who can run review your financial condition including credit history and provide you with ultra competitive rate quotes from multiple local savings banks and portfolio lenders. 

You may indeed be pleasantly surprised by the mortgage products available to you in today's market place.

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Here's a breaking story that could dramatically change the face of Manhattan real estate and your  very own quiet little enclave.  From Landmark West via The Historic Districts Council blog comes this breaking news:

Today, the NYC Board of Standards and Appeals (BSA) gave a green light to Congregation Shearith Israel (CSI)-and to all nonprofit and religious institutions seeking to turn the air above their sites into luxury condo revenue streams, even where laws designed to protect neighborhood character and property values explicitly restrict it. CSI’s planned development project is located in the R8B-zoned, low-scale, brownstone mid block of West 70th Street, adjacent to the Individual Landmark Spanish & Portuguese Synagogue, in the Upper West Side/Central Park West Historic District.

With its unanimous approval of 7 zoning height and setback variances, the BSA bowed to CSI’s argument that denial of its application to construct 5 floors of luxury condominiums on top of a new 4-story community house would interfere with its charitable mission and impose an economic hardship on this congregation (one of the wealthiest in the city, counting among its members Jack Rudin, the developer for the St. Vincent’s Hospital project in Greenwich Village). In other words, CSI says, “Back off, City, we’re a nonprofit and nonprofits can do whatever they want.” The (mayor-appointed) BSA rolled over, despite CSI’s repeated failure over many months of public hearings to demonstrate hardship or any link between its mission and the condos (to be sold on the open market for millions).

Contextual zoning is a ceiling developers have been pushing against for decades. And now, 5 floors or 50 floors, the sky’s the limit for nonprofits with properties in traditional, low-rise communities in Brooklyn, Queens, the Bronx, Staten Island and Manhattan.

We know all this commotion over a 9-story, 114-foot-tall building sounds alarmist (even though it is double the size of the 4- and 5-story brownstones that define 95% of the historic West 70th Street midblock). But, even as we speak, the BSA is also poised to approve Mount Sinai Medical Center’s proposed development including a 542-foot-tall (the equivalent of 54 stories) residential tower on the eastern edge of Central Park. Meanwhile, planners have identified 10 potential development “soft sites” along Central Park West, many occupied by low-rise institutions such as the New-York Historical Society (which, until recently, had planned a 280-foot-tall tower that would have required special zoning exemptions).

It doesn’t take a microscope to spot this trend, which could have even greater ramifications in the other boroughs. With today’s approval, the BSA has opened the door to luxury condos towering over nonprofits in every previously protected neighborhood in the city. And their decision is final. Except for court. Stay tuned…

Imagine the ramifications of this?  The Catholic church alone could so dramatically change the skyline and inventory of Manhattan real estate.  It will be very interesting to see how this plays out!

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My phones are beginning to ring with more frequency and although this is merely anecdotal, I am seeing and hearing evidence that activity may pick up considerably this fall.  I and many of my colleagues are receiving inquiries from possible sellers who are considering a sale in the coming months.  The phones are also busier with inquisitive buyers, patient indeed, but more numerous.  Both sides seem to be willing to wait until summer's end to see in what direction the Manhattan real estate market will move. 

Here's my two cents: 

I think we are going to see a modest increase in inventory over the coming months but still not enough to greatly effect market conditions.  That said, tight lending standards will continue to thin the pool of qualified buyers and a relatively stable, give and take market will continue into 2009.  As I stated in yesterday's post, patience is indeed an important virtue for sellers and buyers alike.  Properly priced homes with some outstanding quality will continue to be the first to be snapped up while others will take considerably more marketing effort and time to sell.  I also suspect that prices may come down slightly but for the record, I have been saying that for 3 years...eventually I will be right. 

Lastly, I think this more challenging market environment will prove too much for many of the more novice real estate agents as sellers demand experience and/or marketing sophistication.  This will likely result in a thinning of the ranks among real estate professionals. 

Now I could be wrong of course on absolutely all counts but I thought I would go "half way" out on a limb for a change and make some "vague" predictions.  Let's see what happens.

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If you're one of the few sellers out there who has such a uniquely special (is that redundant?) property to bring to market, then this post isn't for you because "special" properties that are priced right continue to be snapped up as quickly as they hit the market.  But for the rest of you, patience is perhaps the most important quality that you must exhibit in today's bizarre Manhattan real estate marketplace.  There are several factors that have changed the pace of transactions today:

• Mortgage Market has Thinned Buying Pool-Many who believe that they are perfectly well qualified for a mortgage are in for a rude awakening.  Tightened lending standards are effecting many who would have easily afforded a home this time last year.  We recently had a established and respected reconstructive plastic surgeon denied for a mortgage on a sub-$1M property based on his student loan debt and credit score in the mid 600's...last year he could have gotten 90% financing...NOT NOW.
• Market Analysis is More Sophisticated- Each micro-market behaves differently and I have said it a multitude of times before but now more than ever do I see very distinct differences in the behavior of Manhattan's micro-markets.  Apartment size, style, and geographical location serve to divide Manhattan real estate into markets that shift and act independently of one another.  When pricing, don't compare your Upper West Side Classic 7 on a price per sf basis to post war 3BR apartments...they are different markets.
• Your Market Determines Movement in Inventory-The owner of a 4BR condo with spectacular views on the Upper West Side is much more in the cat-bird seat than the owner of the cookie cutter 1BR on the Upper East Side.  Overall inventory numbers are meaningless...if you own a Prewar 2BR in a specific area, ask your agent to track inventory specifically with those parameters.
• Buyers are Both Anxious and Cautious-No one wants to think that they are buying at the absolute peak of the market and at the same time they are reading daily media reports of how awful the "housing market" is performing.  The mixed messages that buyers are receiving are confusing and make the decision of whether or not to buy a home much more challenging than in the recent past.  Sellers should expect buyers with cold feet these days and deals to dissipate during the process before finding the 'right" buyer.
• Sellers are Nervous-Trust your real estate agent regarding price.  Many sellers are eager to reduce prices these days because they haven't yet received a bid.  When I started in this business in 1992, properties were often on the market for 2 years or more (we're not there) and if price reductions were the only answer, we would have been giving places away.  That said, often times, a price adjustment is necessary.  if so, make it count.  Reduce the price significantly enough (10% or more if possible) to resuscitate the property.

Overall, the Manhattan real estate market has changed drastically from the days of multiple bids on every property that hit the market.  That said, those properties with incredible views, layouts, outdoor space or other unique features are still garnering a plethora of interest.  The rest will also sell...it may just take longer than you had planned.

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For those who can't make it to tonight's free panel discussion on The Future of Local Video, you can watch via a Live Feed right here tonight at 6:45PM:

If the above feed isn't working, click here

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The Washington Post today reveals that one of the beneficiaries of ABC's Extreme Makeover: Home Edition has successfully squandered the equity in their free home which is now scheduled to hit the auction block:

Symbolic to our era like a sledgehammer to drywall, the biggest house that ABC's "Extreme Makeover: Home Edition" ever made over -- a sprawling, four-bedroom starter castle, a three-car garage mahal with a turret and all -- has gone into foreclosure, in the 'burbs south of Atlanta.

In that particular episode of the hyper-benevolent reality show, which first aired in February 2005, it took 1,800 volunteers a week to demolish the house with the overflowing septic tank that belonged to Milton and Patricia Harper of Lake City, Ga., and then entirely rebuild a new, larger house, while the Harpers and their three children went away to Disneyland. When they returned, they had the biggest house on Ahyoka Drive, with all the appliances and furnishings, plus enough money to pay taxes on it for decades, plus a fund to send their children to college.

The house will be auctioned off, according to the Atlanta Journal-Constitution, next Tuesday on the steps of the Clayton County Courthouse. 

 So how could a home that the Harpers were given be facing foreclosure?  You guessed it...Equity!

The Harpers had used their home as collateral on a $450,000 loan from JPMorgan Chase and fell in arrears, the newspaper reported. He ran a home security business; she mommed at home. Happy to be on television back then, they declined to be interviewed last week, when a news crew showed up from local station WSB, wanting to know wha'ppen.

A high profile story due to the affiliation with ABC's television show but a problem in many housing markets across the country where people expected home values to climb forever.  Now who is going to buy this house that was constructed in 7 days???

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Perhaps the fact that Moscow is the most expensive city in the world and NYC is only #22 has something to do with it? (Elizabeth Butler Cordova from Crain's via Curbed):

For residents around the globe, the Big Apple is looking more and more like a big bargain.

On a list of the world’s most expensive cities to live in, New York City fell seven spots to No. 22, according to a cost-of-living survey from human resources consulting firm Mercer, a subsidiary of Manhattan-based Marsh & McLennan Cos.

So New York City is indeed looking cheaper and cheaper to prospective buyers across the globe.

"The decline in the ranking of all U.S. cities is due to the weakening value of the U.S. dollar against most major world currencies," said Mitch Barnes, principal at Mercer’s U.S. division. "On the bright side, the U.S. dollar's loss of value may serve to attract globally mobile executives to business centers such as New York, Chicago and Los Angeles. The difference in cost of living can be significant, particularly for those executives with families."

No surprise either that the NY cost of living is driven primarily by the cost of housing but as other cities become more expensive, Manhattan appears to be a bargain to the foreign investor.  No surprise at all as foreign money continues to pour into New York City. 

This is one list that I'm thankful we don't own the #1 spot!

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Sales volume has definitely picked up since mid June but the qualtity of property hitting the market seems to be lacking for the most part.  90% of my business is representing sellers with the sale of their homes but the 10% of business that I conduct with buyers often takes a great deal more time and energy.  So imagine the frustration when you're fortunate enough to have well-qualified and ready, willing and able buyers for months while nothing "magical" hits the market to suit their needs. 

That's precisely what I have seen over the past 6 months.  Of course some buyers are pickier than others but a lot of mediocre property has hit the market recently most with price tags that are way out of line with their "just average" features and amenities.  I think that part of the problem lately is that some sellers and their agents are coming to market as they would have during the height of the housing boom expecting a quick sale at top dollar despite the property's condition. They aren't making the effort to decluttter, touch up paint, stage, or even clean windows.  Why would they as EVERYTHING has sold over the past decade?

Now, there is some resistance by buyers.  Most have little or no desire to take on large renovation projects unless of course the property is fairly and attractively priced with the renovation costs considered.  Some buyers even comment that they don't want to do a kitchen, a bathroom, or even floors for fear that they won't recoup the cost of their improvements should they have to sell in the short term.  I have very strong feelings about renovating to sell an apartment.  More often than not, I'm against it unless the price is so discounted that it makes financial sense.  That said, I'm a HUGE fan of sprucing up a place to help effect a sale.  I know I have said it before but here are just a few things that almost every seller can benefit from when selling their home:

• De-clutter:  make sure books on bookshelves are vertical, not too many family photos, maximize amount of exposed floors, and pack away the extra books, toys, photos and chachkes.
• Touch-up paint:  dingey rooms or hallways that are faded, scuffed or just tired should be spruced up with some fresh paint (eg.  One of my sellers painted her apartment after 2 months on the market and it sold immediately.
• Consider some floor work:  polishing, waxing or buffing floors may be all you need to restore the shine but a minor sanding and refinishing may be worth it if the floors are in horrible condition.
• CLEAN, CLEAN, CLEAN:  first the windows and then everything else!  The home should be spotless.  I can't tell you how many times I suggest a seller clean the windows and they are stunned at the amount of sunlight the grime was blocking out.  Additionally, dust and grime in the home are also off-putting so get rid of the dirt before showing the property.
• Minor renovation?:  If you're really bent on renovating prior to selling, consider a minor job rather than a complete gut.  Painting or refacing kitchen cabinets, replacing old hardware with polished stainless or brushed nickel, or replacing old appliances may help your apartment stand out from the rest.
• Staging:  It's likely that a good stager can take what you have and re-work it to freshen up the look of your home.  if not, you may want to consider renting furniture but make sure you get more than one broker/agent opinion on this before incurring the expense.

These are just some suggestions for minor repairs and touch ups that will create a new first impression of your home for the prospective purchasers.  And who knows, you may like the new and improved digs so much you will no longer want to move.

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The most common question I'm currently being asked by owners seeking to sell their Manhattan homes is "how long have you been doing this?"  And of course the second question is "how's the market?"  which seems to be just an inquiry to further support what they already know...it's shaky. 

I became a real estate agent in the early 90's when property often took 2 or more years to sell.  It was a time when buyers were like gold and taking the exclusive right to sell a property required careful consideration as the marketing alone could easily eat up most of the commission if you were lucky enough to sell it and see that commission.  That said, transactions did take place but the experienced brokers/agents who had been around the block were the ones sought as the experts during that time.  It made it very difficult for a newbie like me to earn a living which was precisely why I focused most of my energy on renting properties (what a disgusting experience that was!).

Fast forward to today.  Although transactions continue to take place across all segments of the Manhattan real estate market, the pace has definitely slowed.  For the first time in 15 years, I have a Georgian Townhouse at 863 Riverside Drive in Washington Heights (cheap plug I know but what the hey) that I have been marketing now for 18 months.  It was listed with another broker for 6 month's prior so it's been listed now for two years.  This is not the norm of course and I'm not implying that our current market has dipped to the snail's pace of the early 90's but it is definitely another indication to me that our market continues to change.  

Here is how I see the story with the above property.  It was originally listed in May 2006 at a very aggressive and ambitious price set by the executor of the estate.  The property was listed as being in East Harlem in the listing database for 6 months making it impossible for people looking in Washington Heights to find it.  I took over the home in December 2006 and against my better judgment followed the wishes of the executor to keep the price at $2,450,000.  I was however able to suggest that we should market at that price for a completed renovation and $2.2M as is.  It was still too high.  By the time we reduced the price to $2.2M in June 2007, buyer psychology had started to change and August brought us the credit crisis.  In September 2007 we reduced the price to $1.995M which is where it has remained for the past 10 months.  We have had 2 contracts out in the past 2 months at levels very close to the asking price but one party ultimately could not obtain financing and the other couldn't build high enough to make the space work for their religious organization.  So nearly 20 months after taking this property over, it remains listed at $1.995M and I continue to spend significant time and money marketing and showing the home in an effort to procure the "right" buyer.  The reason that the seller has continued to renew his agreement with me is because he appreciates the continuous effort over the past 19 months that we have made to procure a buyer...and we will sell the home.  The reason that I continue to market the home is because I believe it is a magnificent property for the right owner and of course I have put way too much sweat into the place now to simply walk away.  I remain committed to sell this home.

There are two significant points to this story.  Obviously hindsight is 20/20 but had the owner allowed me or his first broker to price the home right out of the gate at $1.995M, the estate would have been sold almost 2 years ago and everyone would have moved on with their lives.  As it is, this is a prime example of how being behind the curve in a softening market only results in more time on the market and a lower final sales price.  The key is to be ahead of the curve and price a property at an attractive level for current buyer psychology.  The second important point is that a seller should constantly and consistently be checking in with their agent to make sure that marketing is continuing and being tailored in a constant effort to procure a buyer for their home.  All too often in markets like the early 90's, agents get a signature on an exclusive listing agreement and then just hope and pray that the right person comes along to buy it. 

My business is about selling homes, not accumulating listings that can't be sold.  So on the rare occasion that I find myself with a property for this length of time, I constantly evaluate my marketing strategy, motivation and whether or not I'm captaining the ship.  That said, I have to go call my captain...uh...um...I mean seller.  Eureka!!!

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I just returned from a visit to the Maryland and Delaware shores and let me tell you that the resort housing markets in these areas are seriously hurting.  Signs are posted everywhere suggesting that "now is the time to buy and we will tell you why?"  Vacancy rates are high on both the residential and commercial fronts (an entire shopping mall that has been there since I was a child is now vacant), traffic volume was incredibly low for this time of year, and getting a table at a restaurant was a snap.  I can't remember ever seeing these areas so quiet during the 4th of July in all of my years visiting. 

So is it indeed the time to buy in places like these?  No one wants to catch a falling knife but it appeared from just a glance at advertisements for condos and homes that prices are as much as 30-40% off their peaks and inventory is plentiful.  A recent conversation with friends who summer on the Jersey shore have also indicated much of the same in terms of price drops and surges in inventory.  I wonder how much farther prices will have to drop in these areas before buyers jump back in sensing bargains.  For those trying to "time the market," \good luck with that.

And lastly, is this any indication of what is to come for the Manhattan marketplace?  I don't think so...or at least I certainly don't hope so.  That said, a 10-20% adjustment in prices would certainly generate an increase in sales volume and may even provide the opportunity for home ownership for so many who have been priced out of the market.   The good news about Manhattan housing cycles is that they generally lag other housing markets across the country and they are usually the first to recover making our down cycle a bit shorter than the rest.  That said, I am seeing some price softening in the market as buyers remain cautious and sellers become much more realistic about their expectations.  Deal flow (anecdotal of course) has remained steady through the first 2 quarters of 2008 but lags that of same period 2007. 

There is no one out there who has a crystal ball to tell us whether Manhattan will see price depreciation like that of so many other markets across the country.   That said, those of us who have been doing this for 16 or more years can tell you unequivocally that Manhattan is not immune to a housing slump (late 80's through early 90's).  It doesn't however appear to be headed in that direction...yet (I believe prices have dropped in some segments of the city as much as 10-15% already).  With rental vacancy rates still very low and co-op, condo and town home inventory still at relatively low levels, the choices for those who wish to call Manhattan "home" aren't plentiful.  It's buy, rent or stay put and of course it makes it much more difficult for me to earn a living if people choose the latter.  Thankfully, New York remains appealing to a plethora of prospective purchasers/investors from across the globe.  And let's not ignore the fact that New Yorkers themselves are absolutely OBSESSED with real estate and where they will next hang their hats and everyone needs a place to "hang their hat." 

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As housing markets across the country flounder, many owners and developers are turning to auctioneers to help sell their languishing properties.  Alison Gregor of The New York Times writes today that Auctions Are Aiding Sales in a Weakened Market.

It has been 15 years since real estate auctions held by property developers have been commonplace, but in the current torpid real estate market, they’re starting to re-emerge in cities throughout the country. 

Gross sales revenues from auctions of residential, commercial and industrial real estate grew by about 5.2 percent in 2007, to $32.6 billion, according to the National Auctioneers Association, and there are indications that the number of real estate auctions involving multiple condominiums will be much larger in 2008. For instance, Accelerated Marketing Partners, a real estate marketing firm with headquarters in Boston and in Danville, Calif., has held 25 auctions thus far in 2008; in 2007, it held two all year. 

Just further evidence that price overcomes all obstacles.  One developer's tale:

So, with published minimum sales prices for one-bedroom apartments of $170,000 and two-bedroom apartments of $250,000 (a reduction of about 40 percent from the last asking price), the auctioneers sold about 30 units — about half of them one-bedrooms — at an average auction price of $244,200. About 100 people attended the auction.

But it is imperative that the auction strategy is planned and implemented correctly:

“The price points were less than I had thought they would be,” Mr. Kuhn said. “One of the mistakes we made was starting off with the best spaces first, because people were unsure of how the auction process worked. That meant the auction pricing on the best units moved very slowly, and then locked in at a low price that became the cap for the auction.”

Are we going to start seeing auctions here in the Manhattan market?

It remains to be seen if New York City developers will feel the need to hold property auctions. Louise Sunshine, a real estate development consultant, said she was able to improve property values with auctions held in the late 1980s at residential developments like 52 East End Avenue.

“Auctions are more useful when the market is at a dead halt,” she said. While auctions can provide momentum for a marketing program, “they have to be used very carefully,” Ms. Sunshine said, “because the word ‘auction’ could connote distress. Developers could use some other marketing terminology, like maybe a ‘sealed bid sale.’ ”

The irony here is that during the housing boom of the last decade, I and many of my colleagues relied heavily on the "auction type" atmosphere to successfully market and sell property.  When more than one person perceives value in a home and they all bid, there is no telling what the winning bid will be but it is often a number that positively surprises both the seller and their agent.  They key once again to creating the perception of value is to aggressively price the property to appeal to a larger pool of buyers.  A tricky task in today's less heated market. 

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Sometimes I receive emails or comments from TrueGotham posts that are so unbelievable that they warrant their own post.  Check out this horror story from a Co-op shareholder and former board president:

Here's my story

I have owned a 4 level co-op on 38th between park and Madison  I was president of the co-op from the time I made the purchase about 4 years ago. At the time I moved in, the co-op was in trouble financially losing about 25K a year and had a few thousand dollars in reserve. During my term as president I made numerous changes and basically took the building from the brink of bankruptcy to having more than 400K in the reserve fund. A few changes included writing a rules and regs book for building procedures and selling a rent controlled apartment (with tenants in place) that only pay a fraction of the going rental rate, for 375K.  Everyone said it could not be done. I also instituted an increased flip tax from 1 to 4%, plus raised maintenance to levels that made us slightly profitable every year

It gets better, One of the board members spent a week with us in our home in Utah for the Christmas holidays last year and at the end of their stay we offered the maintenance check for the apartment and she said  "No, that's OK, just mail it."  5 days later we get a note from the "board" that out check was late, and we owe a $50 late fee ????

12 months ago I was forced to sell my business and move to Utah for employment. We were fortunate enough to sell our apartment to a very well qualified buyer who was turned down by the board. She had all the qualifications; excellent income,good assets, wanted to participate on the board(self managed building wants that), even willing to put up 1-2 years maintenance in escrow. vs me, who is close to stopping payments on the mortgage plus the apartment has been vacant most of the time for a year.  I wrote a letter to all the shareholders explaining that this was a bad business decision,aside from the fact that I saved the building from ruin. "only one reply, from a new shareholder, nothing from all of my "friends" who thought nothing of knocking on my door ,day or night for anything, personal or otherwise.

It gets better. I thought I would rent the apartment .The board had told me in Dec that they were considering instituting a rent fee of 15% (that would mean $1800 a month to them for my apt,if it rents for suggested $12,000 month), all of a sudden, I have new partners. They told me before the new rule went into effect that they would never try to collect that from me, only new shareholders. You guessed it, seems that they have short term memory loss on that subject. 

So I thought about splitting up the apartment into 2 or 3 units (as it was one 3 separate units) but that would change out tax status and cost the building money (I was the one that got our taxes reduced in the first place) One of the existing owners offered to buy one floor of the apt and combine with hers, that would not change the total units or the tax status,plus we had an offer for the other 2 floors. the only condition was that the existing owner wanted to rent out that apt until she was ready to move in. You guessed it, board said no to the rental, and the deal was dead. they would rather have my 4 floors vacant.

I own 26% of the building,If I go under, the entire building becomes insolvent and nobody can sell their apartment or get financing

I need help

Thanks for listening

It seems to me that the best choice for this particular owner is to sell and sell fast to sever ties with a clueless co-op.  That said, I wish I could hear the co-op's side of the story.

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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.

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Current market conditions have prevented me from blogging as regularly as I like to as negotiations are taking considerably more effort than they have in the past and relationships with sellers are requiring more hand holding and regular in depth conversations regarding asking prices and marketing strategies.  Go figure, my job is preventing me from blogging.  That said, I'm working on some scheduling issues that should free up some time for me to start blogging daily again...I hope!

Going forward through the summer no one is quite sure where the Manhattan real estate market is headed.  With mortgage rates up 3/4 of a point in the past 4 weeks and some speculation that they may go higher, some buyers wait in the wings for further (yes I said "further" as prices in many areas are definitely off their peaks) price softening and others have already taken the leap to lock in a lower rate and lower monthly payment.  As buyers either take their time or play wait and see, sellers who are making lateral moves for a change in neighborhood or those who are upgrading to a larger apartment have become more flexible with asking prices as they realize that they will likely have more negotiating power on their purchases as well.

All in all it is a very active real estate market with buyers and sellers playing a lengthy and fair game of give and take in order to come to a meeting of the minds. 

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The Carnival is up at Mike's Corner. Check it out.

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I'm sure that regular readers of TrueGotham have noticed that the number of blog entries here has decreased significantly over the past several weeks.  I'm a broker who blogs, not a blogger who occasionally sells a home so my priority has to be my clients and their sale or purchase of property.  That said, after a slow start to the Spring buying season, sales volume has picked up considerably for me. 

In addition to more transactions, each transaction is requiring much more energy to both market and negotiate. 

• Marketing:
  • 3 C's:  Today's real estate market requires constant, consistent and creative marketing in order to keep a property fresh and in the minds of prospective purchasers and their agents.  New buyers continue to enter the fray and you don't want them or their agents to miss your property.
  • What Tier?:  The Manhattan real estate market is multi-tiered and each segment requires different marketing targeted at different buying pools.
  • Patience:  The number of days on the market for all tiers seems to be increasing as is inventory so more patience is required to procure the right buyer at the right price.
  • Pricing:  Same ole' story here.  Proper pricing has never been more important than it has become as of late.  Pricing too high is the kiss of death.
• Negotiations:
  • Buyer Psychology:  Buyers are being bombarded with daily media reports that span the spectrum of grossly negative to somewhat positive (mostly the former of course).  Agents must be able to explain and support asking prices.  I have recently had a few purchasers for properties that I'm representing who have changed their minds a multitude of times before finally inking a contract.
  • Seller Psychology:  Ironically, but not surprisingly, sellers are reading the same media reports and some are garnering a positive spin on the Manhattan housing market often believing that their homes are worth significantly more than they were the same period last year.  However, most recently I am seeing the majority of sellers being more realistic about their expectations when bringing their homes to market.
  • Deal Terms:  Mortgage contingencies are more prevalent, some developers are offering higher commissions to agents and incentives to buyers, and some buyers are surprised at the higher down-payment requirements in today's lending environment.

So all in all, the Manhattan real estate market is no place for the meek agent, seller, or buyer.  It is indeed a market where preparedness, knowledge, and savvy have become the most essential characteristics to completing a successful and smooth transaction.

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As I mentioned on Monday, I just returned from a business trip to explore an impressive development project in Argentina.  I had the pleasure of previewing the Algodon Mansion, a 10 unit ultra-lux boutique hotel to open in December of this year in Buenos Aires as well as Algodon Wine Estates situated in the exploding Argentine wine country of Mendoza, specifically in San Rafael. 

I chose to share my trip with my readers because it exemplifies the phenomenon of more and more investors "going global" in search of lucrative real estate investments.  No longer are people only looking in their own back yards and no longer is global real estate investment reserved for only the super wealthy.  Just check out this CNNMoney article from April 2006:

Last year, Vladimir Gasic had an enviable problem. The 50-year-old former IT executive made a small fortune flipping a dozen properties in Phoenix's Maricopa and Pinal Counties. But he couldn't figure out where to reinvest his bounty. Trouble was, after a two-year stretch during which Phoenix-area home prices jumped more than 60 percent, Gasic worried about a looming slowdown, and his confidence in the U.S. economy began to sour.

So where does a bubble-wary real estate player turn?

Gasic thinks he's found the answer--in San Rafael, Argentina. Last November, capitalizing on Argentina's devalued currency, he snapped up 120 acres of farmland for just $140,000. The region's soil and climate are ideal for growing grapes for malbec wine--a Bordeaux varietal that's catching on outside of South America--and Gasic, an aspiring vintner, swears the area is a potential gold mine. "The land would sell for five times as much in Chile," says Gasic, who plans to turn his acreage into an income-generating vineyard within three years.
Gasic's six-figure bet doesn't look so radical, though, when you consider that more and more U.S. dollars are moving into foreign real estate. According to research firm Jones Lang LaSalle, Americans invested $12 billion in foreign commercial real estate ventures last year, almost double the amount spent in 2004. Meanwhile, global cross-border investment hit a record $475 billion in 2005.

What's driving the growth? Investors in many countries where prices have peaked are scouring the globe for better returns, according to Paul Willcox, founder of U.K.-based brokerage Someplace Else. "As their own markets have slowed," he says, "they're betting on locations they wouldn't have imagined a few years ago." Finding property abroad is also easier now because of the Web, where buyers can skim listings and contact sellers instantly.

The Algodon projects are the brain child of Scott Mathis of InvestProperty Group, a division of DPEC Partners of which Mr. Mathis is the Chairman and CEO.   Some may say that a development in Argentina is risky due to current political and economic conditions.  I would argue that Argentina and San Rafael specifically is ripe for investment and growth because of these precarious conditions.  William Wilkerson was thought to be insane when he built the Flamingo Hotel way out in the Las Vegas desert  and in 1965 Robert Mondavi was the first winemaker to open a new large scale winery in Napa Valley since the days before prohibition.  If only we all had invested in Vegas in the 40's or Napa Valley in the 60's!  Well this may indeed be your Napa/vegas opportunity.

The Algodon Wine Estates among it's incredible amenities will bring the vineyard experience to the consumer without the travails of the harvest or the wine-making process.  Much of the 2000+ acres lie on the vineyard with some of the vines dating back to 1946.  The malbecs, cabernets, chardonnays, bonardos and roses coming from this region are stellar.  A purchase of land in this magnificent gated community can deliver these grapes right to the back door of your villa...literally.  Each landowner can build a villa on their property for approximately $100/sf and enjoy the delicious wines that are harvested from their very back yard.  The Algodon winery will harvest, barrel, bottle and personalize your labels for your very private reserve.  It is an experience like no other!

Obviously I'm a big fan of this project and believe that in 10 years there will be a multitude of people wishing they had grabbed their piece of paradise 10 years prior.  Carpe Diem!

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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.

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I've just returned from a magical visit to Argentina.  I was there visiting a new boutique hotel project in Buenos Aires as well as a 2000 acre award winning vineyard in Mendoza that is going to be developed into a magnificent gated residential resort of approximately 240 homes featuring polo fields, signature golf courses and the ability for each property owner to own a piece of the vineyard.  Malbecs, Cabernets, Merlots, Bonardos, Roses, and Chardonnays will come directly from villa owner's back yards, be bottled by the winery and will feature personalized wine labels sure to impress your friends.

The trip was both exciting and serene and brought to mind how incredibly global real estate investment is becoming for a wider segment of the world's population.  As real estate markets across the world ebb and flow, more and more investors (and not just the super wealthy) are seeking out opportunities to diversify their portfolios and make a piece of the international real estate puzzle theirs.  From islands in the Caribbean to small villages across South America, Europe and places like Vietnam, investment opportunities abound as the "global" economy becomes ever so attractive to those who's local housing markets seem crippled.

In the coming weeks, I hope to feature some of these projects starting tomorrow with The Algodon Mansion and Vinas del Golf.

Stay tuned...

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If you're a real seller, this is NOT the market to grossly overprice your property.  Surprisingly though, I would have to say that as many as 50% of the marketing presentations I have done in the past couple of months have been with sellers who are terribly unrealistic with their asking prices.  And for those who stubbornly suggest pricing above what I believe the market will bear, I say 'best of luck to you."  I also walk out the door wishing I could say, "I look forward to hearing from you in 5 or 6 months when you become more realistic," but I tastefully refrain. 

Just this morning I learned that the owner of a prewar 3BR property chose to list with one of my colleagues who priced his home at $1,000,000 more than what I and another agent at a third competing firm determined to be the value.  That's right!  Both I and an experienced agent from another very large and reputable firm (she is currently representing another property in the same building that isn't selling) independently priced the home at $3,495,000.  The agent who received the privilege of "attempting" to sell this home priced it at $4,495,000.  I'm sure that you're asking yourself right now, "How can that be?"  The answer is that sellers sometimes (certainly not always) hear what they want to hear.  I'm just surprised that this gentleman, with a real estate background, was deaf to the more realistic data supporting a lower asking price.  But it's hard to let go of the possibility of $1,000,000 more in your pocket!

All of that said, I often explain to new brokers that it is better to be the second broker who actually sells the home than simply the one who "wins" the initial round of marketing presentations.  Having been in the Manhattan residential real estate business for 16 years, i remember the days when property was on the market for 2 years before a buyer would surface.  It takes a lot of time and money to market a property for 6 months only to have a seller hire another agent after that 6 month term who likely reduces the price and sells shortly thereafter.  I know because I have been on both sides of this phenomenon.  In the past 3-6 months, I have had multiple sellers reach out to secure my services after not hiring me initially.  On every occasion, I was able to effect a sale for an excellent price in a reasonably short period of time (a couple of times we sold after our first day on the market after another agent had marketed for 6 months).

So for the sellers out there who refuse to listen to what the market is telling you about the value of your home, you may find yourself interviewing brokers in another 5 or 6 months.  If so, just be mindful that market conditions will not likely be what they are today and you may regret not listening to the market earlier.

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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.

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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.

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I apologize for the light postings lately but business and life in general have kept me away from the blog.  As my friend Peter Comitini says, "I'm a real estate broker who blogs, not a blogger who sells real estate."  That said, the market is indeed keeping me busy and on my toes as a great deal more effort is going into each and every transaction these days. 

Here is an anecdotal snapshot (activity all over the map) of what I see going on right now in the Manhattan Residential Real Estate market:

• Contract finally signed over the asking price after 5 Highest, Best and Final Offers
• Some buyers are lowering budgets based on interest rates and tighter lending requirements while others continue their search and raise budgets.
• Many properties are being snapped up after several months on the market as soon as price is adjusted appropriately for current buying pool (i.e. Property on market for 4 months overpriced at $1.15M sells immediately after price adjustment to $999K)
• Mortgage contingencies are much more common in deals under $2M.
• Multiple offers and contract out over the asking price for a West Village 2BR (inventory in each area of city still low and sometimes creating bidding frenzies)
• Other properties sit on the market "patiently" waiting for the "right" buyer to walk in.
• "Creative" offers being submitted by unqualified buyers (i.e. $5000 deposit on a $2M home contingent on 90% financing and the sale of another home...good luck)  NEWS ALERT!!!!...we're not in a market that will generally entertain such an offer unless a seller is desperate and there just aren't too many of those.
• Inventory is opening up a bit in the sub $1M market.
• Buyers are patient but eager to buy while interest rates are low.
• Anxiety has calmed a bit as many see Wall Street bleeding near an end.
• The ultra lux inventory remains tight as people wait for their perfect home to hit the market.

That's about it.  Again, this is what I see in my business.  Make of it what you will but there is no doubt that we are in a much different market than we were this same time last year.  In some ways it feels more "healthy" but I would be lying if I didn't say that I preferred the deal flow last year.  Things do seem to be picking up though which is in large part why I haven't been blogging as frequently.

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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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A new client of mine sent me todays's James R. Hagerty Wall Street Journal article entitled The Brighter Side of Housing which suggests that many houing markets around the country have seen such increases in inventory and declines in prices that it may be an excellent opportunity for a buyer who was priced out of the market just 2 years ago.

And now for the heartwarming side of the housing bust: It's helping some people buy homes that they couldn't afford a couple of years ago.

Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn't feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.

Don't forget though that housing is made up of a plethora of micro-markets.

As usual, there is huge variation from town to town. In most of the country, inventories of unsold homes are no longer growing quickly, as they did in 2006 and 2007, but remain huge. The supply has shrunk modestly in Boston and Denver over the past year. But the number of for-sale signs continues to rise swiftly in the Portland, Ore.; Seattle; Raleigh-Durham, N.C.; San Francisco; and Washington areas.

Which brings me to my client's question this morning: "At all true for NYC??"  The answer: an unequivocal "Not really but it absolutely depends on the buyer's and seller's individual situations."  That is supposed to be funny. 

In Manhattan, the higher the quality of the buyer, the more leverage they have...sometimes. Of course the amount of leverage any buyer has is also dependent on the unique situation of a seller.  For example, a solvent buyer with a credit score over 800 who is financing 70% or less with prudent liquid reserves after purchase may have a considerable amount of leverage should they encounter a seller who must sell because of a relocation or job loss.  That same buyer may have to pay the asking price to the patient seller who is trading across the market. 

There are a multitude of factors that determine the direction of the Manhattan real estate transaction::

• Terms of buyer's offer: of course price, flexible closing date, contingent on financing or not.
• Solvency of buyers: how they present to the Board if a co-op, amount of financing, and liquidity position after purchase
• Seller's motivation: relocation, job loss, upsizing, downsizing, geographical move within the city
• Seller's perception of the market:  does seller think they will get the same price that their neighbor did last year (in some cases they will and in others they won't) or is the seller in panic mode fearing a future decline in prices?

So in Manhattan it remains difficult to gauge the current state of the real estate market as some transactions are taking place where buyers are experiencing some leverage and others see the sellers with the upper hand.  Navigating this marketplace continues to be challenging but definitely not impossible and often fruitful for one or both sides of the transaction. 

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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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Frequent readers of TrueGotham know my feelings about the national housing market.  There is NO SUCH THING as a national housing market!  I have repeatedly defended the fact that the country and even each local market is made up of a plethora of micro-markets.  For example, take the recently released market reports from the major brokerages (via Curbed).  If you were to break each of this up into the micro market neighborhoods that comprise Manhattan, you would see different trends in different areas.  Perhaps one neighborhood has seen double digit price appreciation while another neighborhood remains flat (just speculating here based on anecdotal evidence).  A solid example of the erratic behavior of housing's micro markets is beautifully displayed on Carol Lloyd's SFGate.com in A seller triumphs in a bad micro-market's micro-bloodbath as she describes the effects of speculating in San Francisco's suburb of Antioch:

In April 2006, the market continued to rise — one house at 4601 Mendota Way sold for $650,000. The price wavered slightly that year: In late 2006, an identical house — 5347 Southwood Way — sold for $641,500. In November 2006, that model of home hit its highest price when 4592 Imperial Way sold for $720,000.

Since then, this particular example of the American dream has seen better days. By March of 2007, one of the models at 4599 Menona Drive sold for $644,000. This month, the sale of 4561 Mendota closed at $363,000. The number of upgrades can influence the pricing slightly. In this case, it makes the drop in prices look even worse, because 4561 Mendota, according to Strausz, had an extra $35,000 in upgrades. For it to work as a comp for the other homes, the value should be closer to $328,000.

What's the bottom line? Since its their high of $720,000 less than a year and a half ago, these particular models of Antioch homes have fallen a whopping 55 percent.

This 55% percent drop in this micro-market is NOT in line with the overall San Fransisco market and some in the area are even seeing as many as 20 offers on a single property:

Thus, one might brandish the latest figures suggesting that San Francisco Bay Area markets were cooling since there was a 20.4 % dip in median price between February March 2007 and February March 2008, but a real estate professional could counter by mentioning a recent San Francisco listing that garnered not less than 20 offers.

This is an excellent illustration of how broad market numbers can't possibly portray an accurate picture of what is happening across all micro-markets in any given area.  Although most of what is posted here and on other blogs like UrbanDigs, Curbed and Matrix is anecdotal, it can't be ignored that the Manhattan real estate market is a complex and sophisticated conglomerate of multiple markets (both geographically and financially) that often times behave completely independent from one other. 

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Most of my readers know how important I feel proper pricing is when selling your home.  But don't just take my word for it.  My friend Jonathan Miller of Miller Samuel Appraisers and blogger of Matrix appeared last week on Reuters TV.  Here's what he has to say on pricing in today's marketplace:

• Listed within 3% of market value) = SELL.
• Listed >3% of market value = fodder for listing catalogues.

Here's the entire clip Of Jonathan's take which also includes a sound bite from another colleague and friend, top producer Ann Cutbill Lenane:

The Art of Pricing remains the primary determining factor to whether your home sells or not.

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Welcome to the 86th edition of the Carnival of Real Estate. I'm absolutely thrilled and honored to be hosting the Carnival for the second time and want to especially thank Drew for the opportunity again.  There were a plethora of submissions to read and it is a difficult task always in deciding who makes the list and who doesn't.  A huge shout out to BlogCarnival for providing their new and awesome Carnival Editor Beta which made this time hosting a true breeze!  Thanks also to everyone who submitted.  Here are my 15 picks of the week in an effort to remind all of you out there that tomorrow is April 15th.

MY PERSONAL FAVORITE:  Not just the rule in Tallahassee Joe Manausa presents Selling Your Home - Single Most Import Fact You Must Know posted at Tallahassee Real Estate Blog.  He reminds us that buyers are the primary factor in determining the value of our homes.

An excellent source on obtaining your credit score without falling for any gimmicks as Raymond presents How To Get Your Free FICO Credit Score posted at Money Blue Book.

Ned Carey addresses all those late night infomercials granting false hope to those who want to invest with "no money down."Check out Can I Really Invest in Real Estate Without Money? posted at Baltimore Real Estate Investing Blog, which says, "A post to get you thinking not just about money but what other resources do you have."

I know about the changing face of the mortgage market all too well...Joe Peffer presents Pre-Approved? Think Again, You May Not Be. A Cautionary Tale posted at Columbus Real Estate Notes on Homes for Sale, the Columbus Market, and Home Buyer Help, saying, "active buyers need to keep one eye on the market and the other on their pre-approval as the mortgage market changes almost daily these days."

In the 2nd part of a 2 part series MoneyNing presents Be Human and Buy a Home posted at Money Ning, saying, "Buy a Home now!"

In one of the most eloquent blogs I've ever read Larry Walker presents Your Money or Your Life posted at Larry's Take on the Cocoa Beach Real Estate Market, saying, "How good must the deal be to forget that tired old mantra; location, location, location?"

Helen Anderson presents 5 Tips for Buying a Home in a Down Market at Best CD (Certificate of Deposit) Rates, Money Market Rates, High Interest Accounts posted at Bankaholic.

An excellent insight into what goes on behind the scenes when qualifying for a mortgage as Silicon Valley Blogger presents How Do You Qualify For A Mortgage Loan? posted at The Digerati Life.

Nigel Swaby presents 0 Down Mortgages Headed for Extinction (they're NOT extinct already?)posted at Salt Lake Real Estate Blog.

Sarah Mann presents Does Size Really Matter? posted at Zillow Blog

Eric Bryant presents Every “Real Estate Batman” needs a “Geek Estate Robin”! Unless they want to fade away… posted at GeekEstate Blog.

Trevor Mauch presents HousingMaps.com - A Cool Way to Find Properties On Craigslist? posted at Real Estate Investing Brain, saying, "Article on a great tool for helping you find properties on Craigslist. This is a map integrated with Craigslist listings to make it very easily searchable for properties by city and price."

Jessica Donnovan presents Marketing Your Real Estate Business Online posted at Real Estate License.

Mike Mueller presents Will Brent Bring Down Zillow Mortgage? posted at Mike's Minute... "The danger of Zillow's Mortgage Marketplace - with a comment from David G from Zillow"

Life. Money. Development. presents The 7 Attributes of Leadership posted at Life. Money. Development., saying, "An excellent presentation of the attributes every leader should have."

That concludes this edition. Next week's carnival will be hosted by Reachd.  Submit your blog article to the next edition of carnival of real estate using the carnival submission form. Past posts and future hosts can be found on the blog carnival index page.

Technorati tags: carnival of real estate, blog carnival.

UPDATE Friday, 3/18:  Drew Meyers just interviewed me about my experience with the CoRE, blogging, and the Manhattan real estate market.  Here's the...

 complete with an iTunes link

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In the immortal words of Poltergeist's Carol Ann..."WHAT'S HAPPENING!?!!!"  The market she is a changin' as tighter lending standards, more savvy consumers, and overly cautious co-op boards sculpt the new face of Manhattan residential real estate.  Here are examples some bizarre behaviors and the players that exhibit them in today's marketplace:

• Managing agent emails us this morning stating that the building in which we are representing purchasers will only accept 30 year fixed rate mortgages...NO exceptions.
• First time buyer calls to ask if another co-op will accept 90% financing...good luck even finding a bank much less a co-op that will these days.
• A buyer signs a contract after a 3 week negotiation and informs his attorney of his arrest record.  The attorney wants to make the record part of the contract so that WHEN the board turns her client down, he would not be considered in default...moving on to the next bidder.
• Bank calls client and informs them that they will no longer be lending them the money they promised in the commitment letter because they can't repackage the loan and sell it.
• Buyer contacts my seller directly in an attempt to strike "a better deal by eliminating the brokers." Buyer also bids and asks to put down $5000 contract deposit on a $2M property (standard is 10%).  Seller explains that commission must be paid regardless so she should reach out to me.  She then reaches out to her own agent whom she also circumvented.
• Above buyer's attorney is a litigator and spends most days in court unable to respond to seller's attorney.
• Managing agent takes 5 weeks to process a Board application.  If you think this is typical, then you need to hire Hoffman Management and work with Gordan Noah who can turn a package around in 24-48 hours.  He's a stud!
• Many buyers asking for mortgage contingencies and sellers remain reluctant to accept this.
• 6 contracts fall through on one property for a variety of bizarre reasons none of which have anything to do with the property or building itself.
• Simultaneously, bidding wars take place and multiple properties go to contract significantly over the asking prices.
• Agent uses horrendous photos of property from 7 years ago to market a very high end property.  Despite my client's and my better judgement, we view the space anyway only to find it is a STEAL with glorious views (not marketed as such) and has been completely renovated. 

So it is indeed a bizarre environment in Manhattan residential real estate right now.  Deal flow continues but not without sometimes very odd challenges along the way.  Navigating all of this provides a wild ride!  My head hurts!

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Whether at a cocktail party, a birthday party or school event for my son or daughter, or just a casual dinner with friends, never has the conversation been more real estate centric.  The media across the country continues to bombard the consumer with reports of many declining housing markets while Manhattan media has pointed out just how bullish our market has been only recently chiming in with the possibility that we're not immune to greater market forces.  Having said that, the local Manhattan residential real estate market is itself a compilation of multiple micro markets with not only each neighborhood behaving independent of the rest but 3 separate and seemingly independent tiers of market activity.

• Tier 1-The Sub $1M Market:  Obviously buyers and sellers who are trading property valued at less than $1M.  Inventory is comprised of mostly studios and 1BR's with some 2BR's.  Buying pool contains many first time home buyers.  This market has remained quite active as far as I can see with the last 3 sellers that I have represented going to highest, best and final offers and selling at or significantly above their asking prices.  These buyers also seem to be the most skittish. 
• Tier 2-The Middle Market:  This is the meat of the market in my opinion and consists of those trading property in the $1.5M to $5M price point.  My Spring market is late to bloom this year but there is anecdotal evidence that this market seems to be picking up yet again in preparation for another busy season as more of these buyers and sellers are reaching out to me to discuss up-sizing, downsizing and lateral moves.  I have many sellers coming to market in the coming weeks and buyers who have been on the sidelines who seam to be ready to jump for the "right thing." I also think that this tier has the greatest segment of Wall Street buyers who are most greatly effected by the financial anxiety to which they work so closely.  Despite that anxiety, I have a fellow from Bear Sterns interested in one of my current properties and several Wall Street buyers still waiting for that nearly perfect place.
• Tier 3-The Ultra-Luxury Market:  71 properties over $10M closed in the first quarter of 2008 at 15 CPW and The Plaza.  That segment of the market has seen sales volume increase more than 300% YoY.  Those are huge numbers that heavily weigh on averages but also show that the wealthy have a great deal of confidence in Manhattan real estate.  These buyers aren't typically looking for a "deal" as much as they are seeking quality of the product.  Most of the buyers I have worked with in this price point also see their home, whether it be a primary residence or a 3rd or 4th home, as a place to hang their hat first and a part of their portfolio second (barring the investor or flipper of which Manhattan has fewer than other markets in the country).

It remains to be seen how exactly our local market(s) will be effected by national housing trends, economic reports, and financial worries countered by the desire to make Manhattan one's home.  Whatever happens, I don't think we can count on the same buyer or seller behavior across all three tiers.  One thing you can count on is that people will continue to love Manhattan and owning a piece of it will remain a strong desire by those who can afford to do so. 

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The 85th Carnival of Real Estate has been posted at fellow blogger Jim Duncan's RealCentralVA.  Check it out.

The Carnival of Real Estate #86 will be posted right here at TrueGotham next Monday, April 14th...and don't forget your taxes!

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A potpourri of stories from around the country to right here in our own backyard:

• Housing cycles: lessons learned-an entertaining animation in which John Burns reminds us “Remember, every down cycle is the beginning of the next up cycle.” (via Hot Property)
• Also cyclical...Realtors' Leaving the NAR at Fast Clip (via Bubble Meter)
• If this is all too confusing...Our Confusing Economy, Explained (via NPR)
• If you're buying, get your ducks in a row because Fannie Mae Tightens Rules for Mortgages (via RealEstateJournal.com)
• If you're so unfortunate that you're both selling in one of the country's tougher markets and getting a divorce (ouch!), be mindful that Breaking up is harder to do (via SFGate)
• Check out Curbed's First Look at Renovated Madison Square Garden.  As a Baltimore native and unfortunate long time fan of the Orioles (no longer as long as Peter Angelos owns the team), I can tell you that renovating or building a new arena isn't likely to bring any championships.
• And if this seems like more bad news than good, well check out Housing Crisis Humor (via Zillow)

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I know I'm a day late but yesterday was another very busy day and I didn't have an opportunity to post any data.  Yes...that's right, I'm busy again.  I'm swamped today too.  So this time around, I'm going to simply defer to the master of Manhattan residential housing numbers, Jonathan Miller who shows precisely how fascinated New Yorkers are with their real estate (check out his insight and the links he has provided).  And if you want to continue following all of the media coverage, Jonathan has that covered too.

The reports continue to baffle me as each major company has provided very different numbers from what should be the same data set.  There has been talk about the inefficiencies in housing reports before and I remain puzzled.

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Yesterday I broke down exactly for what a seller's agent is paid and today I will discuss what a buyer's agent performs in that same real estate transaction for their 50% share of that 6% commission.  For this segment, I elicited the help of my friend and colleague Noah Rosenblatt, a successful buyer's agent at The Halstead Property Company who is also a fellow blogger of UrbanDigs.com.  Noah and I have developed a friendship over the past couple of years as we both share the desire to make the residential real estate process more transparent and more honest.

Here's Noah's take on what a good buyer's agent should perform:

Buyer's Agent 3% -(directly from my InBox from Noah) 

I must admit that the majority of my sales business is on the BUY side, representing first time buyers or even veteran buyers who are seeking to upgrade. The consistent feedback I get from my buyer clients regarding the level of service that is both expected and wanted, is that they want unbiased, value oriented consulting to determine a best of breed product in a particular price point. Buyers actively tell me that my focus on profit potential at resale is what they admire best when I go and view a property.

Its a product to me and buy side brokers should focus on property quality, property valuation, profit potential, individual scalability, comps analysis, bidding strategy, negotiating, and providing a smooth process from contract signing to closing. In addition, I usually consult my buyers on the anticipated closing costs, renovation ideas & costs, and the loan/rate process. Having an unbiased and product oriented focus while you view 10+ properties is sometimes hard to do, but buyer brokers must adapt to what the buyers' needs are and take in what they like and don't like about a specific property as you view with them. In the end, this allows the buyer broker to fine tune their strategy for that specific client and actively look for a product that not only is the best value in the price point, but also one that can extend a time-line to own and offers the best resale potential for down the road.

The days of sugar coating an overpriced property to get a quick deal are done and will only insult the buyer's intelligence and result in a lost client!

Having worked with buyers from all walks of life, I would agree with much of what Noah suggests and it is obvious to me that he excels with buyers from the financial world who really view their property as part of their overall portfolio.  But I have to wonder how many buyers out there feel like they are getting this level of service?  And the bigger question is that I wonder how many seller's feel like the buyer should be paying this 3% side of the commission?

Now it's true that a buyer's agent takes part in the negotiation process and the preparation of a Board application in the case of a Co-op sale but both of these responsibilities are aligned with the buyer's interests so why is the seller paying their commission?  I have long been a proponent of a change in commission structure but for now we work with what we have and that is a system where a seller pays a buyer's agent for all of their time and hard work leading up to the showing of their property as well as the responsibilities that the agent incurs from the point an offer is made to the closing table and beyond.  For the record, I don't think buyers have reached the point where they would be comfortable paying for an agent's services but if more agents work like Noah, that may change.

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Long time readers of TrueGotham know that although I feel like a 6% commission is well worth it when you hire the right person to represent the sale of your home (podcast), I'm also one who believes we will see hybrids of the current 6% model arise and that the driving force behind this change is the consumer who is fed up with paying 6% and not getting all that much for it.  As I have said time and time again, that's totally fixable--choose a different broker who brings more to the table.

In New York Times writer Hope Reeves' piece That 6% Is Getting Harder to Earn some light is shed on the uptick in consumer demand for more service for that 6%.  

Brokers say that the current market is requiring them to be more creative, to spend not only more money but also more time and effort to make a sale.

Joan Goldberg, a broker at Brown Harris Stevens in Brooklyn Heights, sees herself as a sort of broker-contractor. She has a team of people — painters, contractors, gardeners, stagers, house cleaners, handymen, haulers — at the ready to whip her listings into shape.

“People are often overwhelmed by the prospect of selling, and it’s my job to get them to see that their home will show better and sell for more if we can just take away some of the layers and layers of personal items and grime they’ve accumulated,” Ms. Goldberg said.

For the most part, she does the hiring and scheduling, and she said that she tries to get each client as fair and economical a deal as possible. Sometimes, she winds up paying for some work herself or simply doing it herself.

“I like to plant flower boxes, and I change them weekly and water them if the owner forgets to,” she said. “I often go to the flower district early in the mornings or out to the big nurseries on Long Island to get just the right thing to put in a pot on a brownstone stoop. But, then, I’m a bit of a perfectionist.”

Ms. Goldman also routinely buys new trash cans and paints the street address on them in an effort to make the best impression when prospective buyers arrive to see a listing. “Some people carry plastic bags for dogs,” she said. “I carry them so I can pass by my listings and pick up trash.”

This is not a new phenomenon but perhaps more agents are catching on finally that if you're going to ask a seller to pay 6%, you better make them feel like your worth it.  Most of the successful brokers I have done business with over the past 16 years have their own arsenal of people who can step in and help a seller snap their property into shape and many of these same top real estate professionals have yearly business plans that allot a certain percentage of their own personal commissions to marketing both on a personal level and for the properties that they represent. 

There is one area in which no amount of money can replace and that is experience.  And experience is never more important than in a challenging real estate market.  Here are some examples of what a savvy real estate professional brings to the table to earn their commission:

• The savvy of pricing properly according to current market psychology and conditions.
• The savvy of conducting negotiations with honesty and integrity to yield the best price for the seller and a positive experience by all.
• The savvy of being able to relate current market conditions and buyer behaviors to similar markets in the past...those who have been selling for 10 years or less in Manhattan have NEVER seen a difficult real estate market.
• The savvy understanding the most effective tools for marketing each specific property.  Some advertising mediums are better than others for different types of properties.
• The savvy of representing a property as accurately and transparently as possible to the consumer effectively managing expectations and generating prospective purchasers with "real" interest in the property.  Video is the most powerful marketing medium to achieve this result.
• The savvy of exhibiting the personality and character that enlists buyer trust.

And finally, let's take a look at the typical commission breakdown to grant insight into where your 6% is going.  In this example, we will take the average 2BR/2BTH Manhattan Co-op apartment and assume a sales price of $1,500,000 with a 6% commission of $90,000 to be split between the seller's representative and the buyer's representative:

Seller's Agent 3%-Seller's agent firm receives 50% of 6% or $45,000.00.  That is split with agent's firm who pays for some marketing, advertising, web site, and branding. So the average agent is left with $22,500.00 of which a conservative 30% goes to taxes after deductions...or should.  This leaves $15,750.00 for the agent before paying for many things out of their own pocket.  Let's break it down on an hourly basis:

• Assuming an average time on the market from start of marketing to closing of 131 days or 18 1/2 weeks (per 2007 4th Quarter Prudential Douglas Elliman Manhattan Market Overview) and a very conservative estimated average of roughly 2 hours per day 6 days per week (yes, we work Sundays at least and many of us work 7 days a week) of the following:
  • Regular meetings to discuss and plan marketing strategy
  • Organizing and completing floor plans, photos, and video
  • Gathering information from management company regarding every facet of building from offering plans and financial condition and history to house rules and Board requirements.
  • Fielding email questions and phone calls regarding the property
  • Scheduling open houses and individual showings of the property
  • Reviewing offers and financial portfolios of prospective purchasers
  • Negotiating offers to procure best terms for seller
  • Preparation of Deal Summary and dissemination to buyer and seller's attorney along with offering plan and financials to buyer's attorney in timely fashion...immediately upon acceptance of offer.
  • Facilitating a timely execution of contract by effectively communicating with all parties involved.
  • Gathering, reviewing and preparing Board application for review by Board of Directors for Co-op.
  • Overseeing processing of Board materials to insure prompt dissemination to the Board of Directors.
  • Assisting to schedule interview of prospective purchaser by Board of Directors.
  • Upon approval, facilitating the closing by effectively communicating all parties needs to respective attorneys, managing agent (closing agent), and banks if necessary.
  • Attending closing.
  • Often times their is work to be done post closing like assisting with the forward of mail, tying up loose ends regarding repairs, helping with the facilitation of moving, and general questions that arise once a seller has moved out and the buyer has moved in.
  • Assume an agent pays for their own video (roughly $600 for a property of this size) and other miscellaneous marketing pieces (super conservatively $400)

So for all of this effort, and this is indeed the typical amount of work that goes into the average transaction, her/his agent nets $14,750.00 or roughly $66/hour ($99/hr pre-tax income-corrected thanks to commenter Julie) of that $90,000 commission that the seller pays.  We're not talking minimum wage here but we are talking numbers that are significantly less than I would guess most people suspect.  And this doesn't factor in the properties that agents work diligently on for 6 months or more that never close for a number of reasons.

BTW...for the average $200,000 home in the United States, this would work out to $27/hour pre-tax income and although those agents don't have the Co-op process to deal with, in most markets they do write their own contracts

So if you decide to pay your seller's agent that $66/hour ($99/hr pre-tax income corrected thanks to commenter Julie), make sure that your getting the biggest bang for your buck and that s/he knows exactly what to do to earn that commission.

Tomorrow I will breakdown the other 3% of the commission that goes to the buyer's agent.

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Trying to get across a "Don't Panic" message in a 4 1/2 minute segment on the Today Show yesterday was quite a challenge.  Since I'm fortunate enough to have the medium of this blog to elucidate, here are some additional tips, advice and comments that I would have made if I had an hour :-D And of course, much of this applies to those homeowners across the country who have the misfortune of living in a declining market.

• If you don't have to move, just chill-I wanted to be clearer about the fact that sellers who have no intention of moving for years but painstakingly compare their home value to peak value are creating unnecessary anxiety.
• NO NATIONAL HOUSING MARKET-Although I briefly mentioned the hyper-local nature of housing markets, I really want to drive home that what is happening to home values in Vegas has almost nothing to do with values in Phoenix (I say almost because you can't ignore that credit defaults and tightening lending standards that have an effect on all markets; some more than others).  Manhattan for example is a perfect example of multiple micro-markets all rolled into one as even certain neighborhoods are outperforming others.
• NAR Stats and Statements-I hope that I was clear in stating that it's way too soon to tell if a 3% uptick in sales volume from January to February  means anything.
• Property Values Across the Country-Only the Baltimore home example from yesterday actually lost money because the owners sold.  The other 2 owners purchased their properties some time ago, have seen very impressive gains, and would have a long way to go before those gains vanished.
• Moving or Staying Put-The bad news comes to the investors or speculators who purchased at the peak of the market for the quick flip. They either have to sell and take a loss or change their plans and hold the property until it recovers and that could be years.
• Other Options for "Peak" Purchasers-
  1. Investigate the success of auctions in your area as sometimes the auction atmosphere elicits the best price for a home.
  2. Rent the property.
  3. Sell at a loss or lesser profit depending on your current market conditions.
  4. Or stay put.

Here's a bit more insight on the tips I provided if you decide to stay to increase a home's value (Obviously it is a difficult decision to pour more money into a home that you feel is decreasing in value so these aren't things I would do unless I was planning on being in the home for a 5 or more year time frame):

• Add a room- maybe convert half of your garage to living space, create a small den or solarium. More space usually means more money.
• Update or replace kitchen and baths-the thought of renovations are overwhelming to many buyers and old kitchens and baths give buyers leverage when negotiating the purchase price.
• Landscape-beautifying the exterior of a home to increase it's curb appeal. It's the first impression a prospective purchaser has of your home and doesn't have to be expensive.

And if you MUST sell these are less expensive ways to help your home stand out regardless of market conditions:

• De-clutter-remove as much of the clutter from your home as possible including most or all of the family photos, clean book cases, and make sure as much of your floor shows as possible. Less clutter means more money.
• Replace or remove old carpeting-nothing screams "renovation " to a buyer like old, worn out carpeting. Have it professionally cleaned, replace it or remove it altogether if you have nice floors beneath it.
• Stage-either hire someone or visit some of the model homes in your area to see how they are being presented. Use this as your goal with the understanding that you likely don't have the budget of a builder but if you make every effort to go for a clean, crisp look it will likely be better than what you have now.

Now how was I supposed to say all of that in 4 minutes?

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I'm happy and excited to report that I will be appearing on NBC's Today Show tomorrow morning, Thursday, March 27 to discuss housing markets across the country and what sellers can do to both add value to their homes and increase the chances of selling if they are one of the unfortunate ones caught in a down market.

The interview will air live during the 10AM hour of the show at approximately 10:30AM.  If all goes well, I will post the interview in it's entirety here on TrueGotham ASAP.

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Throughout my 16 years in the residential Manhattan real estate market, the majority of my business has come from representing sellers in the marketing and negotiation process.  The first 2 questions I ask of all of my sellers is "why are you selling and where will you go?"  I'm often very surprised by the responses.  Many who reach out to me for advice on selling have no immediate plans for where they may go after the sale.  Some suggest that they would rent, others may move to another area of the country, some say they would downsize and of course some just need more space.  But often times, the motivating factor is fear.  Reacting to negative press or a drop in perceived equity in one's home is the last reason that someone should sell.  Consider the following before you go to market with your home:

1. What was your plan (time-line) when you purchased the home?...If you were going to stay there for 5-7 years and it's only been 2, then why are you selling?
2. Has your job changed or relocated forcing a move?
3. Are you busting out of your current space? 
4. Do you need the equity that you have in your home for something else?
5. Are you a "market watcher?"  The recent phenomenon of viewing real estate as a part of your financial portfolio is exactly that...recent.  Most of our parents and grandparents purchased their homes as a shelter and a place to raise their families.  Stop comparing your home's value at the peak to what it is now.
6. If you're a "flipper" or investor, consider changing your plans to a more long-term objective.
7. Are you a serious seller or testing the market?  Sellers who "test" the market are just adding to inventory which generally negatively effects prices.

There are a lot of people out there who are making lateral moves or trading up or down for space in today's real estate market.   Others are seeking a change in geographical area.  In a city like Manhattan with so many transients, many of whom are native New Yorkers (people move a lot here), real estate trades continue to take place but at a less feverish pace than the same time last year.  In many parts of the country where markets feel like they have slammed on the brakes altogether, sellers must seriously consider whether they have an important reason to sell their homes or if they are being motivated by fear.

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As debates take place among the nation's leading economists as to the health of our economy and the housing markets (plural because they are local), the anxiety here in Manhattan continues to rear its ugly head.  All parties involved in the residential real estate transaction are experiencing a greater level of anxiety than I have seen in my 16 years in the industry.  This is a huge change from the Manhattan housing market of the past decade where most anxiety was felt exclusively by buyers and their agents with the occasional seller frazzled with the decision as to which prospective purchaser they should choose.  Times they are a changin'!

Of course most of what I share here on TrueGotham is anecdotal but I also make every effort to garner feedback  from friends, family and colleagues regarding their personal experiences in the housing market.  Here is what I'm seeing in today's ultra anxious and confusing housing market and exactly how it is frustrating and confusing each party in the real estate transaction:

• BUYERS: 
  1. Almost overnight and due to tighter lending standards, many buyers have decided that a mortgage contingency is a must in any sales contract.  A 14 day contingency as opposed to the standard 30 days seems to be becoming the norm.
  2. Media reports of low-ball offers paired with those of multiple bids are making this market as confusing as ever and feeding the anxiety that often comes along with bidding on a home.
  3. Many buyers haven't spoken with a bank or mortgage professional before bidding on property only to find out that they aren't as qualified to purchase a home as they once were.
• SELLERS:
  1. Unless they are fortunate enough to have multiple bidders for their property, which is still happening quite a bit in Manhattan, sellers are being asked to consider financing contingencies in contracts. 
  2. Some sellers have even been asked to accept contingencies on the sale of a purchaser's current apartment.  ATTN BUYERS:  This isn't happening...yet.
  3. Many buyers are getting cold feet and changing their minds in the 11th hour when it comes time to sign a contract.
• ATTORNEYS:
  1. Many attorneys for buyers are advising clients against signing contracts without financing contingencies.
  2. Many attorneys for sellers are finding themselves sending out multiple contracts as fewer deals make it to the signing table.
  3. As Manhattan buyers believe they have more leverage than in the past (not necessarily true), both buyer's and seller's attorneys are working more diligently in negotiating contracts to balance the give and take that is more frequent in today's market.
• AGENTS: (I know many of you out there love to hear about real estate agent grief...so here ya go!)
  1. No deal seems easy.  A quote from one of the most successful agents in Manhattan, "It's really hard out there right now!"
  2. Some properties sell quickly and others languish...we actually have to work to make money...go figure.
  3. Navigating inventory and making sense of pricing has been incredibly challenging as struggling and desperate agents tell sellers what they want to hear in an effort to procure the exclusive right to sell their property.
  4. The number of agents has risen to astronomical numbers while inventory remains ridiculously low...something has to give and I suspect we will see a thinning of the ranks in the near future...I can hope can't I?

And that's what I'm seeing.  Need to get back to the trenches, it's brutal out there.

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From Jane J. Kim of RealEstateJournal.com comes Credit Scorers Find New Ways to Judge You.  As lending standards continue to tighten, many credit rating agencies are delving further into your payment history than ever before in their effort to provide greater peace of mind to lending institutions.  Check out some of the ways in which each agency is changing the way they report your credit worthiness:

"Hey honey, did we pay that phone bill yet?"

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Just yesterday a friend of mine shared that his wife is going to withdraw $21,000 from her 401K to pay for their 3 year old to go to nursery school for 3 hours a morning next September.  For those reading this outside of Manhattan, the numbers to dial for a coronary are 9-1-1!!!  Yep, $21K for 15 hours of nursery school per week.  Which brings me to this post today at Calculated Risk regarding the surge in 401K withdraws to keep homes from going to foreclosure.

Tanta at CR references Christine Dugas' USA Today article 401(k)s tapped to save homes.  As the economy struggles despite some saying that we are NOT in a recession (LA Times), more and more people are finding themselves in difficult financial situations and are doing what's necessary to stay afloat. 

Struggling to save their homes from foreclosure, more Americans are raiding their 401(k) retirement accounts to pay their bills — and getting slammed with taxes and penalties in the process, according to retirement plan administrators.
Rather than borrow money from their 401(k) accounts, which would have to be paid back, a growing number of beleaguered families have been cashing out, plan administrators say.

This is happening even as borrowing from 401(k) accounts remains fairly flat. Fewer still are borrowing from 401(k) plans to buy homes. By contrast, new figures from plan administrators show the number of 401(k) "hardship withdrawals" is up in early 2008 compared with the same period last year.

The main reason? The need to stave off foreclosure or eviction.

Consider Tamara Campbell, who raided her 401(k) after her husband was laid off from his job as an occupational technician, and they fell behind on their mortgage for several months. "If I hadn't done that, we would have been foreclosed on last year," says Campbell, who lives in a Denver suburb.

No evidence of this happening here in Manhattan...yet.  But if some are finding the need to tap the 401K for education, saving their apartment may be next.  It's getting ugly out there!

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The state of the Manhattan real estate market remains stable but some of the rules that have been followed for more than a decade are meeting resistance and dare I say, may be changing.  Of course my experience is anecdotal but I always try to get a sense of market conditions from my colleagues anytime I'm preparing to write about the goings on in Manhattan real estate.  Something that seems to be happening with more and more frequency is the request for the financing contingency in contracts.

For more than 10 years during the housing boom, sellers have had the upper hand and in the case of financing contingencies, they were almost NEVER permitted.  In addition to lax lending practices that gave everyone the confidence that they would procure financing, there were almost always multiple buyers vying for the same property.  Striking the financing contingency from a contract gave a bidder more leverage and the seller more comfort that the prospective purchaser was confident that they would close on the property.  As the sub-prime and ALT-A mortgage mess is trickling UPHILL now, we are seeing more and more attorneys advising their clients against signing a contract that is not contingent of financing.

If you're not sure what this means, here are the 3 financing options as written in a boilerplate Julius Blumberg Contract of Sale (Co-op):

•  1.20.1 Purchaser may apply for financing in connection with this sale and Purchaser's obligation to purchase under this contract is contingent upon issuance of a Loan Commitment Letter by the Loan Commitment Date.
• 1.20.2  Purchaser may apply for financing in connection with this sale but Purchaser's obligation to purchase under this Contract is not contingent upon issuance of a Loan Commitment Letter.
• 1.20.3  Purchaser shall not apply for financing in connection with this sale.

These are the 3 options.  No more, no less.  For the past 10 years or so, almost every contract has stricken 1.20.1 and 1.20.3 leaving the purchaser the ability to obtain financing but protecting the seller from the buyer walking away should their mortgage not be approved.  If the buyer was unfortunate enough to sign a contract this way and not procure financing, they would forfeit the 10% deposit that they submitted with the signed contract.  In 16 years, I have NEVER seen this happen.  That said, attorneys seem to be much more gun-shy about advising their clients to sign non-contingent contracts in today's bizarre lending environment as more well-qualified borrowers are experiencing the frustration of stricter lending standars.  For example:

• Purchaser with $4M in cash buying a $2.7M property was advised by his attorney against signing a non-contingent contract...they lost the apartment to another bidder.
• Multiple purchasers having agreed to sign non-contingent contracts were advised by respective attorneys that banks were finding reasons not to close on loans increasing the risk of losing that 10% deposit.
• Prospective purchasers concerned about their future employment are also balking at the non-contingent contract.

The non-contingent contract is no longer a given.  Fortunate sellers have more than one bidder thereby allowing them to continue to insist on non-contingent contracts.  Other sellers are being presented with 7-14 day contingencies as opposed to the standard 30 day.  Whatever the case may be, sellers are more frequently being faced with the decision to allow a prospective purchaser the make their contract contingent on getting a loan.  And in today's lending environment, that makes a seller much more anxious than they have been in quite a long time.  It also makes it that much more important to have qualified buyers at the table who are represented by savvy and sophisticated real estate agents, mortgage professionals and attorneys.

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The flu is sweeping through our house with the latest victim being my 3 year old daughter.  My wife and I are just waiting for its attack on one of us...oh happy day.  So here's a list of some of the interesting bits in the blogosphere today as I attempt to fend off the flu bug:

• Ew Ew That Smell-From Bradley Hope of The New York Sun comes Upper West Side Staple...uh...I mean Stable becoming Luxury Condos
• Sticking with the topic of Vanishing Old New York check out Jeremiah Moss's ultra-depressing blog (via Curbed)
• Ready to Refinance...not so fast...Ruth Simon of RealEstateJournal.com points out that Snags Abound
• More on the bizarre defiance in some local real estate markets as Global Meets Local from Carol Lloyd of SFGate.com
• The FBI investigates Roger Clemens while jokers like Casey Serin go unpunished (via HousingPanic)
• The Mother of all Margin Calls: Leverage Bites from my friend Noah Rosenblatt at UrbanDigs
• Curbed's Morning Credit Crunch explores median prices below $1M in East Hampton....WHAAAAAAAAT?!!!

Still feeling healthy...see you Monday.

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Lauren Baier Kim of RealEstateJournal.com asks the question, Do Young, Tech-Savvy Buyers
Need a Real Estate Agent's Help?

In real estate, there is a growing dichotomy: buyers are getting younger, while real estate agents are growing older, according to articles in the Seattle Post Intelligencer and the Boston Globe.

Using data from the National Association of Realtors, these articles note that while the median age of home buyers was 39 in 2007, the median age among Realtors is 51. And, among first-time home buyers, 49% were between 25 and 34 years old.

This could present a real problem for the real-estate industry, which despite the current overload of real-estate professionals, is actively trying to recruit younger real-estate agents, reports Aubrey Cohen of the Post-Intelligencer. Younger agents will be needed to replace an aging workforce and to create inroads with a uniquely high-tech set of house hunters, the articles say. Youthful home buyers are more independent and rely more on the Internet in the home-buying process than their predecessors did, these articles note.

There is no doubt that Gen Y buyers and sellers are "turned on" by technology.  For example, all of my twenty and thirty something clients and many of Gen Y "minded" beyond their thirties are tech-centric in such a way that as sellers they demand things like video be used in marketing their homes and as buyers they won't even look at properties except those online that include multiple photographs, floor plans and video tours.   These same sellers and buyers want responses from their agents within minutes of firing off an email so a BlackBerry or like device is essential.

As one reader pointed out in response to a WSJ.com post on photos in real-estate listings, "most agents are not utilizing technology efficiently." The readers explains, "We had a young agent and he did an excellent job with marketing our town home. We ended up getting three dozen offers. He also uses BlackBerry and a few other tech gadgets which many agents simply don't use or cannot afford or whatever."

This shifting perspective of the real estate agent's value in a transaction poses some serious problems for those in the industry who resist advances in technology.  There is an independent agent whom I have interacted with in the recent past who has been in the industry for 30 years.  She has no website, she types up property fact sheets with her typewriter, draws floor plans herself, and provides no photographs at all.  For this unparalleled service, she charges sellers a 3% commission and refuses to work with other agents.  The last few properties that she has represented have languished on the market in a building that sees properly marketed homes sell within days or even hours of coming on the market.  For obvious reasons, this woman's deal flow is decreasing exponentially.

As more consumers embrace technology and all of the ways that it makes the real estate industry more transparent and efficient, real estate agents better get on board too.  And for you resistant dinosaurs out there, beware, a technological "asteroid" has hit Earth and your days are numbered.

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While the headlines across the country depict an atrocious housing market, the Manhattan real estate market continues to baffle many of us.  Just a few weeks ago I blogged about an open house that was attended by more than 150 people of which ten submitted bids.  That apartment went to contract for nearly 15% over the asking price. 

Two weeks ago, we had nearly 70 people attend an open house for another property we were marketing.  That open house also resulted in multiple offers over the asking price with the winning bidder at 5% over the asking price.   The unusual outcome of this multiple bid situation is that the winning bidder decided after a revisit to the apartment that they didn't want to proceed.   No problem right?  Wrong.  Three days after the highest, best and final (see definition below) bids were received, we reached out to our back-up bidder who had offered a higher price to inform him of the good news that his bid was now being considered and the seller wanted to proceed to contract.  He was no longer interested as he was negotiating on another property. 

highest, best and final-each bidder is given one final opportunity to put their best foot forward and bid at the highest price with which they feel comfortable.  In addition to submitting their highest bid, the best terms for the seller are conveyed to each bidder so that they can formulate an offer that appeals to the seller in both price and terms. Bidders must also submit a financial statement that discloses a complete breakdown of all assets/liabilities and income/expenses.  The highest bid price is not always the best offer based on the seller's desired closing date, financing contingencies, and/or financial condition of the bidder.

On to bidder number three.  Thinking that bidder number three would jump at the opportunity based on their disappointment at not getting the place initially, we were confident that we would have a deal with them.  Not so fast.  When notified that the seller would accept their bid, this prospective purchaser suggested that they needed to view the property again at this past Sunday's open house before proceeding.  Which brings us up to date...

Yesterday, another 50 or so people came to the second open house of this property and we now find ourselves with 3 more offers over the asking price and at least 2 more coming in today before 5PM.  Our hope is to accept the highest, best and final offer this evening so that we can have a contract signed by the buyer and delivered with their 10% deposit to the seller's attorney by 3PM on Friday.  That's our hope but we will see how this round plays out.

In my 16 years selling Manhattan residential real estate, I have never facilitated 2 highest, best and final offer scenarios for the same property within a 3 week period.  It's very bizarre and a sign of the times.  Here's what I see:

• Buyer anxiety remains high
• Sellers remain in the "catbird seat" reluctant to budge in negotiations
• Financing contingencies are being requested more frequently by some buyers
• Sellers are still not amenable to financing contingencies particularly when they have multiple bidders to choose from.
• There are still plenty of ready, willing and able buyers who want to own their piece of Manhattan.

So as we all wait to see how the national housing crisis plays out in our backyard, for the time being it looks like the game goes on with similar rules and similar players as we've seen over the past decade.

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In March, TrueGotham will celebrate 2 years in the blogosphere and if I do say so myself, "we've come a long way baby!"  Having said that, yesterday and Monday were the first back to back weekdays of silence on Truegotham since its inception and I don't plan on making a habit of that.  The impetus for the silence...well...LIFE!   I spent Monday in Baltimore for one of my dearest childhood friend's father's funeral.  Why do we wait for Weddings and Funerals to reconnect with people who mean so much to us?  Yesterday, I had the pleasure of spending the day with my son and daughter as the three of us helped to "train" their new nanny.  No time to blog...at all.  For those who are saying to themselves, "Who cares?" I offer you a quick anecdotal snapshot of what seems to be going on in today's Manhattan real estate market:

• The phones have definitely quieted down from buyers in the sub $3M market as interest rates have climbed almost a full point in the past 4 weeks.  Many experts including our very own Dan Shlufman suspect that interest rates will come down again in the coming weeks.
• We remain incredibly busy with Co-op Board applications and contracts for the deal flow that took place in February but new business is coming more slowly.  I typically have between 5 and 20 exclusive properties/sellers that I'm representing at any given time and I currently have 2. 
• Relative to the same period last year, I am definitely seeing a slower market with fewer transactions taking place.  No great dips in prices yet but fewer buyers.
• Inventory remains very tight causing less impact to the decrease in the number of buyers.
• I experienced the first ramifications in my business of the sub-prime meltdown as tighter lending standards across the board for all borrowers slow deal flow (ex. Chase generated a commitment letter for a purchaser of mine who has twice the purchase price of the apartment in liquid assets that made the sale of their current apartment a condition of fulfilling requirements to procure the mortgage...this would NEVER have happened this time last year but I'm happy to report that Chase is removing that contingency at the borrower's request.  It still has delayed the purchase process.)

So the Manhattan real estate market remains stable and continues to churn but not nearly at the pace that I experienced this same period last year.  I would love to hear from sellers, buyers and colleagues regarding their experiences in today's marketplace.

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Here's what I'm seeing in today's Manhattan real estate market:

• Realistic sellers who price "right" are seeing incredible activity on their homes with multiple bids and bidding wars commonplace on those properties that are appropriately priced.  We are having yet another highest, best and final bid on one of our properties after more than 60 people visited our open house on Sunday.
• Buyers remain plentiful but more patient in cases where properties have been on the market for 3-4 weeks or more.  Again, buyers who have significant experience and knowledge of the current market are snapping up 'special" properties that are priced right.
• Some buyers remain confused and anxious about the national credit crisis and how it will effect our local housing market and overall economy.  Many of them are actually angry that the Manhattan real estate market hasn't corrected like many housing markets across the country.  For those with a short time horizon for ownership (maybe they only want to own for 2-3 years) the anxiety is higher and perhaps warranted.
• Some sellers (very few that I'm seeing) are still choosing to "test the market" with unrealistic asking prices.  Most of my colleagues with 10 or more years of real estate experience are choosing to steer clear of these sellers as overpriced properties languish on the market.
• Experienced Manhattan real estate agents are quite busy.  Those newer to the industry appear to be having difficulty earning a living...with exceptions of course for the new "superstars."

So as everyone tries to make sense of what is happening with our local housing market (me included), many continue to buy and sell and many real estate professionals remain busy.  In the meantime, angry buyers, testing sellers, and inexperienced real estate agents wait for more clarity. 

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

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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Yesterday, in part I of this Article, I discussed the main components of the Economic Stimulus Package. Today, in Part II, I will address (i) who will benefit from these higher limits; and (ii) what the effect this law will have on the real estate market in Manhattan specifically, the Metropolitan area generally and the economy overall.

Since there has been such a large disparity in interest rates between conforming and jumbo rates, as was previously noted, there are a lot of borrowers with loan amounts between $417,700 and $729,750 who will be candidates for refinancing once the Package takes effect. As a result, the immediate impact of the Package will be a flurry of refinance activity.

Anyone who bought a home in the past two years and has a fixed rate loan of 6.25% or more (which is most of them) will be in a position to refinance. They will now be able to get a fixed rate loan in the mid to upper 5s on a 30 year fixed or low to mid 5s on a 15 year fixed.

In addition, anyone who has an adjustable rate mortgage (i.e. an ARM) in these loan amounts, will also be able to refinance into a conforming rate. They will either be able to refinance into a fixed rate mortgage at a low rate or into another ARM at the conforming ARM rates. In either event, it will be a short-lived opportunity that should not be missed.

Assuming that rates stay stable over the next few weeks, which we expect that they will, there will be a mini-refinance market created by this activity. It will result in people saving hundreds of dollars per month on their mortgage payments, which will help their monthly cash-flow. In addition, it will improve the business prospects of those involved in the mortgage industry who have been struggling such as appraisers, title companies, mortgage companies and closing attorneys.

The refinancing activity by itself will most likely be a short-lived phenomenon and will not by itself do too much to improve the real estate market. However, with the lower interest rates on loans of up to $729,750, which we are presuming is the amount that will be in affect in Manhattan, there should be some increase in purchases of apartments in the $900,000 to $1,200,000 range. These purchasers will be helped most by the lower rates since (i) the loans best match up with these purchase prices and (ii) the lower monthly payment of $600 or so ($729,750 at a savings of approximately 1.25% from 7% to 5.75%) will have the most affect on the low, mid-range of the market.

The larger impact in the real estate market will be felt in the suburbs of Manhattan, specifically, Westchester, Long Island, Northern New Jersey and Southern Connecticut. In these areas, house prices have dropped by 10-25% over the past two years. And, more troubling has been the lack of liquidity in the suburban market where sellers have been unable to sell their homes.

A loan amount of up to $729,750 should help stimulate the mid-part of this market which has seen few sales the past two years. Though many suburban houses sell in excess of $1,200,000, the vast majority of them sell in the $500,000-$1,000,000 range. This is exactly the market that will be helped by this Package and the lower payments resulting from it.

Though we do not expect the housing market to rebound robustly as the result of this Package, we do expect increased activity as we enter the traditional spring buying season. We still think that it will continue to be a buyer’s market due to the excess inventory and that the number of homes sold will pale in comparison to those sold in 2001-2005. Nevertheless, the Package should have the effect of stemming further loses in suburban housing market and help us start to come off the bottom. In effect, it will turn what would have been a disastrous house-buying season into a below average to fair one.

With respect to the overall economy, we do not expect the Package to have much effect overall. There are many factors that are affecting our economy that are not controlled by the housing market or interest rates. These include consumer spending (most of all), the weakening of the dollar, the underperformance of many companies’ earnings (especially those in financial services) the job market and events affecting world economies. At this point, unfortunately, even a strong real estate market, which we do not expect to have for several years, will not be enough to turn around the economy. Other factors, beyond the scope of this Article, will need to do that.

The Package will help out consumers by making mortgage money cheaper for many as noted above. This will help some people buy homes and others refinance. It is a good thing for the real estate market, but far from a savior. Individually, many people can and should take advantage of low rates to either (i) refinance their loans that were jumbos and now are not or (ii) buy homes that are now on sale with cheaper money. As this relief is only in affect for 2008, we suggest that everyone take advantage of it as soon as they can.

By: Daniel M. Shlufman, President and General Counsel
FCMC Mortgage Corp.
dshlufman@fcmc.net

Posted By Daniel Shlufman | Permalink | 4 Comments | Email This

It has been reported in the news that the House and Senate recently passed the Economic Stimulus Package. The Package will become law once it is signed by the President which should happen some time this week, possibly as early as today. The main provisions of the Package and those that have been widely reported involve tax rebates to consumers.

However, the provisions of the Package that will have the most effect on real estate and, I believe on the economy as whole, are those that involve increases to the limits of Fannie Mae and Freddie Mac loans a/k/a non-jumbo or conforming loans.

Presently, a conforming or non-jumbo loan is one that is in the amount of $417,700 or less. As the average price of Manhattan apartments significantly exceeds $1,000,000 now, most loans taken out to purchase the apartments are non-conforming or “Jumbo” loans since they are in amounts greater than $417,700.

Pursuant to the Package, the conforming limits will be increased nationwide to a maximum amount of $729,750. The increases will be in effect through December 31, 2008. These increases will be available in high-cost areas and in amounts based upon the median area sales price.

To determine the maximum loan amount in high-cost areas that qualify under the Package, the calculation will use 125% of the median area sales price. Pursuant to this calculation, a median area sales price of $583,800 would presumably qualify for the highest loan limits.

The higher loan limits will not be available immediately since several factors will need to be established. First, it will need to be determined how the definition of “area” is addressed. While it is clear that Manhattan real estate below 125th Street (and probably somewhat beyond as well), would significantly exceed a median area sales price of $538,800, it might not be the case if “area” is expanded to include upper Manhattan and some of the boroughs (especially the Bronx). I do not expect this to be the case, however, since it would greatly diminish the impact of the Package (which impact will be addressed in Part II of this Article tomorrow).

Second, Fannie Mae and Freddie Mac will need to pass additional regulations setting forth their requirements for these loans. These will likely (though not definitely) include different underwriting criteria for loans over $417,700 such as higher FICO (i.e. credit scores) and lower permissible loans-to-value.

Finally, Fannie Mae and Freddie Mac, along with the lenders, will need to determine the additional costs associated with these loans. It is expected that due to the additional risk (whether perceived or actual); the rates on these loans will be slightly higher than they are for loans of 417,700. Regardless of this, with jumbo 30 year fixed rate loans averaging close to 7.0% and conforming 30 year fixed rate loans averaging about 5.75%, these new loans will provide significantly better rates than those currently available on jumbo loans.

Based on the mandate from Congress and the fast tracking of this bill, we do not expect the delays in implementation to take too long. We are hoping that these higher limit conforming loans will be available by the end of February. But, in any event, do not expect them to be available later than mid-March.

In tomorrow’s part of the Article, I will address who I believe will benefit from these higher limits. I will also address what I believe will be the impact of this law on the real estate market in Manhattan specifically, the Metropolitan area generally and the economy overall.

By: Daniel M. Shlufman, President and General Counsel
FCMC Mortgage Corp.
dshlufman@fcmc.net  

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With inventory still incredibly low in most parts of the Manhattan residential real estate market, eager buyers are hopeful that they and/or their agents will be the first to spot and view properties as they come on the market.  Being the first can indeed be an advantage but many factors come into play in determining just how strong that advantage may be.  Assuming you are the very first person to see a new property and you feel like you must absolutely have it, you must consider this:

• How is the apartment priced? How does it compare to others like it and others that have piqued your interest in the recent past?
• How do the features of the apartment make it stand out from other available inventory or recently sold and closed properties? Consider the views, light, condition, layout, size, building, location (not necessarily in that order).
• What is your time line of ownership?  How long do you plan on living here? 
• And now the mother of all questions:  WHAT IS IT WORTH TO YOU TO KEEP THE PROPERTY FROM BEING BROADLY MARKETED?

That question is indeed the most difficult to answer and will likely be based on your current experience in the marketplace both in comparing this property to others and weighing your experiences with multiple offer scenarios, gazumping, and lost bids.  Assuming that you have some experience losing properties that you felt were viable options for you, it may be time to step up and do what is necessary to prevent the same from happening yet again.  Don't be surprised however when a seller balks at your attempt to preempt his/her marketing strategy.  Unless you dangle a very big carrot (asking price or better), most sellers aren't going to feel very warm and fuzzy about selling to the first person who sees their property. 

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

Instead of the loosening of inventory that I had so hoped for this busy winter season, a further contraction seems to be a harsh reality.  So in the sincere hope of procuring some very special properties to bring to market, here's a quick list of what some of my buyers are hoping to find (please be mindful that we have seen EVERYTHING currently on the market so if it appears on the following wish list, it isn't on the market...yet!):

• Classic 6 with light and views on the Upper West Side (high 60's to 90th Street) for $2.4M or less.
• Large 2BR/2BTH (1400sf or larger) with stunning views and doorman for $2.5M or less.
• 2000sf or larger 3/4BR on Upper West Side on high floor with stunning views and doorman for $4M or less.
• Single or Multi family townhouse from 67th  to 75th Street, between CPW and Columbus for $12M or less. Willing to do work.
• Large 2BR/2BTH (1200sf or larger) below 14th Street (Lower 5th Ave...Gold Coast) for $1.4M or less.
• Large Prewar 1BR/1BTH on Upper West Side with doorman, light and views for under $850K and reasonable maintenance (not $2 per sf).
• Upper West Side 2BR/2BTH (1000sf or larger) with light for $1M or less.  Seeking best "value."

There's more, but that's a start. 

Sellers...PAY ATTENTION:  If you're considering selling in the coming months, there may be an opportunity right now for you to capitalize on the incredibly low inventory in the Manhattan real estate market.  That said, if you have a plain cookie cutter type apartment and you're hoping to score big, you may want to just stay put.

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For those wondering if there is still an inventory shortage in the Manhattan real estate market, I'm here to tell you...ABSOLUTELY!  Gazumping just doesn't happen all too often in falling real estate markets and I and many of my colleagues have been victims of the gazump numerous times in the past 2 weeks.  I can't speak specifically for my colleagues but my personal anecdote is this: 

After negotiating an incredible deal with "eager" sellers of an Upper West Side Classic 6, my clients and I awaited delivery of a contract.  After an unexplainable (we thought) delay in receiving the contract, I received the news from the seller's agent that another offer had come in about 5% higher than our agreed upon and accepted offer.  The agent kindly gave us the opportunity to match the offer but my clients rescinded based on the level of renovations that the apartment required.  As an agent who's business is largely representing sellers, I completely appreciate this scenario but I'm always wary of the gazumping offer actually proceeding to a fully executed contract.  The ultimate decision as to whether a seller wants to risk losing the "bird in hand" is completely up to the seller and in this case money talked.

One important point that people need to take away from these scenarios is that none of this is personal and all too often agents and/or their clients do take it that way.  I know deep down that my buyers would love to hear next week that the gazumping bidder backed out of the contract and the sellers are back to square one.  As for my buyers plans, we have the fortune of having found another property even nicer (requiring no renovation) that they would love to call home.

So the bidding begins...

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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 don't know exactly what is going on but the Manhattan real estate market is churning white hot yet again.  I'm having difficulty finding the time to blog.  For example, here's just how today went:

• Highest, best and final offer for property first offered this past Sunday.  7 "final" offers (3 dropped out...intimidated) of which 6 were way over ask.
• Contract out to be signed tomorrow on property that received multiple offers last week after a board turn-down and 4 months on the market.
• Contract out to be signed tomorrow on another property which also received multiple offers after 5 months on the market.
• 10:30AM-11:30AM-met with buyers to view 2 properties: one didn't have the view they like and the other is a viable option.  Awaiting there call to see if they want to bid.  50/50 chance I think.
• 12:15PM-5PM-with buyer viewing new development projects with pools.  Bidding on something we saw.
• Email to follow-up with prospective seller.
• Appointments arranged for buyer to visit property 2nd time with architect.
• Expediting closing for 2BR.
• Phone call with seller who may want to sell 3BR East side Condo to purchase Townhouse.
• Email with seller who wants to see 3BR fixer-upper and may sell Classic 9.
• Right now...doing searches for 2 prospective purchasers who are ready to buy ASAP.
• Going home to see my wife and kids!

All in a day's work.  I love this job!!!

And BTW...my colleagues seem to be incredibly busy too!  Our top agent put 6 new exclusives into the system TODAY.  Anyone else care to share what's happening in their business or with their searches?

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Some of my readers recently asked me what I meant when I said that "property is king" in the Manhattan real estate market.  Yesterday at one of my open houses, the evidence of this truth was never more powerfully displayed. I have been in the Manhattan residential real estate business for 16 years and never in that entire time have I experienced the masses of traffic that appeared at this open house yesterday.  I am not embellishing in the least when I tell you that about 150 people came through this apartment in 90 minutes!  I remain stunned.  We currently have 5 offers, 4 at the asking price, and anticipate many more before we go to a highest, best and final bid scenario.  I attribute this incredible amount of traffic and interest to one or more of the following reasons:

• The recent decline in interest rates. 
• Ultra-low Manhattan housing inventory 
• Attractively priced with very low maintenance.
• Condition of the property...it's pristine and beautifully decorated. 
• Location of the property (72nd Street just off of CPW)
• Transparency of listing (accurate square footage, accurate photography, and video tour...see below)

So if it's still not obvious why property is king as a Manhattan real estate agent, here's my point.  I have been working with some of my buyers for as long as 3 years.  Some of these buyers have difficulty trusting that I'm doing a good ("complete") job for them despite all of my efforts.  On the flip side, there is this particular seller whom I met 3 weeks ago and who was referred to me by someone she deems credible with high levels of integrity.  Therefore, she trusted me to price the apartment properly and market it effectively to appeal to the broadest segment of prospective purchasers.   In this instance, her trust, my expertise (I got this one right), and most importantly, current market conditions all came together likely resulting in an efficient sale whereby the market will truly dictate the price at which this home sells. 

And some additional anecdotal evidence of a more active Manhattan real estate market:

• A studio we have been representing for 5 months has multiple offers as of last week.
• And another home that we are representing received multiple offers after yesterday's open house.

That is precisely why PROPERTY IS KING!

Here's a video of the home that saw 150 or more bodies pass through Sunday between 11:30am and 1:00PM.

For my regular readers, you know I hesitate to market my properties on TrueGotham (and I'm not really marketing this one here either) but I felt that in this instance a display of the video may further explain the reasons behind the huge turnout for this property.

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As phone calls to my office have increased from sellers seeking "fresh representation" for properties that are languishing on the market (yes, even in Manhattan), Newsday provides some excellent tips for selling in a down market (I would suggest that these tips are effective in a confusing market too like we are experiencing in Manhattan):

1) Stay in the market. Any downtime means potential lost opportunities - and more competition when you return. 

TG Says:  Buyers are more savvy than ever and they won't fall for the off the market/on the market "play."

2) Be the "bright penny in the jar." Do the necessary cosmetic work: painting, cleaning, sprucing up. 

TG says:  DON'T UNDERGO A MAJOR RENOVATION FOR RESALE!

3) Be open to price changes. Most agents have a good sense of what it takes to make your home sell, particularly in a changing market. 

TG Says: Price overcomes ALL obstacles but patience may be necessary too.  Let go of what you "think" you should sell for and be guided by your agent, the market and your time horizon/motivation.

4) Be open to increased marketing. Standing out in a crowded market may mean more open houses or other tactics to bring in buyers. 

TG Says:  Make sure the marketing machine is churning until the day your home is in contract.  Check in with your agent to see what their current strategy is to sell the home and how they are implementing said strategy.

Sometimes a resuscitation of the property by a new listing agent is precisely what is needed to sell and it may have absolutely nothing to do with the efforts or lack thereof from your current listing agent.  If you're happy with your current agent, schedule a meeting to sit down with them and discuss how they will bring your property "back to life."  It's not always an easy task, but I have seen properties that have languished for 6 months or more fetch multiple bidders after a new marketing plan is implemented. 

The bottom line...if it's not selling, something has to change.  Whether that change be your price, your marketing plan and/or your agent is a decision that you as a seller must often make to expedite the sale of your home.

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I just returned late last night from a 3 day family skiing weekend to Mt. Snow, Vermont.  As a proud father, I must share that my 6 1/2 year old son skied from the Grand Summit having only been on skis 4 times before and my 3 1/2 year old daughter made her inaugural appearance on skis and is already tearing up the slopes.   It was a much needed respite from all of the negative stock market and housing market news that is jamming my In-box.

So back to reality.  I am now convinced that we are officially in a recession and as most economists will tell you, the federal government won't let us know until sometime next year when we have hopefully begun to recover.  That said, the Manhattan real estate market continues to remain active with the number of visitors to open houses picking up as well as the willingness of buyers to bid.  I and my colleagues are also seeing an increase in phone calls from prospective sellers who are considering a sale in the very near future. Perhaps this is in part due to seller anxiety, an influx of bonus money (see Jonathan Miller's Matrix: Only Bonus Babies Really Know The Fine Print) to the marketplace and/or falling mortgage rates.  Regardless of the reasons, transactions continue here in the Big Apple.

Now back to my weekend jaunt to Vermont.  Every time I lay foot outside of Manhattan, I witness evidence of all of the negative housing news that I'm bombarded with on a daily basis.  As we drove around parts of Vermont this weekend, for sale signs were plentiful and stories were swirling about failed developments and drastic price drops in a market that seems to be sliding further before it will rebound.  It's hard not to let this type of  negative news have some effect on my local market sentiment but every time I think that we may be headed for a slow down or even decline, I have been surprised by Manhattan's resiliency.  That said, we are not immune to a drop in home values! 

Here's how I see our local market conditions today:

Positive (my observations and not necessarily my beliefs):

• Interest rates are incredibly low and may go lower!
• Inventory remains at historical lows.
• People still want to live in Manhattan.
• Rentals remain incredibly expensive.
• Wall Street bonus season is still providing an influx of cash to the real estate market.
• With the stock market in disarray, many see Manhattan housing as a safer place for their money.
• The dollar remains weak which continues to attract foreign buyers who feel like they are buying a piece of Manhattan for 50% off.
• The Manhattan housing market is being buoyed by a plethora of industries unrelated to Wall Street.

Negative:

• We are likely in a recession.
• Buyer anxiety remains high as buyers don't want to feel like they are overpaying in a declining market (no one wants to catch the falling knife).
• Wall Street bonuses are being paid in large portions of restricted stock (people generally don't buy homes with stock)
• It's difficult to make sense of the dichotomy in the market place.
• Buyer and seller psychology haven't yet "met." (They're getting closer)
• We can't ignore the suburban markets outside of Manhattan that are fueled largely by the same buying pool (Greenwich, Westchester, parts of NJ)

That's my perspective of how today's market looks.  Again, deals are being done at a slower pace than last winter, but buyers seem to remain eager to own their piece of Manhattan.

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After all the bad news that has been coming out recently about the real estate market generally and the mortgage industry, specifically, I am here to finally report some good news. Unbeknownst to most homeowners, interest rates on conforming/non-jumbo loans (i.e. loan amounts of $417,700 or less) have now fallen enough that we have just entered a refinance market.

Interest rates on these loans are now available in the mid 5s on 30 year fixed rate loans and the low 5s on 15 year fixed rate loans. Due to the tightening in the lending markets, banks are requiring that borrowers have good credit (with scores at least in the mid 600s) and equity of 10% or more in their homes. In addition, borrowers will need to be able to verify their income and employment to qualify for these rates.

For anybody who purchased a home in the past two years and has a 30 year fixed rate interest rate of 6.25% or more, it will be worth exploring the possibility of refinancing. If the monthly savings on the new loan, due to the lower rate, are enough to repay the closing costs within 2 years, it is worth refinancing. Since closing costs on cooperative loans are typically only about $2,000 or so, a savings of as little as $100 a month on this type of property will make a refinance worthwhile!

Also, for someone who as an adjustable rate mortgage (i.e. an ARM) that will be resetting in the next year or two, this is the time to replace it with a fixed rate loan. Since most of those ARMs have interest rates in the upper 4s or low 5s, the fixed rates are now low enough to replace them without incurring a significant increase in payment.

Finally, there are many people who have large balances on their home equity lines of credit at interest rates that are tied to Prime. These lines of credit generally have rates ranging from 6.75-9.5%. As a result, it is worth considering refinancing to consolidate these lines of credit with a first mortgage to lower the rate and payment.

If you can benefit from a refinance, this is the time to contact your mortgage professional to begin the process. If rates stay low, which we expect they will, a refinance mini-boom may occur. This will begin to clog the emails, telephone lines and pipelines of lenders, causing frustration and needless wastes of time in applying, approving and closing loans. Moreover, it will delay starting the savings from lower monthly payments that you can begin enjoying now!

Written By:

Daniel M. Shlufman,
President and General Counsel
FCMC Mortgage Corp.
dshlufman@fcmc.net

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A Tale of Two Psyches appears to be an appropriate title for the current Manhattan real estate market as languishing properties coexist with bidding wars.  Activity in the past 10 days has picked up for me and my colleagues exponentially from late November and December.  This past weekend, on behalf of our clients, we bid on $4.2M worth of residential real estate ranging from a 1BR co-op asking $779k to a Classic 7 room co-op asking $2.45M.   The $779K property is selling "considerably above $800K" per the seller's agent and the $2.45M has multiple offers at the ask and will likely go to a highest, best and final bid over the asking price.  Both were well priced (duh...obviously) but not so well priced that one would expect this type of multiple bid scenario.  Another colleague of mine just informed me that his buyer (with liquid assets in the high 7 figures) just lost a bidding war on the Upper East Side by $100K and he bid $51K over the $1.7M asking price (so it's selling for $1.851M or almost 10% over the asking price).

So what's going on?  Inventory remains unbelievably low and SOME buyers are snapping up SOME of the quality inventory that hits the market.   The unusual aspect of the current real estate marketplace that I'm observing is that the anxiety surrounding the future of our overall economy is effecting Wall Streeters much more significantly than other professional sectors such as doctors, attorneys, entrepreneurs/business owners, retired empty-nesters, and those who just refuse to pay a landlord.  Many Wall Streeters, fearing a recession and therefore expecting a buying opportunity have either put their search on hold or consistently underbid prices at levels unacceptable to sellers.  Another interesting piece of the current dichotomy is that some attractively priced and well located properties continue to languish on the market with numerous "interested" parties neglecting to bid.  It's a very bizarre (and challenging) environment that I don't ever remember seeing in my 16 years in the industry. 

These happenings over the past couple of weeks could indeed be anecdotal but I think it's worth paying attention to the number of buyers who are still sitting on the sidelines with cash just waiting to pounce on their home as evidenced by the numerous bidding wars taking place.  2008 is already shaping up to be a wild ride indeed!

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If you're not familiar with IntoTheBox.TV then you absolutely must check it out. 

IntoTheBox is all about peering inside the surreal housing market here in New York City. With approximately 13 million people residing in the New York Metropolitan area — and available housing at an absolute premium — it's no wonder the market has been compared to a blood sport. People will lie, cheat and steal for a small slice of the scrumptious real estate pie.

IntoTheBox takes a look at the news, trends and politics of the NYC real estate market. The stories here are even better than fiction. Our daily videocasts provide you with an intimate view of the way New Yorkers cope with the absurdities of living in the best city in the world.

I had the recent pleasure of meeting IntoThe Box's creator, Rachel Natalie Klein as we spoke on a video blogging and podcasting panel together at Inman's most recent Real Estate Connect.  What she is doing is both entertaining and informative.  But don't just take my word for it, check out todays episode and visit IntoTheBox.TV for more.

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Thanks very much to Brian Scully over at Property Shark for providing TrueGotham readers an early look at the key takeaways from their NYC Q4 Foreclosure Report:

Here are the Key Takeaways:
• Reversing course from the upward trend of the prior 3 quarters, Q4 2007 saw a 13% decrease in new foreclosures over Q3 2007. However, the number is 71% higher than Q4 2006.

• New foreclosure auctions in Staten Island rose by 53% compared to last quarter, while all other boroughs experienced a quarterly drop between 10-30%. Compared to Q4 2006, new foreclosures in Staten Island jumped by 223%, the highest increase among all boroughs. All boroughs increased compared to Q4 2006.   “Incredibly, Staten Island now has more first time foreclosures than Brooklyn, despite being one-fifth the size in terms of household numbers.” – Ashleigh Rose Clark, data acquisitions manager, PropertyShark.com

• Comparison to Q3 2007: Los Angeles (up 24.47%) and Miami (up 26.85%) continued their upward trend in first time foreclosures with both counties setting quarterly records compared to the prior 8 quarters. After dipping in Q3 2007, Seattle foreclosures jumped by 43.42% while New York City saw a decrease of 13.32%.

• Comparison to Q4 2006: Scheduled foreclosure auctions in Los Angeles, jumped 235% compared to the fourth quarter of 2006, while Miami increased by 156% and New York City by 71%. Seattle foreclosures decreased by 2.7% compared to Q4 2006.

• Foreclosures per Household: Of the four cities, Miami again had the highest foreclosure rate per household, 5 times higher than Seattle, and over 12 times higher per household than New York City.

Anyone from Staten Island care to elaborate on your market?  The sky seems to be falling in Staten Island, Los Angeles, and Miami while NYC saw a 13.2% decrease in foreclosures.

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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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I'm at the Inman Real Estate Connect conference all day today and promise to have something interesting to report later today.

Until then, straight from Matt Woolsey of Forbes.com comes the 10 Most Expensive Cities for Renters.  Average rents provided by Marcus & Millichap.

New York, N.Y.: $2,922
San Francisco: $1,904
Boston: $1,658
San Jose, Calif.: $1,612
Los Angeles: $1,452
San Diego: $1,304
Washington, D.C.: $1,302
Miami: $1,080
Philadelphia: $1,014
Chicago: $1,010

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Just a reminder that it's not too late to register and check out an amazing group of speakers at this year's Inman Real Estate Connect Conference. 

I'm speaking on a blogging panel tomorrow morning at 9:45 Beyond the Written Word: Videoblogging and Podcasting. I'm looking forward to particpating on this panel but more excited about the various workshops and presentations that are scheduled for this year's event which goes through Friday.  The Housing Debate: Bull Vs. Bear marries a superstar panel organized by my friend and fellow blogger Noah Rosenblatt of UrbanDigs.com and proves to be well worth the visit!

Hope to see you there!

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So here's the update on yesterday's post I May Be Buying Again.  Last night at 5PM. my wife and I visited the 3BR/3.5BTH Condo with a gorgeous eat-in kitchen, W/D, a formal dining room, and a corner living room with open river views.  We were not alone.  The apartment was packed with prospective purchasers who all seemingly wanted this apartment.  Some were already measuring for their furniture and discussing the neighborhood.  All had looks of disdain for the others as they spoke in whispers about how they would make this apartment "theirs."  It was a scene reminiscent of last Winter when buyers often became manic with thoughts of "beating" others to "win" properties in bidding wars.  The difference between last night and last winter was the asking price.

Anyone who reads this blog knows that I am a huge fan of pricing property aggressively to appeal to the broadest segment of the buying pool.  This is precisely what the agent representing this 3BR condo has done and his sellers are going to reap the rewards of an efficient sale (highest price in quickest amount of time...about 4 days) because they listened to him regarding pricing.  By setting an asking price of 20% less than market value (my opinion of course but I think i know my market), the seller's and their agent have done what few have been able to do in this somewhat stagnant market and that is bring in a plethora of bidders. 

If negotiations for this apartment are handled properly and they indeed proceed immediately to a highest, best and final offer over the asking price scenario, then this property will sell for exactly where the market says it should.  If you're a seller, what more can you ask for than that? 

By the way, my wife were only prepared to pay the asking price because at that number it was a deal in my mind, even if we are heading into a recession which remains to be seen.  We also decided to remove ourselves from the bidding because we just aren't ready to give up the amenity-rich environment of our current building.  With a 4 and 6 1/2 year old, it would be too painful to give up the pool, playroom, basketball court, and gym that we have all grown so accustomed to.  So for now, we stay where we are...HAPPILY!

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Just a quick note that my phones are ringing considerably more than last week and there seem to be more buyers coming to the table ready to buy property, me included (see below).  Inventory remains low however and we still aren't seeing many "deals" hit the market.  That said, occasionally an apartment comes on the market that is drastically under priced.  Call it a sales tactic, call it agent incompetence, call it whatever you want.  I choose to call it an opportunity and yes one such opportunity has presented itself to 3 of my clients.  Fortunately for me, none of these 3 buyers are interested in this particular property so today at 5PM, my wife and I are going to take a look totally prepared to jump at this opportunity.

This isn't the first time in my 16 years that such an opportunity has presented itself.  Twice in the last 7 years, my wife and I purchased apartments that I stumbled upon while searching for my clients.  On both occasions, I notified my clients that if they weren't interested in the properties, that I was and that I intended to bid on them if they didn't. The first was a 2BR/1.5BTH Co-op that had been on the market for 5 months in an incredibly hot market.  The listing had become "stale" with very few agents showing and many thinking that something was wrong with the apartment.  There was nothing wrong with it and thus my wife and I made it our home for 3 years having our son there.  We had no intention of leaving that apartment even after we discovered that our daughter was on the way.  Fate had other plans.  Again, I had the fortune of showing a 3BR/2BTH condo to yet another client of mine who decided that the space wasn't for them.  It was DEFINITELY for US!  I quickly called my wife who darted up from her job in Midtown to immediately agree with me that this would be the perfect home for our soon to be family of four.  We bid and after a heated bidding war (they actually did a two full page spread story in the NY Post about this) we "won" the privilege of purchasing our current home (I had buyer's remorse for 2 months!).

So fast forward to this morning.  In my relentless search for my current buyers, I stumbled upon an incredible condo with stunning views that is priced at only $1100/sf!  Today at 5PM I will see the space with my wife and I suspect we may be moving in the next few months unless I lose this bidding war.  I will keep you posted. 

My point to this story is that I'm not afraid to sell and buy in this market based on the idea that my family will likely call this place home for a long time (maybe not based on how frequently this type of scenario happens to us).  Mortgage rates are incredibly low right now and I firmly believe that owning a bigger piece of Manhattan real estate is never a bad idea (unless you are forced to sell in a bad market...if that may happen to you, then don't buy).

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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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Straight from my Inbox are the highlights and key takeaways from the 4th Quarter report courtesy of Prudential Douglas Elliman via Jonathan Miller of RadarLogic and Miller Samuel Appraisers:

Overall Manhattan Market [includes entire island]

In the final quarter of 2007, the Manhattan real estate market continued to see gains in most market indicators, consistent with the prior three quarters including increased price levels, increased number of sales and a decline in inventory as compared to the same period in 2006.

Price levels were generally up this quarter, with the greatest price gains seen in larger apartments, specifically 2-bedroom and 3-bedroom units with 22.1% and 39.8% gains respectively over the same period last year, with a portion of the increase in price attributable to an increase in the size of the units actually sold.

-The median sales price increased 6.4% to $850,000 over the prior year quarter result of $799,000 (1.7% below prior quarter result of $864,397).
-The average price per square foot increased 18.2% to a record $1,180 over the prior year quarter result of $998 (3.1% above the prior quarter result of $1,144).
-The average sales price increased 17.6% to a record $1,439,909 over the prior year quarter result of $1,224,840 (5.1% above the prior quarter result of $1,369,486).

- The number of sales increased 3.2% this quarter to 2,518 units as compared to the 2,441 units sold in the prior year quarter.
- Listing inventory fell 13.5% to 5,133 units from the prior year quarter total of 5,934 units.
- Days on market was 131 days this quarter, faster than the 149 days seen in the same period last year but 8 days slower than the 123 days last quarter.
- Listing discount was 2.7%, essentially unchanged from 2.8% in the same period last year, but higher than the 2% last quarter.

Co-op Market

-The median sales price of a co-op this quarter was $675,000, up 3.8% from last year at this time. Average price per square foot increased 21% and average sales price increased 9.1% from the same period last year reflecting higher price gains at the upper end of the market.

-Inventory levels for co-ops fell 26.2% to 2,254 units as compared to the prior year quarter total of 3,054 units. Co-op listings are comprised of nearly all re-sales.

Condo Market

-The median sales price of a condo this quarter was $1,100,000 this quarter, up 6.8% from last year at this time. Average price per square foot and median sales price showed 10.6% and 17.8% gains respectively from the prior year quarter reflecting higher price gains at the upper end of the market.

-Inventory levels for condos totaled 2,879 units, unchanged from the prior year quarter total of 2,880 units. New development added to the market offset the decline in re-sale listings.

Luxury Market (upper 10% of all co-op and condo sales)

-The median sales price of a luxury apartment this quarter was a record at $4,300,000 this quarter, up 28.4% from last year at this time and up 8.9% from the prior quarter. Average price per square foot and average sales price showed similar 29.8% and 32.8% gains respectively from the prior year quarter.

Loft Market (co-op and condo sales)

-The median sales price of a loft apartment this quarter was $1,445,000 this quarter, up 3.6% from last year at this time. Average price per square foot and average sales price showed 18.3% and 11.3% gains respectively from the prior year quarter reflecting higher price gains at the upper end of the market.

I choose to ignore "averages" as they can be greatly skewed by increased activity in the luxury market.  But there are some interesting things to note from this report.

MY Key Takeaways that can't be ignored (IMHO):

• Median sales price up 6.4% from same quarter last year but down 1.7% from 3rd quarter of this year.  It remains to be seen as to whether or not we will see a trend in decreasing median prices.
• Listing inventory decreased 13.5% from same period last year (no wonder prices remain strong)
• Days on market increased from 123 to 131 days from 3rd Quarter.
• The listing discount increased to 2.7% from 2% in the 3rd Quarter.
• Median co-op prices increased a modest 3.8% from same period last year.
• Median condo prices increased 6.4% from same period last year.
• Luxury demand continues to be off the charts with median prices increasing a whopping 28.4% from the same period last year.  Credit crunch obviously isn't affecting the wealthy...yet.
• Median loft prices increased a modest 3.6% from the same period last year.

Delving further into the report and comparing 3rd and 4th Quarter numbers we see the following:

• Overall median sales prices dropped 1.7%
• Overall number of sales dropped 28% from 3rd to 4th Quarter
• Inventory dropped 1.4%

These are the facts.  Spin them anyway you like but my sneaking suspicion is that the first 6-8 months of 2007 were where most of the big gains were seen.  And again, averages schmaverages!  They mean absolutely nothing to me when discussing such a unique real estate market made up of so many micro markets.

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Well I knew that the day would come when a voice on the other end of the phone would say, "We're in a holding pattern because my bonus wasn't anything like I thought it would be."  That day has indeed arrived as one of my team members informed me that he received just that phone call last week from one of his buyers who was in line to purchase a $2,900,000 property at The Rushmore.  This particular buyer was looking at a $2.2M property and based on his bonus expectations increased his budget  more than 30%.  His expectations were not in line with those of his bank and he and his wife have now decided that 2008 may not be the year for them to buy their dream apartment.

The question that lingers in many of our minds is how many "casualties" like this will we see in 2008?  On the flip side of this story are buyers who have received record bonuses but wait patiently to see how the market shakes out in the coming weeks instead of jumping on whatever inventory exists at whatever price.  The psychology seems to have shifted significantly from the same period last year when money seemed to be burning holes in people's pockets and they just couldn't wait to snap up whatever suitable inventory they could find.  This year is different.  Although inventory remains incredibly low, buyers are exercising more patience.   There are still a plethora of buyers ready, willing and able to purchase a new home but there are many fewer who will settle for simply "suitable" as they appear ready, willing, and able to wait for the "right" home that more completely suits their needs.

For sellers of special properties (ex. Prewar Classic 6, 7, 8, and 9's), don't worry!  Your homes are exactly those for which these patient buyers wait.   Just be smart when you bring them to market and price them attractively to appeal to the broadest pool of buyers.  For these sellers and those in the ultra luxury market ($5M+), 2008 should be another solid year for Manhattan real estate.

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Anxiety levels are high in the Manhattan real estate industry as many eagerly await some sign of market direction in January.  Some signs are already appearing as Fall sales have been slow, inventory is increasing (albeit modestly) and price direction seems to be stabilizing at best.  Lauren Elkies of The Real Deal (check out the entire article, well worth the read) asked some industry experts about the current market.  Here are those responses:

Shai Shustik CEO and founder, Manhattan Residential
There has definitely been a slowdown for the average cookie-cutter unit. People are looking for deals and taking longer to execute. Units that are priced as if we were in 2005 are not moving and just flooding the market with unsold statistics.

Frederick Peters president, Warburg Realty Partnership
There are few bidding wars, and when they do occur it is only on very well-priced properties. Even then, things are not going much over the asking price and there may be two or three bidders, not six or eight. Almost nothing is sold anymore in a week or two.

Kathy Braddock co-founder, Braddock + Purcell, and Charles Rutenberg Realty
The most positive trend in the market right now is that the mortgage problem and the media have not deterred our market. The most negative is that it is still hard for first-time buyers to acquire the liquid assets that they need.

Diane Levine brokerage manager of the Downtown office, Sotheby's International Realty
Certain sellers are still attempting to push beyond the value of their property. Correctly priced properties are moving. And, those attending open houses tend to be "real" buyers.

Gordon Golub senior managing director, Citi Habitats
Studios as well as larger units (1,600- to 2,200-square-foot two-bedrooms and three-bedrooms) are being absorbed very rapidly, while one-bedrooms are taking longer to go to contract.

Barak Dunayer president and founder, Barak Realty
Overall, the attendance at open houses has been steady. The only noticeable difference is that buyers stay away from undesirable properties. I still remember the times that people bought any hole in the wall.

David Schlamm president, City Connections Realty
The rental market actually slowed down a lot earlier than in previous years. This year we felt it slow down in the beginning of October, where traditionally it really slows down closer to Thanksgiving.

Brian Huang sales manager, City Connections Realty
The overall market has strength in prime locations, but we are seeing some negotiability in "up-and-coming" areas. We've also had more interest in larger apartments than last year.

Jonathan Miller director of research, Radar Logic
There is modest appreciation based on median sale price, a relatively tight listing discount and the normal number of days on market so buyers and sellers seem to be in sync.

Because of all the turmoil on Wall Street and the discussion of lower bonuses, we're expecting to see an expansion of marketing times and some cooling off of the elevated activity. But, we're still seeing a lot of activity.

Here's my two cents on some of these comments:

• "Correctly priced properties are moving."  Not all of them are.  I'm here to tell you that some properties that are priced quite aggressively are spending quite some time on the market as we all wait for signs of market direction.
• "Those attending open houses tend to be 'real' buyers."  Perhaps they are "real" but they are also "real" patient.
• "People are looking for deals and taking longer to execute."  SPOT ON!
• "Almost nothing is sold anymore in a week or two."  Everyone hear that?  It's true.
• "Studios as well as larger units (1,600- to 2,200-square-foot two-bedrooms and three-bedrooms) are being absorbed very rapidly, while one-bedrooms are taking longer to go to contract."  In some parts of the city but not everywhere.  I would add that properties over $5M are still selling if priced well and those priced well below $1M are still moving but I don't see "rapid absorption" right now of anything.
• "We're still seeing a lot of activity."  Where?  When? Who?  Not in my office of 250 agents.  I'm hearing the same thing from everyone so where are all of these deals being done?

For the record, I have a great deal of respect for many of those quoted in this article.  That said, I'm just not seeing most of what they are reporting.  I'm not at all suggesting that they are spinning things or not reporting things as they see it but the disconnect between what they are reporting and what I and all of my colleagues are seeing is puzzling and frustrating.  Neil Binder of Bellmarc actually seemed to describe the Fall market more closely to what i and my colleagues have observed:

"August and September were bad. If I had a weak August and September, collections will be weak in December and January," said Neil Binder, principal and co-founder of Bellmarc Realty. "Most firms will have to go into reserves to keep the show on the road" those two months.

"The month of October was fine, nothing special, nothing terrible. It was just OK. This particular month looks similar," Binder said in late November.

As far as how I see the market and what current conditions mean for 2008...well....um...it's not an easy question to answer but here goes my educated guess based on current market conditions and anecdotal information provided by my clients and my colleagues.

Early 2008 will see an increase in activity but not at levels seen in the past few winter markets.  As 2008 progresses, sellers and buyers will finally meet somewhere in the middle regarding pricing thereby generating an increase in transaction volume and a renewed confidence in Manhattan real estate from those who are currently overwhelmed with anxiety. 

Oh, and by the way...I hope that I'm completely wrong, that Wall Streeters are throwing cash around again and that 2008 is a record year.  Not counting on it but who knows when your talking about Manhattan real estate?

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With all the talk of housing markets across the country still in decline and a quiet stalemate here in Manhattan, many sellers and their agents are confused as to how they should price their property for an efficient sale.  Lew Sichelman wrote Figuring out the math when it's time to move on for the LA Times on Sunday and addresses absorption-rate pricing for the real estate industry.

In a hot housing market, it doesn't seem to matter what price sellers put on their homes. Whatever you ask, someone will offer more.

But in a slow market, pricing is key. Price the place too high and it will languish, soon taking on the aura of a white elephant.

Yet the key isn't so much your asking price as it is how fast you want to sell, said Zan Monroe, a senior instructor for the Council of Residential Specialists based in Fayetteville, N.C., and proponent of "absorption-rate pricing." If you've got time on your hands and are in no real hurry to move, then, yes, you can offer your place at the high end of the market. But if you want out fast, you have to be much more realistic. You need to find the price point at which your house will sell as quickly as you need it to.

Absorption-rate pricing isn't new. Practically every type of business uses the technique. But it is new to real estate. "Our industry is just now catching on," said Monroe, who teaches agents how to help clients determine an asking price commensurate with their need to move on.

Monroe suggests the following to determine absorption-rate price for your home:

1. First, realize that only a certain number of houses will sell in any market, strong or not, in any given time period.
2. Determine the odds that your house will sell. Hire an agent familiar with MLS or local listings data to determine:
   • How many properties were on the market in the past 6 months?
   • How many sales closed?
   • How many new listings entered? (Ex. Let's say there were 53 closings of the 128 listings that entered the MLS in the last six months. That means 41% of the houses that entered the market sold. So the odds of your place selling in the 180 days after you put it on the market are just over 40% -- regardless of how low the price)
3. You can cast as wide a net as you want. Or you can drill down to, say, your own neighborhood, a certain price range, school district or even house style. The more detailed the search, the more accurate the results
4. Once you determine your criteria, you can figure out the absorption rate by completing a 12 month, 6 month, and three month analysis. (EX. 1,200 sales fitting your search criteria closed in the last year. That's an average of 100 per month. Divide the number of active listings -- say, 800 -- by the average closed per month, and you'll now know that there's an eight-month supply of houses on the market)
5. Perform the same analysis doing a six-month search and then a three-month search (EX. If the months' supply of houses is going down, the rate of sales is speeding up. But if it is going up, sales are slowing)
6. Determine your "walkaway" price which is the amount of money you'll have in your pocket after closing. Look at the prices of the homes in your search criteria that have been sold and that are still on the market to see if your "walkaway" price is in the ballpark of the sold homes.
7. Based on the absorption rate in your search, you can see how long it will take to sell your place. If it will take more time than you have, you'll have to set a lower price.

If this isn't terribly clear, here's my two cents:

• Select your price based the amount of time you have to sell focusing less on current supply of inventory (in terms of prices) and more on what has actually sold or gone to contract.
• The 12 month, 6 month, and 3 month analysis can be useful tools in determining price if you actually pay attention to the data but keep in mind the criteria that you used to gather that data.
• And LASTLY but MOST IMPORTANTLY, hire an agent whom you trust with the interpretation of the data and make them explain how they came up with a price.

Manhattan definitely isn't Fayetteville but I think Mr. Monroe's tips could indeed be useful in any market.

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The question that is most frequently asked of me, particularly as of late, is "how's the market?"  To which I usually respond, "Can you believe how well those New England Patriots are doing?"  That "how's the market" question is increasingly more difficult to answer as it totally depends on my sources of information (I could spin the market in any way I chose by selecting supporting evidence from any number of media sources) and the anecdotal evidence of my business as well as that of the colleagues who sit in close proximity to me.  So based on those factors, here's my answer:

It's SUPER quiet right now!  The best article that I have read lately that most accurately portrays the current market is Between Buyers and Sellers, a Stalemate written by Christine Haughney for The New York Times (and I'm not just saying that because I was quoted in the piece).

Manhattan is apparently full of sellers who think foreign buyers, or bankers who might still get big bonuses, are ready to pay full price for their apartments. These sellers do have recent history on their side. For the first three quarters of this year, Manhattan apartments over all continued to sell at record prices.

Now, brokers say, they see a stalemate developing between buyers and sellers in Manhattan, especially for apartments in the $1 million to $5 million range. Sales in this range made up more than half of the total dollar volume in the market in the third quarter of this year, according to data tracked by Radar Logic.

Brokers say it is the buyers in this sector of the market who are now growing concerned about the impact of the weak national housing market and the effect that Wall Street losses might have on Manhattan apartment prices. So they’re lowering their bidding or stopping their searches altogether until they have more confidence in the market. 

Buyers and sellers alike are indeed digging in their heels.  Having said that, I'm seeing more motivated sellers on the market right now than those who "test" the market to see if they can get their price (inflated usually).  I have also experienced many sellers pulling property off of the market as they have made the decision to stay where they are and "ride out the storm."  If there is going to be a storm, and that remains to be seen, then perhaps this is the calm that precedes it?  As I  eluded to in the article, most of my Wall Street buyers (all of them now since the article was printed) are patiently awaiting signs of market direction in Q1 2008 before proceeding with their purchases. 

So what do I see happening in 2008?  Based on the plethora of economic data that I have been watching, certain segments of the Manhattan market may see the current imbalance of inventory and buyers tip slightly more toward the buyer's favor.  In other segments (i.e. the Classic 6 and 7 markets in prime Upper West and Upper East side locations) it will remain business as usual with buyers frustrated with the minuscule amount of product to choose from.  In the condo market, I'm not sure that I believe that the increases in inventory will be offset by increasing numbers of foreign buyers but as long as Manhattan remains relatively clean with low crime stats, I imagine the worst case as being a stabilization or even modest decrease (as much as 10%) in prices.  So here is my advice:

Sellers: 

• The days of picking a price from thin air and letting the market dictate selling price seem to be behind us.  Pricing is more important in today's market than it has been in the past 10 years.  If you really want to sell your current home, price it aggressively but leave some room for negotiation.  Buyers aren't eager to pay asking prices right now regardless of how you may support it.
• Keep in mind that if you are trading up in a stable or declining market that you may actually do better from an equity perspective.  (ex. If you sell a home at a 10% decrease at $1M and you purchase a larger home at a 10% decrease for $2M, you have gained $100k in equity in the new home.) 
• Don't bother "testing" the market.  It's a waste of your and your agent's time.

Buyers: 

• Be Patient.  If you are fortunate to have more than one property that interests you then you should have more leverage to get a deal done at a reasonable price point on at least one of those properties.  I say "should" because we still have many sellers who think that someone with a pocket full of Euros is going to snap up their home.  History shows that the learning curve for sellers can be long and painful.
• Determine your time line for ownership.  If you're buying for long term (5-7+ years) you have a much better chance of doing well than someone with a 3 year time line.
• Analyze your current situation.  Do you rent?  How does it compare to cost of ownership?  Consider tax benefits as well.  Speak to your accountant and a reputable mortgage broker regarding your financial picture. 

Overall, I think there are a lot of buyers waiting patiently on the sidelines who will jump as soon as they see an opportunity and feel comfortable with the real estate market, the economy, and their own job security going forward.   Q1 2008 is going to answer a lot of questions and as an agent sitting in a very quiet office right now I say, "bring on 2008!" 

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People's feelings about Co-op Boards range from utter disdain to acceptance as a means to control one's environment.  Madonna is apparently of the former as she is filing a lawsuit against her Co-op Board at Harperly Hall for refusing to approve her purchase of her neighbor's apartment.  from the NY Post:

The pop icon has filed suit against her Central Park West building's co-op board, charging that it wrongfully blocked her from buying a neighbor's apartment.

In papers filed in Manhattan Supreme Court, the singer says the board recently stopped her from closing on a deal to buy Julie Clark Thayer's home. Madonna is seeking a court order allowing the sale to go through, as well as legal fees and expenses. Board president Phyllis Harrison-Ross did not return a call for comment.

The Daily News also chimes in with some interesting "Madonna haters" leaving comments.  This one is particularly hilarious:

These celebs are just like athletes, They think they are entitled to whatever it is they want! This ***** wants to break thru the walls of an historic building and make more space for her self and she has the money to do it and she thinks thats enough! To **** with the co op board! "I wan't it and you have to give it to me!" Its no wonder the rest of the world wants to take a shot at us when they read **** like this! The co op board of the other building was right in rejecting this demanding *****! She has too much money and not enough brains, Pig!

Can you say envy, jealousy and resentment?  Good grief, she has the money to purchase the neighbors space and the Co-op could easily oversee the combination.   I would love to have been a fly on the wall during that Co-op Board meeting.  I also wish that the bill forcing the co-op to disclose their reasons for the rejection had already passed.

A colleague of mine recently had 2 Board turndowns for the same apartment in the Dakota with the second coming after an officer on the Board of Directors promised his neighbor, the purchaser, that s/he would be approved for the combination.  I know that many shareholders in buildings that exhibit such exquisite architecture as The Dakota and Harperly Hall are reluctant to compromise the integrity of the original layouts.  That said, some even turn down combinations that would restore apartments to their original layouts.  There is quite a bit to consider when allowing a massive combination project to proceed in such an old building as well.  I guess we will never know what Madonna's Board was thinking.

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The Property Shark November 2007 Foreclosure Report has been released and here are the key takeaways:

• Comparison to October 2007: Although Los Angeles, Miami and New York City experienced just slight increases compared to October 2007, all three regions reached two-year highs for new foreclosures. Seattle saw the second highest monthly foreclosure value for the past 2 years and a jump of 118% over October 2007.
• Comparison to November 2006: Scheduled foreclosure auctions in Los Angeles, grew by 234% compared to October 2006, while New York City increased by 129% and Miami by 111%.
• Foreclosures per Household: Of the four cities, Miami had the highest foreclosure rate per
  household, about 6% higher than Los Angeles, and 872% higher per household than New York City.
• New York City Boroughs: First time foreclosures in Staten Island increased by 49% compared to October 2007, again surpassing Brooklyn to be the New York City borough with the second highest number of monthly foreclosures. All boroughs had higher foreclosure numbers compared to October.
• Los Angeles Trouble Spots: Ones again zip codes in Lancaster and Palmdale topped the list with the most new foreclosure auctions scheduled in November..

Manhattan's foreclosure numbers remain relatively stable as you can see from this chart:

Just more evidence that housing markets are hyper-local. 

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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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Fellow blogger and respected voice of real estate, Jonathan Miller is blogging today at Matrix about something that he and I share as a pet peeve:  There Is No National Housing Market.

The use of national housing statistics has been a key source of confusion for consumers, real estate brokers, lenders, media, financial markets and government agencies among others. The statistics are often applied to local markets and properties. The reliance on these numbers for ground level use has been a pet peeve of mine for many years.

And mine as well.  What I find interesting is that now that markets across the country are experiencing some dramatic drops in pricing and activity, the real estate community as a whole is embracing the reality that real estate is local.  This concept didn't seem to be a focus for the NAR or economists while these same markets exploded over the past decade.  The National Housing Market was robust and booming.  The National Housing Market was defying all odds.  The National Housing Market was a great place to invest.  Now that these statements aren't true in many markets across the country, we finally appear to accept and acknowledge that real estate is local?  Referring to RadarLogic's own report (which for the record Jonathan has always acknowledged that real estate markets are local), Miller quotes:

The report effort was based on the premise that there is no national housing market; rather, each of the MSAs, while having some economic influences in common like mortgage rates, is influenced primarily by local conditions.

Jonathan goes on to point out that other major real estate organizations are finally acknowledging that specific markets across the country are behaving differently.  The Office Of Housing Enterprise Oversight [OFHEO], the NAR, and the National Association of Home Builders have all recently commented on the housing market from a different and more accurate perspective.  Hard to not say that this shift in perspective seems incredibly self-serving.  That said, I just hope that when markets across the country begin their rebound that these organizations don't go back to reporting on the National Housing Market because now we all agree that 'it" doesn't exist.

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If you're a seller with a property currently on the market or you're thinking of selling anytime soon, it's imperative that you listen to the market and pay close attention to current buyer psychology. 

This morning I received an email from one of my Wall Street buying couples with a subject line that read, "hopefully this will help us negotiate!"  The article from this morning's Wall Street Journal titled They'll Take Manhattan -- For Less-No Longer Immune, Sales and Prices Slip; Waiting for Bonus Time is just the type of press that is fueling buyer anxiety and adding to a market that is already seeing multiple stalemates between unrealistic sellers and overly pessimistic buyers.

This is just the type of press that most sellers will choose to ignore and most buyers will over analyze in their own favor.  But even this article has some contradictions (see the bold points) For example, here are some comments/quotes taking directly from this piece:

Pro Buyer

• Fewer apartments are being sold -- 858 went into contract in September, a 9.9% drop from a year ago and the lowest total in two years, according to brokerage Corcoran Group
• inventory of unsold apartments is increasing.
• Prices are also leveling off. The median price of a Manhattan apartment fell 3.4% in the third quarter from the previous one, according to the research firm Radar Logic.
• The firm says properties are sitting on the market longer, too, an average of 123 days, up from 94 days at the peak of the market in 2005.
• Developers used to seeing yet-to-be-built apartments get snapped up sight-unseen are increasingly offering incentives, from help with closing costs to museum memberships, to jump-start sales.
• "Buyers are more hesitant," says Hall Willkie, president of brokerage Brown Harris Stevens.
• Trouble in the financial sector will hurt home sales, says Nouriel Roubini.
• Christopher Mayer, a Columbia University professor and director of the school's Paul Milstein Center for Real Estate, says the idea that Manhattan will continue to boom amid a nationwide housing bust is "wishful thinking."
• Some buyers are already finding bargains.
• "We're getting this apartment for probably 2004 pricing"
• ...some New York brokers and potential sellers are growing nervous. So far this quarter, 1,473 sales have been recorded in Manhattan compared with 4,337 for the entire quarter last year, according to Gregory Heym, chief economist for Terra Holdings, which owns brokerages Brown Harris Stevens and Halstead Property. Many sales negotiated earlier in the quarter haven't closed yet, but with December usually a slow month, Mr. Heym says there will almost certainly be fewer sales this quarter than last.
• In October, the Office of Management and Budget cut its projected revenue from property transfers by $82 million, a 5.9% drop from its original forecast. (The figure includes revenue from both commercial and residential sales.)
• Supply, however, is increasing.
• New developments have begun to offer incentives to attract buyers .
• The number of price cuts, at all levels of the market, is also growing.
• The average sales price of a co-op fell 2.8% to $1.12 million in third quarter of 2007, compared with the second quarter, according to Radar Logic.
• ...but prices downtown have fallen 18%, to $1.1 million, according to Terra Holdings.

Pro Seller

• In recent months, the continuing strength of its (Manhattan) real-estate market has drawn even more attention, and led many local real-estate professionals to contend that Manhattan is immune to the forces that have battered much of the rest of the country.
• Prices remain near record levels.
• The median price of a Manhattan apartment is $864,397, up 2.3% from a year ago.
• The weak dollar has led to increased interest from abroad.
• Some brokers say they haven't seen a drop-off at all. Pamela Liebman, chief executive of Corcoran Group, says the brokerage is on pace for a record year and says that after a September slowdown, October showed an increase in sales. Jacqueline Urgo, president of the national real-estate firm The Marketing Directors, says sales in most of the company's Manhattan properties improved in mid-September after a brief lull. Even many brokers who have seen a falloff say the shift says less about the current market than the frenzied one that preceded it. "We're just seeing the market return to normal," says John Burger, a broker at Brown Harris Stevens.
• So far this quarter, the average price on the Upper East Side has risen 11% to $1.7 million
• ...listed their pied-à-terre on East 28th Street for $495,000 in May. They quickly accepted an offer for $480,000, but their co-op board rejected the buyer.  (It's still on the market for $450,000)

From the looks of all of this data it appears that the market is tipping in favor of buyers.  I'm still not seeing that entirely...yet but I am seeing a much more patient buyer which is bringing some anxiety to some sellers.  Yes I said SELLER ANXIETY...touche to all of you buyers. This I haven't seen in a decade and I'm going on the record right now and saying again that sellers would be wise to listen to their respective markets and not be so quick to turn down reasonable offers or they may indeed find themselves getting bitten in the asking price! 

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If you're a reader of TrueGotham and not also reading UrbanDigs, you are missing some incredibly valuable insight and information from my friend and fellow blogger Noah Rosenblatt.

Recently, Noah unveiled his new site with a feature that is only becoming more useful and insightful with each passing day.  The Manhattan Housing Data Charts (powered by StreetEasy) provide real time data of Manhattan housing inventory including new listings, contracts signed and price changes.

I am asked the question of how inventory is trending almost everyday and now the source for the answer is at my fingertips at UrbanDigs.  Bravo to Noah for the beautiful job he has done in upgrading his site, providing this valuable data and making the market more transparent for the consumer.

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My colleague and fellow blogger Kevin Boer at 3 Oceans Real Estate has this week's Carnival of Real Estate.  With a World Cup of Soccer theme, Kevin's top three picks are absolute must reads including how to be a successful agent in a down market, the future of the real estate blog, and how sellers hire agents often based on unfulfillable promises.  Check it out.

Regarding Sunday's robbery. I hope to have the pictures up today as building management has approved their release to me.  It also appears that this criminal duo (it may actually be a couple with the man dressing in drag...more on that later) has been robbing Open Houses since at least October 21st.  I'm just puzzled as to why no one has shared this within the industry or with the public to thwart these crooks? 

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Today's New York Post reports that Leonard Blavatnik has signed a letter of intent to pay $150M for the Penthouse triplex at The Mark.

The space for sale, totaling nearly 30,000 square feet, is a combination of five planned units on the top three floors of the building.

If sold separately, the apartments would comprise a total of 23 bedrooms, 25 bathrooms and five powder rooms.

Also featured is 3,900 square feet of outdoor space - including a huge rooftop terrace with a pavilion and fireplace - a ceiling from 10 feet to 26 feet, a gym and all hotel amenities such as twice-daily maid service, fresh linens and room service.

This purchase by Leonard Blavatnik at The Mark will SHATTER the $100M record price paid by by Ron Baron for an East Hampton land parcel earlier this past summer.

UPDATE:  Deal NOT happening (via The Real deal).  Ouch, losing that commission hurts!  I suspect this won't be the last we hear about this transaction.

UPDATE 2: The Post is reporting today (Friday, 11/9/07) that Blavatnik's offer is only $125M.  Where are The Post and The Observer getting there information?  Who are these sources?  I wonder how Mr. Blavatnik feels about his negotiation being so public.  IMHO...I think he should buy the entire building and hire someone who respects confidentiality to sell what he doesn't want.

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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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BUY NOW!!!  SELL NOW!!!  DO ANYTHING!!!  JUST DO IT...NOW!!!  (I'm kidding...kind of)

I have always told my friends, family and client base that I would welcome a bit of a market correction here in the Manhattan real estate market.  The thought being that any "shakeout" would result in some sort of increase in inventory (wishful thinking?) and perhaps an increase in transactions.  I've been sharing this "theory" for three years now and nothing of the sort has happened...yet?  That said, if the October and first week of November activity are any indication of what's on the horizon for the New York City real estate market, that correction may indeed be just around the corner.  I'm not prophesying by any stretch here as that always gets me into trouble but this has been the quietest October I have seen in the past 10 years. 

Some anecdotal evidence:

• Many sellers remain reluctant to reduce prices even after their properties have been on the market for quite some time (8-10 weeks).
• One of my buyers has his eye on 3 properties with stubborn sellers and all 3 remain on the market unwilling to accept reasonable offers within 5% of their asking prices.
• That particular buyer is in a "holding" pattern, has rescinded his offer and now expects to obtain one of these 3 properties for a discount of 10% or more off the asking price (only time will tell)
• Another buyer has rented for the time being in order to "shop patiently" for the right "deal."
• Another buyer has given up on Manhattan and purchased a single family home outside of the city.
• I have taken 3 properties recently that were marketed unsuccessfully by my colleagues (hope that I can do better?)
• I keep a dry erase board of transactions on the wall behind my desk and the property section has decreased (only representing 5 active properties) while the buyer segment of the board has increased exponentially to 10 buyers (90% of my business over the past 10 years has been representing sellers...that has changed in the past couple of months)

Again, these are simply anecdotal examples of what I'm seeing on the front lines and many of my colleagues are reporting similar experiences.  We all await Wall Street bonus reporting with expectations that numbers will be 20-30% less than bonuses last year.  Let's not forget that last year was a record bonus year though and we are all wondering how the hit to Wall Street is going to effect Q1 2008.  For now, we, and many of our buyers and sellers wait. 

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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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Location, Location, Location is undoubtedly the most oft-recited mantra in the real estate industry.  Just look at the housing markets across the country (plural because there is no singular "housing market") and you see evidence of the importance of where a property is located.  In each micro market that is experiencing a housing slump, there are areas that are less effected or even unaffected based on their proximity to water (beach, lakes, etc), transportation, schools, etc.

In my humble opinion there is perhaps no better illustration of the BIG PICTURE of how important location is than what has been happening in Manhattan versus the rest of the country.  Not only is it the financial capital of the world but it is seemingly the most desirable US city for foreign investment and thanks to decreasing crime and increasing cleanliness it has become evermore attractive as a place to start and raise families. 

Although I often daydream of what my apartment proceeds would buy me somewhere else, my wife and I ultimately come to the same conclusion.  We can't imagine living anywhere else without the conveniences that New York City provides.  Having said that, I still love Anna Bahney's column in The New York Times What You can Buy for $X.  And it occasionally inspires me to entertain the thought of an exodus from Manhattan.  The thought is almost always short lived when I do more research on the particular area that has piqued my interest. 

Case in point...my mom and step dad were visiting this weekend and brought along a copy of the real estate section from the Baltimore Sun newspaper.  Perhaps they are somewhere deep down thinking that my wife and I could be persuaded to move their grandchildren closer to them but I think it was more of just a fun comparison.  On the front page of this Sunday's Baltimore Sun real estate section was Baltimore's Top Selling Property (unclear for what period???).  This 7,291 square foot 6 bedroom with 4 full and 3 half baths in Reistertown, MD just sold in August for $1.75M.  Take a look. 

And to think that $1.75M doesn't get you much more than 1500sf (if you're lucky) here in glorious Manhattan.  So for now I will just keep dreaming of that big house and until they let me build it on The Great Lawn in Central Park, I and the family will continue to squeeze into our small 3 BR apartment for the conveniences and excitement that Manhattan living offers.

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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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It's no secret that the bottom continues to fall out of the housing market in most places across the country.  The credit crunch has directly effected both sub prime and prime borrowers as well as earnings, Wall Street bonuses, and employment numbers (lots of layoffs on the Street as well).  So why do I continue to receive to good to be true mortgage offers in my inbox every morning?

Carroll Lloyd of SFGate.com recently wrote an excellent explanation of What's behind the continuing bombardment of too-good-to-be-true mortgage solicitations?  Check out the post in it's entirety but here's a peak at some of what Carroll has experienced:

In the past few weeks, the mounting offers have formed a mountain on my desk, each offer promising a mortgageable moon, each aiming for a creative slant on the old chestnut "Here's a deal you just can't pass up." (Or as Lenox Financial — the controversial "no closing costs" (i.e. higher interest rates) lender likes to put it in its radio ads: "It's the biggest no-brainer in the history of mankind.")

Some offers focus on turning the idea of equity into a lifelong solution for any problem. A mailer from US First Credit Union unfolds into a 16x24-inch blueprint of a fabulous house. On the house plans, various rooms are labeled according to what they can buy you: a new SUV, a college degree, bill consolidation, etc. All you need to do is take out a home equity line of credit: a 15-year fixed for "as low as" 7.49 percent. And because they "want to wake you up to days full of excitement and possibilities" (Hey, who wouldn't want that?) the company is including a "FREE 3Day/2night Getaway" to 22 destinations.

Other companies focus less on the life of infinite possibilities and more on the world of insurmountable woes. A notice "from the desk of Angie McGuirt" at Wachovia bank, informed me that I was "pre-selected" (always good for your self-esteem) for an equity line of $250,000 with a variable rate of Prime minus 0.5 percent — now amounting to about 7.75 percent. If this sounds like a so-so deal, Angie reminds me that it's "far less than you'd pay for most credit cards or other personal loans." (In other words, "You're probably hemorrhaging money every month, let us stanch the wound.") Um ... yes, but you can't lose your home using a credit card. I call Angie to learn more about the deal, but the broker informs me that no one will speak to me because I'm a journalist. "We refer all journalists to the Web site," she says. What about Angie? "She doesn't take incoming calls."

She shares another recent offer for a 1% loan regardless of credit history or bankruptcy.  Just this morning I received an e-card from Countrywide suggesting that now is the time to refinance and their website touts Low rates may not last. Don't wait, refinance today.  So that's not as bad as the 1% loan offer but as Carroll Lloyd points out, refinancing to pay bills isn't always a wise move.  You won't lose your home from credit card debt. 

To answer the question of why these solicitations continue to bombard us, Carroll suggests that you have to understand how mortgage brokers are paid.

There are primarily two ways brokers are paid. One is through "points," in which a home owner pays a percentage of the purchase price up front at the time the loan closes. A 1-point loan means a 1 percent fee. Another more often misunderstood means of paying the brokers is "yield-spread premium." In this scenario, the borrower pays a higher interest rate for the life of the loan in exchange for a "zero-point loan." The broker gets the "spread" — i.e. the difference between the "wholesale" rate from the lender and the rate that is passed to the consumer, which can vary from as little as .5 percent to more than 1 percent.

Need I say more?  As Robert Youngjohns states in Carroll Lloyd's article:

Youngijohns suggests that complex commission structures often lead to what he calls "bad behavior." "I was raised Quaker and so I was taught to see the good in everyone," he says. "Until it comes to people's commissions — then you have to assume they're fundamentally evil."

Now although I completely understand and appreciate where Mr. Youngijohns is coming from, I have a little bit of a problem with this generalization and feel like it was used more as an "exclamation point" for the end of the story.  I have worked with a multitude of mortgage brokers over the past 16 years and have no doubt had some "interesting" experiences but that's another story.  The greater percentage of those who have done loans for my wife and I, my colleagues, and many of my clients have been very clear about the costs involved when borrowing.  And I also think it should be mentioned that 99% of the unsolicited email, faxes and "snail" mail that we receive goes directly in the garbage.  It also appears that nothing will put a stop to this barrage of offers more than consumers not responding to them..

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I'm being bombarded with emails from past clients asking me about the project that is likely to be built at 160 West 62nd Street (via Curbed).  Gothamist has a great piece on the project exploring Objections to Fordham's Manhattan Campus Expansion as well as some great renderings of the project.  Check out one of them here:

I have actually met for lunch with the developers (Douglaston Development) of the condo tower that will be built on the northeast corner of 62nd Street and Amsterdam Avenue.  It will be an amazing project.  Stay tuned for more updates.

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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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The Prudential Douglas Elliman 2007 3rd Quarter report for Long Island and Queens is hot off the presses and here are the highlights:

The Long Island/Queens housing market showed mixed results this quarter with overall prices indicating some stabilization but results varying widely by individual markets. Higher priced housing units saw price gains which was unexpected. However, inventory levels continued to rise and number of sales fell.

Long Island/Queens Market (Overall)

- Average sales price was $530,916 this quarter (a record), up 1.3% from the prior year quarter amount of $524,073.
- Median sales price was $445,000 this quarter, down 2.2% from the prior year quarter amount of $455,000 (a record).

- Listing Inventory increased 7.6% to 36,183 units from the prior year quarter amount 33,362 units. The pace of inventory growth appears to be slowing.
- Number of sales decreased 10.6% to 8,782 from 9,821 units in the prior year quarter.

- Days on market increased to 103 days by 20 days over the prior year quarter, but slipped from the 111 average days on market in the prior quarter.
- Listing discount increased to 5.3% from the prior year quarter listing discount of 4.5% but was down from the 5.6% prior quarter listing discount.

Queens Market

- Average sales price was $484,847 this quarter, down 2.9% from the prior year quarter amount of $499,388.
- Listing Inventory increased 13.4% to 11,255 units from the prior year quarter amount of 9,925 units.

Nassau Market

- Average sales price was $628,839 this quarter (a record), up 1.7% from the prior year quarter amount of $618,388.
- Listing Inventory increased 3.3% to 10,167 units from the prior year quarter amount 9,844 units.

Suffolk Market

- Average sales price was $469,331 this quarter (a record), up 2.3% from the prior year quarter amount of $458,770.
- Listing Inventory increased 6.5% to 14,761 units from the prior year quarter amount of 13,863 units.

North Shore Market

- Average sales price was $1,025,818 this quarter, down 6.5% from the prior year quarter amount of $1,097,179.
- Number of sales increased 14.7% to 680 units from the prior year quarter total of 593 units.

Luxury Market (upper 10%)

- Average sales price was $1,341,090 this quarter, up 8.3% from the prior year quarter amount of $1,237,741.
- Suffolk saw the largest rise in prices with a 15.8% increase in the average sales price to $1,298,099 from the average sales price of $1,121,379 in the prior year quarter.

Condo Market

- Average sales price increased 22.9% to $364,202 this quarter from the average sales price of $296,443 in the prior year quarter. The jump was due to a larger concentration of higher priced closings in Long Island City, Queens
- Average sales prices for Nassau were up 4.3% over the prior year quarter and Suffolk average sales prices were down 1.3% from the prior year quarter.

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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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In the "What You Get For..." column of today's New York Times, Anna Bahney describes three properties in Front Royal, VA (uh....where?), New Orleans, and Friday Harbor, WA (uh...again...where?).  Check out the entire article but here's the gist:

Front Royal, VA-A three-bedroom, two-bath house with 1,778 square feet of living space in the residential subdivision High Knob; this home is new construction. Asking $299K or $168.67/sf.

New Orleans-A 100-year-old renovated Creole cottage with one bedroom, one and a half baths and 1,400 square feet of living space. There are dark hardwood floors and ceiling fans throughout this two-story home. The renovation included new wiring, redoing the plumbing and roof, and the installation of a central air-conditioning and heating system. Asking $299k or $213/sf.

Friday Harbor, WA-A two-bedroom, one-bath condo with 1,222 square feet of living space in the 31-unit Victoria Crossing condominium development.  Asking $299,990 or $245.49/sf.

So what does $300K get you in Manhattan?

Upper Westside of Manhattan-A single room 250 square foot studio just off of Central Park with a renovated kitchen, new windows, just finished maple wood floors, and a Murphy bed. Asking $299k or $1,196/sf.

Can you say LOCATION, LOCATION, LOCATION?

Since I have lived here for almost 20 years or more than half of my life, I totally consider myself a New Yorker at this point (except for my professional sports alliances).  Having said that, I often find myself trying to explain city living and our pricing structure to friends, family, and just plain ole non-New Yorkers.  Explaining that $300k gets you a 10' x 25' room blows most people's minds.  For instance, my best friend owns a 6000sf home on 4 acres with closets that are almost 250sf.  He just can't fathom why anyone would pay that kind of money for such little space.  Well I get it!  It has taken me a long time to appreciate all that this incredible city has to offer but their is no place in the world where the "location, location, location" mantra holds more true.  If you don't believe it's an amazing place to live, just ask all those $300k studio dwellers. 

You gotta love this town to call someone else's closet "home."

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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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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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Hot of the presses...here's a summary.  The complete report will be available in the coming days.

Highlights:

Overall Manhattan Market [includes entire island]

The Manhattan residential real estate market saw more of the same characteristics as the prior 2 quarters of 2007 did. An elevated number of sales, declining inventory, modest price increases overall but sharp increases seen at the upper end of the market. It is likely too soon that the events of the credit crunch that began in mid-July will have an effect on market conditions in the 3rd quarter. Its impact, if any, would more likely be seen in the coming two quarters.

- The number of sales increased 65.6% this quarter to 3,499 units as compared to the 2,113 units sold in the prior year quarter.

- Listing inventory fell 31.7% to 5,204 units from the prior year quarter total of 7,623 units.

- Days on market was 123 days this quarter, faster than the 150 days seen in the same period last year.

- Listing discount was 2%, down from 4% during the same period last year.

Price levels were generally up this quarter, with the greatest price gains seen in larger apartments, namely 3-bedroom and 4-bedroom units with a 17.9% and 16.4% gain respectively over the same period last year.

-The average price per square foot increased 9% to a record $1,144 over the prior year quarter result of $1,050 (0.4% above the prior quarter result of $1,139).

-The median sales price increased 2.3% to $864,397 over the prior year quarter result of $845,147 (3.4% below prior quarter record result of $895,000).

-The average sales price decreased 0.8% to $1,290,391 over the prior year quarter result of $1,300,928 (5.4% above the prior quarter result of $1,224,840).

Co-op Market

-The average sales price of a co-op this quarter was $1,118,465, up 2.8% from last year at this time. Average price per square foot increased 9.2% and and median sales price slipped 2.4% from the same period.

-Inventory levels for co-ops fell 32.8% to 2,472 units as compared to the prior year quarter total of 3,680 units. Co-op listings are comprised of nearly all re-sales, with only about 1.6% of new co-op development added to the housing stock.

Condo Market

-The average sales price of a condo this quarter was a record $1,638,798 this quarter, up 9.2% from last year at this time and up 12.4% from the prior quarter. Average price per square foot and median sales price showed 9.1% and 5.2% gains respectively from the prior year quarter.

-Inventory levels for condos totaled 2,732 units, down 30.7%% from the prior year quarter total of 3,943 units. New development was estimated to account for 36.7% of condo inventory this quarter.

Luxury Market (upper 10% of all co-op and condo sales)

-The average sales price of a luxury apartment this quarter was the second highest on record at $5,085,883 this quarter, up 12.8% from last year at this time and up 10.3% from the prior quarter. Average price per square foot and median sales price showed 16.7% and 16.3%% gains respectively from the prior year quarter.

Loft Market (co-op and condo sales)

-The average sales price of a loft apartment this quarter was $2,069,364 this quarter, up 4.9% from last year at this time but down 14.2% from the prior quarter. Average price per square foot and median sales price showed 8.8% and 20.1% gains respectively from the prior year quarter.

So there you have it. 

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Christine Haughney of The New York Times reminds us that Manhattan is an entity unto itself...in more ways than one.  In this particular circumstance, we're talking about housing and how our local Manhattan housing market continues to buck the downward trend of markets across the country...for now.

Four reports issued yesterday by the city’s major residential real estate brokerage firms showed that apartments closing in Manhattan in July, August and September sold for the highest average sale price ever and that the inventory of homes for sale declined over all.

On average, buyers spent $1.37 million for a Manhattan apartment, a 6.3 percent increase from the corresponding period last year, according to one report, by Prudential Douglas Elliman. The number of apartments on the market fell by nearly a third, to 5,204, in the last quarter, compared with 7,623 a year earlier, the report said.

As many of the transactions included in these reports took place in the weeks prior to the credit crisis, it will be interesting to see how the last quarter of 2007 ends up.  As of right now, inventory is remaining tight, interest rates are low, and buyers are still "interested" in buying.  It seems as though tight inventory and reasonable mortgage rates will continue to be the story going forward.  The big question that remains is just what will happen to Wall Street?  Layoffs...yep.  How many?  Who knows?  Bonuses...some lean...some not.  A lot will be determined in the next couple of weeks when Wall Street finds out what they will get paid and whether they have a job.  This news could drastically effect both the buying pool and inventory in the coming months.

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The news this morning from The Wall Street Journal that New-Home Sales Hit 7-Year Low paired with yesterday's news of discount broker Foxtons going out of business makes me wonder if any discount model can survive in a slumping housing market.  Take for instance the quote from Foxtons' senior vice president and general counsel, John D. Blomquist:

"The plain fact is that we have been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern."

So as housing prices continue to decline across the country, there appears to be a bit of a double edged sword.  With profits dwindling and perhaps losses expanding, seller's are obviously going to want to keep as much of the proceeds of a sale as possible.  The problem however is that the discount model that would allow sellers to do just that doesn't provide the caliber of service from a marketing perspective necessary to sell a home in a falling market. 

I have been selling real estate for 16 years and I'm here to tell you that when I started in the industry in 1992, representing sellers was tough!  Property often languished on the market for 18-24 months despite continued marketing efforts.  A large percentage of the 6% commission (almost always split with another agent) was spent over that lengthy period on marketing.  So how will a discount broker model that stands to make only a few thousand dollars or only 1-2% commission deliver buyers in a slumping market?  I suspect it will be more challenging than most of them had ever imagined.  It's not unlike the experience to come for the real estate agent who has only been in the market for the past 5-7 years and has very little experience marketing or selling property because it has basically sold itself.  The discount brokers who have popped up during the housing boom are in for a rude awakening as they realize that their business models won't pay the bills if they can't sell the homes. 

I suspect that Foxtons won't be the only victim of the nation's housing slump and that seller's are going to experience a renewed appreciation of the value that a solid, knowledgeable real estate professional brings to a transaction.   In fact, if it gets any worse, many sellers will just appreciate any transaction. 

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Full service real estate agents across the country will be heard partying into the wee hours after the announcement that Foxtons is DEAD!  Another discount model goes belly up.  Check out Foxtons done in by housing slump (Asbury Park Press)

Foxtons, a West Long Branch-based real estate company that made a splash with its discounted commissions, said Wednesday night it is closing because of a downturn in the housing market.

The company said it is contemplating bankruptcy for an orderly shutdown, and it will continue only with a skeleton crew; it is laying off 350 of its 380 employees.

"The plain fact is that we have been battling against a real estate market that recently has turned into a sharp decline, and the company no longer has the liquidity to operate as a going concern," said John D. Blomquist, Foxtons' senior vice president and general counsel.

A quick Google search of Foxtons turns up a plethora of dissatisfied customers who were the victims of a weak business model. 

See also:

So Long, Foxtons (via NJ Real Estate Report)

Foxtons may file for bankruptcy (via Newsday.com)

UPDATE:  Foxtons Shuts U.S. Operations, Blames Housing Slump (via Bloomberg)

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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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Ray Rivera of The New York Times reports that the City Council has voted unanimously to limit high rises on the Upper West Side. 

The City Council unanimously passed a rezoning plan yesterday that limits the spread of high-rise buildings along 51 blocks on the Upper West Side, an area that officials say has undergone a significant increase in development.

The plan is intended to preserve the physical character of the community. It generally limits buildings to 14 stories along Broadway; 10 to 11 stories along the other avenues; and 6 to 7 stories on the side streets. Additionally, it imposes design restrictions so that new developments more closely match the neighborhoods around them.

The rezoning area is bounded to the west by Riverside Drive and the east by Central Park, and to the south by 97th Street and the north by 110th Street.

A perfect example of government controlling housing inventory.

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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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I have received so many emails in the past 24 hours from readers, clients, friends and family regarding the David Leonhardt story in The New York Times, Will the Fed Reverse the Housing Slump? 

The Federal Reserve sent the stock market soaring yesterday (Tuesday). So can it stop the decline in home prices, too?

Don’t count on it.

From the late 1960s until 2000, the price of the typical American home and the income of the typical family moved almost in lock step. House prices rose a bit more quickly than incomes during the occasional real estate boom, but would always settle down again. In 2000, the median home cost about $130,000, roughly three times the typical household income — almost precisely the ratio that had held since the ’60s.

Then came a real estate boom unlike any before it. By last year, this ratio of prices to incomes had suddenly shot up to 4.5. For it to return to its old level, home prices would have to fall by an almost unthinkable one-third, and probably more in California, Florida and the Northeast.

I'm sitting in my office right now listening to two of my colleagues on the phone as they share their predictions with prospective clients regarding the possibilities of a Manhattan housing slump.  All of this is so amusing to me as so many factors come into play in determining what direction the Manhattan housing market will trend.  Of course both national and local economies play a large part as does foreign investment and the perceived health of Wall Street .  We would be fooling ourselves to think that our local housing market is immune to a slump but the anomaly that has been a healthy Manhattan market is hard to ignore.

Truth be told, I just don’t know what to make of all of it.  I will say that it appears we are seeing some increase in inventory locally but not sure how much effect it will have on market. I think weak Wall Street bonuses and layoffs will have the greatest effect on stagnation this winter but having said that, I know a lot of people (well qualified and not Wall Streeters) who are just waiting for an opportunity to buy. In the meantime, I’m keeping my fingers crossed for a slight market softening that increases inventory as well as number of transactions.

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It's no secret that a large contributing factor to the strong Manhattan real estate market has been Wall Street's success.  So it's no surprise that we are eagerly awaiting earnings reports this week from the major Wall Street brokerages to give us some sense of how bonuses will affect the Manhattan real estate market this Winter.  So Lehman announced a 3.2% decline in earnings this morning which topped expectations (via Wall Street Journal):

Lehman Brothers Holdings Inc. reported a 3.2% drop in fiscal third-quarter net income as more than half of the firm's revenue came from overseas, kicking off an intensely anticipated earnings season for brokerage firms navigating turbulent mortgage and credit markets.

The results calmed some investors' nerves, sending the stock higher in premarket trading to $61.60 from Monday's closing price of $58.62.

For the quarter ended Aug. 31, the investment bank reported net income of $887 million, or $1.54 a share, compared with $916 million, or $1.57 a share, a year earlier. The results show how quickly the markets have turned for brokerage firms. In its fiscal second quarter, Lehman booked record quarterly net income of $1.27 billion.

This is significant as Lehman is one of the Street's biggest underwriters of mortgage backed securities.  Expectations of low bonuses remain however and rumors of major layoffs are permeating the industry.

Last year we saw a significant increase in activity in the housing market in mid October after most Wall Street bonuses were initially reported.  It took no time at all for Wall Streeters to begin shopping with that anticipated bonus money.  This year is likely to be quite different and it will be interesting to see how the local housing market weathers a weak bonus season.  One saving grace for our local housing market is the still weak dollar but can that alone keep our market buoyed? 

If you haven't checked it out already, you must read New York Magazine's piece on Best and Worst Case Scenarios for the Manhattan Real Estate Market. 

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A quick morning check of Manhattan listing inventory yielded the following information:

• There are currently 7,784 active Manhattan property listings (inclusive of co-ops, condos and townhouses)
• Summer inventory:  June saw 795 new listings, July 901 and August 1058.
• From Labor day to 9/8/2007, 65 new properties hit the market.
• Last week saw an additional 301 new properties hit the market.

Although there is a definite trend towards increasing inventory, anecdotal evidence is showing that many buyers remain frustrated as they patiently await their opportunity to buy.  Patience is key here.  With talk of a possible recession, the anticipation of weak Wall Street bonuses and layoffs, there could indeed be a buying opportunity right around the corner for many of these patient purchasers.

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The Townhouse Report is back and the numbers are staggering.  And to think 10 years ago I showed a client a Harlem Townhouse for $130,000.  I should have bought it myself!

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Bradley Hope of The New York Sun reports this morning that the Market Tilts to Buyers of Real Estate.  A catchy title indeed but I and my colleagues have plenty of frustrated buyers who sit patiently on the sidelines awaiting some increase in inventory.  These buyers and their agents aren't feeling any "tilt" toward a buyer's market.  Having said that, Mr. Hope could indeed be on to something regarding to predictive nature of developer's behavior:

Incentives to lure buyers are increasing in new developments in some neighborhoods of Manhattan and Brooklyn. At a new 45-unit development in Hell's Kitchen — which has seen price tags cut on 11 units by as much as $50,000 since March — the developer is offering to pay the closing costs that are traditionally shouldered by the buyer. Closing costs, which include state and city transfer taxes, and fees for the brokers and lawyers, add up to thousands of dollars. For example, a two-bedroom unit at the building, at 517 W. 46th St., has an asking price of $1.4 million, with closing costs of about $30,000.

At the Lenox Grand in East Harlem, the developer is advertising an even more generous deal: In addition to paying the closing costs, it will pay two months of maintenance and the first month of common charges and insurance, according to the building's Web site.

In Williamsburg, the Maspeth, a 24-unit condominium, is offering a deal for buyers under which the developer will pick up the closing costs and also help qualified buyers secure a $10,000-down mortgage.  (NOW THAT'S FRIGHTENING!!!)

Are these incentives an attempt by some developers to sell their projects out ahead of what some believe could be a national recession?  Perhaps these are just anecdotal stories specific to struggling development projects only?  The new development projects that I have been visiting aren't offering such incentives as they have managed to control inventory and maintain a steady stream of buyers for that inventory.

Again, the question here is whether or not these particular developers are panicking or simply adjusting their marketing strategy based on their own economic forecasts for local housing.  Developers aren't immune to anxiety and therefore panic, so that could indeed be the case.  I would keep my eyes on the big experienced developers like Related and Extell.  If they start offering incentives, cutting prices, or even talking about restructuring buildings into hybrids (combo of rental/condo) to hedge the market, then we should all pay very close attention.  As of now, I see no signs of that happening.  In the meantime, some buyers will reap the rewards of the small developer's anxiety.

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Happy New Year to all of TrueGotham's Jewish readers (although most won't be reading today).  For those who aren't Jewish, Rosh Hashanah is the beginning of the Jewish New Year and the beginning of a period of reflection, introspection and atonement for the mistakes made the previous year.  The 10 Days of Awe leading up to Yom Kippur are an opportunity to seek reconciliation with those who one may have wronged in the previous year. 

The impetus for this post today is this article from Peg Brickley at RealEstateJournal.com.  A disturbing article about thousands of homeowners facing foreclosure because of American Home Mortgage's bankruptcy.

Thousands of homeowners face an "imminent risk" of losing their homes because of clashes between American Home Mortgage Investment Corp. and its former financial backers, according to Freddie Mac, a government-chartered housing financier.

In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., Freddie Mac said it seized $7 million that homeowners sent to American Home to cover principal and interest payments, property taxes and insurance just before the company's Aug. 6 collapse. American Home quit making payments to tax authorities and insurance companies Aug. 24.

Some serious reconciliation needs to be considered here and I don't have any answers.  It just seems insane to me that homeowners could lose their homes solely based on their mortgage company.  Any thoughts from the financial gurus out there on how this may play out?

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I have always recommended to my prospective sellers that they interview multiple agents when determining who is best suited to represent them with the sale of their home.  One of the reasons for this is to get some collective concept of what the proper value of the home is in the current real estate market.  In this week's OpenHouseNYC segment, New York Magazine's popular Triple Assessment feature leaps from the page to the TV screen to further support my reasoning:

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 video version of their popular feature, Triple Assessment.

Triple Assessment is an appraisal from three brokers on the proper price of an apartment about to hit the market. Going by 3 factors of reading the market, valuing the property and what prospective buyers might tell them, New York Magazine asks three real estate brokers to name a price for a new listing. In this special video edition, Jhoanna invites her coterie of brokers to 55 White Street to appraise a Tribeca studio apartment.

The apartment has very high ceilings and great natural light, but it is only 600 square feet, so how will that impact the broker’s price estimates?

Click the video to see how brokers price the apartment and then find out how close they got to the actual listing price.

Three experienced agents with solid reputations for success in the industry come up with a range from $715,000 to $825,000.   So what is a seller to do?  This seller selected an agent to market the property in early July at $815,000.  It was reduced to $785,000 in mid August and is still available per the agent's website.

My advice to all sellers:  If you are going to take the time to interview multiple agents to market your property, also take the time to request and review the exact data that was compiled to come to the suggested asking price.  I am a big believer in selecting comparables that actually have an accepted offer, signed contract, or have been recently sold and closed.  Properties that are currently active on the market should be considered only as a gauge of inventory.  As is obvious from this Triple Assessment, asking prices can be all over the map are are NOT an indicator of the value of your home.

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From the September Real Deal comes an excellent piece from Alison Gregor on How the Sub-prime Fallout Will Effect Real Estate Pros.

Since delinquencies among sub-prime loans that had been packaged and resold on secondary markets reached fever pitch this summer, there have been tremors in not only the New York City residential real estate market, but in the thriving commercial one as well.

The era of cheap credit has unraveled quickly, as a crackdown on risky loans has tightened standards among all lenders. The fallout has affected all parts of the New York City real estate food chain. It's hit residential sales brokers, some of whom have seen their deals jeopardized as lending terms change and interest rates rise, as well as developers of office buildings, who are finding it more difficult to obtain financing from lenders.

Others, like commercial brokers, real estate attorneys and new development marketers, have also felt an impact. The Real Deal set out to capture the reaction to the sub-prime mortgage debacle and credit crunch from individuals on the front lines in several sectors of the New York City real estate industry.

Definitely worth the read.

Reading this piece brought back memories of a Board turn down that one of my sellers experienced several months ago and how clairvoyant the Board seems in hindsight.  Some may recall that the buyers had received official written Board approval for the purchase of the 2BR co-op and between receiving the approval and closing they decided to change their mortgage product without sharing this detail with anyone.  They switched from Citi to Countrywide and the Board was displeased with both the last minute change and the terms of the loan with Countrywide.  Of course we all know the issues with Countrywide these days. Did someone on that Board have a crystal ball?  Who knows.  What I do know is that I feel like I owe that Co-op Board an apology for my tirade that went like this:

Co-op Boards are sometimes made up of people who don't wholly understand the processes in which they are involved. These purchasers changed their lender which happens all the time and they are actually getting a better rate and better terms that should be more favorable to the Board. I suspect that some Board members are reading way too much about the sub prime mortgage market implosion (which doesn't apply at all to this situation) and are reacting to the fact that they are familiar with Citimortgage and perhaps not so with Countrywide? Again...pure speculation on my part as a real estate professional and former board member. Who really knows what they are thinking?

So I apologize because it seems this particular co-op Board knew exactly what they were doing.  Not to mention that I have since sold and closed that property for almost 20% more money.  My lesson here:  Co-op Boards may indeed be in large part the reason that the sub-prime meltdown isn't crushing our local real estate market and for that I am incredibly grateful.

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I have penned with some frequency about the many inefficiencies that exist in the New York City real estate market and the frustration continues with property managers.  My team and I seem to be hitting a wall with numerous property managers when inquiring about building policies and amenities.  Now in my 16th year as an agent in the Manhattan residential real estate market, I have created a 2 page questionnaire for managing agents to complete in an effort to make the information gathering process more streamlined and efficient.  Almost all managing agents see the benefit of this (primarily it decreases the number of phone calls with questions and the prevents the dissemination of inaccurate information) and have embraced the completion of this questionnaire.  Some however continue to protest and make the information gathering process terribly inefficient.

Last week we signed an agreement to represent a seller of an apartment in an Upper West Side apartment building that has had a complete changing of the guard in terms of the Co-op Board.  The very nature of Co-op Boards makes not only the Board itself, but the building policies on such things as guarantors, subletting, flip taxes, and pied a terres quite dynamic.  Even amenities can change within months of of previous sale so it's imperative that we gather complete and accurate information regarding all policies and amenities each time we represent a new seller in any given building.  Buyers will accept nothing less and accurate and complete information makes the overall transaction process a smooth one with no surprises and therefore no financial ramifications for the parties involved.  So what does a broker do when they make every attempt to gather this information, often times with the assistance of the shareholder, to no avail?  This is precisely what I and my team are in the midst of right now.

A very large (award winning even...go figure...many of the shareholders they represent are puzzled by the "award winning" status after dealing with them) management company has not only charged us $100 to complete our questionnaire (much more typical these days than in the past and no big deal) but they have sent back answers in a piece meal fashion and still have left some very important questions unanswered.  We are in our second week of marketing and just finally learned that there are currently no assessments.  Thankfully we received building financials yesterday after waiting 10 days.  We are still waiting on some official word on the building policy on pied a terres as it has changed several times in the past as well as their policy on open houses.  There has been no lack of effort on our part to have these questions addressed and just yesterday we were informed by the managing agent that she has 7 business days to respond to our inquiries.  It has been 10! 

I absolutely appreciate that many property managers (most in fact) are over worked and underpaid but I am offering them an efficient means of providing accurate information and still some protest.  It makes no sense to me.  So if any property managers are reading this post (I doubt it) please let the brokerage community know how we can make your lives easier and in turn how we can best inform prospective purchasers of "current" building policies and the like?  We really don't want to make your jobs more difficult but we do owe it to our sellers and our buyers to accurately represent the property that we are selling.  If I'm not mistaken, you're job is to provide the information to help us do that?

So if your a seller, don't be surprised if you are asked by your agent to get involved in the information gathering process and don't assume that all the rules in your building are the same as when you purchased.

If your a buyer, don't shoot the messenger.  I and many of my colleagues do the absolute best we can to provide you with complete and accurate information regarding current building policies and amenities.  We are only as good as our source so be sure to have your attorney confirm all of the information that you have been provided.

By the way, we procured another listing last week from a building managed by Hoffman Management (they managed my last co-op).  Gordon Noah of Hoffman completed our questionnaire within 24 hours and has received NO email or phone correspondence from us since (except a thank you of course).  We love Hoffman!

UPDATE:  2 weeks on market and although we have accepted an offer on this property we have yet to recieve the co-op questionaire that we paid to have completed.  Frustrating process sometimes.

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Note some key takeaways and quote from PropertyShark CEO, Ryan Slack:

• Sales Volume: The market for NYC walk-up apartments was very active in the second quarter of 2007, with 21.14% more transactions than the first quarter of 2007 and 14.58% higher than the second quarter of 2006. Total sales volume almost reached a record $1.4 billion.
• Price/Sq Foot: The price per square foot for New York City walk-up apartments remained at 2-year highs ($187/ft) this quarter, a 27.59% increase compared to the second quarter of 2006.
• Average Sales Price: The average sales price for NYC walk-up apartments ($2,508,202) rose 9% over the first quarter of 2007 and 30% compared to the second quarter of 2006.

“Walk-up apartment buildings continue to be a red-hot area for real estate investors, with record level sales volume, price per square foot, and average sales price this last quarter. While the flip gains decreased this quarter, the appetite for this real estate investment class is very high.” – Ryan Slack, CEO of PropertyShark.com

Here's the report in it's entirety. 

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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 can't resist sharing MMI: Staying Ignorant in Five Easy Steps from Calculated Risk which exposes the numerous holes in a recent MarketWatch report about qualifying for a mortgage in today's credit crisis (and it is a crisis) which begins like this:

You still may qualify for a mortgage, regardless of a shaky credit market. But you need to know the ropes because many lenders have tightened standards. So what should you do if you're buying a home today or you need to refinance?

The MarketWatch piece then goes on to misinform it's readers as to exactly what they should do to secure financing during our current credit crunch.  There is no doubt that many prospective homeowners out there are financially sound and savvy enough to purchase property in a tumultuous market.  Having said that, many are NOT and never were.  This comment from the Calculated Risk piece sheds some additional light on the problems with our mortgage markets.  Commenter "sniglet" pens the following:

I don't blame borrowers (either of the consumer or corporate variety) from making unwise decisions to expand their debts during the boom. If people are willing to lend you money at ridiculously low rates, with little protection (e.g. covenant "lite" bonds), then you'd may as well take as much as you can get...

If asset prices continue expanding you will get rich. If asset prices fall, you just let the lender possess the assets used for collateral and walk away. This is what many struggling home-owners are doing right now.

In fact, so long as money is easy to borrow it is almost silly to put your own capital at risk. Why make a down-payment on a house that could go down in value? Instead, let the lender take all the risk and keep your money elsewhere.

A black mark on your credit rating is a small price to pay for not having to have a dead asset (e.g. a depreciating house) on your balance sheet.

Don't blame borrowers for getting in over there heads?  Let the lender possess the collateral?  A black mark on your credit rating...?  Sniglet really believes that if you got in over your head that it's the bank or mortgage broker's fault.  Hell, s/he probably thinks the real estate agent should be held accountable too.  Just not the actual borrower.

Take a look at Calculated Risk's critique of this ridiculous Marketwatch piece.  Here's a quick synopsis:

MarketWatch Says:  Pay down credit balances. That will make you look less risky and might help your credit score, suggests Tom Quinn, vice president of scoring for Fair Isaac Corp., Minneapolis. If you have good credit, it may be possible to raise your credit score by asking existing creditors to raise your credit limits. But ask the lender not to pull your credit report to do it. Credit-report inquiries or deteriorating credit can lower credit scores.

Calculated Risk Wisely Says:  ...If your credit card debt is trivial, so is this advice. And for the love of God, can we stop talking about what makes you "look risky"? What, "risky" is just some subjective attribute, like "fat in horizontal stripes," that can be fixed by changing your outfit? After all this turmoil, we're still making people think that it's just a matter of appearances and easy steps.

MarketWatch Says:  Get a copy of your credit report from each of the three major credit bureaus. Fix errors and get as much adverse information removed as possible. You're entitled to one free credit report annually from each credit bureau at www.annualcreditreport.com. Read six steps to correct your credit report.

Calculated Risk Wisely Says: ...You get bonus points if you ask yourself how "fixing errors" became code, during the boom, for fraudulent "credit repair." You get double bonus points for asking how some people became able, easily and without cognitive dissonance, to tell themselves that their debt problems were "all a big mistake."

MarketWatch Says:  Check licenses of lenders you're considering. This may not be easy because state licensing requirements vary by state and lender. Banks and thrifts can be checked out at www.fdic.gov by clicking on "Institution Directory."

Calculated Risk Wisely Says:  Do you yet know whether all depository lenders actually require state licenses? I didn't think so. Do you yet know how many imploded, bankrupt, and criminally-investigated lenders so far this year had perfectly valid licenses? I didn't think so.

MarketWatch Says:  Shop several lenders. Don't assume if you get one quote of an unusually high interest rate, all will be high. Negotiate lower rates and seek removal of unnecessary fees.

Calculated Risk Wisely Says:  Do you know what "unusual" is? Do you know what fees are "necessary"? Please analyze and evaluate your "negotiating" strength in a credit crunch. You can use the back of this paper if you need more space. (Hint: it's called a "credit crunch" when you have no position from which to negotiate because you need a loan more than the lender needs to make one.)

MarketWatch Says:  Consider that interest rates and terms may change daily. Also, a low interest rate could mean more upfront points or added fees. Get all pricing information in writing before obtaining a written commitment for your loan. Get a commitment letter directly from the lender who's financing the mortgage, which may be different from the loan originator.

Calculated Risk Wisely Says: ...Much, much more to the point is that a "commitment letter" commits the lender to lend at the specified terms. It does not commit the borrower to borrow. You are not obligated for diddlysquat until you sign something with "Note" at the top and "I promise to pay" somewhere in the first line. We have heard story after story about people who didn't think they could "back out" when they were confronted with closing documents that didn't look right. Helpful advice might involve explaining that issue.

Ignorance is ignorance and doesn't excuse a borrower from getting in over his/her head. So when Thomas Gray penned Ode on a Distant Prospect of Eton College he said:

To each his sufferings: all are men,
Condemn'd alike to groan—
The tender for another's pain,
Th' unfeeling for his own.
Yet, ah! why should they know their fate,
Since sorrow never comes too late,
And happiness too swiftly flies?
Thought would destroy their Paradise.
No more;—where ignorance is bliss,
'Tis folly to be wise.

So in this case of uninformed or under-informed borrowers, it's plainly obvious that ignorance is definitely not bliss.   

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Just couldn't resist sharing this news of a record breaking summer rental in the Hamptons (via The Real Deal).

A Hamptons waterfront luxury rental for Memorial Day to Labor Day hit $1 million this season, a record.

The Southampton house was rented through Harald Grant, senior vice president at Sotheby's International Realty in Southampton. He declined to say where the house was or who rented it.

While brokers working on such tony deals can be tight-lipped, the $1 million summer rental shattered the previous record high of $550,000 for a summer rental. Russian aluminum heiress Anna Anisimova shelled out that sum in 2004 for the Southampton mansion of socialite/songwriter Denise Rich.

"That's what people are paying," Grant said. "Oceanfront rentals, waterfront rentals command these huge prices."

Seems the local real estate agents out there are quite excited that a new ceiling has been reached.  As crazy as this may sound to most of the rest of the country, when considering what one would pay to own a home like this (perhaps $35-40M), it seems reasonable...did I just say that?

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I'm back from vacation and here to report that I and my team have experienced our first "casualty" as a result of tightening lending standards.  The bad news is that the buyer who has decided not to sign the contract for one of our exclusive properties has backed out because her interest rate is going to be more than a point higher than she originally anticipated.  It seems that her retired status and lack of income is negatively impacting her financial picture despite her asset rich portfolio.  The good news is that another qualified buyer was waiting in the wings to snap up the property.  The key word here is "qualified" as that definition has changed dramatically over the past 30 days. Many who were considered qualified buyers just one month ago are finding that their monthly payments at current interest rates are making ownership less attainable.

So what are these people to do?  Rent?  With rental vacancy rates in the city reported to be less than 1%, that isn't necessarily the answer.  Are these "marginal" borrowers going to be forced to leave the city?  For many who don't the option to stay where they are, I think that will be the unfortunate reality.  I have always maintained that Manhattan is moving toward being an exclusive island for the wealthy and as the wealthy are being less affected by tightening lending standards and high rents, the trend towards an ultra-lux Manhattan continues.

Having said that, let's not count out the middle class just yet.  The largest percentage of these buyers still qualify for mortgages at competitive interest rates.  Those "marginal" buyers who don't will have to stay put or consider leaving the city.  Don't feel too badly about those 2 options though.  It could be much worse.  Just ask those struggling right now to avoid foreclosure.

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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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All of the recent press regarding the current mortgage meltdown and rising rate atmosphere is enough to make a borrower or their real estate agent a bit queasy.  Of course those who can weed through all of the negative press and decipher what this means to our local Manhattan real estate market are having a little less agida.  So what does it all mean:

First and foremost, the mortgage brokers and bankers to whom I've spoken have all indicated that the sub prime market was less than 5% of their local business.  Remember that we're talking Manhattan here.  But we're not talking just sub prime anymore as the spread of lending fears to the prime mortgage market have resulted in higher rates across the board for many.  Just this morning, one of my associates (she works for me which is why I have the emails) shot an email off to a client who is purchasing a one bedroom on the Upper West Side.  Here's the email Q & A:

Agent:  I was just in a meeting in my office- discussing state of market and mortgages. Have you locked in a rate at all- what is the current status of your loan?

Buyer:  We've locked in a $417,000 mortgage(we will be putting up $133,000 , $55,0000 at signing and $78,000 at closing). 30 year fixed at 6.75%. It was .25% above our original estimates. Putting the extra $23,000 down is not only a wise investment, it also keeps us out of the jumbo market, and lowers our monthly payment.

So these buyers are avoiding the higher rates in the jumbo market by putting more money down.  Fortunately for them, this is an option.   For many of our buyers in the past several years, the extra down payment would not have been an option because it would change the buyer's financial picture and negatively effect the way in which a co-op board perceived them. 

These tightening lending standards are exponentially increasing the financial quality of the buyers in our current marketplace.  Having said that, those marginal buyers who can't come up with the extra down payment or no longer qualify for their loan based on a higher interest rate/a higher debt to income ratio won't be shopping for an apartment anytime in the near future.  The only way this pool of less qualified buyers can enter the purchase market is if lending standards ease (possible but not likely anytime soon) or prices come down (that is the million dollar question).  The latter is the healthiest way in my opinion to welcome once marginal buyers back into the housing market. 

In the meantime, those who can't afford to buy a home, can't actually buy a home.  Wow!!!  What a novel concept!

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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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Vikas Bajaj of The New York Times reports on a Home Refinancing Program (that) Aims to Help Owners Stay Put:

New York State and the Federal National Mortgage Association will announce plans today to refinance up to $100 million in mortgages for homeowners who are facing the prospect of higher monthly payments on troubled home loans in the coming months, officials said.

A mere bandage for a problem that needs a tourniquet.  But some relief nonetheless.

The plan, which is called “Keep the Dream,” is expected to provide enough money to cover several hundred mortgages. It is similar to programs adopted by several states, including Massachusetts, Ohio and Maryland, that are trying to address, in a limited way, the fallout from the aggressive home loans made during the recent housing boom.

In the coming year and a half, mortgage experts say, about $800 billion in adjustable-rate mortgages will reset to higher interest rates. Though most homeowners should be able to refinance, economists worry that many may no longer qualify for a new loan because lenders have become stricter and home prices have been falling in most parts of the country outside Manhattan.

The powers that be at both the Federal and State level seem to acknowledge that this is just the beginning of what needs to be done to prevent further meltdown.

At the federal level, Senator Charles E. Schumer, Democrat of New York, has introduced a bill that would offer $300 million in federal funds to refinance and provide counseling for borrowers nationwide who are encountering difficulties. The senator also hopes to raise $600 million from private lenders.

Now $900 million may seem like a lot of dough to some, but considering some of my colleagues sell $100 million worth of real estate in any given year, this hardly seems like it will make any great impact on the troubled mortgage market.  With an average home price of about $250,000, this program would help about 400 people nationwide assuming Schumer successfully gets the $600M of private money.

Having said that, it will provide relief for those  who meet the following guidelines:

The loans can be no bigger than $427,000. Borrowers cannot earn more than 125 percent of the area median income in upstate New York and 165 percent of the area median income in the city and its suburbs.

If you do in fact meet these guidelines, you can apply for these loans beginning in September.  For the rest of you, buckle in, it's gonna be a wild ride!

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It's mighty quiet in the office today except for the chatter among my colleagues about the stock market plummet (Dow down more than 300 points if you didn't know already).  But I'm not here to feed your anxiety, nor mine so if your interested in some truly smart talk about what is going on regarding this story and residential mortgage backed securities, check out my friend Noah Rosenblatt's blog UrbanDigs. 

On a much lighter note, you absolutely must read"Should I Become a Real Estate Broker?" on Curbed.  It begins like this:

Hi Curbed, should I become a real estate broker? I'm sort of frustrated at my current job and have always fantasized about entering the real estate fray. Becoming a broker seems intriguing, but I have a few questions:

1. Money (will s/he make any)
2. Timing (funny right?)
3. Sphere of Influence (this person allegedly has none)

Check out the entire post paying particular attention to the comments thread...good stuff...some not so good.

Here's my answer to this Curbed reader's question:

In my humble opinion, it doesn't seem like the best time to switch from your current profession to that of a real estate agent.  In short, here's why:

1. Money-unless you enter the industry as an assistant to a top performer, I can almost guarantee you will make very little or no money at all for your first year or two.  In my 15 years, I have watched the revolving door of agents come and go in as little as 30 days but usually about 6 months.  It takes some thick skin to work in a profession that is covered in a cloud of disrespect.
2. Timing-the entire country with the exception on Manhattan is experiencing a horrendous housing slump.  It seems increasingly more likely that Wall Street isn't going to setting any bonus records this year (that's putting it lightly) and that sector has played a great role in buoying our local housing market.  The slump could in fact be around the corner for NYC.  Having said that, I entered the business in 1992 when properties were on the market for 2 years before selling.  I got a great education but the growing pains were numerous.
3. No Sphere of Influence-I too had no "wealthy" sphere of influence when I started in 1992.  My first boss suggested I write down every single person I would invite to a wedding.  I did just that and was stunned at the sources of business that came about from that initial list.  This isn't a reason NOT to join the industry but the long wait for that first deal and current market conditions may be.

As far as the Curbed readers opening comment about being frustrated at her current job...well...um...uh...you want to experience frustration like you've never experienced it before, then come on over.  We've got plenty of that to go around!

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So little time to blog lately as the market has indeed been keeping me and my team busy so here's some links that you may find helpful or at least a good read:

• Thank G*D that real estate salespersons are going to be required to take double the current curriculum to receive a license (via The Real Deal).
• NYCGarages.com has changed its domain name to BestParking.com and added some very cool upgrades (via Curbed)
• 2Q 2007 Long Island/Queens Market Overview Available For Download (via Jonathan Miller's Matrix)
• Hoteliers hedge their bets by adding more condo units (via WSJ)
• A sign of current market conditions...33% of 255 East 74th is sold in a matter of weeks with no advertising or sales office! (via The Real Deal)
• Another recent piece on whether or not the real estate profession is necessary? (via SFGate)
• Having trouble selling your home in New York? ABC's 20/20 wants you!!!  (via Zillowblog)
• And this is too good to be missed!  Bill Gross of PIMCO (the God of the Bond Market) addresses the difference between the wealthy and the rest of the population as he shares his current market outlook in Enough is Enough

Be back tomorrow with some original TrueGotham material.

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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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Tina Mattow of PropertyShark.com was kind enough to send over their 2nd Q Foreclosures Report of four major cities: Los Angeles, Seattle, Miami and of course our very own New York City.  Here are the "key takeaways" directly from the report with an obvious focus on our local markets(important to note that New York City encompasses all 5 boroughs):

• Comparison to Q1 2007: The number of scheduled foreclosure auctions this quarter in Los Angeles soared (54.63%) higher from last quarter. Miami (29.89% increase) and New York City (16.06% increase) also increased. Seattle foreclosures declined by 13.02% compared to last quarter.
• Comparison to Q2 2006: Scheduled foreclosure auctions in Los Angeles, jumped 202% compared to the second quarter of 2006, while Miami increased by 146% and New York City by 19.5%.
• Foreclosures per Household: Of the four cities, Miami had the highest foreclosure rate per household, about 136% higher than Los Angeles, and 775% higher per household than New York City.
• New York City Boroughs: Properties in Queens and Brooklyn again dominated the total number of new foreclosure auctions in New York City, although the largest percentage increases from last quarter were seen in the Bronx and Staten Island. Queens foreclosures are up 102% compared Q2 2007.

Since the last quarter of 2006 Queens jumped from 167 to 324 foreclosures and Brooklyn from 84 to 147.  The Bronx had 41 in Q4 2006 and 83 this quarter ...OUCH!!!  And we can't ignore those Manhattan numbers (20 in Q4 2006 and 35 this quarter) which in my humble opinion points directly to the fact that the sub-prime meltdown is not as big of a problem for wealthy Manhattan homeowners.  That could change however if it begins to effect wealthy Manhattan bonuses???

Thanks again to Tina and PropertyShark.com for sharing this data. 

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Amy Hoak of RealEstateJournal.com shares Effective Incentives to Woo Buyers and Sell Your Home.  Hoak points out that gimmicky incentives like trips, cars, and flat screen TVs are less likely to provide the incentive a buyer needs than good old fashioned price cuts or financial incentives such as:

Reducing the Price (obvious right?)

A price reduction is often the incentive that is looked at first, says Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.

"The price is something that is a common currency -- it appeals to everybody," she says.

Gene Rivers, who owns four Keller Williams real-estate offices in Florida, agrees. If a buyer has in her mind that she'll pay $350,000 for a home and the seller won't budge from $375,000, "$5,000 in closing costs and a plasma TV ain't going to get it done," he says.

Paying Points (one of my favorites!!!)

Sellers can offer to pay mortgage points for a buyer, an incentive that Mr. Dalzell tends to use in environments like today's, when rising interest rates are at the front of a buyer's mind. One point is 1% of the loan amount, charged as prepaid interest.

"When a buyer sees a lower interest rate or monthly payment, that's something they can relate to," he says. The setup makes sense for a buyer who has to buy furnishings for the new place; it also can make for an easier monthly payment transition for families that are upsizing.

Buyers should understand, however, that the lower rate often lasts only from one to three years. Before accepting, understand and plan for the point in time when the mortgage bill will increase.

Down-Payment Aid (not possible in a Co-op)

For some buyers, the hardest part of entering the ranks of homeownership is the down payment -- also an area where a seller can help. It's mostly first-time home buyers interested in this kind of assistance because they're often the ones lacking in funds to complete a deal, Mr. Zadel says.

"It gets people into homeownership," he says. "The disadvantage is that the buyer is financing that additional amount," he adds, because a seller would likely come down in the price of the home if a chunk weren't dedicated to down-payment assistance.

Closing-Costs Help

Closing costs include items ranging from legal fees to title insurance and can add up, ranging between 2% and 7% of the loan value, according to Freddie Mac. So many buyers, especially those stretching to make a down payment, will be interested in having a seller help out.

In Phoenix, buyers in every price range have been asking that these costs be covered, according to Re/Max's Ms. Ramsey. "They ask for it because they know that they'll get it," she says.

Adding a Warranty

A residential-service contract is sometimes thrown in as an incentive because it acts as insurance for a home's systems, often including plumbing, heating and cooling. At a cost of a few hundred dollars, some real-estate agents consider it an inexpensive add-on that affords a buyer a little extra peace of mind, Mr. Dalzell says. That peace of mind can be especially welcome during the first year in a house.

The Little Things

Other perks will appeal to buyers, too, ranging from the common to the unique. Payment of homeowner association fees -- typically associated with condo developments -- are sometimes offered. Ms. Ramsey says that a seller with a swimming pool might also offer a year's worth of upkeep for it, a welcome help for those worried about the maintenance of the backyard attraction.

Or maybe, if a corner of the home was designed for a grand piano, leaving that instrument behind entices a buyer to go through with the deal, USC's Ms. Conway says.

Some of these incentives could indeed be quite effective in helping a seller procure a buyer for their home.  In the strong Manhattan market however, the best way to achieve that goal is to price the property properly.  Should our market shift to more of a buyer's market, I really like the idea of a seller offering to pay points to provide a buyer with a lower interest rate.  That can add up to serious savings over the life of a loan.

As far as the other incentives go, the co-op market here in New York City makes most of these impossible.  For instance, no Co-op Board is going to accept a seller assisting with a down payment.  Having said that, none of this much matters under current market conditions as sellers still seem to have the upper hand in most cases.

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Here I go again providing anecdotal evidence of what is happening in today's Manhattan residential real estate market.  I just can't stop myself.  After a very quiet month of June, someone has awakened the buying masses.  Some of my personal evidence of the recent blip in activity.:

• 2 properties that we have been marketing for 3-6 months now have multiple offers on them.
• Another property that we have been marketing for more than 6 months had its most highly trafficked open house yesterday (it remains to be seen if we will have any offers).
• My team and I had over 80 (yes 8-0...EIGHTY) people come through another open house yesterday and we already have multiple offers on this property.
• One of my buyers ($4M price point) wanted to see a property that came on the market Thursday evening that already has 2 offers on it.
• Another of our buyers waits on the sidelines for more inventory (likely not the only ones which could very well put them in a multiple bid situation when the time comes).
• And another property that we just brought on the market received an offer in less than a week (not an acceptable offer but an offer nonetheless).
• We also have 3-4 more properties coming on the market in the next 1-2 weeks.

So the current Manhattan real estate market continues to defy national housing trends by chugging along and continuing to frustrate buyers, some sellers, and many agents as making sense of it is nearly impossible. 

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As a Manhattan real estate professional for the past 15 years, one of the most common questions I'm asked by my clients is "should I go directly to my bank or use a mortgage broker?"  I personally have always used a mortgage broker believing that more often than not, they will be able to secure the best mortgage product for my personal needs.  My most recent loans and refinances have been handled by Daniel Shlufman, the President of FCMC Mortgage Corp.  Since I trust him implicitly with my personal business as well as the mortgage needs of most of my clients, who better to answer this question.  Here is his response:

I. Choice of Lenders, Products and Rates

Mortgage brokers work with many different lenders. Some of these are large national banks such as Citimortgage, JP Morgan Chase and Bank of America. Others are smaller regional savings banks such as Astoria Federal Savings and Ridgewood Savings Bank. As a result, we are able to effectively shop the market for you since we have several lenders that specialize in every type of loan product.

In addition, mortgage brokers work with non-bank lenders, who lend to borrowers who either have special situations or credit issues that need to be addressed. Many of these are sub-prime lenders who either do not work with borrowers or who prefer to work through mortgage brokers due to the complexity of these transactions.

The variety of lenders available to us allows mortgage brokers to tailor a loan and product to each persons individual situation. We are not bound by the requirements and programs of any one lender so we can offer the best program to a borrower regardless of which lender is used.

When going directly to a bank, the borrower can only avail themselves of the programs that are offered by that particular bank. For example, a bank may have a great rate on a 30 year fixed rate loan, but an above market rate on an interest-only adjustable rate mortgage (or “ARM”). Brokers, on the other hand, will use the best bank rate they have for a 30 year fixed and the best bank rate they have on an interest-only ARM, which will usually be from two different banks.

II. Priority Pricing and Payment of Brokerage Fees

In this competitive interest rate environment, lenders often offer pricing incentives to mortgage brokers to bring loans to them. As a result, mortgage brokers are often able to offer better interest rate to borrowers than they would get by going directly to the same lender. Also, mortgage brokers work with some lenders who you might not be aware of. This can also save you money when, as often is the case, these smaller or regional lenders offer more favorable terms or rates.

Generally, the mortgage broker fee is paid to the mortgage broker by the lender. This occurs in all cases when a borrower is taking a 0 point loan. In such event, so long as the rate is as good or better as one the borrower can find on their own, they get the mortgage brokerage services detailed in this article at no cost to themselves. However, they get all of the mortgage brokers expertise, processing services, bank access, etc on the banks dime!

III. Allegiance to the Borrower

Unlike the loan officers, appraisers and processors who work for the bank either as employees or independent contractors, mortgage brokers work for the borrowers. The borrower is the mortgage brokers client, and the mortgage brokers job, as a professional, is to understand and satisfy the needs of that client.

The mortgage broker discusses with the client the best type of loan for the client based upon the clients specific income, asset, and credit situation. We also analyze the loan requirements with respect to the amount and proposed use (e.g. purchase, refinance, cash-out). Once the mortgage broker determines what type of loan will best suit the clients needs, we are then able to figure out which lender has the best rates and terms (which often include maximum cash-out on refinances or minimum documentation when required).

In addition to acting as an adviser to the client, as issues arise throughout the process, the mortgage broker becomes the clients advocate with the lender. When going directly to a lender, a borrower is only one of thousands of borrowers in a lenders pipeline. However, a mortgage broker has an on-going relationship with each of their lenders which gives them leverage in resolving issues. Mortgage brokers have priority access to the bank decision makers which allows them to obtain answers quicker and more efficiently

IV. Service to the Borrower

Most mortgage brokers are local to their geographic area and, therefore, have specialized knowledge of that area. They are aware of such things as mortgage tax in New York, Peconic Bay Tax in the East End of Long Island and unique issues with respect to cooperative apartments in Manhattan with which out-of-town banks and internet companies are not familiar.

The loans are processed by the mortgage broker who has control over the process. Telephone calls made to a mortgage brokers office are handled efficiently by the loan officer, processor or owner of the company. Unlike calling a bank, there is no (800) number to dial, no prompts to work your way through and no extended hold times.

Since mortgage brokers handle the processing of the loan, they are able to process it much faster than lenders can since it does not go into a large black hole in some back office somewhere. The typical time for processing is 2-5 days with approvals received 5-10 days later. In the competitive real estate arena and in our fast paced world, time is money. Mortgage brokers understand this and react accordingly. We structure every deal with the clients needs in mind. This can include a mortgage contingency clause in the contract or a closing date to accommodate date specific needs for the funds.

VI. Summary

Mortgage brokers offer a valuable personalized service to make sure that their clients receive the best loan at the best rate for them. They shop the market for interest rates which save their clients time and money. They work for the clients from pre-application through closing as advisers and advocates. And, best of all, nearly all of the time the banks pay the fee, yet you as a client receive the valuable service for free.

Again, if I didn't know Dan was of the highest integrity, I wouldn't have asked him to answer this question.  Now I definitely have high-end clients who have personal banking relationships that could never be matched by anyone.  Having said that, Dan has always told these clients when they already have a great deal that no other lender can beat. 

With all of the sub-prime market meltdown, mortgage brokers are more frequently being unjustly vilified.  People just love to point fingers and dish out the hate.  Of course, there are bad seeds out there, but just as a savvy real estate agent brings value to a transaction so does a knowledgeable and honest mortgage broker.

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Check out this letter to the editor from this past Sunday's New York Times regarding their recent story on what brokers can and can't say to prospective clients:

To the Editor:

Your June 24 cover article “Questions Your Broker Can’t Answer” focused on the Fair Housing Act’s prohibitions against discriminatory advertisements, but mischaracterized its proper legal application.

Housing providers who advertise that their buildings are “family friendly” aren’t violating the law. Instead, they are announcing their compliance with the law by saying that they don’t discriminate against families with children.

The law in this area is simple but just. Housing providers should not fear that making such statements will put them on the wrong side of it.

Kim Kendrick

Washington

The writer is assistant secretary of Housing and Urban Development for Fair Housing and Equal Opportunity.

This makes me wonder just how insane the interpretation of these laws has become in recent months and how much fear-inspired misinformation is being spewed?  Hmmmmm?

BTW...I'm insanely busy right now!!! 

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I'm back from vacation today and once again, my week off was insanely busy.  The summer market has indeed heated up again and here is the Prudential Douglas Elliman press release of 2nd quarter 2007 residential real estate statistics:

The Manhattan residential real estate market continues to be characterized by falling inventory, rising prices and a record number of sales in contrast to the national housing market.

- The number of sales increased 104% this quarter to 3,939 units as compared to the 1,934 units sold in the prior year quarter.

- Listing inventory dropped 31.5% to 5,237 units from the prior year quarter total of 7,640 units, which had been the highest level recorded in more than ten years.

- Days on market was 117 days this quarter, 4 weeks faster than the same period last year.

- Listing discount was 2.2%, down from 3.5% during the same period last year.

Price levels were generally up this quarter, with the greatest price gains seen in larger apartments, namely 3-bedroom and 4-bedroom units with a 17.6% and 36.2% gain respectively over the same period last year.

-The median sales price increased 1.7% to a record $895,000 over the prior year quarter result of $880,000 (7.2% above prior quarter result of $835,000).

-The average price per square foot increased 5.2% to a record $1,139 over the prior year quarter result of $1,083 (6.4% above the prior quarter result of $1,070).

-The average sales price decreased 3.8% to $1,333,316 over the prior year quarter record result of $1,386,193 (3.3% above the prior quarter result of $1,290,391).

Co-op Market

-The median sales price of a co-op this quarter was $695,000, down 3.7% from the prior year quarter but up 3% from the prior quarter. Average price per square foot and average sales price showed similar patterns.

-Inventory levels for co-ops fell 39.6% to 2,481 units as compared to the prior year quarter total of 4,105 units.

Condo Market

-The median sales price of a condo this quarter was $1,040,000 this quarter, up 5.1% from last year at this time and up 5% from the prior quarter. Average price per square foot and average sales price showed similar patterns.

-Inventory levels for condos totaled 2,756 units, down 22% from the prior year quarter total of 3,535 units. New development is estimated to be 34.9% of condo inventory this quarter.

Luxury Market (upper 10% of all co-op and condo sales)

-The median sales price of a luxury apartment this quarter was $3,600,000 this quarter, down 10% from the record $4,000,000 median sales price set in the prior year quarter last year at this time but up 5.1% from the prior quarter. Average price per square foot and median sales price also showed declines from the prior year quarter. However since this segment of the market is defined as a percentage of the total market, the declines reflected a wider range of included sales due to the surge in the overall number of sales. The 3-bedroom and 4-bedroom markets are more reflective of the high end market this quarter.

Loft Market (co-op and condo sales)

-The median sales price of a loft apartment this quarter was a record $1,650,000 this quarter, up 10% from last year at this time and up 1.2% from the prior quarter. Average price per square foot and average sales price showed 6.5% and 10% gains respectively from the prior year quarter.

The combo of stable demand and decreasing supply is fueling this active summer market.  Properties that are priced appropriately continue to be snapped up quickly and those who are "testing the market" with unrealistic asking prices will continue to wait for a buyer.  Today's buyer is more patient and savvy than any I've seen in 15 years.

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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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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.

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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.

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Maya Roney's piece entitled Americans Afraid to Buy Homes that she wrote for BusinessWeek Online is a prime example of why there is NO "National Housing Market" but also why those "national housing stats" are having a psychological effect on some Manhattan buyers.

This morning, the NAR said existing-home sales “remained essentially unchanged” in May as they slipped 0.3% to an annual rate of 5.99 million units. Sales jumped 5.8% in the Northeast and 0.7% in the Midwest, so it looks like the West (down 0.8%) and the South (down 3.4%) are the biggest losers.

NAR senior economist Lawrence Yun said “psychological factors” are currently the biggest drag on housing, with tighter credit for subprime borrowers coming in a close second. Rather than take the plunge into this uncertain market, “many people are doubling-up—they’re adding roommates or moving in with parents,” he said. Yikes!

So what exactly are those "psychological factors" that Yun is speaking of?  Well, anecdotally (I have become accustomed to making the "anecdotal" disclaimer) I'm seeing buyers who are indeed afraid to "overpay" for real estate despite the signs that the local New York City real estate market remains strong.  Many are ignoring comparable sales and listening mainly to national housing news that kicks up their anxiety to a level equal that of Alvy Singer in Annie Hall. 

Just today I was out with a client who could be considered a "picky" buyer except for the fact that he really isn't requesting all that much considering he will spend up to $4 million!  He wants 2000 or more square feet with light and views for $4M or less.  After viewing 2 properties both in the newer Trump Place buildings on Riverside Boulevard, he became increasingly discouraged at the inefficiency of the Manhattan market and specifically the random asking prices that seem to be pulled from space. 

You see, 2 weeks ago we viewed this client's perfect home asking $3.995M only to be told after our second visit that the apartment was now asking $4.25M.  We submitted an offer based on the "original" ask of $3.995M only to be told that the seller wouldn't accept less than $4.2M.  That apartment sits on the market and I suspect will for quite some time.  Back to the Trump Place units we viewed today.   Both are asking roughly $1900/sf.  The one with the terrace overlooking the river has multiple offers and the other unit is a would be combo of 2 units that would require at least another $250K in renovations.  Obviously the terrace is a draw for buyers unlike the prospect of combining 2 units.  So why the same price per sf?  No clue.

So I continue my search with this buyer who is being bombarded with scary "national housing" news that has very little to do with what is happening locally.  Except for the fact that he's listening and the fear is nearly paralyzing.  That combined with some sellers (fewer than before) who are still trying to eek out a bit more than the market will bear makes for a frustrating buyer's market.  At least in the $4M range.  By the way, the same is true for two of my buyer's in the $10M range.  Anyone feeling sad yet...didn't think so.

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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!

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It's no secret that I'm a supporter of transparency in real estate...every aspect of it.  Which is precisely why I believe that something needs to be done about the secret society that is the Manhattan co-operative.  Check out these previous TG posts:

• Co-op Board Antics-Redux
• More Co-op Board Antics
• Will NYC Co-ops Have to Disclose "Why?"

From Eliot Brown of The New York Sun (via Curbed) comes Stalled Co-op Rights' Bill Gains Backers. 

A bill that would affect co-op boards, long stalled in the City Council, is getting a boost from local law professors who yesterday sent a letter to Mayor Bloomberg and Speaker Christine Quinn urging action on the legislation.

The bill would require co-op boards to disclose specific reasons for rejecting potential apartment buyers. It is supported by a majority of the council, a host of civil rights groups, and now 13 law professors from universities in the city.

It's going to be very interesting to see how this plays out and whether or not Bloomberg would support such a bill.  I suspect he has quite a few friends on Co-op Boards who strongly oppose such legislation.

Opponents of Mr. Monserrate's bill say disclosure of reasons for rejection is hardly a solution to the onerous process of buying in a co-op, and boards would never openly disclose if they did engage in illegal discrimination.

One of my readers suggested the following quite some time ago and I found it quite intriguing:

My thoughts are having a set of 'standards' for coop boards and establishing a group (either self-governing or through the city) to 'audit' boards and ensure they are meeting these standards. Much in the same way that public companies now have to have their auditors sign off on internal controls.

Such standards could include maintaining sufficient meeting minutes, whether all shareholders are required to have homeowner's insurance (some boards actually don't require this!), etc.

The 'auditors' wouldn't necessarly opine about the coop's management abilities but instead disclose whether coops are meeting these standards.

Kind of like a public health inspector...does't matter what the food is like or how much they charge, but make sure the place is clean.

Of course there would be the cost of maintaining this process but it might be less than legal fees incurred as a result of the proposed law. And if done effectively you'd see the price gap btw condos & coops narrow.
-newbie

An interesting proposition.  What are your thoughts?

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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!

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From The Wall Street Journal Online comes a report of shifting investor strategies as long term bond rates rise. 

The recent bond market rout is prompting some fixed-income investors and mortgage shoppers to rethink their strategies.

Some investors have begun buying bonds with longer maturity dates, taking advantage of yields that moved higher as bond prices fell. Meanwhile, as rates on 30-year mortgages also jumped, some borrowers have begun taking another look at adjustable-rate mortgages. Bank of America Corp., for instance, says it's seeing increased interest in hybrid ARMs that carry a fixed rate for the first three, five, seven or 10 years and then adjust annually.

In the Manhattan real estate market, I haven't seen much of a trend away from these products so I am surprised to hear that BofA has seen an increase in interest in Hybrid ARMs.  A large percentage of my buyers and those who are purchasing property that I represent continue to borrow utilizing these Hybrid products.  Most of my buyers, including those who are in the mortgage industry, are attracted to the 10 year interest only mortgage with a fixed payment for 30 years (of course the amortization schedule adjusts after 10 years if you only make interest payments) as it gives them both security and flexibility with payments (this is the product my wife and I have on our current home).  Why this product versus a standard 30 year fixed rate loan?

The benefits of taking out a hybrid ARM have increased recently, although the spread between rates on hybrids and fixed-rate loans is small by historical standards. Borrowers can cut the rate on their loan by about 0.28 percentage point by opting for a hybrid ARM that's fixed for five years instead of a 30-year fixed-rate mortgage. That spread is the widest since October, but well below the 0.68 percentage-point average over the past 14 years, according to HSH Associates.

A quarter of a percentage point when loan amounts average $1M (half of a car lease payment perhaps?) is a significant enough monthly savings to make these products attractive.

For now, hybrid ARMs are likely to get more attention from borrowers with larger loan balances. "The jumbo category [loans above $417,000...that's nearly every property on the island of Manhattan] is where you're probably going to see the most movement," says Brad Blackwell, a national sales manager for Wells Fargo & Co., in part because borrowers with larger loan amounts tend to be more sophisticated. The potential savings from switching to an ARM can be greater, too, for borrowers with larger loans. 

It's also imperative to note that Manhattan buyers differ from much of the rest of the country in their transiency.  The average apartment owner moves every 5 to 7 years here  which means they likely won't have to worry about that adjustment after 10 years.

With interest rates not likely to fall significantly in the coming months, I suspect we will continue to see interest rate sensitive buyers continuing to utilize Hybrid ARMs to purchase their homes.   It remains to be seen how interest rate rises will impact buying power and ultimately sales prices.  Only time will tell. 

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Check out the latest inventory numbers from Jonathan Miller's Matrix which shows the number of available co-ops, condos and townhouses dropping 26.1% from last year to its lowest level since August 2005.  So what does this mean?  Frustrated buyers!  There is so little inventory on the market right now that most of my buyers (and I'm working with many more than I typically do) are incredibly frustrated with the lack of options available to them in all price ranges.  Having said that, property with inflated prices is not moving but new property that is appropriately priced is being snapped up by buyers who are waiting on the sidelines for "their home" to hit the market.

So if you are considering selling your apartment in the next 6 months, I have never believed more that the summer market may indeed be good for you.  The buyers are just waiting for you to put your place on the market but don't be fooled into thinking you can get whatever price you want because the current pool of buyers is patient and willing to wait for the right home at the right price.  It's simple supply and demand.  The demand is there at the right price if only you would release the supply.

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What better to blog about on a hot and sticky Manhattan day than the increase in the number of condominium projects with swimming pools (via The New York Sun).  As I walked to the office this morning sipping my hot coffee (not so brilliant) it was no big surprise that I arrived with a sweat soaked shirt.  A dip in a pool sure would be nice right now.  Well if you're one of the many new condo buyers at projects like 20 Pine, One York, or Sheffield57, an afternoon dip in the pool is a luxurious reality.  So what are people willing to pay for a swimming pool?

A recent Sheffield57 buyer, Joel Ehrlich, said the open-air pool with a 16-foot retractable glass door to facilitate winter use was a major factor in his decision to spend more than $1.5 million on a two-bedroom apartment in that building. "Moving from Scarsdale, I was concerned about what I'd be giving up," Mr. Ehrlich, a married father of three grown children, said. "When I saw the rendering of the pool, I realized that it would be like having a beach and a country club — and all I would have to do is take an elevator."

Mr. Ehrlich said he was willing to pay a 10% premium for an apartment in a building with a pool, and surmised that the amenity, located on the building's 58th floor, would boost the unit's resale value, though he has no plans to sell it.

I can tell you first hand as the owner of a condominium at The Bromley on the Upper West Side, our swimming pool is invaluable both in the heat of the summer and during the blistering cold winter months.  With 2 kids, it provides hours of fun and relaxation when the elements outside aren't as favorable.  In fact, my wife and I purchased our current apartment in large part because of the pool and the other amenities in the building and it seems we are not alone as the lifestyle that these condominium amenities provide makes living anywhere else seem mundane.

The founder and chief executive of the Shvo Group, Michael Shvo, said the value of a pool depends entirely on the profile of the target buyer. He said his firm is now marketing a property at 225 Rector Place in Battery Park City that features a 75-foot-long indoor, sky-lit pool with a lounge area — "geared toward the buyer who lives an active lifestyle."

"In a large-scale, luxury building, a pool is a necessity," a Shvo sales representative Ariel Cohen, said. "When kids want to go swimming, and they're in they're two-bedroom cookie cutter apartment, the nanny can take them for a dip — and that makes a world of difference."
A senior vice president and managing director of Brown Harris Stevens, Paula Del Nunzio, said swimming pools tend to draw would-be buyers with young children.

So if you're seeking a building with a swimming pool, there doesn't appear to be a list anywhere that is all inclusive of these "wet" condos.   That said, I just did a search and came up with more than 500 available units in buildings with swimming pools.  Dip anyone?

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There is no doubt that transactions are taking place right now at all price levels with an absolute frenzy occurring in the ultra luxury ($10M+) Manhattan residential real estate market.  Having said that, I'm still here with anecdotal evidence of a quieter market in the past several weeks as I and my colleagues although still somewhat busy are experiencing a bit of a lull in the market.  In fact, just a few days ago I wrote about this welcome calm in the Manhattan Real estate market. Tom Acitelli of The New York Observer disagrees as seen in his article yesterday, This Summer, No Cooling Off for Manhattan Residential Market.

Simply put, the market hasn’t had the ups and the downs of the national housing market. No bursts, busts or slumps here—just more of the same, quarter in and quarter out, year after year, going back at least a decade and certainly running through the last few years. While not the most riveting story line, Manhattan as steadily successful perhaps best explains the housing market’s performance, now and as it will likely unfold this summer.

Over the last decade, Manhattan home sales have either gone up in the summer from the spring, or down—but merely slightly.

In 2006, condo and co-op sales increased over 9 percent from the spring through the summer, according to Miller Samuel. In 2005, sales dropped over 8 percent from the spring to the summer. In four of the last 10 years, sales have dropped from spring to summer, but never by very much; and both seasons, together, remain generally the busiest times of the year for Manhattan home sales.

In fact, it’s impossible to find a slow summer in any recent year. Take 2002, the year the housing boom really took popular hold nationally. The number of closed Manhattan sales dropped from the spring through the summer, but the number of summer sales—2,366, according to Miller Samuel—remained higher than in the winter or the fall.

Again, my market pulse is anecdotal based solely on my own business and that of the 200 or so agents with whom I rub elbows every day.  The top producers in my office are all talking about how things have quieted a bit since mid May and some are even nervous about when it will pick up again.  The fact is that traffic is down at open houses and buyers seem to be exercising more patience while searching for their homes.  Inventory has also dropped significantly (via Matrix).

I wonder how much the stats are skewed by properties that go to contract in the Spring and close in the Summer months?  I guess we will all have to wait and see what 3rd Quarter numbers look like come September but I still suspect that this Summer will be more relaxed for my industry than the typical January through May sales frenzy.

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I have just finished perusing the RSS feeds and news stories today and nothing really grabbed my attention. 

My anecdotal opinion on the current Manhattan real estate market:  It's quiet.  This time of year traditionally sees a bit of a lull and I sit back and watch as many of my colleagues begin biting their nails (even after 15 years, I can sometimes be seen chewing a finger or two). 

Last June was the "beginning of a slowdown" which in reality lasted through October when Wall Street bonuses were announced.  Those who bought last summer actually picked up property for "reasonable" prices related to post bonus announcement prices.  Once that bonus news hit, the market gained steam again and we all made "hay" this past winter.  It appears that Wall Street is going to have another good year which will likely fuel another late Fall through Winter buying period.

Having said that, buying in the summer months often provides less inventory, but also fewer buyers to compete for that inventory.  Summer buying can indeed be a much more relaxing experience than the multiple bid environment often seen from January through May.   And for the buyer with no sense of urgency, the lack of competition in the market allows for a more patient approach to buying your home.   

Sellers who wish to sell over the summer need to exercise a bit more patience than those who sell in a more active market but pricing your property appropriately will bring you a qualified buyer and likely a smooth, pain free transaction.

As a real estate professional, I'm a big fan of the summer months for both buying and selling as everyone has time to think before making a commitment.  It's a more traditional market mentality where offers are made, negotiations take place, and a meeting of the minds results in people moving to and from their homes.  I'm not suggesting for one moment that there aren't competitive bids for property in the summer months but I am suggesting it's not as common place as it is in the winter months.  In my experience, the lazy days of summer make for more relaxing transactions.

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Breaking news from The New York Sun that Manhattan Borough President Scott Stringer has submitted a recommendation to cap buildings at 14 stories between 97th and 110th street along Broadway:

Stringer waived his review period and submitted a recommendation in favor of rezoning a swath of the Upper West Side yesterday, a day after Community Board 7 unanimously approved the plan. The rezoning, which will likely be passed by the City Planning Commission and the City Council, would limit the height of new buildings in the area, as well as provide incentives for affordable housing. Developers along Broadway could build up to 145 feet, or 14 stories, if they built affordable housing units. Buildings on side streets would be subject to lower height limits. Many in the neighborhood rallied around the need to limit heights in response to two high-rise towers built by the developer Extell at Broadway and 100th Street. Many noted that the rezoning would be insufficient to preserve the character of the neighborhood, but nonetheless backed the plan. "It's the best we could get," the vice president of West Siders for Responsible Development, Bill Crane, said. "The longer we wait the longer developers will have to put up these gigantic high-rises."

Congrats to Gary Barnett of Extell.  Your Ariel Condominiums will seemingly accentuate that Broadway corridor for years to come. 

And more...via Curbed...Upper West Side Downzone Update: Hong Kong Cometh

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From Peter Coy of BusinessWeek.com comes 'Don't Watch, Read, or Listen to the News If You Can't Handle the News'.

Coy shares this:  Here's an excerpt from the promo for a new podcast by the co-founders of GetMyHomesValue.com, Rory Wilfong, Steve Young, and Dave Conklin:

There are a lot of stories in both trade and consumer publications that seem geared toward sparking debate and nothing else. They will create fear and doubt if you let them. As Rory says, “Don’t watch, read or listen to the news if you can’t handle the news.”

...and Peter also suggests...(I guess the same goes if you're a Yankees fan this season.)

I would go one major step further here and suggest that if you can't handle the news, you're probably not reading enough of it.  On any given day, I'm bombarded with RSS feeds, emails, and news stories that touch every single perspective and every single angle of the housing market from booming local markets to "the sky is falling" national market mentality.  It can make a anyone a bit schizophrenic (me too, yeah, me too) particularly someone making a living selling property.  Having said that, it has never been more important for the real estate community to be completely abreast of events that are changing the dynamics of our marketplace: transparency of information, advances in technology, forward thinking marketing and strategic planning concepts, consumer sentiment, industry sentiment, and of course the overwhelming mumbo jumbo of statistics and economic indicators that claim to be forecasting our futures.

To my savvy colleagues, and there are many, who continue to raise the bar in our industry by making sense of all the information out there available to the public, thank you.   There is great power in having all of this information at your fingertips so that our clients feel confident with your interpretation of it. 

For those who remain frightened with their heads in the sand, good luck with that.  I can't remember the last time I or anyone I know selected someone to provide a profesional service who was paralyzed by fear.   

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It's here!!!!  The past 4 years of sales data including co-ops (yes co-ops!!!) is available to the public to peruse.  Thanks to Ethan Wilensky-Lanford of The New York Times for the tip off on real estate sales data searches.   Check out the search engine at www.nyc.gov/html/dof/html/property/property.shtml.

No square footage...of course not...because it's not accurate. Nor is a room count available...they vary too depending on whom you ask.  But this is a valuable tool for owners to gauge value of their homes and take a little bit more of the mystery out of the process.  Has to be refreshing too for all those who are sick of feeling like the real estate industry has been holding information hostage for so long.

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No time to blog today because I've been insanely busy with clients and Triathlon training (and thank all of you so much who have taken the time to generously donate to this cause!!!).  Mostly the former!  The market continues to buck national housing market trends as the ultra luxury market finds buyers who have money to burn:

• Stories are swirling of Charles Schwab paying $27M for a property at 834 Fifth Avenue that was listed at $16M ($11 million OVER THE ASK!!!!)
• Also hearing scuttlebutt about an $11M property at 1125 Fifth that has gone to contract at $17M.
• And of course there were my buyers who were gazumped last week by a buyer offering $18M or $1.3M over our contract price.

I'm also witnessing first hand buyer frustration at the inability to find the "right" home in price ranges from $1M to $5M.  The market below $1M seems a little bit quieter but not much.

My professional observation...

Aside from the fact that those purchasing homes in the $10M and up range have considerably more cash than most (that's all relative of course with some having "more" than others), I see the higher end buyer psychology as being significantly different than the rest of the market.  The ultra lux buyer sees a home purchase as a roof over their head and a place to call home and is less inclined to view the purchase as an "investment" per se.  That said, regardless of someone's wealth, no one I have met in my 15 years wants to lose money.  Whatever it is, the ultra lux buyers are snapping property up like hot cakes in Manhattan showing that those with big money either have great faith in the strength of our local economy and real estate market, or they just don't care.  Again, I think it's the former. 

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I hope everyone is looking forward to this long Memorial Day weekend as much as I am.  I'm heading out to Bridgehampton with the family to spend the weekend with my in-laws (that's a good thing...I actually really like them). 

• And as much as I DETEST spin classes, I have agreed to join my brother-in law for a class at Zone Hampton on Saturday.  Hey Neal, why aren't we stayin' in the hood and checking out Soul Cycle  which I just found out about via Gotham Gal's Joanne Wilson?

Now back to real estate:

• I somehow missed this but since we are talking Hampton's, check out this record smashing deal that will be the record residential purchase in the United States (via The Real Deal)
• Eliot Brown of The NY Sun shares that Extell is at it again with approval of purchase of land at Hudson rail Yards, solidifying the company as a "development tour de force" in Manhattan over the past few years.
• Check out the recent renderings of 2075 Broadway at 72nd Street via Curbed.  What that corner desperately needs!  BTW...I started my real estate career in 1992 in the building that was torn down...I don't miss it!
• Jen Chung at Gothamist has got some great Manhattan-centric pieces today.  Check out more on congestion pricing to reduce Manhattan traffic, Old Naughty NYC Vs. Current Boring, Safe NYC, and some insight into the amount of vacant property in Manhattan.
• Some commentary on yesterday's housing numbers (New Home Sales up 16%?) from BusinessWeekOnline.
• And more on the subject of how the jump in home sales is sending a mixed message from NPR.

That's all I've got for today.  Taking off on Monday so have a wonderful weekend and see you all on Tuesday.

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For all of those real estate haters out there who think that I and my colleagues are effortlessly collecting fees for selling property, here are a couple of anecdotes that you're sure to enjoy.  After all, readers of blogs like Patrick.net seem to "get off" on anything related to real estate agent angst.  Well here goes because I'm deep in it right now. 

Twice in the past 4 months, I have represented buyers of very large residential purchases who had the transaction implode in the eleventh hour.  The buyers 4 months ago had signed the contract and provided the 10% deposit check only to call their attorney on the day the contracts were to be delivered and "kill the deal."  It took a while but I got over that one...it happens.  When people are spending in excess of $10,000,000 on a home, you have to appreciate "cold feet."  They ultimately decided that such a purchasing in this particular project just "didn't feel right."  Just can't argue with that.  If your spending that kind of money it better darn sure "feel right."

The second incident happened today to clients I have worked on and off with since 1997 also in the $10M+ price range.  Today, they were the very unfortunate receivers of a good, solid gazumping.  After a 10 day negotiation, a contract was drafted on Tuesday and sent to my client's attorney.  Yesterday, I was consumed with this transaction as the seller's agent insisted that a contract needed to be signed by the end of the business day Wednesday.  After multiple phone calls and conference calls, more than 100 emails to various parties, and my office hand delivering original contracts for buyer signature and back to buyer's attorney, I still couldn't rest.   Then I received confirmation that the contracts had been hand delivered to the seller's attorney.  I later received email confirmation from both the seller's attorney (via the buyer's attorney) and the sales agent that the seller was "committed" to signing the contracts at 10AM today.  At 9:30AM I received a call from the seller's agent that they received an offer this morning that was $1,300,000 over my client's negotiated contract that they "committed" to sign.  OUCH!!!  The seller had refused offers as much as $1,000,000 more over the past week because she was "committed" to my clients.  But that extra $300,000 was the straw that broke the "committed" camel's back.  My clients have since rescinded their offer, requested the contract and deposit be returned and the seller is proceeding with a new buyer.

Now I would be lying if I said this doesn't sting...heck it aches.  After all, we're talking big numbers here.  Having said that, what is bothering me more as the day passes is that even this moral and ethical seller had her "price" supporting the old adage that "everyone has their price."  I'm sure many out there are going to say, stop with the self-righteous BS, but isn't that part of the problem with our society.  A person's word is only worth what the next person is willing to pay for it.  And to prove that I walk the talk, my wife and I accepted 5% less than a higher bidder on our last sale because we had "committed" to the original buyer.  And I have many clients who have done the same but all too often money does indeed talk.

Of course I wish both of my clients had proceeded with their respective purchases but it just wasn't "right" in both instances.  I will likely sell both of them something else so it's not about me losing a deal as much as it is about how people do business.  In Manhattan, we have no binders.  A deal is not a deal until the seller counter-signs the contract and deposits the 10% contract deposit.  The time that lapses before that actually happens creates the "perfect storm" for gazumping. 

What has happened to a person's word or a hand shake?  Sadly, it all too often doesn't mean anything in today's society.  It's all about "show me the money" and that is unfortunate.

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As most of you know, True Gotham is a voice for residential real estate matters but I recently had the privilege of a presentation on Commercial Lease Review and Administration by Scott Bloom, President and Managing Member of Bloom Real Estate Group LLC.  For all of you out there who have commercial leases, I asked him to explain in layman’s terms what a lease review is and why a lease needs administration:

Scott:   When we perform a lease review, a client provides us with a copy of the current lease and all the invoices received from the landlord during the term. We go over the lease in detail and prepare a one- or two-page description of the basic rights and obligations as a tenant. Then we compare that list to the invoices and look for ways in which they may have been overcharged.

Q:  What are you looking for? Once you sign the lease, hasn’t the chance to save money pretty much passed?

Scott:   In some cases, that’s true. But we are looking at things like the rent concession. When the lease was negotiated, the landlord might have granted, say, three months free rent. If those three months are all at the beginning of the term, the tenant most likely knew when they were up and expected to start paying rent. Sometimes, though, a three-month rent concession is spaced out during the term of the lease: first month now, second month a number of months or years into the lease, and the third one even further on. If the landlord’s accountant neglects to allow for those free months later on and sends the invoices straight through, the tenant might forget about them and pay the rent automatically. That’s thousands of dollars going unnoticed.

Q:  How does a tenant get that money back once it’s paid without doing battle with the landlord?

Scott:   If we find that a tenant has been overcharged, we have a discussion first and make a game plan. Then we will contact the landlord as an agent, and work out a refund in terms of free rent or a refund check. This way, our client can maintain a friendly relationship with the landlord while we act as a professional buffer correcting the “mistakes”.

Q:  Is rent concession the only way to be overcharged?

Scott:   No, we also look for things like security deposit burn-downs and rent escalations. These things can come up years after the lease have been signed, when the tenant is deeply immersed in making the business grow.

Q:  It seems like a good business person should do this themselves?  Wouldn’t it be smarter to go over your own lease and pocket the whole refund instead of paying you for this service?

Scott:   Sure, you could do it yourself. You could do your own accounting, too, and your own taxes, but you don’t. You hire someone who has the expertise and experience to be able to do a better job than you can, and be held responsible for the results. And why should you take time and attention away from managing your business? Besides, we don’t charge our clients for lease review and administration. It’s all part of making the deal. We don’t collect the commission and disappear. We are in it for the long run. We want you to let us handle your next move, or your expansion, or your additional offices. We want to act as your outsourced real estate department.

So it seems like a no brain-er to have a lease review to determine whether or not you are being over charged.  If you're interested, you can visit Bloom Real Estate Group’s website and learn more about this service.  And by the way, Scott and his team saved my daughter's nursery school $750,000 when negotiating a lease.

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I just can't resist back to back posts on a subject that has kicked up some feelings for all of those involved in the real estate industry.  Sunday night's 60 Minutes episode Hi Tech Real Estate Moves In has created quite the buzz across the Internet and among my colleagues (check out Peter Comitini's take on the subject).  And of course, the NAR is up in arms about the piece as seen in this letter to its members shared by Christine Forgione at NYHouses4Sale.com (I'm not a "Realtor" so I didn't receive this letter...but Christine did and here it is):

Dear Fellow REALTOR:

I am disappointed and dismayed at the biased story that 60 Minutes aired on Sunday evening. I want to let you know that we've been working to stay on top of this story.

One of the most difficult challenges we face is educating the news media about today's real estate industry. There's no better example than this 60 Minutes show. For more than a year, NAR worked with the producers who put the segment together and offered several spokespersons to be interviewed for the show, including myself. Yet, NAR's voice was strangely and noticeably absent from the segment though CBS gave time to two critics who disagree with our policies on the display of listings on the Internet.

At times, NAR and REALTORS&#174 have often been the subject of less than accurate news coverage. Your association and its professional staff is making every effort to get the REALTOR&#174 message out to the news media. The result is that only a fraction-less than five percent-of the vast news media we receive is negative.

We encourage all of you to contact CBS to voice your concerns -- maybe have some of your satisfied customers do the same.

Thank you for your support.

Pat V. Combs
President

I just wish I could have heard good ole David Lereah's reaction (aka "spin") to this 60 Minutes segment.  Is the NAR surprised that this story is "bias?" 

This debate over whether or not a discount real estate brokerage model can survive in the marketplace has been going on since before I started in this business 15 years ago.  So I did a Google search this AM to see exactly what I could find by the way of discount firms.  My search of Discount Real Estate Brokerage (no caps) turned up 1,210,000 search results with 7 of the first 10 being bonafide discount real estate agents.  If you're interested in this type of service, there are options out there for you (try the same Google search).  There will always be consumers who prefer Charles Schwab over Sanford Bernstein.  I'm counting on continuing to make my living servicing the latter.

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Last night I received a company wide email from one of our "top brass" urging me to turn on 60 Minutes to view their story on discount online real estate brokers and the demise of the 6% commission.  Based on this report which was comprised of a "smart" appearance by Glenn Kelman of Redfin, and the frightening "rebuttal" by ReMax agent Deborah Arends (check out her marketing plan), even I came away feeling disdain for my own industry.   But heh, that's nothing new if you read this blog regularly.  It's no secret that a multitude of real estate agents across the country are providing little or no real service for the amount of commissions they charge.  This is precisely why services such as Redfin will continue to gain footing and change the face of our industry by providing more options for home buyers and sellers.  This is the most widely discussed topic in my industry and the one that brings the highest levels of anxiety to most traditional real estate agents.  If you or someone you know is one of these agents, be afraid, be very very afraid.

I feel fortunate to be working in the Manhattan real estate market where I believe full service brokerage will outlive most other markets around the country.   I also believe that those in my industry who bring more to the table than simply sending out flyers and mailing postcards (are you kidding me?) will continue to be sought out for representation in real estate transactions.  Marketing expertise and negotiating savvy can be worth a significant amount of money when the average market price is $1.4M.  Of course, as I have said in the past, a broker shakeout is coming.  Having said that, I still don't see Redfin handling the sale of a $24,000,000 celebrity apartment on Central Park West.

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I'm currently training for the 2007 Nautica NYC Triathlon  in honor of my father-in-law who has been battling stage 4 pancreatic cancer for 18 months (more about my participation in the race here).  So the training is a bit grueling taking up big chunks of time (as much as 3-4 hours a day some days).  The race is July 22, so the Friday Link-O-Rama is going to be a regular feature at least until the race is completed.   By the way, I'm angry at my coaches for beating me into the ground so today's L-O-R has an EVIL theme to it :-D So here goes:

• BED BUGS...ewwww (via Consumerist).  Two families in my son's nursery school had this happen to them last year and it was an absolute NIGHTMARE!  Many of their things had to be discarded.  It doesn't just happen in hotels but it appears one friend brought them back to the apartment from a hotel.  Check the reference to Harvard School of Public Health on what do to if you are infested.
• Ah ah ah ah ah...the EVIL Yield Spread Premium (via Business Week Online).  For the record, most of the mortgage brokers I work with pass this on in form of savings to their clients.
• From Housing Panic Blog comes an open letter from a mortgage broker.  He's scared!
• Surprise surprise...David Lereah speaks with forked tongue (listen on NPR)
• Christine Haughney of The New York Times explains how New York City Renters Cope With Squeeze.  Can't find an apartment to rent after 'B' school?  Pitch a tent on the roof of a building (I'm kidding).
• For those of you who enjoy a good fight, an Upper West Side Rezoning Fight Begins (via the Sun).  Will the skyline of the Upper West Side continue to change?....um...probably.
• And an exit from the EVIL theme unless you see the opportunistic lender in this scenario as evil???  James R. Hagerty from RealEstateJournal.com unveils this: Product Taps Home Equity Without Taking Out Loan. 

And that's about all I've got for today.  Think about me tomorrow when I'm running and biking for 4 hours!  Fun stuff.

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Who wears the pants in your family?  Are you the husband who will do anything to keep your wife happy including buying a home that you may not feel warm and fuzzy about?  Or perhaps your the wife who tells your husband that you trust their opinion and will live wherever they want you to?  Maybe you have even convinced yourself that your needs are truly aligned with those of your spouse?  Can you say "resentment?" 

90% of my business is comprised of marketing and negotiating on behalf of sellers.  That said, of the 10% of buyers I work with, almost all come to me either as friends, family, past clients, or friends/family of past clients so I know them well.  Most of these buyers also happen to be couples.  In my 15 years in the industry I can anecdotally tell you that most men who say they will do whatever their wife wants are absolutely full of it (add an "sh" if you prefer)!  June Fletcher of TheRealEstateJournal.com discusses this farce in her piece Why Househunting Can Spark That Age-Old Battle of the Sexes.  So who generally wins in the battle of "wishes?"  Husband or wife?

To Peter Francese, demographic trend analyst for Ogilvy and Mather, a New York-based advertising, marketing and public relations firm, the answer is clear: The woman's. Mr. Francese, who has conducted hundreds of interviews on the subject since 2000, says the reason has to do with the fundamentally different way that each sex typically looks at home. "For women, it's a nest. For men, it's place to go out from and do their thing."

I'm not buying this and don't believe for one second that the couples interviewed for such a market study even know how to answer this question.  Men almost always pretend to do what the wife wants only to subtly manipulate a situation to help fulfill their needs. 

Because a home usually is more meaningful to a woman, married men tend to defer to their wives' tastes when house-hunting. "Time after time, men describe the home they're buying as 'the place their wife wants,' knowing that if their wife isn't happy, they won't be either," he says.

Not my experience at all.  I believe that men say this because it's the "socially correct" thing to say.  None of the men I have worked with have surrendered to their wives 100% of the decision making power in any point of a transaction.  Those who pretend too almost always veto something as we get closer to contract signing.  Men and women do almost always have different agendas even if they don't realize it.

According to Mr. Francese, most women pay a lot of attention to the overall function of a home, including where various family members will eat and sleep. They are likely to care about how up-to-date kitchens and baths are and be more sensitive to outdoor views.

Men, on the other hand, generally are more concerned about how maintenance-intensive a home is. Most don't worry about functionality, as long as they have their own retreat. "Show a guy a house with a garage, a workshop, a built-in barbecue and a home office, and he'll buy it," he says.

Now maybe this is true for the suburban home buying couple, but again my experience in Manhattan real estate does not gel with these stereotypes.  I have worked with men (husbands or boyfriends) who insist on specific design elements that some would say are stereotypically a woman's decision.  I also work with a very large percentage of women(wives and girlfriends) who are incredibly sophisticated financially and have strong opinions about the financial structure of a transaction. 

I guess what I'm saying here is that I don't see many "stereotypical" "traditional" couples these days.  Nor have I for the past 15 years that I have been selling New York City real estate.  In fact, I think all of us (yes me and my wife included) would benefit greatly from a "housing therapist" to help us align our wants, needs and desires in an effort to procure a home that suits the entire family. 

Oh, that's my job!

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If I had a nickle for every time one of my clients or colleagues said "did you hear that so and so is doing such and such to this and that," well, I probably would have at least $1.35 by now!  I hate rumors mostly because they are hardly ever based in fact.  Case in point:  the RSS feeds are flooded today of rumors that Stuyvesant Town is going to be leveled so that Tishman Speyer can build lux condos on the parcel that they recently bought for a record breaking and whopping $5.4 BILLION dollars (best stated in a sinister voice with an "ah ah ah ah ah" punctuating the end).  Check out the highly speculative rumor from Curbed's Stuy Town Follies: Rent Hikes and Secret Destruction Plans? (via The Real Deal).  It's worth reading for the comical comments alone lambasting those with cheap rents.  And get a load of the "reported" rent increases...up more than 36% for a one year lease renewal of a $2200/mth 1BR...ouch!!!

A very large percentage of Stuy Town is rent stabilized and although not impossible at all, it is a grand task indeed to vacate all of the 8,757 apartments that make up the complex.  Looks like a very real concerted effort is being made to rid the complex of it's market rate tenants.  Having said that, I find it very hard to believe that $5.4 billion was "invested" to protect those who can't afford market rate rents.  So no I don't believe that Stuy Town is going to be demolished in the very near future.  But I'm certain that Tishman Speyer has plans for the complex that involve the company stuffing its pockets with greenbacks!

BTW...since we're on the "rumor" subject...check out the top 25 Urban Legends at Snopes.  And the next time you hear a rumor, check out Snopes to determine whether it's a hoax or not...many of the emails we receive are exactly that...BS.

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I'm currently in the midst of a transaction in which the buyer of a property wants to move into their new property before the closing.  Sometimes I regret that I work in one of the few real estate markets where I as agent can't draw up contracts.  In this particular instance I'm thrilled that attorneys are involved because I don't completely understand the legal ramifications of pre-possession (when the buyer moves in before closing) or post-possession (when the seller stays in the property after closing) agreements.  Zillow blog's Wiki Wednesdays has a great post today referencing Greg Swann's ( of Bloodhound Blog) article The Perils of Pre- and Post-Possession.

Swann wisely points out that it isn't always clear to insurance companies who is covered under who's policy should the house burn down, etc.  He suggests, and I concur as do almost all attorneys I have asked, that pre or post-possession agreements are "bad ideas:"

Why? Because they create a de facto tenancy. It may be just a friendly agreement between buyer and seller, but when you occupy a home you do not own, you are a tenant. You should ratify the occupancy with a lease. But there is still potential for big trouble.

Suppose the house burns down. Who is liable? The owner, even though he is not occupying the home? Or the occupant, who is not the owner and probably just lost all of his personal property?

But that's what homeowner's insurance is for, right?

Maybe not. If the owner did not disclose the tenancy, the insurance company probably will not pay on the house. If the occupant had homeowner's insurance, not a tenant's policy, his underwriter also might refuse to pay for the lost personal property. There may be two aggrieved lenders, and both might call their notes due, even though the house is now destroyed.

But the worst is yet to come. Everyone involved gets to spend years in court fighting over who owes what to whom. The owner will be out the value of the house. The occupant will have lost all of his portable wealth, including the memories attached to those things. Everyone will emerge from this lengthy process bruised, begrudging and much, much poorer.

Greg's advice to those considering these types of agreements:

Take possession at the close of escrow, just as the purchase contract advises. Whatever convenience you might enjoy from pre- or post-possession, the risks are just too great.

As I'm seeing in this current transaction, many of the "friendly" things that were agreed to in the contract have been cause for debate between buyer's and seller's attorneys.  Certain items suddenly aren't conveying with the sale and the closing date and terms of pre-possession agreement have become "cloudy" over time.  The contract itself is not well written and in this instance, the buyer wants to do work in the new apartment prior to closing.  In my humble opinion, this is a potential recipe for disaster for all parties involved...and for what...to save a few days time in the spirit of being more "efficient?"  This could end up being one of the most inefficient decisions that these parties have made...only time will tell.

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First I would like to apologize to my readers for the "cop-out" post yesterday and the "light" post today (let's call it TG Lite).   There is a bit of an explanation.  Of course, the primary reason is that I am in the midst of a still busy Manhattan real estate market with over 70 people attending a 1 1/2 hour open house and multiple offers coming in.  For the record and despite what seems like an anomaly, I think the market is likely creeping into a cooling period for the summer.  My friend Noah at UrbanDigs feels the same way and he has an intelligent post about the transition that we will likely see over the next couple of months. 

I'm not sure we will see a complete shift from seller's to buyer's market but I do concur that it is likely that we will see some buying opportunities this summer much like we did last.  As an anecdote, I had a buyer who purchased a 9 room apartment last August for $3.1M that they could have easily sold in the past 3 months for $3.6M or more.  If I was making a move, I would sell my home now and hope to capture additional equity in the market this summer by picking up a "deal."  I am by NO MEANS suggesting anyone try this...I'm a bit of a gambler.

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I've been out all morning with friends/buyers (some people are just so much fun to hang out with) showing them prospective properties to call home in the $4,000,000 price range.  Now those of you who are saying, "WOW, that must buy you an incredible apartment!"  Think again.  "Incredible" is relative and for every price point, buyers have their specific list of priorities.  We saw properties this morning from a 2100sf Prewar co-op for $3.2M to a 2350sf Penthouse in a new development project for $3.75M.  I heard things from listing agents like "there is a theme of textured living throughout" and "you can rip out the ceilings to gain 3-4" more height."  And of course my buyers biggest concern (and he knows I love 'em), is whether or not his California King bed will fit in the bedroom.  Is it hilarious (and a bit disconcerting) or what to think that someone can pay close to $4,000,000 and be concerned that their bedroom is too small? 

By national housing standards (hard to talk about a "national" marketplace but will here for sake of comparison), the New York City real estate market is skewed.  A harsh reality indeed. 

• A 650sf ONE ROOM apartment (they will call it 2 because it has a kitchen the size a the large boxes most of us played with as children) asking $800,000. 
• A 1500sf 3BR/2BTH with barely 8 foot ceilings for $2,000,000.  
• Or how about the $3.95M fixer upper with 4/5BR's and 3BTHS where the building common areas are circa 1979. 
• Perhaps you would prefer the 5400sf Penthouse with 2000sf of terrace for $16,000,000? 
• Or you can have the top three floors of The Pierre Hotel for a cool $70,000,000. 

A few times today I actually found myself irritated that we didn't stumble upon the perfect home for $4,000,000.   I need to take a step back sometimes and not be so quick to spend other people's money, particularly when it's millions of dollars for a 12' X 14' master bedroom...get rid of that bed dude!  That's just insane!

My Point:  In Manhattan, the "perfect" home doesn't exist at $500,000 or $70,000,000.  And sometimes I'm still shocked that this is the market in which I live and work.  I'm one lucky SOB!!!

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The Port Authority Bus Terminal may soon get an incredible face lift.  According to Annie Karni of The Sun a Gleaming Office Tower May (soon) Rise Upon a Symbol of Urban Decay. 

The Port Authority Bus Terminal, for decades a symbol of urban decay and a hub of crime, drugs, and vagrancy, is moving toward a complete overhaul and could soon be topped with a soaring office tower or two.

With rents in Midtown Manhattan reaching record highs and vacancy rates dipping to new lows, developers are showing a renewed interest in building a 42-story office tower above the bus station and retail hub.

The board of the Port Authority today is expected to approve the resumption of negotiations with two prominent developers for the purchase of the lucrative air rights above the bus terminal on Eighth Avenue.

In July of 1989, I moved to Hell's Kitchen having never even visited New York City before.  My girlfriend at the time picked me up from the dilapidated Port Authority Bus Terminal.  I would be lying if I didn't tell you that the experience of walking through that building and continuing through the streets to 10th Avenue and 51st Street (which I called home for the following 18 months) was scary as hell.  Coming from just outside the city of Baltimore (I could literally throw a rock to the city line...and often did), you would think that I would be somewhat immune to "urban decay."  Now before everyone from Baltimore goes crazy here, that city has made great strides to clean itself up but I'm here to tell you that it has a loooong way to go.  Manhattan on the other hand has improved exponentially in the past 18 years that I have resided here.

When I arrived, the Port Authority Bus Terminal wreaked of urine.  Several unfortunate people were curled up on the floors throughout the building, some with the ingenuity to build shelters with boxes and blankets.  Prostitutes and drug dealers were plentiful and spilled out of the building on to pre-Disney 42nd Street.  It was seedy.  For the following 18 months, I kept a P.O. Box at the Port Authority Building (I wasn't allowed to use the mailbox in the Westie inhabited apartment building I lived in) and checked for mail once a week so that I didn't have to walk through the place.  My first job in Manhattan was at the Silver Bullet Saloon on the 8th Avenue side of the building.  I walked in and asked the guy behind the bar if they needed help and he threw an apron at my chest and said "hop behind the bar chief."  I quit that job 2 hours later when I witnessed an ambulance refuse to pick up a very sick homeless man on the sidewalk because he had no insurance and another fine gentleman drag a commuter by her purse in a mugging attempt (not sure if he succeeded).

Then Disney moved in, crime dropped, destination restaurants moved in, residential and commercial development skyrocketed and people have felt safe in this neighborhood for more than a decade. So bring on the "Gleaming Office Tower" I say.  The wait has been long enough. 

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Suppose that New York City Co-op Boards and their Directors were subject to random or scheduled "audits" to insure that they maintained a pre-determined set of standards?  On Monday I blogged about The New York Times piece on whether or not Co-op Boards will have to disclose a reason for a rejection.  There is a great deal of opposition to a bill before the City Council that proposes to require Co-op Boards to give a reason for rejections of proposed applicants.

Now I have to say that my absolute favorite thing about blogging is that I am able to hear from some very intelligent readers who's propositions are sometimes brilliant and often "outside the box" of those that have been discussed within the industry.  Such an instance occurred on Monday when a True Gotham reader opened a dialog of how the co-op market could be held accountable for it's actions resulting in more transparency in the marketplace.  This forward thinking readers comments are worth posting twice:

From TG reader "newbie:" Doug, my thoughts are having a set of 'standards' for coop boards and establishing a group (either self-governing or through the city) to 'audit' boards and ensure they are meeting these standards. Much in the same way that public companies now have to have their auditors sign off on internal controls.

Such standards could include maintaining sufficient meeting minutes, whether all shareholders are required to have homeowner's insurance (some boards actually don't require this!), etc.

The 'auditors' wouldn't necessarily opine about the coop's management abilities but instead disclose whether coops are meeting these standards.

Kind of like a public health inspector...doesn't matter what the food is like or how much they charge, but make sure the place is clean.

Of course there would be the cost of maintaining this process but it might be less than legal fees incurred as a result of the proposed law. And if done effectively you'd see the price gap btw condos & coops narrow.

And she goes on to elucidate later:

The idea is to have an objective party doing the evaluation.

The comparison with health inspectors is theoretical, but having worked for a financial regulator and as an auditor (and having witnessed the Enron & Worldcom scandals), I think there is a lot of value an 'inspector/auditor/ whomever' could add to the process. After all, you're talking abt the largest financial investment many people have.

Because coops are companies that are accountable to their shareholders they should be treated as such. And this process would (hopefully!) encourage better management of coop boards and greater transparency within the building and the RE market as a whole.

I wonder if anyone else in the RE industry has considered this idea??

I'm not aware of anyone else in the real estate industry proposing such a solution to the current system but I believe this is an excellent compromise to the current legislation sitting before the City Council.

I'm curious to hear what other TG readers think about this proposition and the likelihood of some "objective" and independent auditing service "policing" Co-op Boards.  Newbie suggests that it may bring even more parity to the co-op/condo market and I tend to think she may be on to something here.

Thanks again newbie for intelligent and thought provoking dialog.

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An amazing statistic was released yesterday by Citi Habitats, Inc. Christine Haughney of The New York Times reports:

The vacancy rate for rental apartments in nearly every Manhattan neighborhood remained below 1 percent for all of 2006, according to data released yesterday by the rental brokerage firm Citi Habitats Inc. Last year was the first time in the five years that Citi Habitats has been collecting this data that the vacancy rate was below 1 percent throughout the whole year. In the West Village, the vacancy rate shrank as low as 0.49 percent. Prices for studio, one-bedroom and two-bedroom apartments throughout Manhattan jumped by about 9 percent from the previous year, and prices for three-bedroom apartments rose by nearly 14 percent. Citi Habitats surveyed 60,000 units for its report.

Perhaps this is a contributing factor as to why the Manhattan housing market remains buoyed while the rest of the country experiences the worst home sales drop in 18 years (from CNN.com).  Check out the the NAR's Realtor.com which suggests that the drop in prices and activity is mostly weather related.  Are you kidding me?  It's true that the weather doesn't slow down New Yorkers, but is this the first year in 18 years that we have had a bad winter?...I'm puzzled...and tired of all the spin.

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I'm thinking probably NOT.  Janny Scott of The New York Times reveals that the City Council is co-sponsoring a measure to Push Co-ops to Explain Why You can't Buy.  This legislation has been discussed for years and in front of the Council members for almost 16 months with no vote yet.

Under the bill, a co-op board would have to describe its reasons in detail and reveal the source of any negative information it had used. It would also have to say how many applications it received and rejected in the previous three years. If it failed to turn over the information, or do it on time, it could be fined thousands of dollars.

It's no secret that I have had some issues in the past with some co-op boards and their antics and just recently had the misfortune of a buyer being granted approval only to have it then rescinded.  I want to state that on the whole I think that most Co-op Boards do a fine job of managing the affairs that arise in the course of running a building.  Having said that, I and many of my colleagues have been increasingly puzzled by recent Board rejections and having a reason for the rejection would not only serve to prove that no illegal discrimination occurred but it would also help a buyer in determining how to improve their chances of Board approval in the future.

Currently, co-ops — apartment houses whose residents purchase shares in the cooperative corporations that own the buildings — are free to decide who can move into their buildings and are not required to give reasons. Co-op groups say most rejections are based on applicants’ finances. Like any homeowner or landlord, boards cannot legally discriminate on the basis of race, religion, family status and 11 other protected categories; people who suspect that they have been discriminated against can complain to the city’s Commission on Human Rights. 

Although two thirds of the City Council is said to be supporting this legislation, others who appreciate the need for some sort of accountability by Co-op Boards aren't convinced that this bill is the answer.

The bill’s opponents, who include Council Speaker Christine C. Quinn, say federal, state and city laws already prohibit discrimination and offer redress. They say the bill, the Fair and Prompt Co-op Disclosure Law, would let loose a flood of lawsuits, delay co-op sales, discourage residents from serving on co-op boards for fear of liability and impose an administrative burden, especially on smaller co-ops.

“The only one who is going to come out feeling good is the lawyers,” said Marc Luxemburg, president of the co-op and condominium council, which, with the real estate board, recently issued a guide on how to do co-op admissions fairly in response to the threat of legislation. “Anytime you try to give a reason, you’re going to get sued. You say the guy was obnoxious at the meeting, he comes in and says ‘I’m going to sue you.’ Every time you turn somebody down, you’ve got a lawsuit on your hands.”

No doubt that we live in an incredibly litigious society but can someone actually sue if a Board thinks a buyer was "obnoxious" in an interview?  I'm not an attorney but that seems a bit frivolous, no?

I don't have an answer on how to solve the issue of accountability for Co-op Boards, but I do believe that some form of transparency in the process would be helpful.  For starters, if a co-op board could provide buyers with a specific and LEGAL list of requirements that would have to be met for approval, greater efficiency would benefit all involved.  The current system is terribly flawed and often costs buyers and sellers wasted time and thousands of dollars only to be left out in the cold with no explanation of why perhaps their biggest financial asset is being held hostage by a Co-op Board. 

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It's a beautiful sunny Friday in Manhattan and the local real estate market continues to baffle those watching the collapse of so many markets around the country (again...their is NO National housing market).  I'm busy presenting marketing strategies to sellers and showing property to buyers so here is what is becoming a regular feature of True Gotham, the Friday Link-O-Rama.  Some great stuff here:

• An example of the pain being felt in markets around the country comes from writer Nancy Trejos of The Washington Post: 'Upside Down' Home Sellers Owe More Than They Get. Ouch!!
• Is a Down Payment From In-Laws A Gift, or a Recipe for Disaster? from Diane Ransom of the Wall Street Journal Online.  This down-payment gift came with so many strings attached that it resulted in divorce!  Double Ouch!!!
• Michael Saul of The New York Daily News reports on Michael Bloomberg's plan to endorse a Manhattan traffic congestion plan which would charge a toll to travel below 86th Street on weekdays between the hours of 6AM and 6PM with some exceptions. 
• A positive spin on loose lending standards from NPR.  Listen to Looser Lending Had Upside: New Homeowners
• And lastly some fun from one of my favorites, Cory Doctorow of BoingBoing: Tiny Themed Prefab Houses.  These seem spacious relative to some New York City apartments...not really!

New Yorkers, enjoy this gorgeous first Spring-like weekend!  The TrueGotham Dragons are playing their second game of the season this Sunday on Ward's Island...GO DRAGON'S!!!

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Thanks to True Gotham reader Micky, here are estimated closing costs for multi-family dwellings in New York:

For The Seller

• Broker:  Typically 6%
• Own Attorney:  $5,000 and up
• New York City Transfer Tax:  1.425% of entire gross purchase price, if price is $500,000 or under; or 2.625% of entire gross purchase price, if price exceeds $500,000
• New York State Transfer Tax:  4% (.004) of entire gross purchase price
• Payoff Bank Attorney:  $500

if Seller has a mortgage

• Miscellaneous:  $500
• Transfer security deposits:  TBD
• E Tax Filing (ACRIS):  $150
• Gains Tax Withholding:  7.7% of gain

Out of State Seller

• Non US Resident (FIRPTA):  10% of price withheld or paid

For The Purchaser

• Own Attorney:  $5,000 and up
• Bank Fees:
  • Points:  0 - 2%
  • Application, credit, appraisal, bank attorney, engineer and miscellaneous:  $6,000
• Short-term Interest:  One month max (prorated for month of closing)
• Mortgage Tax:  2.175% of entire amount of Mortgage on Loans of $500,000 or under; 2.80% of entire amount of Mortgage on Loans exceeding $500,000
• Real Estate Tax Escrows:  2 to 6 months
• Insurance Escrows:  8 months
• Fee Title Insurance:  Approximately $300 per $100,000
• Mortgage Title Insurance:  $100 per $100,000
• Miscellaneous Title Charges:  $1,000 (recording, etc.)
• Adjustments:
  • Rents and Security Deposits:  TBD
  • Real Estate Taxes:  1 to 6 months
  • Insurance:  One year
• Creation of Corporation or Limited Liability Company:  $2,300

Thanks again Micky for the head's up.  Here are estimated closing costs for New York City Co-ops and Condos.

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The Manhattan real estate market can be incredibly draining...such is life.  I'm exhausted after a day where nothing went the way I thought it should...so what!  Just mentioning it to shed some light on the fact that I'm posting to TG at 9PM and I also wanted to mention it to further explain the tone of this post:  AGGRAVATED (for the record, this stuff aggravates me on my best day).

I am so frustrated with the number of mortgage bankers/brokers, moving companies, interior designers, architects, and other real estate related "professionals" who solicit my business every single day.  Don't get me wrong, I'm not frustrated that they would make an effort to develop a business relationship with me.  That's not it at all.  What enrages me is the number of these people who attempt to gain my referrals by lining my pockets.  It's laughable...read this blog!

Here is yet another example of the type of solicitation that I receive daily (from someone who obviously didn't read True Gotham):

Hi Mr. Heddings,

My name is Mr. Blah Blah with Blah Blah Mortgage and I am contacting you regarding your BLOG at http://www.truegotham.com/. We are an advertiser supported mortgage directory based in Blah Blah. This month I am helping bring awareness to help announce our 7-Year Anniversary of serving the mortgage and real estate community!

We are contacting companies like yourself in hopes of arranging some type of cross promotion with your BLOG or interest in our affiliate program. We can provide like value to each through the following options:

- link placement

- article content or trade

- sponsorship or advertisement

- additional leads

- paid review of our website

- we pay you $32 per completed application from your visitors.

Let me know if you'd be interested in learning more. Each BLOG is unique so we can get as creative as you like.

Regards,

Mr. Blah Blah
Blah Blah Mortgage

Now again, I don't think there is anything wrong in theory or principal with what this guy is offering but if he would have done some additional investigating (just some plain ole reading) of True Gotham, he would hopefully get a greater sense of our integrity.  I don't even know who the hell this guy or his company is and he wants to pay me to send him your (True Gotham readers) business.  I hope that most of you can see exactly why this pisses me off.  It just seems that so many are more concerned about where there next $32 is coming from (and many don't really care as long is it comes) than any semblance of integrity or the level of service that they or those to whom they refer business provide.  By the way, many of my friends and colleagues ask me why I don't accept advertisers on True Gotham.   It's because I don't want to promote the services of ANYONE who could jeopardize the integrity of this site.

Mr. Blah Blah and all of those out there who want the business of True Gotham or its readers: Please don't ask me to put my reputation on the line by sending you business when I don't  even know who you are.  I have plenty of solid, trusting relationships with all of the above-mentioned professions and NONE OF THEM PAY ME FOR MY REFERRALS.  Instead, I know that when I refer someone to them, they will be handled exactly as I would handle them...with honesty, integrity, loyalty and commitment.  That's worth a hell of a lot more than $32 or any monetary sum that someone is willing to pay me to make a blind referral. 

And that's about all I have to say about that.

Disclaimer:  I do refer business to real estate colleagues across the country whom I have spoken with on the phone or actually met in person.  And as I choose to act liaison/advocate for my buyer or seller whom I refer, I do accept referral fees.  

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From The Consumerist comes an Associated Press breaking story that Arizona bars online home price estimator.  Zillow is facing more scrutiny and attack by the good ole' boys with Arizona banning Zillow's business model based on the claim that they are not licensed to do appraisals.  A very interesting attempt by the traditional real estate establishment to shoot Zillow in the foot.  I'm certain that Zillow will be back in full force in Arizona where I can only speculate that their data is likely more accurate than it is in areas like the New York City area.

Regarding accuracy of their data, the famous/infamous Zestimator gets it's reputation based solely on who you speak to.  Christine Forgione of NY Houses 4 Sale posted a very enlightening piece on her blog entitled Dear Mr. Seller where she explains the downsides of the Zillow "zestimating" tool and how it is still often a hindrance in the New York City market as it frequently undervalues property.  An anecdote: I just sold and closed on something yesterday that Zillow estimated to be valued at more than $1M less than the sales price.  A dangerous "error" to say the least.  I'm still not convinced that Zillow has become an effective marketing tool in the Manhattan real estate market but I remain open minded and will continue to watch their evolution with hopes that someday soon Zillow will indeed become another powerful tool to add to my marketing "tool box."  For now, it's not even close to being that.  It's a lot of fun to play with though.

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Sellers are always asking me how I go about qualifying buyers: both prior to showings and again prior to accepting an offer.  Yesterday's Nor'easter was the best "qualifier" of real buyers that one could hope for as masses (as many as 50-60 people) of dripping wet buyers crowded open houses despite weather conditions.  The common characteristic that all of these buyers shared; they were REAL!  There were no lookers out yesterday.  Now if only I could figure out a way to control Mother Nature.

Yesterday reminded me of an April a few years back when we had quite a snow storm on a Sunday on which I had multiple open houses planned.  The sellers were insisting that I cancel the open houses but there was no time to effectively do so.  We went ahead with 2 open houses in The Armory at 529 West 42ND and only had two prospective purchasers show up.  They each bought one of the apartments.  Again, the weather rarely keeps real buyers away.

So the next time you or your real estate agent think of canceling an open house due to weather, think again.  Know that anyone who trudges through bad weather to view a property is most likely a very serious prospect.   Aside from the weather, it's this agent's humble opinion (I said OPINION) that it is very difficult to "qualify "someone prior to them viewing a property.  Doing so, an agent not only risks violating Fair Housing Laws, but could subjectively exclude someone who may indeed be a perfect fit for the property.  Once prospective purchasers have viewed the property and indicated their willingness to proceed to the offer stage, qualifying them becomes absolutely necessary and exponentially more easy.

Additional tips for qualifying buyers unless you're fortunate enough to have a Nor'easter:

• Have buyers complete a Financial Statement and consider insisting on it being notarized.
• Be sure to insist that buyer's provide specific financing information including how much they will finance (% of purchase price) as well as what type of mortgage they will be obtaining, and monthly costs associated with mortgage.
• Ask for a Pre-approval letter from a mortgage broker or bank.  Don't confuse this with a pre-qualification letter which is based solely on a  verbal verification of assets/income.  Check out the difference at Thinkglink.com: Pre-Approval Versus Pre-Qualification
• Determine whether or not the offer is contingent on financing.  For those who don't know what this means, here goes: 
  • Financing Contingency (Check out this detailed explanation from guest writer/attorney Craig Blackmon at Rain City Guide).  Basically the financing contingency gives the buyer a finite period of time (usually 15-30 days in NYC) to obtain their mortgage commitment.  If the commitment is not received in that time, the buyer may be able to retrieve their 10% contract deposit from the seller.
  • No Financing Contingency (Best explanation from my friend and colleague Noah Rosenblatt at UrbanDigs.com)

Once you have compiled all of this information (ideally from more than one buyer as was the case after our super soaked open houses this weekend), you can select the prospective purchaser with the best overall financial picture.  Again, if this is too difficult, just hope for that Nor'easter.  It brings out the best buyers every time.

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After a couple of quiet weeks (boy it was nice), the Manhattan real estate market is picking up where it left off at the end of March.  It is indeed heating up again as it almost always does going into tax season.  So today, I'm out and about "making rain" so enjoy the following links:

• Speaking of tax season, The Consumerist has a great post: CPA Answers Blog Readers' Tax Questions.  And if that's not enough, check out their Tax Tip Roundup today.
• From David Leonhardt of The New York Times: A Word of Advice During a Housing Slump: Rent that includes this interesting buy vs. rent graphing tool that some of my readers have suggested is difficult to interpret.  And after that you should check out Jonathan Miller's take on it at Matrix.
• Calculated Risk enlightens us to a proposed Foreclosure Moratorium in NJ for sub prime foreclosures.
• And an FYI...Filing Bankruptcy Isn't Helping Homeowners Avoid Foreclosure...from Lingling Wei of TheRealEstateJournal.com
• The NY Sun reports on Colossal Plans for Hudson Yards.  Good grief just do something with all of that space already!  I'm so sick of listening to what's going to happen!  make it happen already!
• I'm petrified of tipping you off to the next post given the hoopla surrounding the Imus scandal, but here goes: Minorities are the emerging face of the sub prime crisis from Carol Lloyd of SFGate.com.  Am I allowed to say "minorities?"  For those who can't tell...I'm kidding and I'm not going into my thoughts or opinions on this latest media witch-hunt and fiasco. 

And that's about all I've got for you today.  Pleasant reading and see you Monday.  Great weekend!

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It's no secret than when condominium owners or co-op owners are faced with a special assessment, sometimes tempers flare.  In fact, Amy Gunderson of The New York Times gives this example in her story Special Assessments: When Your Board Wants More of Your Money:

Bill Raphan, who runs the Fort Lauderdale branch of Florida’s Office of the Condominium Ombudsman, called special assessments “one of the most complained-about issues that come into our office,” which often acts as an intermediary between condo association boards and homeowners.

The board of a Miami condominium recently invited Mr. Raphan to explain a special assessment to a group of homeowners, he said. At the meeting, tempers quickly escalated. “Someone got so angry, he pulled a gun,” said Mr. Raphan, who was immediately escorted safely from the building (he does not know whether the man with the gun was arrested).

For those who may not be aware, condos and co-ops often levy special assessments to fund specific building projects that can't be paid with the building's current cash reserve or maintenance charges.  And when a co-op shareholder or condominium owner receives the notice of a special assessment, the initial reaction is frequently anger such as the gentleman in the above example who pulled a gun.  Now I have never heard of such a strong reaction, but I know many who's initial reaction of anger quickly dissipated when they understood what there money was going to be used for.

A special assessment — a fee approved by a homeowners association or a co-op or condo board to cover items not provided for in the budget — can often be a controversial, unpleasant and expensive surprise, especially to a second-home owner, who may not be around enough of the year to be aware of all the issues. But there are some steps buyers can take to protect themselves, or at least limit the possibility that they will be hit with unexpected and costly assessments:

• Speak up before assessment is voted on.
• Read the Board minutes to determine possibility of future work/assessments.
• Ask the management company of any plans for future assessments
• Consider building location and whether or not insurance premiums will increase (like in Coastal areas)
• Consider buying in a new building which is less likely to assess for the obvious reason that there shouldn't be any need to repair or replace anything.
• If assessed, negotiate a payment plan.

As far as special assessments and there ties to building insurance premiums and ultimately the effect this has on the shareholder/homeowner, I asked an expert.  Bruce R. Swicker of EARHART LEIGH ASSOCIATES, INC. says a person who has less than $25,000 to $50,000 in loss assessment coverage is foolish given how incredibly inexpensive this coverage is.  What does this mean for the shareholder/homeowner?  Mr. Swicker shares with us his perspective on this article and proves that it's imperative to have proper insurance and the best way to insure that you have done so is to work with the "proper' insurance agent who understands the ins and outs of different coverages.

Most of what this article is discussing involves what might be termed "voluntary" or "elective" assessments for capital improvement projects such as the construction of the community center. Other assessments for things such as major repairs, while less "elective" in nature are really maintenance issues, and thus would not fall within any insurance coverage.

To trigger loss assessment coverage, the event giving rise to the assessment must be a covered peril under the policy itself. For instance, the collapsed retaining on the Henry Hudson wall would be - on its own - a potentially covered claim under the unit owners policy, so therefore the assessment made by the association to cover that major claim would, in turn, be covered.

These things can, sometimes, get a bit hazy, such as when the lack of proper, ongoing maintenance to, say, a roof, then turns into a major claim after a heavy snow or rainstorm. Is it a "sudden & unexpected" loss, or failure to properly maintain the property?

Thus, a key issue for any unit owner or prospective buyer - as you know only too well as both an owner and a real estate broker - is to be sure that adequate reserves are being set aside. This can become tricky when dealing...for example...with a complex made up of many elderly residents on fixed incomes. The board members are usually made up of similar individuals, and they may believe that their primary goal should be to keep the monthly common charges as low and affordable as possible, which can lead to inadequate reserving. Could this lead to a derivative claim under a D&O policy (Directors and Officers Policy for Board Members) for negligence - or even self-dealing - on the part of the board? I suppose it could, though whether the D&O carrier would cover the alleged shortfall is questionable - but they would pay for the defense of the board members. After all, the association's own D&O policy is not intended to act as a backstop for the association's own inadequate reserving strategy.

Round and round and round this goes. Each situation is heavily fact-specific, though any unit owner who carries less than $25,000 to $50,000 in loss assessment coverage these days is just foolish, particularly since the cost is so small.

Moral of the story:  Make sure your homeowners policy has loss assessment coverage and for all other special assessments, remember that your money is almost always going to a project in the building that must be addressed...if not, don't vote for the assessment, but be prepared to pay.   Not unlike the single family homeowner who has his/her roof blown off, heating system go up, or a leaking basement, a co-op or condo resident need not think they are immune to the maintenance required to make a building fit for habitation.

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Remember our cautious excitement last year when we learned that a "sort of" MLS was coming to Manhattan?  I had my own opinions of why I welcomed this event but was skeptical that it would ever come to fruition: Ultra Luxury and open Listings.  And how can we forget that opposition to the Manhattan MLS began immediately from smaller firms.  The saga continues and it appears that we are much further from joining the ranks of real estate markets around the country in developing and utilizing a Multiple Listing Service.  Now the BIG firms who control 63% of the cities housing inventory are balking at the idea.

Last week, Josh Barbanel of The New York Times reported on the reluctance of Prudential Douglas Elliman and The Corcoran Group to adopt or participate in a Manhattan Multiple Listing Service.

After weeks of maneuvering by the board to meet the objections of smaller firms, the two largest brokerage companies in Manhattan, Prudential Douglas Elliman and the Corcoran Group, announced last week that, partly because of the costs involved, they were planning to boycott the new Web site (name and address yet to be determined).

“We are not participating,” said Pamela Liebman, the president and chief executive of Corcoran. “We wish the Real Estate Board good luck.”

Ms. Liebman said that Corcoran’s sister companies — Citi Habitats and the Corcoran Sunshine Marketing Group — will also decline to participate.

Dorothy Herman, the president and chief executive of Prudential Douglas Elliman, said in an interview, “At this point we are not joining, either.”

My knee jerk reaction was "here we go again!" But in reading further and listening to the big firms objections, I can see their point.

But the objections of the large firms seem to be a more difficult obstacle. Corcoran and Elliman officials complained that they had spent large sums branding their own Web sites and persuading buyers to look there first and didn’t want to divert their marketing budgets to pay for an unknown industry site.

“I spent a lot of money on my Internet site,” Ms. Herman said. “I have not seen a comprehensive business plan showing how they are going to market it and how they are going to build traffic.”

My only question is why weren't these concerns reported on earlier in the process?  I have to believe that Prudential Douglas Elliman and The Corcoran Group had these concerns from the very start.  And if so, then why can't they, the smaller firms, and the Real Estate Board of New York find a way to address everyone's concerns and make a Manhattan MLS a reality.  I continue to be puzzled at why the rest of the country has adopted MLS's and Manhattan has not.  Let's not forget that the big firms are big because they are smart and have deep pockets.  Although some may think that an MLS would serve to level the playing field, I'm not buying it.  I still maintain that regardless of the availability of information (i.e. listings), those who know what to do with this information and have the deep pockets to support major marketing efforts on behalf of their clients will rise to the top of the industry.  I just wish we could all get along.

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In Jay Romano's piece for The New York Times, Your Home: Converting a Co-op to a Condominium, he addresses a question that has been asked of me and many of my colleagues hundreds of times by clients who own co-ops in this unique Manhattan real estate market.  Just Friday, I ran into a shareholder in a building in which I have sold about 40 units who insisted that the building should convert to condo.  When I suggested it was a difficult process, he stated that all shareholders would have to do is pay $50,000 each to pay off the buildings $13,000,000 mortgage.  Well, I have good news on that front.  Each shareholder would only have to pay about $9,000 to achieve a mortgage payoff for this particular building  But this is the least of the issues that a co-op faces when converting to condo according to this article.

In addition to 80% of the shareholders voting in favor of a conversion, paying off  the building mortgage, and every shareholder receiving permission to convert there share loan to a mortgage, the conversion has some large tax implications for shareholders:

There are also potential tax implications for both individual shareholders and the co-op corporation. Joel E. Miller, a Queens tax lawyer, said that converting an apartment from a co-op to a condo is considered a sale for tax purposes because shareholders exchange their co-op shares and proprietary leases for deeds to their apartments as condominium units. Since the transactions are considered sales, shareholders have to calculate their taxable gains based on the current market value of their apartments. So if shareholders originally paid, say, $100,000 for a co-op apartment, and that same apartment is now worth $700,000, they would have a $600,000 gain, even though they still remain the owners of the apartment.

And tax implications for the building as well:

There are also tax consequences for the co-op corporation. Marc Shernicoff, a certified public accountant in Manhattan, said that when the co-op corporation gives a shareholder a deed in exchange for shares and the proprietary lease, that also is considered a taxable event for the co-op. Since the deed is valued at the current market value of the apartment, any increase in value over the years, from the very inception of the co-op, is considered taxable.

And while the tax laws specifically exempt from taxation any gain associated with an apartment used as a principal residence by the shareholder, that exemption does not apply to apartments owned by investors and those not used as principal residences.

As a result, Mr. Shernicoff said, even if there are only a few apartments that are not exempt from taxes as far as the co-op corporation is concerned, those few can cost the co-op hundreds of thousands of dollars in taxes.

So it appears that the process is quite involved and could be quite costly for all involved...not so fast says an attorney who has successfully navigated buildings through this process.

Kenneth Jacobs, a co-op and condo lawyer in Yonkers who has done such conversions, says that it is easier to make the change from a co-op to a condo than most lawyers believe. And with regard to taxes at the corporate level, Mr. Jacobs said he believes that since the proprietary lease itself has value, the I.R.S. can be persuaded to treat the transfer in such a way that will substantially reduce the tax exposure of the corporation.

Obviously if a co-op board is considering a co-op to condo conversion, they should only consider using an attorney who is familiar with the process and I would add that using someone like Mr. Jacobs who doesn't appear to be intimidated by this process, may not be a bad idea either.

Romano provides more advice for the co-op board considering such a proposition:

For those who want more information, The Cooperator, a monthly magazine about co-op and condo issues published by Yale Robbins, is conducting a panel discussion on converting from co-op to condo at its annual expo on April 25 at the New York Hilton. More information is available by calling (212) 683-5700 or online at www.coopexpo.com.

I can't believe the process is that easy or more co-ops would take the plunge.  Or maybe more co-op shareholders are actually happy with the co-op experience...could it be?

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I have no clue!!!  Many would suggest that I keep my trade secrets to myself.  I say, "NOT NECESSARY."  It's what you do with information that sets you apart from the rest of the pack in any given industry.  So why is it that everyone in the real estate industry isn't using real video tours to market property?  It is a much more effective tool than the virtual tour in so many obvious ways; namely that you can actually "give the tour" on video and narrate as you do so with the ability to point out so many more features than photographs or virtual tours provide.  In effect, you are allowing the real estate community and prospective purchasers the opportunity to preview the home prior to stepping foot into it.

The best service that I have found to host and organize video tours is WellcomeMat (yes that is me in the "How to" video on the front page).  Forgive the following promo for them but I'm a big believer in trumpeting those who are changing the face of our industry in a positive way (and I get nothing for saying so).

We recently went live with the new release of WellcomeMat.com, and are having a very intense (but short) party while we wait on the support emails that follow any major upgrade. The good news is that the foundation of a very big plan is in tact, sturdy, and the end result is going to be nothing short of Rockin’ Roll!

Rather than talk shop in an email that none of you are going to read anyway, we have posted all the new greatness here.

In addition, here are some teasers:

Embed Menu: 5 players to choose from to post on your blog/site
Complete Channel Upgrade
Channel Widget: all of your active videos in the size of two vertical business cards! (see below) 
Revamped Video Pro Directory: search by radius makes Video Pros able to cover multiple towns/cities.
Craigslist Ad: cut and paste Craigslist Ad revamped
Channel Promotion Page: launch promotions and feeds straight from your promo page
Automatic Image Resizing: uploaded logos/pics are now perfectly fitting to all pages

If you are representing a seller, you are doing them a disservice by not preparing a video tour.  Here are some examples of how it works and what it looks like.

And this is the widget!

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For most of my 15 years in the Manhattan real estate market, I have been expressing concern over where the middle class will live as property values have become more unaffordable for that segment of the buying population.  Here are some of my recent blog posts regarding this issue:

• New York City to the Middle Class: See You Later
• Mixed Emotions for a Manhattan Broker: Stuyvesant Town and Peter Cooper Village on the Block
• Condominium Conversions Alter the Social Fabric of Manhattan
• Rent Control for Millionaires

Now the problem is spreading to the six-figure earning upper middle class.  Max Abelson of The New York Observer points out that "Manhattan housing hasn’t been affordable for a long time. But now, even the upper-middle class can’t catch a break."

For the first time, even six-figure professionals—and six figures puts you in the top 10th of national income rankings—are being pushed off Manhattan Island.

“Five years ago, the price point wouldn’t be $600,000, it would’ve been $300,000,” said Pam Liebman, the president and C.E.O. of the Corcoran Group, referring to the rough cost of a basic apartment here.

The relatively rich suffer; the filthy rich prevail. “There has to be a middle ground between affordable housing for the low end of the demographic spectrum and the ultra-luxury at the top,” said appraiser Jonathan Miller, who authored the Elliman report. “You want to attract talented people to maintain your viability, and you can’t do that if they can’t afford to live here.”

...Therefore, a prospective Manhattan homeowner not only needs to be among the top 10 percent of Americans in income, but also must have gobs of saved money, too.

I have been watching the "luxury gentrification" of Manhattan for my entire real estate career and truth be told, I have benefited from it greatly from a financial perspective.  Having said that, on a regular basis I witness both young and established professionals struggle to afford homes in Manhattan.  The frustration for these educated, successful people is disheartening as they are becoming less likely to be able to raise their families on this incredible island.  I have watched many flee to the suburbs as the gentrification of Manhattan creates a homogeneous environment that is altering the character that has always made NYC so special.

There is no doubt that more affordable housing needs to be built in order to stave off the possibility of a mundane, boring, and uni-cultural city.  Until that happens, Manhattan becomes increasingly more wealthy and that is actually good news for those of us who own if all we are considering is our bottom line. 

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My friend Henry Abbott of TrueHoop fame sent me this incredible virtual roller coaster of home prices since 1895 (via Kottke.org).  I can't believe Jonathan Miller hasn't done something like this as he is the master of stats and graphs.  Curbed should also check this out.  The last hill is quite a doozy!!!  And the view from the end of the tracks is eerie.

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Here it is:

Prudential Douglas Elliman Manhattan Market Overview 1Q 07 prepared by Miller Samuel.

And a brief summary directly from Miller Samuel:

...The Manhattan housing market saw a large increase in the number of sales, a drop in listing inventory and a general increase in price levels this quarter. This market has not experienced a large level of individual investors seeking short-term profits (a.k.a. flippers) but rather this market has attracted primarily owner occupant or second home purchasers from the surrounding suburbs, regions and other countries. This condition contradicts the national housing market. The national economy has been tepid, and has showed more recent signs of weakness, which has helped keep mortgage rates low, further stimulating demand in the local market. In the national market, inventory levels remain high, the number of sales have fallen and prices continue to weaken. Solid local economic conditions including low unemployment, rising income levels in the financial services sector, rising corporate profits, the weakening dollar, and gains in tourism have all provided an environment for fostering housing demand. The state of the economy has kept the number of new development projects entering the market at a relatively high level, and so far, the demand has been able to absorb the new supply...

Manhattan real estate bulls abound...but for how much longer.  I will take a look at the report and weigh in with my thoughts as well as thoughts on other market reports later in the week.

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It amazes me how many people begin the process of shopping for or selling a property and are completely unfamiliar with the costs associated with doing so.  For those who are buying in new development projects, pay particular attention to these numbers as you will likely be paying NYC and NY State transfer taxes as well as other seller fees and expenses such as the cost of the seller's attorney.  Here is a good summary of closing costs from the Prudential Douglas Elliman web site that will give you a rough idea of what your sale or purchase may cost:

For Condominiums:

For the Seller

• Broker: Typically 6%
• Own Attorney: Consult your attorney
• Processing Fee: $450+
• NYC Transfer Tax: 1% of price up to $500,000; or, 1.425% of price if $500,000 and over.
• NY State Transfer Tax: $4 per $1,000 of price
• Miscellaneous Title Fees: $200-$500
• Payoff Fee to Title Closer: $100-$300
• Miscellaneous Condominium Charges: Vary by building
  
  Note: For condominiums in new developments, the Purchaser will pay costs normally paid by the Seller. These include Seller attorney fees as well as NY and NYC Transfer Taxes.

For the Purchaser

• Buyer’s Attorney: Consult your attorney
• Bank Fees: $750
• Application Fee: $500
• Appraisal Fee: $300-$1,500 (depending on sales price)
• Credit Report Fee: $9.80 single/$14.60 joint
• Bank Attorney: $750-$850
• Tax Escrows: 2 to 6 months
• Recording Fees: $250-$750
• Mortgage Tax: 1.80% of amount of mortgage on loans under $500,000; or 1.925% of amount of mortgage on loans of $500,000 and over
• Fee Title Insurance: Approx. $450 per $100,000 of sales price under 1m - +15% on 1M or more
• Mortgage Title Insurance: Approx. $130 per $100,000 of mortgage amount
• Municipal Search: $350-$500
• Mansion Tax: 1% of entire purchase where price is $1,000,000 or more.
  
  ADDITIONAL REAL ESTATE EXPENSES
• Common Charge Adjustment: Pro-rated for the month of closing
• Real Estate Tax Adjustment: Pro-rated depending on when the tax is collected
• Miscellaneous Condominium Charges: Vary by building
• Short Term Interest: Equal to interest for balance of month in which you close

For Co-ops:

For the Seller

• Broker: Typically 6%
• Own Attorney: Consult your attorney
• Co-op Attorney: $450+
• Flip Tax: Typically 1% to 3% of price (if applicable)
• Stock Transfer Tax: $0.05 per share
• Move-out Deposit: Varies by building
• NYC Transfer Tax: 1% of price up to $500,000; or 1.425% of price if $500,000 and over.
• NY State Transfer Tax: $4 per $1,000 of price
• Pick-up / Payoff Fee: $250-$500
• UCC-3 Filing Fee: $100
• Miscellaneous Coop Charges: Vary by building

For the Purchaser

• MORTGAGE CLOSING COSTS (ask your bank and/or mortgage broker and read your Good Faith Estimate and these tips
• Buyer’s Attorney: Consult your attorney
• Bank Fees: $350-$750
• Application Fee: $350
• Processing Fee: $280
• Appraisal Fee: $300-$1,500 (depending on sales price)
• Credit Report Fee: $9.80 single/$14.60 joint
• Bank Attorney: $750-$850
• Lien Search: $250-$350
• UCC-1 Filing: $100
• Mansion Tax: 1% of entire purchase price where price is $1,000,000 or more.
  
  ADDITIONAL REAL ESTATE EXPENSES
• Miscellaneous Co-op Charges: Vary by building
• Recognition Agreement Fee: $200+ (best explanation of Recognition Agreements from Braverman & Associates, P.C.
• Maintenance Adjustment: Pro-rated for the month of closing
• Short Term Interest: Equal to interest for balance of month in which you close

And that's about it.  Again, this is an estimate of closing costs and in no way represents a completely accurate indicator of your particular situation.  Consult your attorney, broker, bank and mortgage broker to confirm your costs.  And please don't forget to read your Good Faith Estimate but it's best to review the HUD-1 Settlement Statement for the most precise indication of your costs.

UPDATE:  Micky pointed out that I forgot multi-family closing costs for NY

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This comes directly from my Inbox received just moments ago from Real Estate guru and appraiser Jonathan Miller.  Check out the link below to read more on hos blog, Matrix.

Manhattan Market Information

The 1Q 2007 Prudential Douglas Elliman Manhattan Market Overview was released today. The formal report should be available for download at the end of the day so you'll have all the numbers. I'll send a followup email with a link when the report is online. (And I will make it available to all of my readers immediately upon receipt)

Overview

The Manhattan residential real estate market entered 2007 with a surge in the number of sales, declining inventory, rising prices and shorter marketing times. Record bonus income and stabilizing mortgage rates helped foster the significant increase in demand this quarter. The rise in demand has helped reduce inventory, shorten marketing times and reduce listing discounts.

Key Stats

- Number of sales up (73.3%) from same period last year, a record (but some of the increases due to coops added to public record) means buyers are returning to the market.
- Listing inventory dropped (14.2%) from the same period last year and and remains below levels seen at the end of 2006. The increased demand is helping the market absorb the inventory that is entering the market.
- Listing Discount (2.6%) fell from the 2.8% discount seen this time last year. Sellers are remaining realistic about setting list prices for the moment.
- Median sales price up (1.2%) to $835,000 as compared to the same period last year. Prices are generally stable with some price spikes at the upper end.
- Average sales price down (0.8%) to $1,290,391 as compared to the same period last year. Market share gains of studios pulled down the overall average sales price.

The Manhattan market is in a position for a positive 2007 as compared to the national market
- Bonus money is at record levels for the second consecutive year, with possibly several years of strong earnings remaining for Wall Street
- No significant short term investor activity (flippers); market is driven by owner occupants and second home purchasers.
- Weaker dollar makes investment from abroad less expensive
- The city is well-run, has a surplus with tourism at record levels with local unemployment levels are low
- Commercial office rents are rising rapidly demonstrating demand for employment and residential rental market continues to grow.

Here's a post on Matrix about the media coverage of the report.

The subprime mortgage market upheaval
While it is certainly something to be concerned about, we don't expect it to have much of a direct impact in this market. However, it could have a pronounced effect on the national housing market for a variety of reasons. The area of concern for us will be likely limited to credit tightening, which is already happening. Mortgage underwriters are already looking more closely at marginal deals which could temper the number of sales for the next few quarters.

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Yet another saga to report on the absolutely ridiculous behavior that some co-op boards exhibit.  In May of last year, my team and I brought a property on the market that wasn't without it's challenges as far as procuring a buyer.  Some of those challenges were directly related to current Board policies:

• NO SUBLETTING ALLOWED under any circumstance (a bit unusual for this type of building)
• NO PIED A TERRE ALLOWED (also unusual for this particular building)
• FLIP TAX (10% of profit and not uncommon these days)

These three factors played a very large part in turning away a multitude of qualified candidates who weren't interested in these policies.  Many in fact considered making offers but chose to continue their search for a less "oppressive" building.  Those who did make offers within the 6 month marketing period were not financially qualified to pass the Board's stringent requirements (the current owner, a banker, was asked to put 3 years of maintenance in escrow).

In November, 2006 a contract was signed for the purchase of this property and fully executed by all parties.  The Board application including all financial documentation and mortgage commitment letter was submitted to the Board of Directors in December.  So imagine our surprise when we only found out on March 5th that the Board would APPROVE these applicants if they agreed to put 2 years of maintenance in escrow to be held for 5 years and to have monthly maintenance payments automatically deducted from their bank accounts.  I should also add that the purchasers are financing less than 30% of the purchase price.  The purchasers agreed to the Board's requests and they were GRANTED FORMAL WRITTEN BOARD APPROVAL.

In the meantime, the seller has been compiling receipts for renovations and the like to offset profit in calculating the flip tax.  Those receipts were submitted yesterday.  I had totally thought that the closing would have been set while I was on vacation last week but I received this email from the purchaser's agent upon my return on Sunday (forwarded from the managing agent of the building):

I just got off the phone with a few Board members and they want the following form Mr. & Mrs. "Purchaser". 

Updated financial statement with verification (recent statements)

Update monthly cash flow statement (same format as the other one)

And 2006 income tax returns with W-2s

This is not an unusual request, particularly when the Board took so long to review, interview and approve.  However, it is HIGHLY UNUSUAL when formal Board approval has already been granted as it has in this case.  In my 15 years, I have never encountered this from a Board.  None of my colleagues have either, some of whom have been doing this much longer than I.   Having said that, the purchasers did change their mortgage provider and their mortgage product to a more conservative one just two weeks ago after Board approval was received.  Becuase of this, the Board asked the following questions (answers from purchaser follow):

1) Why the last minute change (in mortgage)? Citimortgage Commitment expired and getting extension was lengthy process (they want to close and contract was signed in November).

2) Why didn't the purchaser’s inform the board of the change prior to the board meeting? We were told that the getting the commitment extended was a simple process. It turned out that all the original information had to be resubmitted and reprocessed as if it were a new application.

3) Why is the board hearing about this now? Because we are now trying to get closing as soon as possible. The new commitment with Countrywide was only received on 3/16/07 well after we were approved by the Board.

4) What happened with the loan at Citimortgage? The Citimortgage Commitment expired and since it had to be extended we were required to submit all new documentation. We decided to review all of the options available to us. The Countrywide Mortgage is a 30 year fixed loan which we felt more comfortable with than the interest only loan with Citimortgage. With Countrywide we will be paying down the principal starting with the first payment. The Citimortgage was going to be interest only for 10 years,

5) Is the old mortgage payment and rate available, if not what happened? Citimortgage’s mortgage rate was floating until the closing date when it would be fixed. There was no 'old rate" on the Citimortgage.

6) Why didn't the purchaser’s try to extend the rate lock extension (if this was available to them)? See answer to question 5 above

7) What made the purchaser’s decide to change from Citimortgage to Countrywide? Suggested by our mortgage broker, The mortgage broker worked for Home mortgage acceptance Corp this was taken over buy Countrywide mortgage. and we are more comfortable with a traditional 30 year fixed rate loan.

The moral of the story:  Co-op Boards are sometimes made up of people who don't wholly understand the processes in which they are involved.  These purchasers changed their lender which happens all the time and they are actually getting a better rate and better terms that should be more favorable to the Board.  I suspect that some Board members are reading way too much about the sub prime mortgage market implosion (which doesn't apply at all to this situation) and are reacting to the fact that they are familiar with Citimortgage and perhaps not so with Countrywide?  Again...pure speculation on my part as a real estate professional and former board member.  Who really knows what they are thinking?

Advice to purchasers:   Keep your prospective co-op Board in the loop regarding all changes to financial documentation and lending institutions and/or mortgage products.  If the board feels that you are open with them and not trying to "sneak" something by them, they will be more likely, in my opinion, to cooperate (after all you are buying a "co-operative") making the process more efficient and less painful for all involved.

Stay tuned for the update to see if these purchasers ever move in to their new home???

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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.

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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).

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From the True Gotham Archives (yep, still on vaca):

Mark S. Nadel has written a paper about fee structures in real estate. From the abstract (via Inman):

While real estate brokers have long set their fee as a straight percentage of a home's sale price, this formula is an anomaly and a primary reason why such fees may be inflated by more than $30 billion annually. Although competitive pressures ordinarily produce a fee structure reflecting costs, real estate broker commissions are strangely unrelated to either the quantity or quality of the service rendered or even to the value provided. Rather, this fee has been based solely on the price of the home. (It is as if tax preparers set their fee as a flat percentage of a client?s gross income, irrespective of how difficult the return was to prepare or how much their efforts saved the taxpayer). Oddly, not only is there no evidence that it is any more costly to sell higher-priced homes than median-priced properties, but it is possible that the opposite may be true! Furthermore, the straight percentage fee formula creates little incentive for real estate agents to provide home buyers or sellers with additional value.

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From the True Gotham Archives (because I'm still on vacation):

This weekend in The New York Times, Teri Karush Rogers put her finger right on a major point about Manhattan real estate: sellers are used to behaving like royalty. She tells stories of sellers changing their minds on major negotiation points, hiring egomaniacal attorneys, asking five-digit fees for curtains and the like.

In the current real estate market--with plenty of inventory in most price ranges--buyers are demanding at least a modicum of fairness and professionalism. Which is probably fair enough.

Off the top of my head, here are some of the challenges sellers have presented us with, personally, in the last few months:

• Insisting on a sales price directly in line with market appreciation numbers reported in the press--in one case this cost my client hundreds of thousands.
  
• Insisting on the identical price as a nicely renovated neighboring apartment.
  
• Overvaluing a renovation.
• Insisting that a property be shown to “serious buyers only,” when our experience, expertise, and work is predicated on finding serious buyers.
  
• Insisting that my assistant feed, walk, and scoop poop for two aggressive little dogs every time the apartment was being shown.
• In one special case we had to make beds, fill the dishwasher, and--it's a long story--clean up a bloody mess.
• Extremely restrictive showing hours, for instance 11 AM -2 PM Monday, Wednesday and Friday.
• One seller decided he wanted to move his furniture back in to show the apartment (I was ambivalent in this case for various reasons, but was fine with it.) It was a little surprising when he asked me to pay for the move, however.
• Sometimes sellers make it very tough for buyers to visit after contract signing--in one recent case it was because the seller didn’t like how long the buyers took to sign the contract.
• I had one recent seller refuse to leave in an air conditioner, which played a major role in a deal falling apart (although that was a case of a particular buyer, too).
  

It's the surest way, say brokers, to cut a buyer's interest off at the jugular.

"Once you lose a buyer's focus, you can't get it back," said Rochelle Bass, an executive vice president at Bellmarc. "That's why I never let sellers be home. It's the kiss of death."

"Helicopter" sellers have their reasons for hovering. "To some people it's a very personal experience," Ms. Sacks said. "They want to show everything. They're proud of what they've done, and they feel they can do a better job selling it than anyone else because they know it so well."

But being asked to marvel over outdated, tacky or merely mundane improvements is too much for some purchasers.

"If someone says, 'Wow, I just put in a new heater' — does anybody care?" said Ellen S. Simon, a senior associate broker at Bellmarc, briefly evoking the lonely tree falling in the forest. "All they care is that it's not cold. Either be nonchalant about it or use a broker to spin it and make it seem really great without overkill."

Ms. Sacks noted: "It's kind of like an overwhelming salesperson when you walk around the store. Even if you love it, you can't stand being followed around and being told, 'Look how wonderful my closets are.' "

Hanging around also interferes with the crucial mental leap that the buyer must make to imagine living in the property.

Innocent slips of a seller's tongue can be equally deadly, said Marguerite Platt, a senior vice president at Halstead. Her seller inadvertently spooked a pair of buyers away from a nine-room apartment on Fifth Avenue overlooking Central Park. As the buyers ogled the view from the windows after their bid had been accepted, the owner agreed, "Well, it is nice, except when the parades go by." The buyers promptly withdrew their offer.

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I'm home with the flu today just two short days before a much needed week long vacation in the Dominican Republic and thought that since I'm out of commission (certainly not in the financial sense of the word) a post for all of those "do it yourselfers" might be appropriate.  To all of my clients who will contact me while I'm out of the country and don't want to wait for my return (this is a joke by the way), here are six GREAT tips (with my commentaryt added after each point) from Amy Hoak of The Real Estate Journal for Selling Your Home Without a Real-Estate Agent:

The biggest advantage of the for-sale-by-owner strategy is that a commission won't need to be paid to a listing agent. But those taking on the job themselves need to roll up their sleeves and prepare for a little work to get the home sold, understanding that they will be the ones taking care of tasks ranging from marketing to showing the property to interested buyers.

1. Prepare the house: clean, declutter and de-personalize 
2. Price it correctly: it's your castle but don't get carried away as overpricing will crush you and don't rely too heavily on the Zillows.  Search the Internet on sites like Street Easy (For New York) for comparable homes in your neighborhood and remember that someones asking price means absolutely nothing.  sales price that you want to compare to.
3. Decide how to use the commission savings: Spend some on marketing 
4. Market it correctly: Good luck with this as this is different in every market across the country.  Take note of how the successful real estate agents in your area are procuring buyers for homes and model them.
5. Get support lined up: Speak with attorneys, title companies, etc before going to market
6. Make sure a buyer can afford it: I recommend having them sign and notarize a financial statement that often times becomes part of the contract.  That way if they are dishonest about there finances, they may be in breach of contract.  Also ask them for pre-approval letter from lender.

So it's a piece of cake?  For some maybe.  As I have said before on True Gotham, many of you out there are just the type to take on a task like this and save yourself thousands of dollars in commissions.  Having said that, there is a reason that most sellers choose to have a professional assist with this process...it's not an easy one.   Check out more tips here, listen to the pod cast, and good luck.

Now I'm going back to sleep.

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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.

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• In perusing all of the RSS feeds this morning, Bubble Meter reminded me that I haven't blogged once about the subprime mortgage market implosion, so courtesy of Bubble Meter, here are some links of sites who are doing an excellent job covering the goings on in the subprime meltdown.
• More on the meltdown and a preview of the conflicts surrounding Dual Agency from The Real Estate Cafe.
• I'm not sure why this is such huge news but The New York Observer reports that there has been a mini-exodus of 4 top producers at Corcoran...BIG DEAL!!!  Rumor has it that they are headed to Brown Harris Stevens.  I've been doing this for 15 years and have watched top producers jump from company to company whenever it tickles their fancy.
• From NPR comes a piece on how one man's misery (foreclosure) is another man's gold as investors are out there in full force across the country trying to scoop up deals.
• Big Brokers setting limits on individual branding for their agents via the Real Deal.
• Amy Hoak of The Real Estate Journal's Using the Web to Find Information Your Realtor Won't Tell You is a must read.

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It's no secret that the prime marketing time for selling a home occurs during the first few weeks of it's listing.  Don't just take my word for it.  "Your home should be priced right from the very beginning," according to Jonathan Miller, President and co-founder of Miller Samuel Real Estate Appraisals and Consultants and author of Matrix, his blog which is "an attempt to cull together items of interest or relevance in the real estate economy."  He has been compiling data on the Manhattan Real Estate market for over 20 years and the creator of the Manhattan Market Report.   We asked Mr. Miller some questions about his perceptions, based on hard data,  of pricing and how it affects a seller's bottom line.

TG:  Is it a misconception by sellers that listing their home at a value higher than market is a good marketing technique?

Miller:  Actually, we find the strategy of listing "high" to be detrimental to the price achieved for the property. It is better to price properties closer to their current values. We define an over priced listing as a price that is more than 5% above market value.

TG: Can longevity on the market create both a stigma for the property and the Sellers?

Miller:  Yes, the impression the property makes to the brokerage community is that the seller is either difficult to work with or has unrealistic expectations of value. The average days on market - defined as the number of days between the last price change (if any) to contract date – is 120-150 in a balanced market with no price appreciation.

TG:  So, in your opinion, based on your knowledge of data specific to Manhattan and your expertise on trends, could we say that Sellers will see their homes sell for a lower and more significant price difference if pricing isn’t accurate?

Miller: Correct. On a simple clerical level, properties that are over priced, do not come up in a brokers listing search for their prospective buyers.

TG:  Is it true that although Manhattan homes may sell faster in this market, that margins can still be affected by poor pricing strategy? 

Miller: Correct. It has been our experience that properties in Manhattan, priced out of sync with their value, will usually sell for less than their potential.

Further evidence that proper pricing proves a priority in procuring a purchaser at peak price.  If you don't believe me, ask Peter Piper!

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• The Forbes 891(yep, that's the number of billionaires on the list this year) has been released.  I imagine not all 891 are True Gotham readers right?
• An interesting "How To" Guide: How to Save Your Home from Foreclosure via The Consumerist and an unfortunate anecdote of someone who should study it from Housing Panic
• Surprise, Surprise...fewer realtors...not enough attrition in my opinion...yet! (via Bubble Meter)
• Jonathan Miller of Matrix dazzles with another fancy chart in his Three Cents Worth Post at Curbed.  Entry level buyers are indeed the most affected by mortgage rates.  I think we knew this but always good to have concrete support.
• David Kaufman of The New York Times  suggests that many are choosing Israel over the Hamptons?
• And from the Real Estate Journal, The Apthorp is going Condo.  And the Real Deal has an excellent piece on whether or not this deal pays off.

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As the press goes on another witch hunt, this time after the rat infested KFC/TacoBell in New York City's trendy Greenwich Village neighborhood, some want to know how something like this will affect property values.  I was interviewed yesterday for a story today in the NY Sun by Jennifer Lee entitled Rats and Resale: Can Rodents Affect the Bottom Line.  As far as rats and rodents go, I don't particularly think that property values will be greatly affected by something like this.  It's been said that rats exponentially outnumber people in New York City and it hasn't done much to property values thus far.  Having said that, there are indeed some instances that I have personally experienced where a neighbor, either residential or commercial, has had some affect on a property owner's bottom line.  The beauty of this blog is that I get to elucidate upon that which was quoted in this article.  So here goes:

• I once represented a seller of an apartment in a building shaped like a U.  In the center of the U was a ventilation stack for the bistro that occupied the first floor.  The smell of old grease permeated every apartment that faced that stack and made it incredibly difficult to find a buyer for the home.  Most had no desire to live there and eventually when someone did show interest they used this ventilation stack as a bargaining chip to procure a reduction in price...it  worked.
• Several years ago the press was going crazy reporting about "toxic dry cleaning chemicals" and the potential harm for those who lived in close proximity to dry cleaners.  I actually remember having at least 1 or 2 people contact me to purchase apartments and specifically ask not to be shown properties above dry cleaning establishments.  Quantifying the affect of this story is virtually if not totally impossible, but I suspect that it did thin the pool of buyers for these properties.

And it's not just commercial tenant/neighbors who may affect value:

• Awful Smells:  I once represented a seller who had an elderly neighbor with multiple cats.  The woman had hospice care so it was very difficult for her to keep her home clean and odor free from the cats.  The smell of urine was so strong that we never found a buyer (in perhaps the hottest real estate market in NY history) for the apartment and the owners are still living there.
• Bizarre Tenants:  When I first started in the business in 1992, my boss at the time shared that he walked into an apartment with a customer and the tenants were barbecuing monkey (no joke...monkey) on a grill in the living room!  Black smoke was bellowing upwards, across the ceiling and out an open window.  The pungent, sour smell brought tears to your eyes.  Needless to say, the buyers weren't interested and the property didn't sell until these tenants were gone.
• Loud Noises: Barking dogs can be obstacles too.  I finally sold a property just recently which had an "anxious" barking dog next door.  EVERY time I showed the apartment, the dog barked incessantly.  Most prospective purchasers were greatly turned off by this.

So what can a seller do when faced with any of these issues?  In the case of proximity to dry cleaners or restaurant ventilation systems, not much.  Just hope that you find a buyer like yourself who isn't concerned with these neighbors.  As far as residential neighbors like those mentioned above:

• Offer a cleaning service:  I only thought of this now but it would have made a lot of sense to offer the elderly woman with the cats a professional cleaning service on a weekly basis to help sell the neighboring apartment.  A small expense that could pay big dividends...or in this case...any dividends.
• Communicate with your neighbors:   In the case of the cooking monkey, my bet is that the owner of the apartment would not have approved of this had s/he known that the tenants were grilling in the living room.  In other instances, simply keeping your neighbors informed of showings and open house schedules may do the trick. 

What should a buyer do to protect themselves from situations like this?  Ask questions...lots of questions of your attorney and the seller's agent.  Make sure that your attorney is effective and thorough with due diligence.  Things like odors, rodent or insect problems, and problematic neighbors may in fact be recorded in the Board's minutes...a MUST read!

Finally, I want to be abundantly clear that I don't believe that the rats at KFC/Taco Bell are going to ultimately affect the price of property in the surrounding areas.  That said, I wouldn't put my home on the market until this all blows over and don't be surprised if a buyer makes an attempt at leveraging the "rat news" in an attempt to get a price reduction.  If your apartment is already on the market, no worries as this too shall pass.

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During the housing boom of the past decade in New York City, I have seen a noticeable trend of people who once believed the grass was greener (or that any grass at all was attractive) in Westchester, Connecticut, and the suburbs of New Jersey, moving back to "the city" out of the convenience the it provides or just plain boredom with the Burbs.   Zillow blog's post Confessions of an Empty Nester gives some valuable anecdotal insight to one couple's move from the suburbs of Seattle to an urban condo in downtown Seattle.

We now live in the middle of downtown Seattle in a condo that’s less than half the size of our last House. Our 3,200 square feet of Texas sprawl has been squeezed down to a cosmopolitan 1,200. We’ve gotten rid of most of our furniture, clothes, and surplus artwork, and all of our meaningless “stuff.” We’ve chucked the lawnmower and garden tools, and pared our dishes down to enough for only four. And best of all -– most gloriously of all -– we’ve sold our three cars!

Our everyday lives have changed in every way imaginable. We don't own a car, so we walk everywhere, including to and from work. We use the bus or ferry if we want to go farther afield. This has had a profound effect on how we interact with people. We realize now that the cocoons of our cars kept us well insulated from the people around us. Our genuine interactions were with family and coworkers, the only people who saw us stripped of the metal that clothed and protected us. Our neighbors, we discovered, were virtually strangers.

Now, we stand face-to-face with people in our building’s elevators, at our corner hangouts, and on the sidewalks. We chitchat and pet our neighbors’ dogs. We exchange “good mornings” with the people we pass everyday on our way to work. We’ve developed friendships with several proprietors and servers at our favorite restaurants.

This post on Zillow blog is perhaps the best and most eloquent argument I have read thus far for why life in the city is far superior to that of suburban sprawl.  I moved to NYC in 1989 from the suburbs of Baltimore (can you say BORING?).  And although it took this suburban Baltimore boy about 10 years to feel comfortable in Manhattan (I didn't leave my apartment for 4 weeks without my girlfriend when I first arrived here), I simply can't imagine raising my family anywhere else.  The culture, the restaurants, the schools, the people:  the best in the world in my opinion.  Perhaps this is another reason that New York City real estate continues to appreciate while suburban markets across the country are literally collapsing? 

It's not just empty nesters either.  They do make up some of those who are coming back "home," but many of the purchasers whom I meet are young families who thought they wanted the suburban lifestyle only to desperately miss all that urban life has to offer.  And many of those who I have worked with in the past 10 years who have explored both urban and suburban options have chosen the city to raise their families.  The following excerpt from the same Zillow blog post is precisely why many, whether it be Manhattan, Chicago, Seattle, San Fransisco, or Miami, prefer to call "their city" home:

One warm, sunny day last autumn, we wandered over to the park where a big band was playing great 40’s music. Several older couples were jitterbugging and waltzing, having the time of their lives. We grabbed some lemonade, sat in the shade, and watched and listened. As the lines of time on the dancers’ faces disappeared and their spines straightened just a little; as their eyes brightened and their laughter mingled with the birdsong above us, we looked at each other and smiled. We knew we were thinking the same thing. We might not have The House anymore, but we were most assuredly home.

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The Billion Dollar question!!!  I received this email from a TrueGotham reader yesterday:

I am considering purchasing in a new condo development.

I understand there's little value added with a buyer broker in this situation.

I don't have a broker, though obviously I could find one.

I'm told I might be better off seeking a discount on purchase price or
asking seller to pick up closing costs rather than involve a broker.
It is hard to see where the broker would add $40,000 of value for me.

Do you have a view?

Thanks for any tips.

This is not the first time that my clients or TG readers have asked this question and I don't suspect it will be the last.  Here's my response:

Absolutely see your point and would generally agree that you could do better without "most" brokers/agents. That said, if you have already visited the project, I would consider not bringing an agent into the picture now. But, if you can find someone who is VERY familiar with the
project, perhaps knowing the marketing agent or developer, that relationship could indeed be more valuable than $40K.

So you see it's not so cut and dry. I'm a fan of having an advocate in my corner who actually knows what they are doing. Unfortunately in the real estate industry, that can be a difficult task. If you do decide to go it alone, ask the on site agent what they typically pay brokers and
ask for at least that as a discount.

Hope this helps and good luck.

More questions from this gentleman:

I really appreciate the prompt response.
I would add:

1) I did visit the project (why do you believe that makes a difference?), but hedged my bet saying I did work with someone but they are out of town, wink. The seller broker suggested that the developer would have a "preference" for unrepresented buyers (if there's competition, you are handicapped). My risk: I get no discount and no broker either; or a useless broker and a handicap.

If I stay unrepresented, am I better off getting a commitment for a concession up front, or bring it up later in the process? also: a) I have a friend who is a broker, but clueless; I'd prefer the
$$ go to her than the developer all things being equal. b) I'm told attorneys can take a simple test and pay a fee to become qualified brokers. I am an attorney. If I were a broker, would I have a claim to the $40k?

2) Somewhat unrelated question, but this place is on the cusp of what I can afford. I considered the idea of renting it for a while to ease the pain. Do you know if any good calculators to see just how things would work out (the tax situation gets complicated ....). I attach a pretty good one I found, but it doesn't consider NY taxes ....

Thanks again.

This is a situation that many of my family, friends, clients and colleagues talk about endlessly.  What value does a buyer's agent add to a transaction?  My response to this reader's last email:

I asked if you had visited project because I knew that agent would inform you of developer's preference that you were working with no one. No secret that developer and buyer can do better without that $40k expense. More room for negotiation. A real argument here over what value a buyer's agent brings to any transaction. I would absolutely go back and ask for a concession up front since you're working without representation. You would have to ask the on site agent about whether or not they would pay you the commission. As an attorney, you are a licensed broker (I know nothing of any test, but that's your realm?). I still think it's best to have the reduction in price so you don't pay tax on commission income. Love the tax calculator you attached (care of Mortgage-Investments.com)...best I've seen.  NYC property taxes are accounted for. You should be able to get a rough idea of state tax implications just by asking your accountant. But as far as I see, almost every detail is included in this analysis.

Good luck! BTW..given the glowing review of your friend the agent, I would stay away from using her for this deal.

So should you use a buyer's agent or not?  As you can see from this email string with one of my readers, I don't have a straight cut and dry answer.  I will say that 95% of my business is representing sellers and when I do work with buyers, I feel like I and many of my colleagues add value to the transaction by bringing professional insight and negotiating experience to the table.  As a seller's agent, I wish that every buyer was represented by a solid, well-seasoned professional to make all transactions smooth and efficient.   All too often, that's not the case. 

Part of the problem in our industry is that lines of communication are so poor that both buyers and their agents have difficulty trusting one another during the process.  I believe that trust is a very important factor when considering an agent in the purchase process.  Similarly, the "buyers are liars" phrase doesn't come from nowhere.  There is very little loyalty and no binding agreement between buyers and their agents to encourage loyalty.  This mutual distrust that agents and buyers have continues to be an obstacle to an efficient market.  Buyer's agency in Manhattan may be an answer. 

In the meantime, buyers and agents alike need to be discerning about with whom they work.  If not, a great deal of time and money will potentially be wasted.  Buyers and agents also need to shift their perspective of one another.  With information becoming much more public, buyer's agents need to bring more to the table than simply searching for property.  Buyers need to select an agent who has an extensive knowledge of the marketplace and a proven negotiating history not focusing as much on what listings an agent provides.  As a buyer, you can search listings on your own...and maybe you should.

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Vivian S. Toy of The New York Times reported Sunday about tightening restrictions that many buildings are implementing regarding open houses. 

In the frenzied real estate market of recent years, the cries of “Enough!” from building residents won out, resulting in bans on open houses across the city. And although the market slowed a bit last year, open houses are once again attracting as many as a hundred people in an hour, giving the anti-open-house forces fodder for keeping, and perhaps even expanding, restrictions.

“We’re definitely seeing more buildings that don’t allow open houses, and it’s largely because people living there have security concerns,” said Deanna Kory, a senior vice president of the Corcoran Group. “Plus there’s also the inconvenience factor and the annoyance factor.”

There are some buildings, mostly on Park and Fifth Avenues, that have never allowed open houses, but in the last few years, restrictions have spread well beyond white-glove prewar co-ops on the Upper East Side. Brokers say they now encounter “no open house” rules in postwar buildings and even in condos, which generally have more liberal policies.

Indeed we in the industry are seeing new rules and regulations regarding open house policies in buildings that would have once begged for the kind of traffic we have these days.  Just 2 weeks ago, my team and I held an open house for a 2BR apartment on the Upper West Side.  As a direct result of the open house, which was attended by more than 100 people in 90 minutes, we had 6 offers and have gone into contract at a price above the asking price.  For these sellers who have a 10 month old daughter and therefore a mass of toys and baby gadgets, the open house was the most effective and efficient way to sell their apartment with the least amount of headache for them.  One big cleaning and vacating the apartment for 90 minutes was all that was necessary to procure a q