True Gotham

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).

Douglas,
I enjoy your blog and am impressed by (and generally in agreement with)your desire to amend and improve aspects of our business.The problem with the concept of"real square foot" being offered on some listings and not others-at least to me this morning with limited brain function and caffeine-is that by definition the first brokers/sellers to initiate this policy would be handicapping themselves in this market.Quite often--as you know--the RSF of your hypothetical apartment might be not 1475 square feet but 1122 square feet. Buyers (and many brokers) would tend to label your listing absurd and overpriced. Perhaps you would get skewered on Curbed--who knows! Buyers drawn to your property (assuming they would bother to see it)would have to face the added psychological challenge to themselves of justifying their desire to purchase what appears on the surface to be a bad deal. Like it or not (and actually I don't) in this era of the internet, airbrushed photos, hyperbolic descriptions etc, price psf remain in the minds of many buyers and brokers one of the more tangible and objective criteria of value.This is not to say that I wouldnt be in favor-as you suggest- of one of those information-compiling companies offering these services independently so that buyers could make use of the information. I mostly sell buildings where this particular issue is not as much of a problem, as any building buyers have access to detailed information independently of that which I supply. Only saying that in this market I wouldnt want to be the renegade broker who first initiates this idea with an apartment listing--I think in the short term I would be doing a disservice to my sellers.

Thank you Lianna. Really appreciate your comments and insight. Your post made me think...hmmmmm...I like to think! Perhaps during the transition from currently listed square footage to "real square footage," agents could quote both and explain the difference. This would make the transition smoother and still provide the "old" numbers for sake of "comparison," even though we both admit the "comparison" is ludicrous given the skewed numbers. I think that would address any issues buyer and sellers may have.

As far as the disservice to sellers....I can appreciate your perspective but I think we are part of a wicked cycle that must be broken. I have, and I'm sure you have to encountered the seller who will feel I was doing a disservice by not lying about other aspects of a property. I don't think either one of us are interested in working with those people.

Thanks again for your post!

I'm a first-time buyer. Can someone please explain to me why it's so difficult to obtain an accurate measurement of square footage? Also, if the final price and sale date can be made available on a unit (you can look it up on the web), why not the square footage?

I know that coops sell by # of shares and not by square feet, but as a buyer it really helps to know how much space you're getting.

I would think that measure the size of an apartment would be as easy as taking someone's weight...but then again I'm new to all of this.

Thanks!

A frank discussion on square footage from real estate agents - who knew! I'm obviously not in the trade, but I have a suggestion for the buyers/renters and maybe even you professionals who want to list honest sqare footage appraisals. You could list the number of rooms with a quick measurement next to it... i.e. Two bedroom, EIK, blah, blah, six rooms total.

MB 16' X 18'
2nd BR 14' X 12'
LR 25' X 35'
K 12' X 12'
PR 5' X 10' (bath room)

So, a buyer/renter will look at this discription and estimate for himself/herself that this apartment is roughly 1500 - 1600 sqare feet. When I was searching for an apartment a few years ago, I would make these notes for myself on the printout - I would count the rooms and walk them off to get an apples to apples comparison between apartments. Square footage is not the end all and be all for a tennant, but it is very important to me when I choose an apartment. Layout and light are equally important to me.

I feel your pain newbie! This practice of misquoting square footage benefits the seller which is why the practice has continued. If someone can sell their apartment for $1000/sf, then of course they want to state as high a number as possible. It is also a difficult situation to put an end to as agents are afraid to quote "real" square footage for fear that the broker community and public will perceive that the property differs in size from a previously listed property. To add to the confusion, you have many ways to measure square feet (from interior wall to wall, from exterior wall to wall, including closets, excluding closets, including risers and support beams or not, etc.) I find it incredible that buyers don't insist on an accurate quote (perhaps with disclosure as to how it was measured) or simply measure themselves. The problems are numerous with a primary snag being that if a buyer finds that an apartment is actually 1000sf when it was listed at 1100sf, they aren't likely to get any discount on price because the most recent comparable in the building was also incorrectly listed at 1100sf. It's INSANE!!!

The only resolution is a standard measure of square footage provided by an independent information gathering entity.

Great idea to actually measure the space yourself to get accurate room dimensions and use that data to make comparisons. As long as YOU do the measuring. That said, if you do this, don't be too discouraged when you see you're paying a lot more per sf than your neighbor paid for their place that is allegedly 200sf larger. If you use it specifically for comparing price per sf values on apartments that you are shopping for and not those that have already sold, your system works fine.

If you don't measure and rely on numbers provided by agents and developers, you may still get burned. Some will measure room dimension from exterior walls making a room at least a foot or two longer than someone who measures from interior wall. There must be uniformity in measurement.

I'm not so much concerned about entire square footage as actual room size...ie. a room on the mls is 12 x 14...and when i come back for my visit with my tape measure all excited and the room measures 12 X 10 I am needless to say...not pleased. Why can't agents measure a room correctly?

Agents generally don't measure. Some guess and others have spaces measured by architects or floor plan illustrators. If you have time, take a look at the 5 part video series on square footage for more insight. The problem is that no one polices the industry.