The Importance of Trust in a Shifting Real Estate Market

2009 was my very best year in the Manhattan real estate business! When I share that fact with the agents whom I have the fortune of coaching, they are genuinely surprised and always ask, “how?” The answer is TRUST.

When Lehman Brothers collapsed on September 15, 2008, there was an eerie calm before the veritable storm but then the phones began ringing and conversations over cocktails and meals were fraught with panicked discussions of doom and gloom. Many lost everything, some lost a lot, others not so much, but no one went untouched by the fear that gripped our nation in the weeks and months following the financial crisis.

Fear can be an incredible motivating factor, but it often motivates us to make knee jerk reactionary decisions that aren’t in our best interest. I decided immediately following the crash that my philosophy of being an advocate for my friends, family and customers hadn’t been more important since the horrifying days post 9/11. Let me be clear that in no way am I comparing our current shifting housing market to that of post 9/11 nor that immediately following the financial crisis in 2008. That said, there is incredible opportunity in any shifting market if you connect authentically with your customers and develop a trusting relationship.

As our current market has become more favorable for buyers, they most often want to know if we think the market will continue to soften. Of course no one has a crystal ball but if you are a provider of accurate data as it pertains to their specific situation, you as their agent and advocate become a real asset in their search and home purchase. On the other side of the equation, if you have the opportunity to represent a seller, pricing properly and talking your customer off the ledge is of utmost importance.

The most important thing you can do for a buyer or a seller at this time is remove yourself from the equation and determine what is best for them. Consider things like timeline and length of ownership as well other things like interest rate sensitivity for buyers. For sellers, analyze their true motivation. In 2009, I talked many prospective sellers out of selling their homes. I even appeared on the Today Show reminding everyone that the loss of equity on paper was not long term and unless they had to sell for financial, relocation or other personal reasons, it was best to just strap in and hold on. Many of those sellers chose to sell. Others are still happily living in those homes and I remain their go to expert for advice on housing.

In conclusion, a shifting market is NOT a time to be a transactional agent. Building solid, meaningful and trusting relationships with your customers and advocating for them based on their needs will win you more business and a much more favorable reputation.

Change: A Real Estate Podcast

I recently had the privilege of sitting down with my dear friend, colleague and voice of the acclaimed Real Estate Success Rocks podcast, Patrick Lilly.

Topics include:

  • Why is change necessary?
  • Why is it difficult for so many?
  • What are the signs that change is in order?
  • Why company/team culture matters?
  • How company culture can affect your clients
  • How to determine the right culture for you
  • Embracing the unknown

Enjoy!

Change: Often Difficult and Always Necessary

I have written in the past on True Gotham about the importance of the agent being aligned with their brokerage’s culture and precisely how that culture fit can impact the consumer. So why is it that so many continue to work in an environment that is not the most conducive to their productivity and well-being? Because change is never easy. And although that is almost always the case, change is always necessary in order to remain relevant, innovative and growing in one’s personal and professional life.

In my years as a team leader, then business owner and now Director of Sales, it has been my task to interview prospective agents to determine if our culture and their personality traits and business acumen are a match. For every 20 people I meet, I make offers to roughly two. Of those two offers, maybe one accepts. Aside from the determination that the culture and the agent aren’t a fit, which weeds out 90% of the candidates, half of those who receive offers decline and that is almost always due to their fear of change.

Of course there are more factors that contribute to that fear of change for each individual, but generally speaking it is one of the greatest fears of all: fear of the unknown. In order to overcome that fear of the unknown, one must take a leap of faith and trust that the change will be positive. The unknown also makes change uncomfortable. It is challenging and takes us out of our comfort zone, as toxic as that may sometimes be, and we humans like to be comfortable. We also like familiarity even if it isn’t the best place for us; change brings about uncertainty. Lastly, but definitely not of least importance, is that change is not popular. Most believe that change may breed resentment from superiors, colleagues and friends resulting in animosity and unnecessary tension. I would argue that is just the story that some tell themselves. The reality is that none of us truly knows what change will mean in our lives. But if we choose to embrace it and attack it with a positive attitude, it can be a launching point into a new career or personal path of which we may have never have dreamed.

So the next time you are sitting in front of someone discussing the possibility of change, try quieting that frightened voice in your head and imagine all the positive things that could come as a result. And don’t forget, if you don’t change today, there will be opportunities galore to do so in the future. Change is most definitely unavoidable.

Pros and Cons of Residential Off-Market Properties

There seems to be an increasing trend both locally and across the country of attempting to sell residential properties quietly and without any advertising, media exposure or MLS/listings feed. These non-traditional off-market properties are frequently a topic of debate amongst real estate agents and their customers. In the commercial real estate world, the off-market property transaction grants privacy to the seller, allows her/him to avoid the nuisance of hundreds of calls and inquiries from real estate agents and others trying to solicit business, and frequently results in an efficient sale. For the buyer of a commercial building it often provides access to a trophy property that would not be listed anywhere and little to no competition or bidding wars. In some cases, the agent who sells the off-market property may be the benefactor of a larger commission if they represent both the buyer and the seller. Often times, there are agents representing both sides of the transaction and the listing agent sees no economic windfall.

The residential off-market sale is even more opaque. Although also beneficial to the uber-private seller as well as the buyer who wishes to avoid competitive bidding, selling a residential property without marketing, PR, advertising and overall broad exposure to the potential buying community creates the very real possibility that the property sells for below market value. I’m a believer that casting the widest net is the best way to guarantee the highest price in any market. That said, some sellers prefer the discretionary nature of the off-market sale and are willing to leave some money of the table in exchange for their privacy. Like the commercial transaction, the agent selling the residential off-market property could also earn a greater commission if they are the only agent involved in the transaction but most off-market sales of which I’m aware involve both a buyer’s and a seller’s agent.

If you are a seller seeking a quick, quiet and efficient transaction and you are willing to possibly leave some money of the table as a trade for this high level of discretion, then an off-market deal may suit you. If you want to achieve maximum value for your home and you are amenable to all of the press, advertising, marketing and publicity that comes with publicly listing your home, then steer clear of attempting to sell off-market and let your agent and the market dictate your home’s value.

It Passed: New Tax Laws and Potential Impact on NYC Real Estate

Last week I discussed the potential impact of what was then the “proposed tax plan” on our local NYC real estate market. Today the “Tax Cuts and Jobs Act” has passed both Houses and will be signed into law as early as next week. What this actually means for New York City homeowners and those who make navigation of our already complex real estate market their profession will only be revealed in time. That said, here are my thoughts:

Locally I think we are going to see one of these three possible scenarios and perhaps a mix of the three:

  1. The robust 2017 4th quarter carries into 2018 with interest rates remaining low (many believe that Fed much less likely to raise rates) and buyers take advantage of an increase in inventory and a softening prices.
  2. Inventory spikes from a knee jerk reaction to the new tax laws, prices fall by 10-15% and perhaps more in ultra-lux market, rental prices also spike due to the immediate attractiveness of renting so buyers ultimately choose ownership in the end and take advantage of softening and the remaining tax benefits of ownership.
  3. Worst case scenario for real estate industry: The market stagnates as everyone scurries to consult with accountants and waits to see how things play out with new tax laws. The patience dam will break eventually and I expect a volatile Spring season if not earlier.

There is some good news. Lobbyists were able to keep capital gains ownership requirements at 2 of 5 years as opposed to the proposed 5 of 8 years. One thing is for certain. Accountants are going to be busier than they have ever been as their clients seek answers and direction on just how to best position their assets in the new tax landscape.

Proposed Tax Plan and Potential Impact on NYC Real Estate

I’m not generally one to discuss hypotheticals, but seeing how so many customers and agents are deeply concerned about the potential impact of the $1.5 trillion in proposed tax cuts, here are my thoughts.

First of all, in my 25 years of selling real estate, nothing good has ever come of knee jerk reactions, particularly regarding that which hasn’t happened yet. Emotions have been running high for most since last year’s elections.  Removing emotion from any decision making process and carefully analyzing one’s hypothetical gain or loss is key. It is advisable to speak with your accountant who understands your current tax situation and who can thoroughly explain the possible ramifications on you should this tax plan become our reality (I’m betting it won’t).

Here are the 4 parts of the bill that would have the greatest impact on homeowners in New York City:

State and Local Income Tax Deduction (SALT): There is no doubt this will have the most impact on homeowners in the highly taxed New York City housing market. The personal income tax is the largest generator of revenue for the state of New York. This may result in some of the state’s wealthiest considering a New Yexit.  That said, I have only heard mumblings by very few New York City homeowners who are considering a move to a state with no state income tax like Florida and most of them don’t plan on selling their property in New York City. Most of our residents are in no position or just don’t wish to uproot their families and leave our great city.

Selling with a Tenant in Place

Selling your investment property with a tenant in place can present some challenges that many property owners don’t anticipate.  Investors often seek to sell their properties with tenants in place. Sometimes they just need to cash out of a particular real estate investment and others they actually feel like the current market will yield a higher return than waiting for the end of a lease. Whatever the reason, 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. (I have met several owners who were 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.  (one such owner had no written lease agreement outlining terms of “month to month” arrangement and tenant wouldn’t allow access to the unit…another had such an agreement but that tenant still manipulated the terms to hinder the 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 going to be displaced before they expected.  As warm and kind as your tenant may be now, trust me when I say that “warm and fuzzy” 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. A solid and experienced real estate agent can be a major asset and facilitator in an often delicate and challenging situation.

Manhattan Market Microscope

In an effort to make sense of current New York City real estate market conditions, I chose to take a deeper dive into data from the last 60 days.

I we examine a representation of all of the properties that have come on the market since 9/1/2017, 34% of those new listings were in the sub $1M market and a whopping 74% of those listings came to market priced below $3M.

Of those same properties that have come to market since 9/1 which have been sold or gone to contract, it is interesting and very telling that 88% of the contract signed or sold properties were in the sub $3M market and a staggering 99% of all sold and contract signed listings brought on the market since 9/1/2017 were priced below $8M.

Lastly and perhaps most importantly, 1,794 (20%) of the 8,626 Active properties on the market, have had a price reduction since 9/1/2017.

The take away here is that the under $3M market is most active, there is little to no new inventoryin the past 60 days in the over $8M market, and one could conclude that properties that are adjusting prices are more likely to procure buyers. That said, buyers remain patient and continue to look for deals and value. Many sellers are caving to continued pressure of aggressive negotiations while a few remain unconvinced that the market has indeed softened and that proper pricing has never been more important.

The accurate presentation of data is vital in helping buyers and sellers understand exactly how the current market is behaving. 3 times in the past 2 weeks, we have presented sellers with robust and meaningful reports that resulted in price changes that brought about offers. In one case, the change resulted in 3 offers and an all cash accepted offer at the original asking price.

When Should I Engage a Real Estate Agent? Seller’s Edition

A few weeks back I discussed why it is never too early to engage a buyer’s agent to assist with the purchase of real estate.

Now let’s explore the right time to engage a real estate agent when selling a property.  Again, it depends on the specific agent and what they do or don’t bring to the table in terms of market knowledge and marketing expertise. Much like the hiring of a buyer’s agent, if someone is truly an expert with a proven track record of selling property in your area, consider consulting with them during your initial conversations about selling.  These are just some of the ways that the early engagement of a seller’s agent can make the sales process more efficient and expeditious:

  • Relocation: if you are moving to another geographical location, a great agent can liaise with a top agent in your destination city to improve the buying process. (finding a top agent is key)
  • Repositioning: an excellent seller’s agent will provide guidance on preparing your home for market to yield the highest price based on your timeline. (paint, cleaning, decluttering, etc)
  • Manage expectations: whether selling for the first time or a sophisticated veteran, a savvy sales agent can provide professional insights that many sellers overlook. (contract process, condo or co-op application process, buyer financing, closing date, etc)
  • Market analysis: BE CAREFUL HERE and make sure you hire an agent who either knows your property and the market comps extremely well or that they plan to enlist a team of their experienced colleagues to assist with pricing.
  • Source of professional referrals: most excellent real estate agents know equally professional attorneys, mortgage brokers, etc. who can further improve your sales experience.

The moral of the story here is that whether buying or selling, consider enlisting the help of a real estate agent the moment the discussions begin. If you hire the right agent, they are sure to be an asset and make the process much more efficient and painless.

Social Media and Doing Right by Our Clients

This past September I decided to take a break from social media, specifically Facebook. While I missed the pictures of my sister’s kids, the posts from my nephews, in-laws, my mom and many of my friends, I did not miss the political posts that contributed to my considerable loss of faith in a segment of our nation. Even more aggravating than the nonsensical diatribes on our political climate, I noticed a huge surge in the amount of egocentric posts by some of my very own real estate colleagues. Facebook Live posts from the backs of taxis, poorly acted vignettes created under the auspices of showing the social media sphere how one runs their business and even inflammatory and highly offensive personal political views are attacking many of the New Yorkers whom we serve.

We were drowning in a perfect storm of self-produced “reality” TV shows, easy access to broadcast ourselves to the masses and an epidemic of unbridled narcissism. We utterly and completely missed the point of why we do what we do – we find homes for the men, women, friends, families and children who make up the greatest city in the world.

Have we forgotten that the customer is ultimately whom we serve? In these posts, I see no mention of them, no appearance and rarely a word about them, unless it’s in effusive praise of the agent. Many may think this is funny coming from the guy who introduced the guided video tour to the Manhattan market in 2006. Yes, there were times when I was shooting where I lost sight of the fact that the video was about the property and ultimately doing my job for the customer. Fortunately, I had videographers who always brought me back to reality (real reality) to maintain focus on the task at hand: doing right by my homeowner.

I’m back on social media now. As much as some of the content remains an irritant, I see many ways in which video, Facebook Live, Snapchat, Instagram and the like can play a positive role in servicing the client and raising the bar in the real estate industry. Some are doing it right but most aren’t, in my opinion. There is a better way and I have to believe that those of us who are committed to doing right by our clients will find it.