Counter Intelligence has an update on an idea that has been around for a while–a real estate Consumer Bill of Rights:
Five years ago this week, a coalition of leading real estate consumer advocates nationwide — including buyer agents, fee-for-service consultants, and for sale by owner publishers — cosigned an petition calling for a Real Estate Consumer Bill of Rights which Consumer Union, publishers of Consumer Reports, echoed in their testimony in Congressional hearings on banks as brokers…
Bloggers, consumer advocates, and real estate innovators — not to mention the US Department of Justice and Federal Trade Commission — are renewing investigations into competition in real estate with a new urgency fueled, in part, by discrimination against flat-fee MLS listing services and their customers, plus industry-supported efforts to establish minimum levels of service for brokerages in an increasing number of states.
I love the concept of a Real Estate Consumer Bill of Rights, particularly the “minimum level of service” requirements that would have to be met by real estate agents.
As far as all of the talk of agents “holding the MLS hostage” as stated in a comment from one of my previous posts, it’s worth pointing out that unlike most of the country, New York City does not have a multiple listing service. We are a horse of a different color.
On any given day, if you peruse any of the major company’s listing systems, you will see similar, but not completely identical data. You will also notice that commissions range from 4-8% with the majority of listings being offered at 6%.
That said, I would welcome a “Bill of Rights” as I beleive it would foster more competition and force real estate professionals to raise the level of service that they provide to clients–thereby earning their commission, whatever it may be.
Perhaps it would even result in a change in the very structure of the real estate business. Maybe sellers who chose to work with an agent would pay a 3% commission for representation and buyers would hire their own agents for 3% to represent their best interests in a transaction. A fascinating concept that I believe would bring more efficiency and integrity to an industry that often gets a bad wrap. Here’s to change!
It’s not hard to understand. It has been a hot market.
Chris Palmeri at Business Week examines the trend:
Thousands of Americans have flocked to the business, most notably as Realtors and mortgage brokers. But Stan Ross, chairman of the University of Southern California’s Lusk Center for Real Estate, notes in a new book, Inside Track to Careers in Real Estate, that real estate job seekers, whether they be recent college grads or older folks looking for a mid-career switch, need to look beyond the obvious professions. That’s true especially as the nation’s hot housing market cools. Ross notes that megatrends are sweeping the industry, creating all sorts of new opportunities.
He makes a great point–that there are more diverse opportunities in real estate than ever before. Everything from experts on green building techniques to developing public/private projects… it’s time to think outside the box.
The incredible flood of new agents has been clear in Manhattan, where the greatest percentage of them are struggling to stay afloat. My company alone has doubled the number of agents it has working in its Westside office, and many of these new agents are seeking creative ways to procure buyers and sellers.
For instance, some volunteer to help a more seasoned broker with open houses in exchange for the opportunity to sign up the buyers who attend the open house. Others have offered creative ideas about how they can assist with properties that have been more difficult to sell, in exchange for a piece of the deal.
The influx of people has forced new agents to become creative. It doesn’t mean they will all succeed, but it does mean there’s some real innovation going on, which has a positive effect on the quality and professionalism in the industry.
Much has been made of former Congressman and Bronx Borough President Herman Badillo’s plans to build several bold mixed-use developments across the city. Gothamist and the New York Post are among those who have discussed his latest plans for Williamsburgh Square.
Angela Montefinise writes in the Post:
The proposed 675,000- square-foot Williamsburgh Square would feature four towers of 38, 36, 20 and 12 stories. There would be 360 underground parking spaces, a charter school, a “semi-public” park, a day-care center, two floors of retail, and both market-rate and affordable housing.
Many are upset at these plans, but I think their ire is mislpaced. Here is a man with incredible vision who was instrumental in revitalizing the Bronx in the 70’s and whose credentials and prior commitments to the city speak for themselves. All neighborhoods seem to fight change with community boards spending a lot of money fighting new development projects sighting “greedy” developers’ lack of interest in their community.
As far as I can tell, Badillo wants to provide real services to the community in the form of schools, supermarkets, day care, community centers and most importantly AFFORDABLE HOUSING, yet he is being met with the same resistance.
What exactly are people looking for? I remain puzzled.
Much has been made of the book Freakonomics and its commentary on real estate. For instance, from the Washington Post‘s review:
Freakonomics presents the notion that homeowners and real-estate agents may have conflicting monetary incentives as big news. Memo to the University of Chicago Economics Department: Everyone who has ever sold a house already knows this.
Authors Steven D. Levitt and Stephen J. Dubner make the case that brokers close quick sales, rather than doing more work for higher prices that have only a marginal effect on commissions.
On its new blog, the National Association of Realtors takes its turn responding.
The authors argue that real estate agents could get higher prices for home sellers by urging them to keep their houses on the market longer. But they don’t because agents would not make enough in additional commissions to justify the extra time on the market.
Levitt and Dubner assume real estate businesses are built around one-time transactions. In fact, successful professionals build relationships with customers for life. Homeowners move once every seven years on average and are likely to use an agent they have used before. Consumers also rely on referrals from friends and relatives to find real estate representation. Wise real estate professionals build their business on endorsements from their satisfied customers. According to NAR’s 2005 Profile of Home Buyers and Sellers, 63 percent of home sellers would definitely refer a friend or relative to the agent they used and another 19 percent would probably do so. Among buyers, 97 percent report they were satisfied with their agent.
It’s clear that real estate professionals must do the best possible job for the consumer if they intend to build a successful business.
I am pleased that that the majority of brokers no doubt view each transaction as an opportunity to establish a relationship with a client for life–that will result in continued business and referrals long after a transaction is complete.
But it’s not always the case. The broker who does very few transactions per year is going to be less likely to encourage a seller to be patient with the sale of their property as their livelihood may depend on that specific transaction. I see that first hand now. The masses have entered the real estate industry and are desperate to sell whatever they can in desperate attempts to remain in the industry.
That doesn’t mean it’s always good to keep a property on the market for a long time. We can not ignore statistics showing that property sells for a better price earlier in the marketing process and selling prices tend to slide as the property spends more time on the market.
Now more than ever, it is imperative to have a knowledgable agent whom you trust to guide you in this decision of patience vs. selling early in the process. In a softening market, it could be that the “perfect” buyer who appreciates all of the qualities of a property doesn’t enter the market until months after the property hits the market. There is no exact science to this and patience in a softening market could be either an asset or a liability.
Sellers usually have very good instincts about prospective buyers and when teamed with a savvy and knowledgable agent, a positive experience is almost certain.
How do you find a good broker? I’m sure we’ll talk about that plenty in the months to come, and we have talked about it a little bit already. There’s a new little gizmo worth watching, however. To find an agent/broker who has been rated… check out Brownstoner’s new Brokerate site allowing anyone to rate brokers with open comments. No doubt those who have had negative experiences will be quick to say their piece so it’s imperative that those with positive experiences also chime in. This might turn out to be a helpful little tool in choosing an agent to represent you with a sale or purchase. Should be fun to see how this shakes out.
Josh Barbanel of The New York Times catches up with the rising tide of condominium conversions in Manhattan.
It is one of more than 60 pending condominium conversion projects in Manhattan listed by the New York State attorney general’s office, involving more than 7,000 condominium units.
These projects, the first large wave of condominium conversions in New York in 20 years, are cutting into the supply of rental apartments, driving rents higher, and ushering in a wrenching period of uncertainty for many existing tenants.
In the 1980’s, tenants facing condo conversion banded together and negotiated large discounts from developers on the sale prices of their individual apartments, and became condo owners.
But now, with rent stabilization laws weakened, landlords are taking a tougher stand, evicting market-rate tenants and offering only tiny discounts on the sale prices to rent-stabilized tenants, who are allowed to continue renting after a conversion.
The buildings described in the article have fairly high rents. Someone who is already paying $4,000 or more per month will likely be able to find somewhere in Manhattan to live. But I worry about all those people whe are paying $650 a month right now.
Sometimes it seems like Manhattan is on its way to becoming an island for the super wealthy, which has ramifications far beyond just the real estate market.
For instance, where are the civil servants going to live? And where are the teachers going to live? And where are police and firefighters going to live? I have no idea. I think they almost all live in the outer boroughs already.
But, as someone who once planned to be an elementary school principal, and has a degree in education, I can’t help but think of things from a teacher’s point of view. And it’s kind of sad.
It’s certainly good for neighborhoods like Harlem and the financial district that all this money is flowing there, but it’s unfortunate that they can’t find a way to strike a balance, and they can’t kind find a way for the teachers–who are busting their humps teaching our kids–to live in the same communities with our kids, and not have to commute an hour and a half from Sheepshead Bay or something.
Through the recent years of incredibly high demand, many co-op boards have become more discerning than ever. By weeding out many of those who’d like to buy shares in their buildings–often without clearly stated reasons–I believe co-op boards are contributing to thinning the pool of buyers, thereby softening the market and ultimately making their apartments worth less money. And I am speaking as recent member of a co-op board.
Tightening of financial requirements such as the amount that a purchaser may finance, the amount required in liquid assets after purchase, the types of mortgages allowed, and greater income requirements have all combined with already high prices to make it increasingly difficult for the average buyer to purchase a co-op.
Take the following scenario (names have been changed to protect the innocent): Mr. and Mrs. Buyer made more than $500,000 last year and have over $1.5M in cash in the bank. They wanted to purchase an apartment for slightly more than $1M, and they were rejected by the building’s board of directors.
We can only speculate as to why they were rejected. Maybe it’s because the purchasers’ income was 70% bonus money–albeit a guaranteed bonus. Maybe it was because the buyers’ average income in the prior two years was less than $100,000 (although they made in excess of $1M three years prior). Maybe it was something else entirely. We’ll probably never know what the real reason was.
Co-op Boards do not have to give a reason for their rejections (legislation has been proposed recently to force co-ops to provide a reason for rejections) making it virtually impossible to address their concerns and negotiate a reversal.
Had I been a member of this particular board, I would have asked how likely it was that a couple with $1.5M in cash would default on their $1,000 maintenance… hmmmm… doesn’t seem likely. Not to mention, this particular couple is a perfect match for this building as they are friendly, hard-working, and financially sound individuals.
Ultimately, the board’s decision resulted in three months of lost marketing and the apartment for sale again in a softer market. This may result in less money for the seller and in turn, a decreased value for similar apartments in the building.
Call me naive but why isn’t it possible for real estate agents to develop professional relationships with co-op boards, to determine specific financial formulas and criteria that boards seek? Surely that could make the market more efficient for all.
Perhaps our litigious environment won’t allow it, or perhaps we are so deeply rooted in past precedent that no one wants to address the incredible inefficiency that is the co-op board process. As a real estate agent, I have mixed feelings about this process. Part of me is happy to particpate in such an inefficient process as it makes agents like me more essential. I think you can see from this post how the other part of me feels.
Yesterday I accompanied a VIP buyer on a series of appointments to some new development projects in the West Village, Soho, and Tribeca areas.
The on-site agents, showing us the property, echoed one sentiment again and again: “if you are interested in any of the properties, you should make an offer.”
In this cooling market, where supply seems to be greater than demand, some developers are considering offers below the asking prices and also offering concessions for closing costs. Not to mention the perks that some are also putting on the table like 255 Hudson, which is offering membership to its neighboring Classic Car Club.
The concessions and perks are completely understood when you cruise the neighborhood and see four new buildings in a one block area. How are all of these new units going to be absorbed in a market where buyers believe their is still room for prices to decline? That remains to be seen.
For buyers who have been waiting to be in the driver’s seat, buckle up and grab the wheel… your time is now.
It is imperative that I do mention here that some of the new developments, like the Philip Johnson-designed 330 Spring (which was his final project before his death in January at 98 years old) and the “hotel-like” 40 Mercer (whose sales office is actually in the Mercer Hotel) have sold a majority of their units. The latter project only has seven of 40 units available, and all for approximately $2,000 per square foot.
So buyer beware… prices have become a “bit” negotiable in many of these projects. Of course, if you offer 30% below the asking price shouldn’t count on signing a contract anytime soon… but it is refreshing to know that you can make an offer below the asking price that will actually be entertained by many of the developers.
Here’s an excerpt of what you’ll hear in the latest episode of the TrueGotham podcast, in which Douglas Heddings explains some of the ways the Manhattan real estate market is different from the rest of the nation:
85 percent of the property you can own in New York City is cooperative housing. Which you know, is a saving grace for real estate brokers, because in the rest of the country where the real estate broker is in danger of extinction, in Manhattan, they have not figured out a way to streamline the co-op board process. Nine times out of ten, when a buyer tries to do it on their own, they get a board rejection. Because they just don’t know what to look for and how to present things to a board.
We spend a lot of time doing co-op board packages. It’s a big deal. You know, it basically is the most gross invasion of someone’s privacy that they’ll ever go through; complete financial disclosure, complete financial statement including assets, liabilities, income, expenses; all of the bank statements and brokerage statements to back up everything that you put on that financial statement; personal reference letters; business reference letters; employer reference letters; your great-grandmother’s uncle’s reference letter…
Co-op boards are getting even more strict where they’ve gotten wise to adjustable rate mortgages and they’re really looking more closely at people’s income and their assets, as opposed to what type of mortgage they’re actually applying for. If someone’s doing a one month LIBOR loan at like, two and a half percent interes, they may be borrowing a million dollars, and they only have to pay say, three-thousand dollars a month on that loan. Boards have figured out that that three-thousand dollar payment could very quickly be eight-thousand dollars if rates go up dramatically. So they’re looking at that worst-case scenario and they’re taking that into consideration.
Listen to the entire podcast.
Not really.
Increased buying in inexpensive markets may have indeed sparked this ever-so-slight increase but I would speculate based on New York City activity that the modest increase in buying is also attributable to increased negotiability in prices for buyers.
In March, we saw increased open house attendance with offers coming in most frequently under the asking price. This is very exciting for all of those buyers who have been waiting on the sidelines for the ability to jump in to the market. Even just nine months ago, many of these same buyers were losing property after property in multiple bidding situations.
And although some of those multiple bidding situations still occur (when property is priced attractively and has “special” features), the market has cooled to a much more normal level where buyers make offers, sellers counter those offers, and a meeting of the minds takes place somewhere in between. This is an exciting environment for the patient buyer who has felt overwhelmed by the recent housing market. Perhaps those buyers are coming aboard, which is why we have seen this positive blip in activity.
In Jacobs’ obituary, Douglas Martin of The New York Times explains her legacy:
In her book “The Death and Life of Great American Cities,” written in 1961, Ms. Jacobs’s enormous achievement was to transcend her own withering critique of 20th-century urban planning and propose radically new principles for rebuilding cities.
At a time when both common and inspired wisdom called for bulldozing slums and opening up city space, Ms. Jacobs’s prescription was ever more diversity, density and dynamism ó in effect, to crowd people and activities together in a joyous urban jumble.
In 2004, Jacobs discussed the current state of things in New York City with The New Yorker‘s Adam Gopnik:
“I love New York so much still,” she said. “But the traffic is the worst I’ve ever known it to be.” (In a chapter in her new book, she explains briskly why one-way streets, designed to streamline traffic, only complicate it.) “New York still has so much pizzazz, because people make it new every day. Like all cities, it’s self-organizing. People looking for a date on Third Avenue make it into a place full of hope and expectation, and this has nothing to do with architecture. Those are the emotions that draw us to cities, and they depend on things being a bit messy. The most perfectly designed place can’t compete. Everything is provided, which is the worst thing we can provide. There’s a joke that the father of an old friend used to tell, about a preacher who warns children, ‘In Hell there will be wailing and weeping and gnashing of teeth.’ ‘What if you don’t have teeth?’ one of the children asks. ‘Then teeth will be provided,’ he says sternly. That’s itóthe spirit of the designed city: Teeth Will Be Provided for You.”
The preservation of some of New York’s communities, so threatened in Jacobs’s day, pleases her, but their gentrification worries her. “Whenever I’m here,” she said, “I go back to look at our house, 555 Hudson Street, and I know that I could never afford it now.” She wishes that the city had taken her advice about communities with mixed incomes: “You build low-cost housing in small lots and then see that it’s kept affordable.”
It’s worth a read. One interesting tidbit: Jacobs told Gopnik she believed it would be smart to wait many years before developing the World Trade Center site.
