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:
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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."
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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.)
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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.
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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.
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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.
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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.
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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.
As of today, the banks have lowered the rates on loans from $417,000-$729,000 to slightly more than the non-jumbo loans. If anyone has a loan in this range, the interest rate is currently 6.125% on a 30 year fixed.
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.
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.
For you straphangers out there who constantly complain about New York City’s subways, suggesting that they are too crowded, I give you this YouTube Video of Japanese "Pushers" stuffing passengers into a train:
TAAAAAAAXI!!!!…or shall I say takushi?
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?
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.
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:
CoRE is up at Reachd. Check it out with a particular nod to Bad Pricing Strategies That Will Likely Come Back To Bite Sellers In The Arse! from Silicon Valley Real Estate Guide.
Although I have lived on the island of Manhattan since 1989, I’m still sometimes baffled at some of the idiosyncrasies of our local real estate market. The lack of a multiple listing service, the housing stock consisting of 75% cooperative housing, and of course the behavior of prices that seems to be completely unique to Manhattan. Case in point, Josh Barbanel’s piece in this past Sunday’s New York Times, A Repository for the Rich reveals the $801,000 purchase price for a basement storage space in the world renowned Dakota at 1 West 72nd Street.
The storage room is situated on a basement corridor and has a locked door, four bare walls, electricity and a half-bath, but is uninhabitable and costs more than the average price for a one-bedroom apartment in Manhattan last year.
But at the Dakota, basement storage spaces for those old papers, sleds, college textbooks, strollers and out-of-favor artwork are hard to find. When the word was circulating that a storage locker would be sold to the highest bidder among the building’s residents, there were bids from at least eight co-op owners, including a representative of Yoko Ono, who maintains a home in the building, according to a person briefed on the sale.
The winning bidder was John M. Angelo, a hedge fund manager and the chief executive of Angelo, Gordon & Company, and a member of the board of Sotheby’s. He has assembled several co-op units into a sprawling apartment on the second floor of the Dakota.
Certainly this seems like an exorbitant amount of money to pay for a windowless room for storage, but when compared to the purchase prices of homes in the Dakota and the overall lack of storage in the neighborhood, $801,000 makes perfectly good sense to me for the luxury of traveling only to your basement to fetch a family heirloom, antique, or piece of art to brighten up your 5000 square foot home. After all, it’s what single family homeowners do all the time.
