As a follow-up to Property Remains King and Some Buyers Really Suck, I would like to share the goings-on with the buyer who was the subject of my angry tirade. I just got off of the phone with said buyer and it appears that in addition to some blatant miscommunication on both of our parts (she still admits trying to cut me out of a deal at a new development), she alleges that she was completely unaware of my displeasure with the course of events that took place after our initial meeting and she had some complaints about how she felt she was "neglected" from the start of her search.
In the spirit of giving back to my industry as well as becoming better at servicing my clients, I share a list of my mistakes/shortcomings that resulted in this client’s dissatisfaction (BTW…it doesn’t matter if these things are accurate from my perspective because the client’s perception is generally all that really matters when judging the service we provide):
- I didn’t ask her enough questions about her perceptions of each property (I thought I did?)
- I assumed that the price range that she gave me was firm and accurate. (I pride myself on listening carefully to what my clients tell me but need to be more cognizant that often times price ranges are flexible)
- I spent too much time on my BBerry while we were together. (GUILTY!…I have to work on focusing on the task/client at hand)
- I wasn’t clear with our next step after the initial showing. (I absolutely should have be more clear with how the offer process would play out)
- I seemed to be "inconvenienced" by her presence. (WOW!!! This is shocking but something that I will be acutely aware of so that it doesn’t happen again)
Moral of the story: When something goes awry in my business, I make every effort to listen to criticism and correct anything that I may have done wrong. In an industry of independent contractors running our own businesses, I answer to a multitude of bosses…my customers!
Of course none of this changes the fact that this buyer tried to get a better deal for herself by removing me from a transaction. But after speaking with her at length this morning, I completely understand (I DON’T AGREE) with how she came to justify her actions. She felt that I really brought no value to the transaction and therefore she was comfortable "cutting me loose." After our conversation, she seems to appreciate the value that I can bring and YES, we are resuming our search together. Stay tuned for more…
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.
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.
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.
[email protected]
I am frequently emailed specific questions from TG readers to whom I directly respond. Occasionally, the questions are such that I believe the responses would be helpful to all TG readers. The comment forum of the blog is also a great place to gain additional insight from others who are willing to share their experiences.
The following two questions were posed by a TrueGotham reader who is obviously somewhere in the stages of purchasing in a new development project:
Q) When buying late in the sales process where the vast majority of apartments are already sold, should you always expect/insist that the selling agent representing the developer will disclose prices paid by those before you (any recommended tactics around this)? If the other apartments have been sold but not yet closed on, assume this isn’t public data and there is no way to determine aside from talking to people?
I have found in my 16 years in the real estate business that expecting disclosure of recent sales data, particularly apartments that haven’t closed, usually results in disappointment. Keep in mind that over the past 7 or so years that new development projects have amended their offering plans so frequently with price increases that the data you are seeking is often irrelevant. It will just make you wish you purchased earlier. That said, I have also found that the most successful development projects won’t only disclose info but they will boast about what properties sold for almost as to make you feel depressed that you didn’t buy earlier. The best advice I have is to do your homework and research the prices in other comparable development projects to get a better sense of the properties value. And remember that when dealing with most developers, they are exceptional at pricing their product at levels that will be absorbed by the marketplace. They have done their homework.
Q) What is the recommended procedure/tactics around submitting a bid on a new construction apartment slightly below asking price if you’re not using a buy-side broker at this stage?
There is absolutely no harm in submitting a bid below the asking price. NOTE: 99.9% of developers protect brokers and have already priced the commission into their Pro forma before the project ever breaks ground. You won’t likely get a better deal without a broker. But if you do prefer to go after it on your own, don’t expect huge discounts off the asking prices. Again, developers are generally keyed in on what the market will bear for their properties. You may want to consider a bid at 5% below the asking price and/or suggesting that the developer absorb some of those high new development closing costs. Developers are much more likely to offer a concession in closing costs at this stage than a price reduction but give it a shot. An offer below ask will not be taken personally by a developer the way it may be by an individual apartment owner. It’s business.
Hope this is helpful and best of luck. If any TG readers out there have differing opinions/advice or thoughts to share on either of these questions, please chime in.
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!
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.
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.
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.
From REAL writer Andy Borowitz of The New Yorker comes Rarely Available which mocks the often laughable property descriptions that I and my colleagues sometimes get a bit carried away with. Here’s just one example from Borowitz (check out the entire piece for more):
EVERY BREATH YOU TAKE, every move you make, we’ll be watching you in Manhattan’s first 100% glass building, the Residences at the Voyeur. Enjoy astounding views of Manhattan while Manhattan enjoys astounding views of you. No doors, no drapes, no problem! Just 1800+ sq. ft. of exhibitionistic living space, custom-crafted for your see-thru life style, perfect for sophisticated entertaining or just making sex tapes. Sun-drenched living room, sun-scorched master suite, and sun-ravaged kitchen will have you checking yourself for moles. We see you living here, and so will everyone else. $3.4M.
I’ve been quite busy the past couple of days both with the phenomenal experience of Inman’s Real Estate Connect 2008 and…go figure…a very active real estate business. It’s been difficult to find the time to blog. Here are 2 links that grant some flavor of the happenings at this year’s Connect:
