My Co-op Is Growing: More Evidence of Square Footage Lies

Back on Monday.  Here’s a recent post that is something I’m passionate about.  BTW…I have a solution for the square footage fiasco and will share on the first episode of TGTV…stay tuned.

Jonathan Miller’s latest Three Cents Worth graph was posted Friday at Curbed.  And the graph shows that condos have decreased in size and co-ops have increased in size over the past 10 years.

Whaaaaaaat?  OK, I get the fact that the size gap between co-ops and condos seems to have decreased over the past ten years but how in G*d’s name have co-ops increased in size?   I will tell you how.  Let’s not forget that almost every new conversion and new development is condo so the co-op inventory we are talking about is unchanged.  My 1200sf co-op that I bought (and sold) 10 years ago is now 1400sf? 

All too often, the unfortunate answer is a resounding "YES!"  Again we are talking about an unregulated system of quoting or as my profession likes to say, "approximating" square footage (check out the pitfalls of price per square foot).  This chart is more proof that as time passes, the "approximate" square footage of many co-ops is trending higher.  Jonathan Miller attributes some of the skewing of data to the high end co-op sales of the past ten years.  Perhaps, but I think it is more a result of overstating square footage.  I have witnessed  the "puberty" of apartments in most listing databases:  The fledgling 1BR that has gone from 620sf to a handsome 750sf "spacious home,"  and the Classic 7 room on West End Avenue that "sprouted" a few years back from a measly 2000sf to a robust 2400sf.

The Attorney General’s office makes some effort to regulate stated condo square footage but makes no effort to do the same for co-ops.  Puzzling to me.  Until some sort of regulation is set in place for co-op square footage, growth will continue until one day that now 2400sf apartment will become a 3000sf star NBA center!

Another Argument for Change in Commission Structure

Still away and back on Monday but here’s a post that ran March 5th of this year that stirred things up a bit.

Respected blogger and real estate agent Noah Rosenblatt tells the story of his experience recently with one of the unethical agents in our industry on his award winning blog Urban Digs.

Surprise, surprise!  An unethical agent in our profession. Noah and I have discussed this on numerous occasions and  we’re on the same page as far as exposing this type of stuff.  He doesn’t name the agent or "her" company because it becomes a legal issue and opens us up for possible liability if we do so.

• Perhaps this agent is savvy and knowingly delayed, lied, and manipulated the situation to benefit her.
• Perhaps, she followed directions of her seller thus lying, delaying, and manipulating on the seller’s behalf.
• Perhaps she’s just an absolute moron…oh…no "perhaps" here.

The unfortunate part is that we will never know her motivation and can only speculate. That said, there is no question that she mishandled this process and was incredibly deceptive. I would also guess that she was protecting what likely was a direct deal that yielded her double the commission.  All the more reason for restructuring the way we do business in Manhattan.

Once again I am proposing that ALL direct deals should be abolished and the Department of State should require each party (buyer and seller) to have separate representation with each agent receiving half of the commission.  Way too much gray area and room for temptation as it is currently structured.  It also breeds horrible mistrust within the industry.  NO MORE DIRECT DEALS!  BTW, 95% of my business is representing sellers and I feel very strongly that a buyer should have their own representation in a transaction.  It would create more trust in the industry and fewer stories like this one.

Real Estate Agents and Their Reputations

Happy 4th!  Back Monday the 9th but here’s a post that originally appeared January 29th of this year.

True Gotham was born to help clean up the reputation of the real estate industry by giving the consumer insight into the inner workings of the industry and some of the tactics that agents use to "seal the deal." The big idea is to be honest and open, which in the long run might to inspire the idea that there are professionals in this line work with integrity. There is a right way to do things, and I know for a fact that there are plenty of professionals doing things that exact way.

So imagine my surprise and disappointment when I read the Sunday New York Times and stumbled upon Vivian S. Toy’s article "Agent Angst." I wasn’t surprised or disappointed by the article itself because it is an old story and one that continues to be told but I would have jumped at the opportunity to speak with Ms. Toy regarding the industry, it’s self-policing, and the "used car salesman" stigma that many of us are trying to dispel. 

After all, I cover this topic daily and it remains the mission of True Gotham.  Toy writes:

A Harris poll conducted last year that ranked occupations in terms of prestige placed real estate brokers at the very bottom of a list of 23 professions. (Firefighters and doctors were at the top.)

Brokers themselves seem well aware that their business isn’t always held in very high regard. The National Association of Realtors has an advertising campaign called “Someone You Can Trust,” which stresses that Realtors are subject to mandatory ethics training. “Not many professionals can claim that on their resume,” the ads read.

I have written about this Harris poll on True Gotham, most recently in a post about agent self-esteem.  And the NAR ads suggesting that Realtors are "someone you can trust" seem to make an attempt at addressing our "bottom of the barrel" and "scumbag" reputation that is voiced on a daily basis on other blogs like Curbed and Patrick.net. 

Now if Ms. Toy had contacted me for my views on this subject, here is what I would have added:

• Although the Real Estate Board of New York is making great strides at monitoring and policing the industry, membership is voluntary and those who do not belong to this organization are not subject to its rules.
• Most New York City real estate agents are not Realtors.
• Rumor has it that the Department of State is incredibly lax about fining or disciplining agents who exhibit unethical behavior.
• I have also had a colleague "manufacture" other offers in an effort to get my buyers to raise their bid on an apartment.
• I believe that most buyers who feel taken advantage of are too embarassed to report it to the Department of State or simply feel like they should have been more aware of the possibility that they were being mislead or lied to (ex. I myself was once told by a colleague that I could install a washer/dryer in an apartment that my wife and I were buying when the building policy was NO washer/dryers.  This colleague worked in the same office as me and I was beyond embarrassed that I took her word for it.)
• The industry does seem to be improving but their is still much more room for improvement.
• And all of this said, the best way to select an agent for representation is through a referral from someone you trust. I have many more thoughts on choosing a good agent.

Finally, Ms. Toy seemingly polled some of my colleagues to come up with the following tips which I agree are useful in selcting an agent:

QUALIFICATIONS Make sure the agent is licensed. In New York City, to ensure an agent has access to all available property listings, check to see that he or she is a member of the Real Estate Board of New York. In New York State, you can check the Department of State’s Web site to see if the agent has had any licensing violations. In New Jersey, go to the Real Estate Commission’s Web site, and in Connecticut, the Department of Consumer Protection’s site.

EXPERIENCE Check real estate agents’ Web sites for lists of recent sales or ask for printed lists. These can give you an idea of the kind of experience an agent has and specific areas of expertise.

REFERRALS Ask friends and relatives for recommendations, because good brokers tend to get most of their business by word of mouth. But even a broker who comes highly recommended may have some weaknesses. Ask the recommender about any broker shortcomings, so that you can work around them.

CHEMISTRY Just in case negotiations get rough, you want to be comfortable with your agent’s personal style because he or she may have to bring you news you don’t want to hear. So think about whether you want someone who will take control and be blunt or someone who will hang back or pamper you a bit. Be prepared to move on if your personalities don’t click.

TYPES OF AGREEMENTS Although there are various types of agreements between buyers, sellers and brokerages, two are common.

When you choose a broker to sell your house or apartment, you will have to sign a contract giving the broker the exclusive rights to list it for a set length of time. So make sure you and the broker get along before you sign.

If you are buying, you don’t need to sign an agreement to have a buyer’s broker represent you. Or you can work with the seller’s broker. As helpful as they may be, you need to remember that the first loyalty of sellers’ brokers is to their clients, not you.

I would add that Ms. Toy missed a very important group of people in her story: real estate bloggers.  People like Kevin Boer of 3 Oceans Real Estate, Noah Rosenblatt of Urban Digs, and Pat Kitano of Transparent Real Estate are raising the bar in the industry by holding it accountable and making the real estate transaction less of a guessing game for the consumer. It’s a new, and potentially very important, resource.

Do You Remember Last September?

Reminder that I’m away this week…this post originally appeared June 26th of last year but the same holds true today.
Everywhere you go in the online real estate world, there’s something about cooling markets, normalization, air coming out of bubbles… whatever you want to call it. Like this, for instance.
Even those who have been most steadfast (insisting through cheesey grins that for the better part of a decade that it has always been an amazing time to buy) are finally starting to acknowledge the market isn’t white-hot any more.
What about all those people who bought at high prices in the last few months, convinced the market was strong and getting stronger? What about those who didn’t sell in the still-strong market last fall? What about those who paid top dollar for condominiums that they haven’t even moved into yet, and might not be worth as much today?
Those are the people who might have been better served by less cheerleading and more honesty.
As part of my regular marketing campaign, I send out postcards and e-postcards with specific market information and predictions. Some of my colleagues hate it–and you’d better believe they complain.
Last September, I sent out a postcard that asked “Are You Prepared for a Falling Real Estate Market?” and continued with five very important questions for sellers–questioning their mortgage product, whether or not they were too heavily leveraged in real estate, and more.
The wrath came down big time. I was told by my friends in the industry at competing firms that their offices were littered with my postcards and the sentiment across the industry was that I should be silenced. My manager even received an irate call from a competing firm’s manager demanding that I cease mailing these postcards.
The real estate market, at that time, was essentially a big ATM for brokers and agents. It was a big machine that spat out money, and nobody wanted that to change. The idea that the market might cool down at some point was scary to all those counting on the party lasting forever.
But we all knew it wouldn’t last forever. My thought is that if I could be the open-minded one, the one not blinded by the cash, the one to correctly advise my clients when the foot would be easing off the accelerator, then my clients would have an advantage, and they’d thank me in the long run with repeat business and referrals.
My timing looks prophetic now–hardly anyone was talking about a slowdown then (when there was still time to take meaningful action in a strong market) and now everyone is–but it wasn’t the result of any economics genius. I only looked at the same basic market data that everyone else sees, stuff like inventory, time on market, interest rates, attendance at open houses, etc., and called it like I saw it. I guess a lot of my competitors just didn’t want to see it.
I believe new internet tools and other market forces are shifting the industry so that more and more brokers will have to earn their keep not as a gateway to listings, but as a trusted advisers. Guides through the jungle if you will. That is an important job, and one that I take very seriously. As the real estate industry evolves, so too will the real estate professional. A more realistic approach to market conditions, combined with a more honesty in sales (that is not an oxymoron), will make for a more efficient and sophisticated real estate market that is long overdue for an overhaul. If we do this right, our clients will love us for it–and when your clients love you, you’re always in a strong position.

Things You Can Overhear in the Real Estate Office

Originally posted June 15, 2006.
This is precisely why I think this blog is a necessity.
Yesterday someone said that she just took an exclusive listing from a seller and she was laughing that it would NEVER sell as it was exceedingly overpriced and had a high maintenance.
She elucidated that she priced it very high to appease the seller, knowing it wouldn’t sell. Why would she do that? As she explained, it was a way for her to get in contact with buyers who might be interested in other properties.
I have also recently discovered that some of my colleagues are writing false names on open house registries under the auspices that they want “to show people how to sign in.” Give me a break! The deception is purely a vehicle to make it appear that more people have attended the open house than actually have.
This absolutely enrages me!
If I thought that pointing this out would result in even a slap on the wrist by the Department of State, I would gladly name names. But in my 15 years in the industry, I have seen and heard much worse, and very seldom does anyone get in the slightest trouble.
I still believe that the majority of professionals in my industry operate with a high level of integrity, but a few bad seeds like this continue to support public fears and distrust of real estate agents.
Sellers and buyers both beware:

Sellers: PLEASE interview three or more agents before signing an exclusive agreement and always get a written market analysis to support pricing and review it with the agent who provides it. Also, try to separate what you want to hear from reality and current market conditions. There are brokers out there who will do whatever it takes to get you to sign on the dotted line with nothing more in mind than their best interest.
Buyers: The best advice I can give is to find a broker who provides a real service, with a wealth of experience, to guide you through not only the search, but most importantly, the bidding and negotiating process.

More tips by scrolling through the Tips & Advice category.
Contrary to what many believe, there are some extraordinarily sound real estate professionals out there who truly have your best interest in mind in the hope that your experience with them will help to grow their businesses in a positive direction.

True Gotham Celebrating Our Independence

I’m heading out of town for a family vacation and back Monday, July 9th.  Happy 4th of July to everyone and see you on July 9th.  While I’m away, I will re-run some of True Gotham’s most popular posts.  By the way, TGTV is indeed coming…we’re just making sure that we do it right.  Pardon the delay.

More Training Available For Manhattan Real Estate Brokers

Thanks to The Real Deal for the reminder that a while back I received an email from REBNY about a new professional designation available to "seasoned" New York real estate brokers.

Here’s the text verbatim from REBNY’s website:

New York Residential Specialist (NYRS)

Thank you for your interest in the REBNY NYRS designation course. This designation course will recognize the business and educational achievements of qualified residential brokers. This professional designation course will be offered only to REBNY members; although, the public can take the state approved program courses but not for the NYRS designation.

The curriculum will consist of 30-hours of course work broken down, in most instances, to 10 separate 3-hour modules (several of which can be applied to a student’s NYS CE requirement). Classes will be conducted at REBNY located at 570 Lexington Avenue on Monday evenings from 5:30 p.m. – 8:30 p.m.

Criteria for admittance to this highly competitive program, schedule and course topics as well as an application are listed below. For further information, call REBNY’s education Department at 212-532-3100.

Criteria for attaining NYRS Status: 

1. Be an Associate Broker
2. Have negotiated at least 30 transactions in NYC
3. Closed at least $30M in sales or $12M (based on 12 x monthly rent) in rental transactions in NYC
4. Completed a minimum of three year tenure in NYC real estate
5. All transactional criteria must be verified by the Broker of Record or Manager of each firm upon recommendation of a candidate.
6. Completed 30 hours of NYRS coursework within a 1.5 year period 1 evening/week from 5:30 – 8:30 pm = 3 credits.  10 Evenings to complete course.

Tuition $375:  Required reading included in tuition fee

1. Emotional Intelligence by David Goleman
2. Getting To Yes: Negotiating Agreement Without Giving In by Roger Fischer & William Ury
3. The Handbook of Emotionally Intelligent Leadership by Daniel Feldman

General Education Guidelines

1. For classes that fall within the State approved curriculum, training modules will conform to the State’s 3 hour time blocks.
2. Topics focusing on ethics, professionalism, leadership and success via a rigorous program will cover a broad spectrum of content relevant to NYC agents at this level of experience.
3. The NYRS program will be designed so that each class builds on the knowledge & ideas in previous classes.
4. NYRS candidates can take classes in any order, but the building block approach will be stressed, and the appropriate order strongly recommended.

Course Completion and Recognition

1. In lieu of a strict evaluation at the end of each course, candidates will be asked to submit a final project at the end of program completion.
2. Evaluation projects may include any format selected by the candidate and approved by the Program Advisor, including, but not limited to: Oral Presentation, Book Evaluation, Essay, Creation of a Website, etc.
3. A candidate will receive an “Incomplete” until the final project is delivered.
4. After the final project is submitted, candidates will receive a framed certificate of completion.
5. NYRS Brokers shall be entitled to use the NYRS acronym/logo on marketing materials such as business cards, stationary, etc.

NYRS Curriculum

1. Psychology and Real Estate – 3-HOURS
2. The Art of the Negotiation (M7072) – 3-HOURS *
3. Professional Ethics – Let’s Make the Deal, with Ethics (M7071) – 3-HOURS*
4. Time & Information Management – 3-HOURS
5. Advanced Business & Communication Practices – 3-HOURS
6. New Development & Condominium Conversions (M7070) – 6-HOURS* (2 evenings)
7. How a Building Works (M7073)– 3-HOURS*
8. NYC Real Estate Macro-Economics (M7074) – 3-HOURS*
9. Leadership Development – 3-HOURS

I am reluctant to say anything about that which I know nothing about and that is precisely the case here.  I am attending this 30 hour course however and will report back with an intelligent analysis of the curriculum.  Looking forward to #3 above but sincerely believe that more than 3 hours should be dedicated to ethics.  I also think 3 or more hours should be dedicated to the topic of integrity.  And lastly, I’m terribly curious to see who exactly will be teaching these courses.  Check back in September when classes begin for regular updates.

How National Housing Market Stats Effect Manhattan Buyer Psychology

Maya Roney’s piece entitled Americans Afraid to Buy Homes that she wrote for BusinessWeek Online is a prime example of why there is NO "National Housing Market" but also why those "national housing stats" are having a psychological effect on some Manhattan buyers.

This morning, the NAR said existing-home sales “remained essentially unchanged” in May as they slipped 0.3% to an annual rate of 5.99 million units. Sales jumped 5.8% in the Northeast and 0.7% in the Midwest, so it looks like the West (down 0.8%) and the South (down 3.4%) are the biggest losers.

NAR senior economist Lawrence Yun said “psychological factors” are currently the biggest drag on housing, with tighter credit for subprime borrowers coming in a close second. Rather than take the plunge into this uncertain market, “many people are doubling-up—they’re adding roommates or moving in with parents,” he said. Yikes!

So what exactly are those "psychological factors" that Yun is speaking of?  Well, anecdotally (I have become accustomed to making the "anecdotal" disclaimer) I’m seeing buyers who are indeed afraid to "overpay" for real estate despite the signs that the local New York City real estate market remains strong.  Many are ignoring comparable sales and listening mainly to national housing news that kicks up their anxiety to a level equal that of Alvy Singer in Annie Hall. 

Just today I was out with a client who could be considered a "picky" buyer except for the fact that he really isn’t requesting all that much considering he will spend up to $4 million!  He wants 2000 or more square feet with light and views for $4M or less.  After viewing 2 properties both in the newer Trump Place buildings on Riverside Boulevard, he became increasingly discouraged at the inefficiency of the Manhattan market and specifically the random asking prices that seem to be pulled from space. 

You see, 2 weeks ago we viewed this client’s perfect home asking $3.995M only to be told after our second visit that the apartment was now asking $4.25M.  We submitted an offer based on the "original" ask of $3.995M only to be told that the seller wouldn’t accept less than $4.2M.  That apartment sits on the market and I suspect will for quite some time.  Back to the Trump Place units we viewed today.   Both are asking roughly $1900/sf.  The one with the terrace overlooking the river has multiple offers and the other unit is a would be combo of 2 units that would require at least another $250K in renovations.  Obviously the terrace is a draw for buyers unlike the prospect of combining 2 units.  So why the same price per sf?  No clue.

So I continue my search with this buyer who is being bombarded with scary "national housing" news that has very little to do with what is happening locally.  Except for the fact that he’s listening and the fear is nearly paralyzing.  That combined with some sellers (fewer than before) who are still trying to eek out a bit more than the market will bear makes for a frustrating buyer’s market.  At least in the $4M range.  By the way, the same is true for two of my buyer’s in the $10M range.  Anyone feeling sad yet…didn’t think so.

iPhone Hype! You Believe It?

There is no doubt that the Manhattan real estate industry will be flooded with iPhones over the coming weeks (release date June 29) with most in my profession being suckers for new technology.  The Consumerist even provides some clever and not so terribly ethical ways to get out of existing cell phone contracts so that you can get your iPhone sooner.  Check out the iPhone rate plans via The Consumerist too.

Now as I sit here on my PC that has crashed on me a few times in just the last 24 hours, I must say that I have for some reason resisted everything Apple since playing games on my wife’s Mac that she used in college 15 years ago.  I understand Apple has come a long way since then.  By the way, I at least own an iPod.  That said, I’m being sucked right into the Apple trance and I’m seriously considering tossing the Blackberry into my bottom desk drawer with it’s previous 3 versions and trading in for the sexy iPhone.  I think a Mac may be next on the agenda for the Heddings family?  Perhaps I will do something I have never done in the past?  Yeah…that’s it!  I will wait until some of my friends, family and colleagues snatch up these phones and provide some serious feedback to support or deny all the hype.  I suspect I will own an iPhone in exactly 4 days.

UPDATE (6/28/07..T minus several hours and counting…)

I knew it was too good to be true.  Check out this email I just got from our IT department and I suspect that the entire brokerage industry, mostly PC-centric, will have the same problems.

With the pending release of the highly anticipated Apple iPhone just around the corner (Friday, June 29th 6:00pm) , I am contacting you today to provide you with some important information regarding the phone. Although the new iPhone is being coined as the “Must Have” device of 2007, and a “Game Changer” when it comes to cellular phones, there is some information you MUST know before buying this device. At the time of release, your iPhone WILL NOT work with your company email account. Due to the many differences between Apple and Microsoft, Apple has decided to not include a Corporate email client in the device. While the iPhone will work with MANY personal email accounts, such as Google Gmail, Yahoo! Mail, AOL, and .Mac Mail, inherently it WILL NOT work with your company email. Please be aware that we are working on getting our hands on the device, as many of you are. Once we do, we will provide you with further information.

For more information about the Apple iPhone please visit: http://www.apple.com/iphone

Thank You.

Still not sure I’m gonna wait.  Likely I will just forward all of my biz emails to a new personal email account that i will receive on my sexy new iPhone. 

Manhattan Real Estate Industry Reacts to Fair Housing Laws

The buzz across the Manhattan real estate market is Vivian S. Toy’s article in The New York Times Questions Your Broker Can’t Answer, which addresses Fair Housing Laws and the very recent push by brokerages to make sure that their agents are complying with these laws.  Jonathan Miller has posted about it on his blog Matrix.  The Property Grunt chimes in too.  Even The Real Deal couldn’t resist passing along the link that covers this controversial topic.  Well I couldn’t resist either because the interpretation of these laws has indeed surprised me and many of my colleagues.

The strict interpretation of fair-housing laws prohibits brokers from providing information about people that could be construed as discriminatory in any of 14 protected categories. The categories include familiar ones like race, religion, sex and disabilities and less well-known ones like familial status, marital status, citizenship and occupation.

The challenge for those in my industry is not the obvious discriminatory categories like race, religion, sex, etc. but those like marital status and occupation do present a challenge.  The reason for this is almost solely due to the co-op housing market.  Part of the reason that Manhattan sellers hire a real estate professional is to help them navigate the co-op Board approval process and until some co-op Boards become more accountable for their  discriminatory actions, this navigation is nearly impossible.  Let me elucidate.

I happen to know of several buildings who boldly discriminate based on age, profession, and one that even takes issue with prospective purchasers who are pregnant because the Board assumes that the mother will not go back to work thus forgoing her income…LUDICROUS!!!!  Having said that, I MUST present all prospective purchasers to this Board despite my knowledge of their discriminatory practices even though I know that any of the candidates mentioned aboved will surely be rejected by the Board of Directors.  Can you say "waste of time?" 

“In my mind, it’s so restrictive it takes away part of the job that the public has relied on brokers to do,” Ms. Kleier said. “To be able to tell them: Is this building a place where I’m going to be comfortable? Or if my kids run through the lobby, am I going to be looked at cross-eyed?”

Brokers are often hired for their expertise in a specific neighborhood or building, and not being able to share certain information will make a broker’s job that much harder, she said.

Mr. Garfinkel said that Ms. Kleier is certainly not alone in her apprehension. “A lot of brokers are concerned about the push-back from customers who feel that, ‘You’re my broker — why aren’t you helping me and answering my questions?’ ” he said.

Again, the only way to remedy this situation is to somehow stop the co-op Boards from discriminating.  I sincerely believe that most of my colleagues follow Fair Housing laws to a tee particularly since this latest push by brokerages to point out every letter of the law.  I personally no longer (yes, my entire industry asked these questions of everyone in the very recent past) ask my client’s their profession, marital status, or blood line 😀  Keep in mind however that as agents, we often spend large amounts of time with our clients who often share information with us solely as a result of conversation and a comfort level (perhaps a friendship) that develops over time.  Disclosing any of this information during the course of the transaction is what is to be avoided. 

An example of what not to do as a real estate agent:

Yesterday, my wife and I traveled out to Boerum Hill, Brooklyn to take a look at an investment property.  I immediately let the agent know that I was a broker but I was not looking to receive any part of the commission.  Within 30 seconds the agent said the following:

• "The people who live in the projects live in the best apartments they have ever lived in."  Quite presumptious a statement no?
• "If they ‘misbehave’ they will be evicted and that’s a ‘great deterrent’ for the neighborhood."  My jaw was hanging open at this point.
• He also shared the public school information telling us that we would have to apply to get into the "better of the 2 schools."  I’m sure he would have shared why one was "better" if we asked but I was afraid to hear what would come out of his mouth.

Obviously, he hasn’t been briefed on Fair Housing Laws and I suspect he’s going to get himself in a lot of trouble hopefully sooner rather than later.

In the meantime, we in the real estate industry ask fewer questions and let buyers make up their own minds about where they should live.  Go figure…a buyer making their own call…what a novel idea!