It’s no secret that the prime marketing time for selling a home occurs during the first few weeks of it’s listing. Don’t just take my word for it. "Your home should be priced right from the very beginning," according to Jonathan Miller, President and co-founder of Miller Samuel Real Estate Appraisals and Consultants and author of Matrix, his blog which is "an attempt to cull together items of interest or relevance in the real estate economy." He has been compiling data on the Manhattan Real Estate market for over 20 years and the creator of the Manhattan Market Report. We asked Mr. Miller some questions about his perceptions, based on hard data, of pricing and how it affects a seller’s bottom line.
TG: Is it a misconception by sellers that listing their home at a value higher than market is a good marketing technique?
Miller: Actually, we find the strategy of listing "high" to be detrimental to the price achieved for the property. It is better to price properties closer to their current values. We define an over priced listing as a price that is more than 5% above market value.
TG: Can longevity on the market create both a stigma for the property and the Sellers?
Miller: Yes, the impression the property makes to the brokerage community is that the seller is either difficult to work with or has unrealistic expectations of value. The average days on market – defined as the number of days between the last price change (if any) to contract date – is 120-150 in a balanced market with no price appreciation.
TG: So, in your opinion, based on your knowledge of data specific to Manhattan and your expertise on trends, could we say that Sellers will see their homes sell for a lower and more significant price difference if pricing isn’t accurate?
Miller: Correct. On a simple clerical level, properties that are over priced, do not come up in a brokers listing search for their prospective buyers.
TG: Is it true that although Manhattan homes may sell faster in this market, that margins can still be affected by poor pricing strategy?
Miller: Correct. It has been our experience that properties in Manhattan, priced out of sync with their value, will usually sell for less than their potential.
Further evidence that proper pricing proves a priority in procuring a purchaser at peak price. If you don’t believe me, ask Peter Piper!
YES…BUT…
How often does money cloud judgement? All too often I would guess.
The impetus for this post is a transaction in which I was recently involved where buyers purchased a property that I wasn’t particularly excited about. Who cares about my opinion? Oddly, most of my clients. That said, my clients ultimately make the final decision based on how a space suits their needs. Although I expressed my negative views about the property, it was indeed challenging to remove my personal opinions of layout, light and location to provide an objective and professional opinion of the "quality" of the purchase as it applied to the buyers. They were looking for the maximum amount of space they could find for the least amount of money and this apartment served that purpose and more. So the fact that I wouldn’t live there had absolutely nothing to do with this transaction.
In my effort to provide honest feedback and advice, I struggled a bit with exactly what I should tell them and what I should keep to myself all the while staying mindful of the fact that the transaction is less important than the relationship. I would never withold my opinions in favor of selling a property I felt wasn’t "right" for my clients, but I suspect many in my industry would. In fact, I have seen colleagues show a property I was representing at 6% commission and have nothing positive to say about it. Some of those same colleagues revisited the property with different clients when we were offering 8% commission and waxed eloquently about how wonderful the property was. A direct result of how the sale would affect their bottom line.
In order to avoid this situation in my own business, I go to great lengths to understand my clients position and perspective in searching for their next home. I try to keep my personal preferences out of the equation unless I’m directly asked for those thoughts. It’s not about me, but about how this property works for the clients and it isn’t always so easy to separate the two.
So if you’re a buyer working with an agent to find that next home, ask yourself or your agent the following questions:
- Do you trust this agent to give you honest feedback and advice based on your needs?
- Do you suspect the agent would tell you anything to close a transaction?
- Ask your agent to prepare a market analysis of any property that you’re considering and do your own homework with a site like StreetEasy.com.
- Have you been thorough and specific with the agent regarding your needs?
- Is the agent your working with transaction oriented or relationship oriented? Ask them how long they typically work with buyers. In my experience, those who spend more time with buyers are typically more relationship oriented and that’s what you want. Of course there are also those who are so damn good and this that they find buyers what they want very expeditously.
There is quite a buzz across the industry about the Fair Housing Act with many of my colleagues sharing stories of company meetings focused on fair housing law and practices to prevent liability issues in the industry. A great idea to train and brief agents on how to abide by these laws, but in 15 years in the business, I’ve never seen such attention paid to this matter (just today a client of mine asked what kind of people lived in the building and the agent wisely responded, "I can’t tell you that.")
The following excerpt is directly from my companies weekly sales meeting. An attorney from a very reputable law firm spoke to everyone in our office. He discussed Fair Housing Discrimination.
Discrimination is the intentional policy or practice that results in unequal treatment of a person or persons in a protected class. He (the attorney) focused on co-ops. From his perspective it is not relevant what co-ops do. Neil is here to protect the broker.
What are the penalties for violating Fair Housing Laws?
$11,000; $27,500; $55,000; $111,000; $250,000. These are all prescribed penalties for violating fair housing laws. You can also be sued for actual damages and punitive damages. You cannot afford to be sued for a fair housing violation. You would be professional ruined, financially ruined and personally ruined. You can be sued and since Prudential Douglas Elliman is responsible for you they will be sued as well. To avoid these problems you need to follow equal professional services. You need to treat everyone equally and be professional at all times. He suggests that you develop a system of record keeping. You should document every visit and every phone call that you make. You should have a folder for each client, so that when you meet someone you ask the same questions every time. This is extremely important. He strongly recommends coming up with an intake form. It enhances professionalism, and you ask the same questions. You treat people the same way every time you meet them.
This attorney also suggests that you listen. Some brokers listen to what someone has to say and then they immediately tell them all the things that they think they want to hear. The truth is that you need to listen to what your potential customers are asking you for. What areas are they looking for; what apartments are they looking for. You need to listen more. (Just Shut up)
Do you return all your phone calls? You should have procedures on how you answer all your phone calls. If you get a phone call – you should return it. Treat everyone equal and educate yourself. Educate yourself about the laws and about fair housing. He recommends that you use Fair Housing logo’s on all of your advertising. After you introduce yourself to your potential customer you should tell them that you are an advocate for all fair housing laws and you subscribe to fair housing. It gives you the ability down the road when you are asked a question that is clearly volatile of fair housing to turn around and say "remember we had that discussion about fair housing, the question you just asked me would be a violation of fair housing and I can’t answer that question. Your answer lets them know that you support fair housing.
Testers – You don’t always know when you are being tested but usually you have a sense when you are being tested. A lot of testers are going to new developments. The testers are here to make you fail. They will badger you. As members of REBNY you subscribe to a Code of Ethics and part of that Code of Ethics states that you agree to comply with all local, state and federal laws. NYC has the most comprehensive list of protective classes, even more than federal and state law.
Protective Class – A protective class is a group of people who share common characteristics and are protected from discrimination and harassment.
What you can and cannot do? Listed below are unlawful practices.
• You cannot refuse to sell, rent or negotiate with any person or otherwise make the dwelling unavailable based on a protective category. For example you can’t say you won’t sell to a person because they are a particular faith.
• You cannot change the terms, conditions or services for different individuals as a means of discrimination. For example, you cannot say families with children will have to pay higher rent.
• You cannot represent that a dwelling is not available when it is available.
• You cannot create print materials or advertisements in a matter that either directly or indirectly expresses a discriminatory preference or limitation. For example, you cannot say you specialize in a particular group of national origins.
• You cannot steer perspective purchasers or renters to or from an area based on the makeup of that particular area.
• You cannot block bust or create a perception that a neighborhood is changing.
• People cannot be denied membership in a multiple listing service or real estate broker’s organization based on a protective class.
• You cannot threaten, coerce or intimidate individuals because they exercise their fair housing rights or assist others in doing so.
• From a lender’s prospective the lender cannot alter the terms or conditions of a loan based on a protective category.
• Lenders cannot indicate a particular area where they will not lend in.
Who is liable? Any person who has the authority to rent, sell or deal with applicants who are a resident of a housing accommodation may be liable for unlawful practices. This includes landlords, superintendents, managing agents, co-op board members and real estate brokers. Similarly newspapers or other publications in media that print discriminatory advertising can also be held liable for the ads that convey discriminatory language.
What can you do? Housing providers do have the right to screen applicants. They can set financial and credit qualifications provided all inquiries are applied equally. This goes back to the intake form. You have to ask the same questions and the same criteria for everyone. If you are going to ask for income, W9’s, pay stubs – you ask this from everyone. You can run credit checks. You can ask for work and landlord references. You can conduct interviews. You have to require the same documentations for everyone that you meet. You cannot discriminate in any circumstance based on someone’s race or color.
Co-ops – You have to assume that when you deal with a co-op that all co-ops are required to follow all fair housing violations. They are not allowed to discriminate. Even if you think that they do, you have to assume that every co-op board subscribes to all fair housing laws and is doing the right thing. There are cases where co-op boards have been found guilty of fair housing violations and discrimination. Coop boards and their ability to reject is under scrutiny. Coops can reject because someone is eccentric but they cannot reject based on occupation. There are two bills pending in the state legislature. There are local bills pending that would require coop boards to give a reason why they rejected someone. Suppose you are suggesting that you heard that a co-op discriminates and in reality they don’t discriminate. You make a decision not to take your customer there. You may have hurt a potential seller, you may have hurt a potential purchaser and you probably hurt a co-op board as well. If you are telling people that a co-op board discriminates then you may be liable for slander. You need to think about what you are saying and what you are conveying to people.
The Co-op Application – Who lives in the building? Your response should be “There are lots of people who live in the building”. Why are you the best person to tell your perspective customer who lives in the building. Let them stand outside in the morning or sit in the lobby if the doorman will let them. Let them make the decision.
Citizenship – You cannot ask if you are a US citizen because citizen is a protective class. You can ask if they have a bank account in the United States and what is their financial make-up. If they don’t have any money in the US then they might not be able to afford to meet the financial criteria. A diplomat is a status (not a protective category) as long as all diplomats are treated the same way a coop board can say unless they are going to waive their diplomatic immunity, unless they are going to put a year’s maintenance into escrow they are not going to allow them in the building and they can do that. Coops can say that they will only permit people who this will be their primary residence. You can’t ask for a marriage license to see if they’re married. You can’t ask for a birth certificate to see where they were born.
Occupation is a protective category. A lot of applications ask what your occupation is. You cannot ask this question. You can ask if they are employed and what company they work for. Why is it relevant what your occupation is? What really matters is how much money you have in the bank.
How do you deal with the other broker who asks what your client’s occupation is? You should tell the other broker that you can’t answer that question. Why is it relevant what your client does for a living?
What if a client volunteers their occupation to you? What was the context and how did it come about? You should not share that information with another broker. You should be very careful about what information you are divulging.
Board applications- What should you do when they ask occupation and US citizenship – Should you leave it blank? There is a difference between typing the form and filling out the form. Do not go through every question of the application with your client. You should not be the facilitator. Have them fill it out. Keep a copy of the typed and the handwritten version so there is never a question about what was on there. If you have a customer who does not want to answer the occupation question. The attorney suggests having them star* it and write they are not comfortable answering the question and by law they don’t feel they have to. Everyone feels that they will be rejected by the board. Your argument would be that by doing this they are putting the board on notice and the board will be less inclined to reject based on that. Neil feels it will be the opposite and they will recognize that that is not the right question to ask.
Advertising Terms– Be very careful about what you say in your advertising. Always have a manager approve it before you send it out.
In conclusion, the Department of State will be cracking down on people who take listings from other sites and put them on their own sites. The attorney believes this is a violation of the REBNY code of ethics and the Department of State. He is going to continue to pursue this and will keep us updated.
What’s so shocking about all of this is how many people in my industry violate these laws each and every day. For those who do…study this and change your practices.
Check this out courtesy of Boing Boing.
The ultimate holdout. This guy in China won’t sell to the developers for less than £1.3 million so they dug a huge moat of sorts around his house. Can you say determination…on both sides? Now how in Sam Hill does he get in and out of that house?
This brings up the subject of how aggressive can a landlord or developer be in vacating a property for demolition. If a landlord wants to demolish a building, tenants must vacate the property. A group called Housing Conservation Coordinators, Inc points out that some landlords may actually file for demolition and not carry it out:
Phony Demolition
By law, tenants are not required to move out of their apartments if a landlord wishes to renovate their building. If, however, a landlord decides to demolish and construct a new building, tenants must vacate their apartments. In order to demolish, a landlord must file a claim with the Department of Buildings. In the case of a phony demolition, a landlord files for permission to demolish, and forces the tenants to leave, but, in fact, just renovates the building. HCC is working with local elected officials and housing groups from around the city go ensure that landlords cannot force tenants out of their apartments by pretending to plan a building demolition.
I don’t think the aforementioned Chinese development group is planning a phony demolition.
And for those who aren’t facing a demoliton but are being harassed, HCC says this:
Tenant harassment is a frequent occurrence, not just in Hell’s Kitchen, but all over the city. Frivolous lawsuits, intimidation, and refusal of services are just some of the forms of harassment many tenants face. As it stands, harassment is not grounds for a lawsuit filed by a tenant. HCC organizers are working with the Association for Neighborhood and Housing Development and other community organizations to strengthen tenants’ rights on this issue. The proposed legislation seeks to make harassment a cause of action under which a landlord can be sued.
This is stunning to me that a tenant can’t sue for harassment. I’m not buying it! Any attorneys out there to support or refute this claim?
The Carnival is up at The Phoenix Real Estate Guy. Check it out.
As the press goes on another witch hunt, this time after the rat infested KFC/TacoBell in New York City’s trendy Greenwich Village neighborhood, some want to know how something like this will affect property values. I was interviewed yesterday for a story today in the NY Sun by Jennifer Lee entitled Rats and Resale: Can Rodents Affect the Bottom Line. As far as rats and rodents go, I don’t particularly think that property values will be greatly affected by something like this. It’s been said that rats exponentially outnumber people in New York City and it hasn’t done much to property values thus far. Having said that, there are indeed some instances that I have personally experienced where a neighbor, either residential or commercial, has had some affect on a property owner’s bottom line. The beauty of this blog is that I get to elucidate upon that which was quoted in this article. So here goes:
- I once represented a seller of an apartment in a building shaped like a U. In the center of the U was a ventilation stack for the bistro that occupied the first floor. The smell of old grease permeated every apartment that faced that stack and made it incredibly difficult to find a buyer for the home. Most had no desire to live there and eventually when someone did show interest they used this ventilation stack as a bargaining chip to procure a reduction in price…it worked.
- Several years ago the press was going crazy reporting about "toxic dry cleaning chemicals" and the potential harm for those who lived in close proximity to dry cleaners. I actually remember having at least 1 or 2 people contact me to purchase apartments and specifically ask not to be shown properties above dry cleaning establishments. Quantifying the affect of this story is virtually if not totally impossible, but I suspect that it did thin the pool of buyers for these properties.
And it’s not just commercial tenant/neighbors who may affect value:
- Awful Smells: I once represented a seller who had an elderly neighbor with multiple cats. The woman had hospice care so it was very difficult for her to keep her home clean and odor free from the cats. The smell of urine was so strong that we never found a buyer (in perhaps the hottest real estate market in NY history) for the apartment and the owners are still living there.
- Bizarre Tenants: When I first started in the business in 1992, my boss at the time shared that he walked into an apartment with a customer and the tenants were barbecuing monkey (no joke…monkey) on a grill in the living room! Black smoke was bellowing upwards, across the ceiling and out an open window. The pungent, sour smell brought tears to your eyes. Needless to say, the buyers weren’t interested and the property didn’t sell until these tenants were gone.
- Loud Noises: Barking dogs can be obstacles too. I finally sold a property just recently which had an "anxious" barking dog next door. EVERY time I showed the apartment, the dog barked incessantly. Most prospective purchasers were greatly turned off by this.
So what can a seller do when faced with any of these issues? In the case of proximity to dry cleaners or restaurant ventilation systems, not much. Just hope that you find a buyer like yourself who isn’t concerned with these neighbors. As far as residential neighbors like those mentioned above:
- Offer a cleaning service: I only thought of this now but it would have made a lot of sense to offer the elderly woman with the cats a professional cleaning service on a weekly basis to help sell the neighboring apartment. A small expense that could pay big dividends…or in this case…any dividends.
- Communicate with your neighbors: In the case of the cooking monkey, my bet is that the owner of the apartment would not have approved of this had s/he known that the tenants were grilling in the living room. In other instances, simply keeping your neighbors informed of showings and open house schedules may do the trick.
What should a buyer do to protect themselves from situations like this? Ask questions…lots of questions of your attorney and the seller’s agent. Make sure that your attorney is effective and thorough with due diligence. Things like odors, rodent or insect problems, and problematic neighbors may in fact be recorded in the Board’s minutes…a MUST read!
Finally, I want to be abundantly clear that I don’t believe that the rats at KFC/Taco Bell are going to ultimately affect the price of property in the surrounding areas. That said, I wouldn’t put my home on the market until this all blows over and don’t be surprised if a buyer makes an attempt at leveraging the "rat news" in an attempt to get a price reduction. If your apartment is already on the market, no worries as this too shall pass.
During my daily reading of my friend Noah’s blog, Urban Digs, I was reminded that he and I were just featured in a New York Magazine piece by S.Jhoanna Robledo entitled When Brokers Blog. Check it out if you haven’t already seen it.
During the housing boom of the past decade in New York City, I have seen a noticeable trend of people who once believed the grass was greener (or that any grass at all was attractive) in Westchester, Connecticut, and the suburbs of New Jersey, moving back to "the city" out of the convenience the it provides or just plain boredom with the Burbs. Zillow blog’s post Confessions of an Empty Nester gives some valuable anecdotal insight to one couple’s move from the suburbs of Seattle to an urban condo in downtown Seattle.
We now live in the middle of downtown Seattle in a condo that’s less than half the size of our last House. Our 3,200 square feet of Texas sprawl has been squeezed down to a cosmopolitan 1,200. We’ve gotten rid of most of our furniture, clothes, and surplus artwork, and all of our meaningless “stuff.” We’ve chucked the lawnmower and garden tools, and pared our dishes down to enough for only four. And best of all -– most gloriously of all -– we’ve sold our three cars!
Our everyday lives have changed in every way imaginable. We don’t own a car, so we walk everywhere, including to and from work. We use the bus or ferry if we want to go farther afield. This has had a profound effect on how we interact with people. We realize now that the cocoons of our cars kept us well insulated from the people around us. Our genuine interactions were with family and coworkers, the only people who saw us stripped of the metal that clothed and protected us. Our neighbors, we discovered, were virtually strangers.
Now, we stand face-to-face with people in our building’s elevators, at our corner hangouts, and on the sidewalks. We chitchat and pet our neighbors’ dogs. We exchange “good mornings” with the people we pass everyday on our way to work. We’ve developed friendships with several proprietors and servers at our favorite restaurants.
This post on Zillow blog is perhaps the best and most eloquent argument I have read thus far for why life in the city is far superior to that of suburban sprawl. I moved to NYC in 1989 from the suburbs of Baltimore (can you say BORING?). And although it took this suburban Baltimore boy about 10 years to feel comfortable in Manhattan (I didn’t leave my apartment for 4 weeks without my girlfriend when I first arrived here), I simply can’t imagine raising my family anywhere else. The culture, the restaurants, the schools, the people: the best in the world in my opinion. Perhaps this is another reason that New York City real estate continues to appreciate while suburban markets across the country are literally collapsing?
It’s not just empty nesters either. They do make up some of those who are coming back "home," but many of the purchasers whom I meet are young families who thought they wanted the suburban lifestyle only to desperately miss all that urban life has to offer. And many of those who I have worked with in the past 10 years who have explored both urban and suburban options have chosen the city to raise their families. The following excerpt from the same Zillow blog post is precisely why many, whether it be Manhattan, Chicago, Seattle, San Fransisco, or Miami, prefer to call "their city" home:
One warm, sunny day last autumn, we wandered over to the park where a big band was playing great 40’s music. Several older couples were jitterbugging and waltzing, having the time of their lives. We grabbed some lemonade, sat in the shade, and watched and listened. As the lines of time on the dancers’ faces disappeared and their spines straightened just a little; as their eyes brightened and their laughter mingled with the birdsong above us, we looked at each other and smiled. We knew we were thinking the same thing. We might not have The House anymore, but we were most assuredly home.
