Last night, I received this email from Steven Spinola, the President of REBNY:
Dear Member:
Last Sunday the New York Times Real Estate section printed an article, Agents of Angst, which heavily criticized the residential real estate industry in its opening paragraphs. Detailing the experiences of one woman whose search for an apartment left a bad taste in her mouth, the article led the reader to believe that these occurrences are not the exception in real estate dealings but the norm.
I have written a letter to the editor, attached below, expressing my frustration in the paper’s perpetuating these myths and cited the Department of State’s handful of complaints as well as our own stringent Code of Ethics as examples of how seriously we take our roles. While we are all too aware of the stereotypes real estate brokers face, we also know how hard you work to satisfy your clients. An article suggesting otherwise is disrespectful to you, the real estate industry as a whole and just plain irresponsible.
Sincerely,
Steven Spinola
***
Dear Editor;
After reading your recent article Agents of Angst, I was very disappointed to see that your article took one or two bad experiences from two people and misrepresented them as common occurrences in the real estate industry. While I’m not suggesting these unfortunate events didn’t occur, they are certainly not the norm in real estate practice as your article suggests. In 2006, there were only 206 complaints brought to the Department of State by real estate clients in the entire borough of Manhattan. And as noted, the Department has received fewer and fewer complaints statewide each year. In addition, REBNY puts forth its own strict code of ethics, which clarifies licensees’ responsibilities to both their colleagues and to the public. If an alleged violation occurs, REBNY immediately handles it by voluntary mediation or binding arbitration. However few and far between, stories of unethical brokers are disappointing – disappointing to the public, disappointing to me and most importantly disappointing to my members, who have to work even harder to clean up the reputation of their industry. New York City real estate agents know the false stereotypes they must overcome, but if the Department’s dwindling list of complaints is any indication, they’re doing a good job of it.
Steven Spinola
President
Real Estate Board of New York
Now I absolutely appreciate Mr. Spinola’s efforts on behalf of his organization’s members. I am actually one of them. Don’t get me wrong, I think REBNY does some wonderful things for the industry and although they are in essence a "self-policing" organization, they do mostly succeed in getting their members to "play nice." Their code of ethics is also an excellent benchmark to keep members "ethical." And for the most part, the quality of agents who are REBNY members is superior to those who aren’t.
That said, I would bet that it wasn’t incredibly difficult for Vivian S. Toy of The New York Times to find examples of unethical behavior in the real estate industry. I think it’s a larger problem than Mr. Spinola wants to admit. Perhaps he actually believes that because only 206 people filed complaints with the Department of State, the "problem" is insignificant? I happen to think 206 complaints are significant primarily because I am of the opinion (I stress opinion here) that most people who feel duped don’t report the incident because they are embarrassed or feel that nothing will be done to "make things right." Furthermore, the "false stereotypes" that Mr. Spinola refers to aren’t necessarily "false" at all. There are indeed some bad seeds out there as I have encountered them myself. I know one person in particular who has changed his name 3 times because of licensing violations, not the least of which was steering. He is still a practicing agent with a very large firm. The very structure of the industry fosters opportunities for unethical behavior as I have written about before. It is imperative that I state here that the majority of people I have met in this industry are seemingly honest and well-intentioned professionals who make every effort to maintain integrity. And I think the article that Ms. Toy penned elucidates just that by describing the successes that the duped customer had when they found a better agent.
In closing, I believe that articles such as these are imperative in keeping the industry on its toes in remaining accountable for the actions of its "members." And let’s not forget that as good of a job as REBNY does in overseeing its members, a very large percentage of licensed agents aren’t members of REBNY and therefore aren’t obligated to follow any of its rules. I would agree with Mr. Spinola that the industry is improving its reputation but I think the Department of State has to play a larger role in policing the industry and holding unethical agents accountable for their actions.
Check out this month’s list of new residential construction (via the Real Deal). if you follow the links at the bottom of their page, you can also see previous month’s projects. An excellent resource!
As I have written many times before, the Manhattan real estate market sometimes baffles me. Yesterday was indicative of exactly the type of day that humbles me and reminds me that our local real estate market is indeed "twisted."
Highest, Best and Final
For those out there who haven’t been involved in a "bidding war" or have no idea what "highest, best and final" means, here goes. It is exactly what it sounds like. In the instance that a seller is fortunate enough to have multiple offers for their property, their broker will inform all prospective purchasers and their brokers that they have ONE FINAL opportunity to submit their highest offer. The best element refers to the terms of the offer such as flexibility with closing date and whether or not the purchase is contingent on financing. If an offer is contingent on financing, the buyer would be entitled to a refund of their 10% contract deposit if they failed to obtain a mortgage. If an offer is not contingent on financing, the buyer is still almost always permitted to get a mortgage but would forfeit the 10% deposit should they be denied financing.
So yesterday morning, I began fielding highest, best and final offers for one of the properties that I’m currently representing. One of the bidders held steady at a number about 5% below the asking price while others put their best foot forward. The offer that was accepted was approximately 8% above the asking price. Now a 13% spread between lowest and highest offer is considerable and puzzles me. The agent representing the lowest offer is advising her clients to be patient and that they will find something in their price range. The agent for the highest bidder indicated that she wasn’t surprised at the multiple offers, and that her clients really wanted this apartment. Both agents are providing sound advice based on their client’s current situations, but I’m curious to see how things play out for the lowest bidder and if indeed patience will pay off. Meanwhile, the highest bidder will be moving forward and eventually moving into a property that they look forward to calling home.
"We Really Want a 2BR for Less Than $500,000"
Me too!!! Within 30 minutes of wrapping up the second "highest, best and final" in as many weeks, I received a phone call from a potential buyer insisting that he wanted a 2BR for less than $500,000. Now this is someone whom I know, and I believe that if we were able to find such an animal, it would be just that…an ugly, cramped beast of an "animal" and probably not suitable for this buyer. But when he was informed that of this likelihood, his next comment was even more telling; "I’m thinking that since prices have come down, we should be able to get something that works for us in the $500,000 range." Has the market shifted that much in the past 30 minutes? Again, puzzling!
The Traditional Negotiation
So my day ended yesterday by assisting a couple in formulating an offer for a property for which I am representing the seller. For the record, it is a rare case indeed when a buyer comes directly to me without a buyer’s agent but this is the second time in the past 30 days that this has happened and to be perfectly honest, I much prefer when the buyer is working with their own agent. That said, I have found that providing buyers with all of the facts and accurate information is the only way to insure a smooth transaction without conflict. I also believe that as a seller’s agent, one should never ask the seller what their bottom line is. This makes the negotiation process honest and forthright: if neither side discloses their "deal" price, there is no chance of compromising the agent’s integrity. So after several emails of comparable units and phone calls to discuss market appreciation, price per square foot, premiums for such things as outdoor space and fireplaces, and discounts for walk-up buildings, the buyers formulated an offer they felt comfortable with. The offer has been submitted to the seller with a complete description of exactly how the buyers arrived at their offer (not always provided when another agent is involved). I’m awaiting the seller’s phone call to discuss a counter offer.
So What Does this All Mean?
- The media is confusing all of us.
- The real estate industry is of many mindsets and may be more confusing than the media.
- It is human nature to hear what you want and discard the rest, and the real estate industry makes a habit of usually providing you with what you want to hear.
- Making sense of current market conditions is no easy task for the professionals, much less for those who are putting their faith in these same professionals.
From multiple bids to a misinformed buyer to a more traditional transaction: the Manhattan real estate market continues to provide a little bit of everything. And all within a 24-hour period!
I’m insanely busy right now as the market continues to defy odds. I find myself in the midst of a 2nd "highest, best and final" scenario on behalf of my sellers in as many weeks and it appears that this property will also sell for a number above the asking price. So here are some interesting reads for the day and I will be back tomorrow with some interesting original content:
Most major media jumped on the NAR report yesterday of the biggest decline in existing home sales in 17 years. The first remarkable part of this story is that the NAR is behind the numbers and as most of you know who read this blog, I’m always skeptical of NAR stats.
The National Association of Realtors said sales of existing, or previously owned, homes fell 0.8% in December from the previous month to a seasonally adjusted annual rate of 6.22 million units. For all of 2006, sales of existing homes totaled 6.48 million. That was down 8.4% from 2005 and was the largest annual decline since 1989, when rising interest rates and relatively high unemployment fueled a housing recession.
But of course you knew the NAR would make every attempt to take the sting out of these numbers:
Even after last year’s sharp drop, 2006 was the third-strongest year for home sales since the NAR began tracking sales in 1968. And prices managed to move slightly higher in 2006; the existing-home median price was up 1.1% to $222,000.
And what will numbers look like in 2007 according to those economists interviewed by WSJ?
For 2007, many economists predict that sales will continue to fall, but at a more modest pace and with most of the decline occurring in the first half of the year. "The biggest drop is probably behind us," said Fannie Mae’s chief economist, David Berson. "But it’s still too soon to say this is unambiguously the bottom."
Surprise, surprise!!! According to the Journal report, Lereah thinks the fall will be almost non-existent.
Forecasts for 2007 vary widely. David Lereah, NAR’s chief economist, foresees a modest sales decline of 1.2% this year. Mr. Berson expects existing-home sales to drop 7% to 8%.
So what does this all mean for New York City. Well, based on current market conditions paired with the 4th quarter of 2006, not a damn thing! I have a big problem with "National" housing numbers that allegedly speak to a non-existent "National Market." There is no doubt based on my conversations with those in the know that many markets, in fact I would venture to say most, are still in the midst of a correction with some areas experiencing such depreciation that the word "bubble" may indeed be appropriate. That said, the current Manhattan real estate market has heated up yet again.
Yesterday, I was discussing 2006 market conditions with a colleague for whom I have a great deal of respect. We and others in my industry concur that June through October 2006 was probably our slowest period over the past 10 years but the moment the media reported the good news regarding Wall Street bonuses, the market picked up steam. Of course, the stabilization and even fall of mortgage rates paired with more realistic asking prices aided in resuscitating a market that many in the business thought had officially cooled.
Now the chatter in the New York City marketplace is that business is booming again with some appropriately priced properties fetching multiple bids and some even selling above the asking price. Two weeks ago, I and my team had more than 60 people attend an open house and we received multiple offers over the asking price on a property that had been on the market for 3 months. Much of the property that I and my colleagues have had on the market since October has been snatched up at incredible prices over just the past couple of weeks. I’m hearing similar reports from many of my colleagues. The common element to all of these transactions seems to be a reasonable asking price.
I’m curious to hear from buyers, sellers, and real estate industry experts across the country to get a feel for whether or not Manhattan is truly an anomaly or are others out there having similar experiences?
I know this is a bit late for most and I apologize for not posting this january 3rd when I initially recieved it, but better late than never. And for for those few who missed those 4th Quarter numbers, here are the highlights from Prudential Douglas Elliman’s 4th quarter residential real estate market report:
* The average sales price increased 3.2% to $1,224,840 over the prior year quarter average of $1,187,404 (5% below the prior quarter of $1,288,748).
* The average price per square foot fell 0.4% to $998 over the prior year quarter result of $1,002 (5% below the prior quarter result of $1,050).
* The median sales price increased 5.1% to $799,000 over the prior year quarter median of $760,000 (5.5% below prior quarter median of $845.147).
Studios showed the most gain in market share this quarter; the downtown and uptown markets posted gains in average price per square foot. "It says a lot for New York City that it has held its own in a time when markets across the country have seen drops," says Dottie Herman, President and CEO of Prudential Douglas Elliman, the company that distributes the report. "I anticipate a 2007 with a strong, healthy and balanced market in New York City."
Co-op Market
* The average sales price of a co-op this quarter was $1,047,219, up 2.7% from last year at this time but down 3.8% from the prior quarter. Median sales price showed a similar pattern while average price per square foot fell from both the prior quarter and prior year quarter figures.
* Inventory levels for co-ops fell 10.7% to 3,054 units as compared to the prior year quarter total of 3,421 units. Co-op listings are comprised of nearly all re-sales, with limited new co-op development added to the housing stock.
Condo Market
* The average sales price of a condo this quarter was $1,486,057 this quarter, up 7.5% from last year at this time but down 1% from the prior quarter. Median sales price showed a similar pattern but more exaggerated while average price per square foot increased from the prior quarter and prior year quarter figures.
* Inventory levels for condos totaled 2,880 units, up 13.3% from the prior year quarter total of 2,543 units. The gain in inventory is primarily attributable to new development, but the general pace of growth appears to be easing.
Luxury Market (upper 10% of all co-op and condo sales)
* The luxury apartment market showed 3-6% price gains this year with an average sales price of $4,324,189 but was down 1-3% from the prior quarter. The other price indicators showed similar patterns. The average days on market fell by 10 days to 151 and the average listing discount was 3.6% down from the prior quarter average of 4%.
Loft Market (co-op and condo sales)
* The loft market saw a similar price pattern as the overall market. The average sales price was $1,847,508, up 11.9% over the same period last year but down 6.4% from the prior quarter.
Quite different from the NAR’s "national" housing numbers and just further indication that there is NO "NATIONAL" housing market.
Local news station NY1 has released some additional information about the groundbreaking to occur for the 2nd Avenue subway line in just a few weeks. You can find an even more detailed description of the construction plan as well as a map of the line on the MTA’s website. And New York Magazine writer Greg Sargent provides some excellent background and history of the project in his article The Line That Time Forgot. NY1 reports:
In a few weeks, say MTA officials, they will award a $333 million contract to build what they call Phase One.
"This is real now, and it is happening,” said Mysore Nagaraja of the MTA Capital Construction Corporation. “And we are excited about it."
The line that will eventually be known as the T will be simply an extension of the Q train, at first, running from 63rd Street to 96th Street.
Now I have heard mixed feelings from all of those I know who make the Upper East Side their home and the reviews are mixed but with a greater number of people welcoming this project. Like most of my friends and colleagues who live between 63rd Street and 96th Street, which is Phase One of the project to be completed by 2013, I believe that the addition of this subway will directly and positively affect real estate prices in the area. Over the past 15 years that I have been in the real estate industry many of the "bargains" available have been on the Upper East Side in the Yorkville area east of 3rd Avenue. In fact, as many New Yorkers know, this area has been home to many returning college graduates because of the good real estate values available. Normandy Court on 96th Street has been dubbed "Dorm"andy Court for just this reason.
I suspect that the addition of more convenient public transportation in this area will result in an appreciation of property values to levels that bring more parity to the surrounding neighborhoods. Of course there will be some growing pains as the construction takes place but according to the MTA and those in the know, the "mole" as they call it that drills through the bedrock is so superior to any used in the past that residents in the area won’t hear or feel the digging. That remains to be seen, but as many of us know, with pain often comes incredible growth and the fact that the day has arrived to begin completing a project that was last attempted in the 70’s is good news for all Upper East Siders.
Writing descriptions of property for online and print advertising is an important part of a real estate agent’s job. In my experience, nothing sells better than an honest description of a property that manages the buyer’s expectations and results in a pleasant experience for the buyer when they first visit the home.
Redfin blog (for those who don’t know already, Redfin is one of the discount options for sellers and buyers) has a great post today about the "locution" of a property’s description. There have been numerous articles about this subject over the years and my advice for sellers is to stear clear of the adjectives like "cozy" which generall denotes small and "charming" which almost always means dark. And check out these stats that Redfin blog provides:
Homes where the seller was "motivated" took 15 percent longer to sell
Houses listed as "handyman specials" flew off the market in half the average time.
Words that denoted "curb appeal" or general attractiveness helped a property sell faster than those that spoke of "value" and "price."
Homes described as "beautiful" moved 15 percent faster and for 5 percent more in price than the benchmark.
"Good-value" homes sold for 5 percent less than average.
I am a big proponent of "beautiful" but have also used "motivated" in my descriptions. Based on these stats, my sellers are no longer "motivated," but their properties are indeed "beautiful." In all seriousness, the most important factor to remember when describing property is that the prospective purchaser is actually going to SEE the property you’re describing so be honest and accurate. There is nothing worse than visiting a property with a buyer whose expectations are based on an inaccurate description (i.e. the agent fails to state that the apartment is a 4th floor walk-up).
The insanity that is Manhattan real estate continues to baffle many of us as Curbed posts about this 700sf studio apartment at Richard Meier’s 165 Charles Street that has an asking price of $2.1M.
Corcoran broker Jon Capobianco must have balls the size of tyrannosaurus eggs. In this era of market correction and slight PriceChopping, Capobianco is shooting for the stars, listing a client’s 700-square-foot West Village studio apartment for $2.1 million. True, it’s in Richard Meier’s 165 Charles Street—with all the fancy amenities and finishes that building offers—but the Sun’s headline kind of says it all. The only other $2 million studio listed in the city is an 870-square-foot Plaza unit with a Juliette balcony, which sounds very lovely. So what gives? Well, you can’t really argue with this logic:
"I get calls from Deutsche Bank guys who say, ‘I stay at the Four Seasons and I’d love a place in the city with a pool and a gym,’" Mr. Capobianco said. "You get the same finish as the $10 million apartments upstairs."
So what do you think? Will someone shell out that much scratch to rock a pied-a-terre with a Murphy bed? It’s the address that impresses, after all.
I know, and actually have a great deal of respect for, Jon Cappobianco who is the agent representing this property. That said, I would have a difficult time keeping a straight face while showing a property like this and "selling" it’s features: excellent building amenities and a queen size murphy bed! Even in today’s market, there are so many more options for $2M that make much more sense. Maybe Jon has the inside scoop that the next door neighbor MUST have the apartment, thus the big price tag but that is a hell of a premium to charge the neighbor. Whatever his reasoning, my money says he sells it and we all look like fools for questioning his pricing.
