Understanding The Lag w/ Quarterly Reports

Posted by urbandigs

Tue Feb 2nd, 2010 10:42 AM

A: Thanks 'jjfashion' for your comments to yesterday's discussion on real time broker status updates to Contract Signed and how the market was faring after the first month of the new year. To hear this guy say it, "To suggest anything other than what is supported by closing data is low integrity unless you disclaim it explicitly...". Now I wont disclaim the quarterly market reports, which happen to consistently vary from one brokerage firm to another, but I will continue to defend how lagging these reports are and how one of the mission's of this site has always been to try to close the gap on what is happening out in the market today and what the lagging reports tell us. In the end, the best information we can get on current market activity and strength is where these contracts are being signed right now and how the pace of contracts signed changes with time!

If you guys know a better way to consistently find out where contracts are being signed today, I'm all ears! The only ones that know this information are the buyer, seller, brokers, attorneys, lender, managing agent that processes the purchase application and the board that will ultimately approve the purchase. It is true that I am just one man and that discussions on this site are taken directly from my business in the field, putting bids in on multiple properties for clients, talking to my colleagues after they go to company sales meetings, talking to sales managers I keep in touch with, and interpreting the real time data I get updates for about 6 times a day directly from one of the distributors of the REBNY broker sharing system. As I stated clearly yesterday and many times before:

"For now clearly buyers and sellers are agreeing somewhere out there - I'm just trying to figure out where!"
It's a constant challenge to figure out where deals are being signed today and I love that challenge!

Now, lets move on to understanding the big time lag with these quarterly reports whose data is based on a collection of closings captured by public record - to get there a number of things have to occur and as readers of this site know I focus on WHEN THE CONTRACT WAS SIGNED as the snapshot in time that defines how the market was doing when the deal was made:

LAG #1: Broker Status Updates - The data is only as good as the agent that updates and maintains the listing. As good as Streeteasy, NYTimes, and Broker Sharing systems are, if the agent does not change the status of a listing from ACTIVE to CONTRACT SIGNED, we will not get that update! So the first lag is the one directly from the agent servicing the listing who is in charge of updating their webad using the broker sharing system provided by their employing brokers. Corcoran uses TAXI, Elliman uses LIMO, and Halstead/BHS/Sothebys uses RealPlus. Other firms use OLR. In the end, the updates are supposed to be immediately shared with all REBNY member brokerage firms and their agents. I find there is usually a 1Day - 14Day lag between when a contract was actually signed and when the broker updates their listing to be shared.

LAG #2: Purchase Application - Generally, Co-op purchase applications are a bit more tedious and time consuming than ones for a condo. Since condos have a 'right of first refusal' board process as opposed to a stricter 'review and interview' process for co-ops, I find co-op buyers spend more time making sure all requirements are exactly as requested and the package is as meticulous prepared as possible. This takes time to gather business and personal references, tax returns, all statements to verify assets, landlord/mgmt letter, employment letters, complete purchase application, etc..

LAG #3: Loan Commitment / Aztec Forms - As we all know, the underwriting process is quite different than it used to be; banks actually check everything and verify that you can qualify to secure financing for the transaction. Additionally, recent HVCC code changes require outside appraisals rather in house ones. All in all, the goal is to get that commitment and aztec forms (for coops) as required if there is financing in the deal; which most deals have. Since there is an overlap with LAG #2 during this part of the process, usually the loan docs are the final piece of the purchase application needed to complete the package for processing. I am seeing loans take anywhere from 3 weeks to 6 weeks these days to come in.

LAG #4: Management Processing - Everybody wants the managing agent to process their package fast! But we all dont get what we want. I find it takes anywhere up to 2-3 weeks for management to fully process a purchase application and send it over to the board for review.

LAG #5: Board Review - In a perfect world, the purchase application will be reviewed within days of receipt by the condo or coop board. But this world is far from perfect. Depending on how your board handles purchase applications, you may have to wait for the next meeting for the package to be reviewed. I find this board approval process to generally take anywhere from 10Days-4 weeks upon receipt of the fully completed and processed package. If I get a package reviewed and approved within 10 days of receipt, I find myself lucky!

LAG #6: Closing - After the co-op approves the deal or the condo waives their right of first refusal, the attorneys will start to work on coordinating a closing date. This date must be agreeable by the purchaser, the seller, the buyer's lender/seller's payoff bank, and the managing agent handling the transfer. Either buyer or seller can also delay the closing a bit if that is preferred before one of the attorneys issues a TOE to get things moving. Generally I find that my closings take place about 1-2 weeks AFTER the approval comes in from the board to close the deal.

LAG #7: Public Record - The final lag for the deal to be captured by the quarterly report! This can take anywhere from weeks to months! If public record happens to capture and record the sale right after the cutoff date for quarterly report inclusion, well then it needs to wait for the next quarter's report!

All of these forces contribute to the lag it takes for a listing to be captured for inclusion into the quarterly report that is released to the public and interpreted as conditions that exist today. That is where I try to come in and explain the flaw.

But don't take my word for, MillerSamuel's Methodology site clearly explains this Public Record lag to you:
Quarterly Manhattan Market Overview: A quarterly analysis of co-op and condo sales in Manhattan. Unlike the stock markets, apartment sales data continues to fall in the prior quarter as it becomes available because sales are usually not recorded at time of closing and may lag the closing date by several weeks or months. However, in order for the report to be useful and timely, the report represents a reliable analysis of market conditions during the quarter based on the sales data obtained by the end of the quarter.
Bam! Right there, in black & white, disclosed to you the lag of several weeks to months for the closing to get recorded and included in the quarterly reports. That is the nature of the data of the quarterly reports!

But if you want me to make it even easier for you, let's take one of my recent closings as an example; with my client's blessing of course:

67 Riverside Drive - Apt 9A

  • Entered Contract October 26, 2009; deal reached 2 weeks prior

  • Streeteasy Caught Update 1 Day Later

  • Sold January 11th, 2010 (document date)

  • Recorded/Filed Date January 25th, 2010

  • Won't Be Included Until Q1 2010 Report released April 2nd, 2010


  • So, here we have a transaction that was signed into contract October 26th after a 2 week attorney diligence review period that due to the lags mentioned above will not be included into the Manhattan Quarterly Reports until Q1 2010 is released April 2nd, 2010! So, when the report is released in April it will contain this one transaction that was representative of the market conditions in mid October, 2009, some 24 weeks earlier!

    Is it possible that where contracts are being signed in March right before the Q1 2010 report is released, have changed a bit from when this deal was signed? The answer is YES! But this is all we got right now and what many are using to analyze and interpret where bids for Manhattan property seem to be coming in today! This is the gap I am trying to fill. Apparently, some people cant take it and say that to ignore these reports as indicative of today's market is to degrade my integrity! Okay then....


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