Can a property be priced too low?

I am constantly reminded of the general inefficiency in the market when it comes to pricing properties. (As you might expect, the pricing part (“the ask”) has a much greater tendency towards inefficiency than the closing price, which has the benefit of incorporating the demand side of the transaction equation.) Nowhere does this stand out more than when looking to the land of FSBOs, and looking at wildly aberrant swings of pricing too high or pricing too low.

About a month ago, I posted the following on TAP (The Apple, Peeled):

The theory goes that FSBOs (for sale by owners) offer better deals to you, buyers, because they save on the typical 6% commission and can pass those savings on to you. We thought we would take a sampling of properties at different price points, and see if this theory holds water. (Of course, all we have to count on is the asking price, so bear with us.)

420 E 55th Street
FSBO: asking $575k for apt 1B
Broker: asking $550k for 9B, on the market 13 weeks

301 E 79th Street
FSBO: asking $740k for apt 8N
Broker: asking $650k for 17N, on the market for 17 weeks

299 W 12th Street
FSBO: asking $1.55mm for 15k
Broker: asking $1.47mm for 6K, on the market 25 weeks

It’s not surprising that pricing comes in above broker-represented properties. Back in 2006 when Urban Digs conducted a similar experiment, he yielded similar results. Just because owners save that 6% doesn’t mean they’ll trickle down those savings.

Now for the other side of the coin: when we dug into the FSBO listings for analysis, what we found is really a bifurcation of property pricing … a bi-polar pricing pattern, if you will: either pricing above market, as the above suggests, OR pricing significantly below building comps or below market. This begs the question of how much money they may, in fact, be leaving on the table for the sake of saving the broker commission.

This last piece is the part that I’d like to point to and question: the concept of under-pricing. Said in a different way: is there such a thing as pricing a property too low? Way back in November, a nice little conversation was started around this very premise. At that time, Noah commented that:

I find that sellers feel that they are GIVING AWAY MONEY if they price their unit at or slightly below where it likely should trade given market conditions and comps. The seller response is something like..."well, I know it should sell for around $1.5M, but how will we know if we cant get $1.6M if we don’t price near $1.8M"? So, they price at 1.8M, listing gets no traffic, no sense of urgency, gets stale over time, and after 2-3 price cuts every buyer out there knows they can probably approach the seller differently. Pricing high to test the market is usually counterproductive unless we are talking about a property with exceptional features.

Whereas other commenters noted:

Sellers can't disassociate psychologically from wanting to discount.

Your suggestion of option 3 [under-pricing] as "intellectually" the correct choice assumes multiple bids for a unit. Even if traffic is good and pricing is great, isn't assuming multiple bids coming in at the same time too much of a leap of faith?

As a potential buyer, I would not under any circumstances engage in a bidding war in this climate. I may offer above ask for a property that is clearly priced below, but I would walk away if a broker told me that I would have to engage in a bidding war to get the deal done.

I've sold twice without a broker before and both times did #3. Both times I sold in a bidding war. Both times I got more than the most recent building/area comps.

As a buyer, I can point to dozens of apartments that I really liked, but didn't even bother to look at, since the asking price made the seller look irrational. for some of those, its possible that I would have ultimately put in a bid, but they took themselves out of the running by indicating an unrealistic price expectation. More importantly, I've also seen a few (not as many as I would like) apartments clearly priced below market. For each one of these, I quickly contacted the broker to see the place in order to place a bid. In all of those circumstances, I found that there were already multiple bids at or above ask.

When the market was really hot, we sold two properties for well above asking by pricing enough below then-market value to generate a bidding war. But in this market I would assume that a place priced low might very well not sell above that price -- but it would sell, and pretty quickly.

Although, I'd hopefully drop out when it turned into a "bidding war", I don't see any issue competing with other buyers if I think they are also bidding rationally and the asking price started out below where I see fair value.

Since November, we have the benefit of hindsight knowledge: bidding wars have indeed materialized since then and sellers have been much more savvy in terms of pricing their properties to leverage those first few critical weeks on the market. The NY Real Estate Market (not the world economy, mind you), does appear to have at the very least stabilized, with the lower end comparing favorably to last year from a pricing standpoint. Sellers appear infinitely more realistic and the buyer pool has shifted away from deep value or distressed hunters to needs- and feature-based buyers.

My questions therefore are:
• Now that we are in a different market, is the concept of “under-pricing” that much less controversial, less of a leap of faith?
• Have the market dynamics normalized enough to conclude that the this strategy will, in fact, help a property reach “market pricing” in the quickest time possible? [To even entertain this notion, you must first believe that markets determine prices, not sellers or brokers.]

Inquiring minds wanna know ☺

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A Kiss is Just a Kiss ... An Ask is Just an Ask

We talk about trends and we generalize in the process of empowering ourselves and our readers with information that’s relevant and real. At end of day, though, a sale occurs when one individual seller and one individual buyer have a meeting of the minds. This means, as is always the case when humans are involved, that markets are not efficient and they are subject to the whims and oscillations of human behavior. As behavior is not always rational or efficient (yes, this point can be argued by die-hard theorists), neither are the real estate markets.

Why this quasi-pedestrian intro? Because it all seems to go out the door in the negotiations process and it all starts with the asking price.

On the buy side:

Though we often advise buyers to consider the “value” of the property as a stand-alone data point, this rarely happens. It’s oh so easy to anchor yourself to the asking price and work from there. Many buyers, encouraged by this buyer’s market, approach properties with a standard 10% or 15% haircut off the top no matter what the ask. This strategy (if we could call it that) neglects the simple fact that all asking prices are not created equal. Some are priced above, some at, and others below market (yes, it happens).

Further, there is the “value” of the property and then there’s the minimum that the seller will actually sell it for … ergo, the difference between seller and buyer expectations that Noah has so eloquently been discussing. (The reason I keep placing “value” in quotation marks is because a property is only worth what a buyer is willing to pay for it, just like any other asset.) The bottom line for the buy side is to treat each property individually to yield the most fruitful negotiations.

On the sell side:

Considering the buyer mentality, what is a seller to do? It’s tough for sellers in this market, because every buyer wants to feel like they’re getting a deal. This is an important distinction: they don’t just want to get a good deal but they want to FEEL like they “won”. As such, sellers have three options:

1. They can price high to test the market and bring the price down later. The negotiation cushion is huge but traffic is very limited and the staleness clock is ticking after the first few weeks.

2. They can price at market and hope that people understand this. Traffic is good but there’s little wiggle room in the price to accommodate those 10-15% automatic discount expectations.

3. They can price below market and hope to god the property gets bid up to the true “value”. Traffic is tremendous, low-ball offers are still made but the smart money prices the property where it should be in the shortest timeframe.

The bottom line for the sell side is that intellectually the third option is the winner, but emotionally it takes quite a leap of faith to go there. Most sellers we’re seeing are just not ready to jump. They’re saying: “but what if someone bites at a higher price? I won’t know unless I try, plus I can stay in the market for a while longer.”

For buyers, asking prices should be relatively meaningless; for sellers, it's everything. Whichever side of the equation you’re on, the buy side or sell side, we’d love to hear your perspective.

Buyers: are you willing to get in a bidding war, as we’ve heard so much about? How are you deriving your offers and how would you react to a seller who will not budge on their asking price at all?

Sellers: what is your reaction to option #3? What drove your decision on where to price and how is it working out?

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Seller Pricing Strategies Should Ignore Stock Rally

A: The less-worse bull market continues and we still have inventory restocking and uber stimulus in the pipeline that will contribute to much better economic data as time goes on. Stocks are in the process of pricing this in and gold is surging which is generating a reflation trade mentality out there. This does trickle down to our markets here in Manhattan in the form of higher buy side confidence and lower sell side motivation for those without a financial pressure to raise $$$ - both psychological. Media headlines are even starting to reflect the impact on sell side pricing strategies. But if I can offer a voice of reason to sellers it would be to ignore the stock market rally and continue to price your apartment closer to the most recent sales and where your price point is trading down from peak levels. The stock market can change on a dime at any time and many buyers continue to question the foundation, or sustainability, of this rally. It takes two to tango and just because you feel your property deserves to price-in future appreciation that hasn't happened yet doesn't mean the buyers will dance with you!

Bids for Manhattan residential property have improved and activity levels are promising for this time of year. It is what it is. However, I still find that buyers are bidding with the caution that the world has changed substantially since the peak. As a result, serious sellers always should be realistic on where the bids are right now.

The media campaign is beginning and we should worry about sellers adjusting their strategy too aggressively. Wait until they get a whiff of the upcoming Q3 report showing the vast improvement in sales activity from the 2nd quarter.

Here are two headlines already:

Time to raise residential prices? Depends on whom you ask

Expected price cuts not coming

Any struggling seller should ask themselves if you would pay near peak or above peak prices for a Manhattan property today? If you answer is 'yes', then I would question your bias as a homeowner who happens to be selling. The market does what the market wants and nothing I say here will change that. The best I try to do is report on it in real time. It seems bids are coming in at better levels than six or seven months ago when fear was high, but not anywhere near peak levels - especially for 1M and above. Therefore, expectations that a future bid will come in at a premium representing future profit potential on a so-called reflation trade should be tamed.

If you must sell, never price a property with the assumption that a perfect buyer with tons of money and no care in the world will happen to come along. Doing so will do more harm than good and may even scare realistic buyers away that otherwise might have been willing to view your apartment and bid. Do not underestimate how many buyers out there simply do not request a viewing because they feel the seller needs to get more in line with the realities of today's market OR refuses to put a bid in for fear of insulting a seller. I tell you from experience that many buyers think this way and will simply pass on your property until pricing is more in line with the market they obsess about daily. Im even willing to bet that the buyer pool out there that is interested in your property probably knows today's market better than you! After all, they are looking at all your competition.

If you have been on the market for the past 3-4 months and had more than 35-40 buyers through your property with no acceptable bid, question your pricing strategy! Simple. Done. If you don't have to sell, fine. The marketplace at all times contains subsets of sellers that either have no financial pressure or reason to sell or is simply choosing to test the market to see if they can get their price - a price closer to peak levels or if anything, minimizing the haircut when buyer confidence seems to be on the rise.

Fact is, this market has been considerably active since May and the upcoming Q3 report will show this on a quarterly trend basis. Given the dramatic improvement in credit and economic data, stocks are surging and this may lead some sellers to think the market will rise up to their expected level - so why not price high or consider increasing your price. Dangerous if you ask me. In this day and age every buyer can see the full listing history of your property even if you decide to remove it from the market and bring it back on later at a higher price. Emotions lead sellers to do these types of things and right now the markets are fueling this 'reflation' sense. This doesn't mean buyers will start chasing property and bidding near peak levels though. If I see that happening I will tell you about it her but I got to tell ya, I don't see that happening.

In my humble opinion, bids from buyers are coming in at the lower end of the range down from peak - not much more. I'll provide a hypothetical example to explain. Lets take a typical F/S Drmn Classic 6 in UES or UWS and see the range where bids came in when fear was high and where they seem to be coming in today:

HIGH FEAR (Feb-March 2009) ---> bids came in down 25-30% from peak levels pricing in fear/uncertainty
TODAY (July-present) ---> bids coming in down 20-25% from peak levels pricing out fear/uncertainty with reflation mentality

That is the best I can describe the difference in market conditions from high fear in March to the one I see out there today - varied on price point of course with higher end still struggling way more than lower price points. The difference is notable as we seem to be trading at the lower end of the range down from peak today, instead of at the higher end of the range down from peak 7 months ago. Bids improved just like it did for equities following an overshoot to the downside.

Now, do we expect this to continue and bids to improve further from here? Maybe, but I'm just not seeing it out there right now as buyers are also questioning the sustainability of this equity rally and noting the continuing fundamental concerns. If I sense a change beyond this trust me I'll tell you. For now, considering the depth of the shock we went through I am still amazed at how quickly this marketplace changed from Armageddon to Reflation. I can't deny it and it is what makes this market such a great place to build a real estate business in.

My advice to sellers is to take advantage of the strategy of realistic pricing and the benefits of high traffic that come with it. In the end the market will dictate the value of your home, not the brokers. Price right, get the traffic in, create a sense of urgency and get buyers to bid it out.

Do some of your own research on where this market seems to be right now and see how that compares with what brokers are telling you on sales pitches - knowing full well the brokers are competing for your listing! Look at the most direct competition that actually went into contract in the last month or two and see how their pricing strategy differs from your ideas. Look at the direct competition that did not sell and is still on market for a 3-4 months and see how they went wrong? Try to find what that gap is. Analyze most recent sales and if you see a deal that was signed into contract in Feb or March, which closed 3 months later, you probably can assume a slightly better bid today. But be realistic. Don't price high or near 2007 levels just because stocks are surging as that will only help to sell the competition that is priced right. Use the active market to your benefit. If you do decide to price high and test the market, prepare yourself for minimal activity and strongly consider all bids that may come in at realistic levels yet down considerably from your ask.

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Working With Sellers In A Changing Market

(Christine Toes here)

Many buyers think that when an apartment is not priced correctly, it's always the broker's fault. Check out this example of a situation where the price has nothing to do with the broker:

Apt is on Madison in the 30s - originally priced at $459K on 2/23/09:
On 5/1 - price reduced to $399K, resulting in multiple offers, but after five open houses my buyers "won" at approx $400K. Within about 10 days, the buyer's attorney received the offering plan, financials, read the board minutes & negotiated the contract. The buyers signed the contracts and sent a check to the seller's attorney, who received them on 7/2.

Morning, 7/6/09: seller decided not to sell and to put the apartment back onto the market at $429K. The seller's broker spent an hour trying to talk the seller out of his decision (discussing the market conditions, how qualified the buyers are, that it was already on the market at $459K and if someone was going to pay $420K for it, they would have already gotten those kinds of offers, there's another apartment in the building for $385K that's not selling, sent the seller comps, etc).

Afternoon, 7/6/09: My customers didn't really want to go through the process all over again and hadn't seen anything they really liked for that price. They don't live in NYC so they'd have to fly back here to start their search again. They increased their offer by $10K to approx $410K.

7/7/09: seller decided that he really wants $469K for the apartment and is putting it back onto the market for $469K!

What do you do when you're the broker in this kind of situation? This would be the point where, if it were my listing, I would say "thank you for the opportunity, I'm sorry we don't see eye to eye on this situation, please keep me in mind for the future if you change your mind." And then I would walk away. (By the way, this is an estate sale).

All I can say to the buyers is... "It wasn't meant to be, don't worry, we will find something better." I will also send a letter to everyone in that line or similar lines in the building to see if anyone is thinking of selling their apartment - just in case, you never know!

Moral of the story is - if you see a listing with:

a. Price decreases and increases; or
b. That has been on and off of the market for several months/years; or
c. There have been several brokers

You might want to steer clear because the seller may be flaky or not that serious about selling under a certain price.

The nice thing about sites like Streeteasy is that the price history for every apartment is more transparent. Keep in mind that streeteasy is not always 100% accurate - I have heard several brokers panic because their brand new listing shows up on streeteasy as having been on the market for a few hundred days, so while transparency is improving, perfection is very hard to achieve for this industry with no standardized MLS system.

It never hurts to ask the seller's broker how long the apartment has been on the market when you're in the apartment. Also ask your own broker what the price history of the apartment is. It is always good to compare notes and you can get a sense of how honest brokers are by their responses. In the end, nobody can force a seller to execute a contract and you do what you can with your client's best interests in mind.

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Chasing A Moving Target

A: A post for the sellers out there after getting some calls recently about this topic. If I had one piece of advice to Manhattan sellers, especially those who own properties that have few special resale features to offer (amazing park or river views, large outdoor space, fireplace, roof rights, amazing location, etc..), it would be to fight denial, resist the urge to anchor to peak prices, and to price your property aggressively at the outset. The hope is to be ahead-of-the-curve and to sell the property before you are forced to chase a moving target. The target of course are the buyers and the bid they may be willing to submit for your property.

When I say 'chasing a moving target', I refer to any property that has reduced their asking price 3,4, or even 5 times over the course of the listing in the desperate hopes to find out where "market value" is. This type of seller is chasing a moving target, a target of buyers that seem to be running away ahead of them; finding themselves behind the curve chasing the market as it falls. As the buyers run away due to declining confidence and deteriorating economic fundamentals, the seller's are chasing them down with the hopes of catching up. The result tends to be counterproductive because it ultimately can lead to fierce sell side competition and even a further depression of buy side confidence.

Let's say you are a buyer and you find an apartment that meets your needs. Now lets say that this property's asking price was reduced from $2,000,000 to $1,950,000, to $1,900,000, to $1,825,000, and is now asking $1,795,000; from original asking price to current asking price. As a savvy buyer in a market that is clearly pressured, with inventory clearly rising, with sales volume clearly way down, what are you going to be thinking about a potential bid?

Chances are you will say to yourself something like this..."well, the seller is obviously eager to sell because they keep reducing the asking price, so why not bid lower and see what type of response I get". This is the kind of psychology that occurs out in the field. Denying this exists, well, is to deny that psychology plays a role in the buyers mind during the buying process.

This buy side psychology is everywhere right now! Arguing this is to be an eternal optimist, and to see the silver lining in every situation; which is fine, but it may get you into trouble if you strategize a property sale in this manner. I'm not saying deals are not happening, they are, but deals that are happening are from buyers that are bidding cautiously! Even the Fed's beige book quoted Jonathan Miller's appraisal firm as telling us this:

"A major residential appraisal firm reports substantial deterioration in New York City's housing market over the past two months: prices of Manhattan co-ops and condos are reported to have fallen by 15 to 20 percent since mid-summer, though it is hard to get a clear handle on prices due to thin volume--much of the recent activity is reportedly from desperate sellers."

This is where deals are happening at, due to the illiquid nature of the marketplace right now! Sellers should learn from this real time information and price accordingly; but most are not. Most sellers are still anchored to previous sales in their buildings, even though the time & place of those sales were in an environment much less pressured than today. As far as I'm concerned, if you are going to use a comparable sale from 8-12 months ago, might as well plan on selling for 20% or so below that figure; calculating in a premium/discount for what floor you are on, light/view differences, layout differences, and renovation differences.

There is a reason sales volume will be down significantly for the months of OCT-DEC 2008, and the reason is a disconnect between buyers & sellers. So, who's right? The buyers of course! The buyers are ALWAYS RIGHT! Umm, correct me if I am wrong, but that apartment you are trying to sell is ONLY worth as much as a buyer is willing & able to pay for it! Nothing more, nothing less. Just because your broker can't believe a buyer is not biting at a certain price, just because a seller can't believe no bids came in after a reduction or two, is proof that the market has changed and that the target is moving!

As publisher of UrbanDigs.com for the past 3 years, I am outrageously lucky to have such a great readership, and active forum for people to openly discuss their thoughts on any topic of the day. But one side effect is that sellers call me for help after they mistakenly fell for the oldest trick in the book; signing on with a broker that excels at the sales pitch, promises an unrealistic price for their property, and sells themselves as an expert on their building with plenty of buyers waiting already in the wings. Of course, the high price puts the seller behind the curve and forces them to ultimately chase the moving target; and there never really were any serious buyers to begin with! So, these sellers call me because they want to know what price their property should be listed at given the real time conditions of the marketplace. I can't help these people because they are signed to listing agreements with their broker, and it would be unethical of me to interfere and give advice to somebody else's client.

I don't care who you use to sell your property, but you need to be smart and acknowledge the world we are in RIGHT NOW! The world 6 months ago doesn't matter anymore. If you decide to price high because a broker promises that their business will get you that number, don't expect a quick sale! In fact, expect a long time on market with plenty of price reductions to re-stimulate traffic to your listing as time goes on.

The reasons why I think the next 2-3 quarters in Manhattan will continue to be pressured are as follows:

1) JOBS - when the forced marriages of the credit crisis close, the re-organization, costs cuts, and job cuts will be announced. I believe Merrill alone is expected to announce up to 30,000 job cuts when their deal with Bank of America closes next quarter. Merrill will not be the only financial institution to announce layoffs.

As it gets going in the financial sector, the slowdown will ultimately seap into the real economy here in NYC. The result will be layoffs at consumer driven business during the course of 2009. Its a very sad chapter of this crisis. To think that Manhattan real estate has seen the worst of the declines, as we enter a period of heavy job losses, is quite silly. Unfortunately, we must assume that X percentage of these jobs lost are from those that own a home here in Manhattan. Lets keep it real here as always, 2009 is likely to be the dark year for Manhattan's economy and it is certainly rational to expect this fundamental to continue to pressure the sell side of our real estate market.

2) APPRAISALS - NEGATIVE TIME VALUE - something that very few are discussing. Let us wake up the reality that the market has eroded and that the significant erosion in prices has not yet filtered through to closed sales. In comes 'negative time value' from the appraisal side. Now, when you do comps analysis on that property you are considering bidding for, you have to review comps from the past 6-8 months, which means the deal was signed into contract between 8-11 months ago or so. It's only when the deal closes that the purchase price is recorded as a matter of public record; and then used as a comp. Think about what will happen when NOV & DEC sales get recorded in JAN & FEB of next year! These fresh comps, that reflect the erosion I have been describing recently, will set the new hallmark for analysis!

Jonathan Miller adds:

"Conditions this fall have been characterized by low sales activity and price erosion. We have been making negative time adjustments on most of our appraisals during this period to reflect the change in value between the date the “comp” sold and current value. Not one lender has expressed concern and in fact, continue to remind their approved appraisers to reflect current market conditions in their reports. The rapid change in this underwriting orientation is personally shocking to me since underwriting has been detached from reality for so long. In my view, restoring trust in the lending process begins with having correct valuations as a benchmark for informed lending decisions."

When these deals close, and are entered into the system as comps, it will set the new level for future analysis. The question then becomes, how much longer will the appraisers price in 'negative time value' into their #s?

3) MEDIA - I am telling you that the market is illiquid, sales volume down significantly, and that deals being done today are in the 15-25% down from peak range. It is likely that these contracts that are signed today, will close in the next 1-3 months. With that said, it appears Q1 of 2009, released April of 2009, could be an ugly report. If it is, and reflects what real time information I am discussing here, then the media is going to go overboard with it.

The effects on buy side confidence and psychology from the media's take on the Manhattan market at that time, is likely to further dampen demand at a time when many sellers will probably have a time pressure to move the property. Time will tell if the media enhances this slowdown cycle.

4) POCKETS OF DISTRESS - feeds from #1. It is likely we see more pockets of distress as long as this market REMAINS ILLIQUID! That is the key phrase, illiquid! If this market remains illiquid, and there are few bids being submitted, trust me, you will eventually see those sellers that absolutely must move property. This may lead to some fierce sell side competition IF the market remains illiquid for a significant portion of 2009. I generally ask myself, what fundamentals will improve over the next few quarters that will lead to a wave of buyers entering this market with strong bids, adding liquidity to the market? I have trouble rationalizing an answer to this question right now.

Sellers, price ahead of the curve for any hope of avoiding chasing a moving target!

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Adjustment Phase Will Reveal Skinny Dippers

A: As the first stage of the adjustment is underway in Manhattan, we get our first glimpse of who was swimming naked. Lets face it, Manhattan is not rampant with speculative flippers or shady subprime borrowers, but that doesn't mean distressed sellers won't rise to the surface here. With the market highly illiquid right now as buyers back off, sellers that were overexposed, over-leveraged, lost their job, bought on the currency trade with expectations to flip at a profit, or just scared about the future, aggressive price reductions are the only way to move property. As I said before, I think the level that deals are happening at right now puts the market down about 15%-18% from peak levels. Illiquidity being the main reason. Hindsight will probably show the peak being contracts signed in early-mid 2007; with delayed new dev closings skewing the actual peak.

Those who signed contracts for new development as the market was near its peak, had to sit tight and wait to close on their property before putting it back on for resale; if that was the plan originally or if the plan changed during the 'waiting period'. With the credit crisis beginning in mid 2007, some 'in contract' buyers were helpless to do anything about their pre-crisis purchase other than to make the tough decision to walk away and surrender their 10% deposit.

I think we will see the sharpest adjustment from peak levels in these forced resales of very expensive new developments first. It's early in the process, as most will choose to wait for things to improve before forcibly selling their property in a tough market.

Just the dynamics surrounding the transaction process for a new development, make it the most exposed to the downturn when buyers simply disappear. Why? Because not only were these products very expensive, with closing costs some 1.5% above a resale condo's closing costs, but the contracts were signed well in advance of the closing as the buyer waited for the building to be completed. This means signing the dotted line for a product before the credit crisis began, waiting to close as the market deteriorated, and pushing back the ultimate resale until AFTER the Manhattan housing market turned illiquid. In addition, foreigners buying on the currency trade with the intention of renting out or flipping for a profit, tended to buy new developments that were marketed directly to them. Second homes and investment properties are usually the first large assets to go on sale when financial distress hits home.

For this discussion, lets take a look at Ariel West, a luxury new development in the Upper West Side that started closings in late 2007, to see what I mean.

Take a look at what appears to be the first resale at Ariel West, Apt. 7-C:

ORIGINALLY CLOSED ---> January 10th, 2008 for $1,558,000
ASKING PRICE TODAY ---> November 16th, 2008 asking $1,450,000

First let me be clear that this is NOT occuring en mass yet in Manhattan, and in fact this is only one of a few new dev resales that I am finding with an asking price below the closing price. Clearly the property is at least trying to be marketed aggressively, ahead of the curve to get a deal done. This apartment probably went into contract in early 2007, before the crisis began and reflects a price near peak levels just under $1,200 per square foot. If the seller didn't have to sell, they probably wouldn't. But as is the case even in the Manhattan market, there are always a number of sellers that must move their property.

This property is currently being listed at a 7% discount from the closing price. But where will it sell for? Its a problem of lack of bids that describes this marketplace right now. There is a big difference between what a property is asking and what it ultimately sells for, especially in a illiquid market like today. In addition, add in that the original buyer probably paid about $85,000 in buy side closing costs, and will have to pay about $100,000 in sell side closing costs (assuming 6% commission and a full ask deal), and you are looking at a minimum loss of approximately $300,000 or so on this transaction from beginning to end.

The adjustment has begun and I have a feeling we will be seeing noticeably more new development resales come to the market. Not all will aggressively cut their asking prices, as most buyers-turned-sellers will try to test the market and recover some transaction expenses in the deal. It is only when desperation hits and the property MUST be sold fast, that the aggressive reductions begin. Seller psychology is a strong force and things like denial & price anchoring tend to take over their minds at first. Nobody wants to hear that the market has weakened or worse, that the market has become illiquid. Nobody wants to hear that they may have to take a loss on the property. Nobody wants to hear at what price will result in a quick sale. My mother sold her house on LI after 11 months at a 25% discount to where the house was selling for in late 2005. It took here 7 months to realize the reality of the situation, at which point, it became a process of finding out where 'true value' actually was. In declining markets, this process is painful, emotional, and feels like it will never end.

The market does what the market wants and nothing I say here will change that. I just tell it like I see it, regardless of how that may affect my own personal business. Right now, we are in the process of finding out what the market feels is a proper valuation for an apartment in a market with clear near term challenges. And nothing I say here will change this or enhance this process. In other words, me writing this article is not the reason any apartment is not selling for a higher price!

My advice to sellers:

a) fight denial and recognize that the market has changed; this is the first step
b) do NOT anchor to peak prices; this will be counter-productive
c) do NOT believe any broker that promises you an extraordinary price because they are the best and they know how to market a property the 'right way' to get 10% more profit than other brokers. In the end, buyers dictate the value of your property and it is only worth what someone is willing to pay, NOT what a broker working on commission trying to get that exclusive listing agreement signed says its worth
d) price ahead of the curve; rather than test the market and play catch up via reductions as inventory rises and the local economy deteriorates further
e) only YOU know how quickly you must sell, so do yourself a favor and anticipate a longer time on market if you start at a higher price. The last thing you want is to put yourself in a position where the property must be sold within 1-2 weeks, because you tested the market first and wasted valuable time that you could not afford

If you have to sell, you have to sell. Period. Hopefully you have enough equity in the property so as to cushion the blow to your originally expectations on what your place is worth. Every seller, including me when I sold my place, thinks their place is worth top dollar because of the renovation work you did and because of the memories experience in your home. Buyer's do not care about your memories, they rarely love every single renovation you did and often have plans to change the place to their own taste, and are very savvy about what is going on right now in the world. The greater fool theory should not be counted on to save you and procure a deal above peak levels. Its a slowdown, it has to happen, and there is nothing wrong with discussing it openly. Adapt accordingly and don't fall for any dirty tricks.

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What Is 'ALL CASH' Worth?

A: A good topic to discuss considering the environment and the fact that one of my buyer clients unsuccessfully bid over ask in a recent highest & best situation. When you are up against 'all cash' bids, what premium should that offer have over a bid reliant upon financing? The short answer is that it all depends on the seller's risk level and situation, the more creative answer in my opinion is about 2-3% of the purchase price. There is no formula for finding out what 'all cash' is actually worth in any given deal, but it is safe to say that in tough lending environments its value surges!

What sort of discount should a buyer offering all-cash in this environment expect? On the flip side, how much should an all-cash bid be worth to the seller? Here is a recent situation where an all cash bid took complete control over a multiple bidding situation; I'll discuss the basics with changed details to get to the point of the discussion.

I'm blessed with very savvy buyer clients who are mini-experts on their price point. This buyer was no different and knew a great deal when one popped up. So, going into the first open house (which was active) we knew a strong bid was the very least needed to get this deal. Not surprisingly, multiple offers came in the very next day including ours. We did our diligence, formulated how under-valued we felt the property was priced compared to comps and property condition, spiced up the terms of our final bid, and went for it!

In the end we bid about 5% over ask and just under what we perceived as market value for the apartment. But it was the altered terms of the deal that we focused on to put us on par with an all cash competitive bid that we were told was already submitted; a very tough task to accomplish when credit crunch headlines make front page news everyday. Here is what we did and what you can do if you ever want to strengthen your bid in bidding war situations:

a) provide a pre-committment letter instead of a pre-approval
b) provide credit score; especially if its very strong
c) offer to sign a no-finance contigency contract of sale
d) raise the down payment by 5% to lower debt/income ratio and ease board review process
e) flexible closing date

the standards: point out liquid assets after closing, debt/income ratio if deal were to proceed, attorney info, lender info, salary & employment info, and a little note that we had advised the attorney to do due diligence within 2 business days of full receipt of doc's!

Did it work? Unfortunately no. We lost to an 'all-cash' bid that was also over the asking price. OK, not the end of the world but certainly frustrating. At least we knew our comfort zone and made a strong play for the property. Which brings us to why we lost!

In my opinion, I think we were the highest bid! Of course I'm not 100% sure, but its just a gut feeling after hearing back from the broker.

TO COMPETE AGAINST AN ALL CASH OFFER THAT ALSO HAPPENS TO BE ABOVE THE SELLER'S ASKING PRICE, PROVES TO BE A VERY DIFFICULT TASK IN TIMES LIKE THESE! SO, YOU MUST BID A PREMIUM TO MAKE THE SELLER EVEN CONSIDER TAKING YOUR DEAL THAT INCLUDES SOME RISK!

In normal times, I would say that an all-cash offer should gather 1-2% of the purchase price as a premium for providing the seller with the comfort of bypassing the loan & board approval process; although I have heard of all cash deals getting rejected by a co-op board, though it is not the norm! Let me explain using a similar over-ask multiple bidding scenario as we just went through with the numbers changed:

NORMAL LENDING / MACRO ENVIRONMENT

$895,000 Co-op Property w/ 2 bids submitted

Bid 1 --> $925,000, solid buyer putting minimum required down and financing the rest
Bid 2 --> $900,000 all cash 2.7% below highest bid

SELLER DECISION --> I would bet that the seller would go with Bid #1 and take the extra $25,000 with little risk the buyer will get a loan and pass the board. When I say solid, I mean that this buyer has the financials required by the board for approval.

TIGHT LENDING / MACRO ENVIRONMENT

$895,000 Co-op Property w/ 2 bids submitted

Bid 1 --> $925,000, solid buyer putting minimum required down and financing the rest
Bid 2 --> $900,000 all cash 2.7% below highest bid

SELLER DECISION --> In today's environment, I'm willing to bet that the all-cash $900,000 offer, even though its $25K less, is extremely appetizing to the seller; assuming of course the seller is aware of what is going on right now in the mortgage markets! It's still over the seller's asking price, who obviously priced low to get a quick sale in first place, and its a lock of a deal both for the loan commitment and the board approval! That is quite a comfort that is certainly worth something.

It's the psychology of the seller that has changed because of the deteriorating credit & mortgage markets. Cash is a very valuable tool for any offer right now, so if you have the means, do use it especially if you want that edge either in negotiating or against competing bids to get the deal done! In my opinion, as long as the mortgage and credit markets are in distress, an all cash offer should be able to win a deal at a 2-3% discount from what otherwise would be an acceptable bid or a competing higher bid!

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Transformation: My JR4 into a 2BR

Note: Was asked by a few buyer clients about this topic so I figured to re-publish what I did with my JR4 when I sold. This post was originally published in Jan, 2006 so please put yourself back into time and place. I'll do quick add on at the end.

A: As I wrote about in a previous post, What To Do With Your JR4, I just started renovations on my JR4 in which I'm changing the alcove into a true 2nd bedroom. Marketing a 2BR property in Manhattan should allow me to greatly maximize the return on this $4,500 project!

In New York City, there is quite a disparity between the selling prices of a 1 bedroom and a 2 bedroom apartment. After all, a 2 bedroom apartment gives you enough room to grow into should you decide to have a new baby or a roomate. The price difference in the Upper East Side looks something like this:

AVERAGE SELLING PRICE 1BR / 1.5BTH CONDO IN UES
$750,000

AVERAGE SELLING PRICE 2BR / 1.5BTH CONDO IN UES
$850,000

AVERAGE SELLING PRICE 2BR / 2BTH CONDO IN UES
$1.1 Million

*Note: Add on some premium for prime location, luxury buildings and those apartments that have been fully renovated or have outdoor space!

To market your property as a true 2BR apartment that won't leave buyers frustrated when they come to see it, you will need the 2nd bedroom to be at least 100 sq. ft., have its own window (a must) and HVAC, and its own electrical switches and closet. Just putting a wall up will not cut it and will leave buyers unsatisfied when they come to preview.

Most JR4's have the window and HVAC in the dining/office alcove leaving you with the job of closing off the room, adding a closet, and doing some electrical work. All in all, expect to pay about $5,000 for this work to be done. A new paint job will seal the deal and put your apartment in the 'sell-o-sphere' of a 2 bedroom! You should be able to add on around $75K to your asking price, depending on the last 2BR that sold in your building; although, you will need to price yours lower to accomodate for the lesser total space.

Here is my alcove space before the transformation:

Here is how it looks after Day 1:

Here is how it looks when completed:

The 2nd BR measures 10'4" x 10'8" and has a closet with 2 shelves and a pole for suits/shirts/pants. For Manhattan, it is suitable for most buyers who require a 2nd bedroom.

Before I start advertising, I need to do some fine tuning to the floorplan using photoshop to reflect the changed layout. I also need to do some research on what 2BR condo's are going for in my building and my neighborhood. I'll be sure to price mine below these (which is still way above the most expensive 1BR condo listings) to spur activity and get traffic into my open house!! In the end, the goal is to have the most aggressively priced 2BR condo on the market.

ADD-ON (2/21/2008) - Careful with pricing as your target buyer to make this strategy work most profitably is young/mature, looking for a starter home that could be scalable if their family grows! It is not for those who need a true 2BR, an extra 200 sft, at least 2 full baths, and a separate dining room! So, make sure you discount your converted 2BR properly or it will get little traffic.

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Live Chat , Update, Tips

In case you didn't notice, I reinstalled the live chat in the right side of urbandigs.com. I'll start doing the chat again daily from 10:00AM to about 11:00AM, or as time allows it. When I'm working, I'll leave the chat online in case anyone wants to talk briefly.

Also, I apologize for light postings past few business days, as I'm very busy right now. Once I get bids in for clients, searches done for new buyers, and appointments all set up I'll work on some new content and views on both the market here and macro updates. All in all, it seems the market here is active which leads me offer a few pieces of advice for both buyers & sellers:

FOR BUYERS:

Analyze your OWN, UNIQUE situation when deciding whether to buy or not. Try not to get caught up in headlines. If you can afford to buy, have the liquid assets waiting to be put to work, have a 4+ year timeline to own, and are happy with your job security and salary, then follow these easy steps so that the resale-ability of the product you will buy is maximized:

a) LIGHT/VIEWS
b) LOCATION
c) RAW SPACE
d) MONTHLY'S

Visit at least 7-8 properties in your price point so that you become familiar with property size, layouts, property condition, what is considered good light/views, etc.. Become a mini expert on your price point; understand how monthly costs should affect affordability of the purchase price on the open market. When a product comes on the market or becomes priced right both for you & the open market, go for it. Analyze building and neighborhood comps, focusing on the building comps more heavily, and devise a bidding strategy to increase chances of 'hitting' your desired # in the end!

FOR SELLERS:

Depending on your motivation to sell, focus on these two things first:

a) PRICING
b) MARKETING

Doug Heddings points out the importance of product quality, which is so important at resale, but in this case you already own your home so there is nothing you can do to change it. So, after pricing & marketing, you may want to dabble with low cost staging and/or renovations to get your property into tip top showing condition!

Psychology IS important to buyers! As they browse through your home, they try to envision if it will work for them. As they go into deep thought and envisioning, they start adding up what work will be needed to the property. More times than not buyers try to deduct these expenses from the purchase price. It's only in cases of aggressive pricing & packed open houses that this train of through becomes less of a factor.

Here are some quick tips:

1) remove your personal/family pictures wherever possible; remove the YOU element of the property so that you don't disrupt the buyers' train of thought as they envision their family in the apartment

2) floors? Refinishing your floors is a low cost and very high reaction type of renovation! For $2.25 - $2.50/sft, Marc at FloorworksNY can add life to your worn out floor; I'll vouch for his services and used him twice myself. As buyers walk into an apartment with a dull floor, they immediately think of replacing the floor and the high cost of that expense; aprox $15/sft! If the floor is sanded, stained, and poly'd and shines right into the buyers' faces as they enter the apartment, this expensive thought suddenly disappears!

3) try to show at sunniest times

4) staging; anti-clutter the apartment and re-arrange some furniture if need be to make the layout flow properly to maximize viewable usable space. Buyers like to see a large apartment, not a cluttered one that makes it appear smaller.

5) clean; such a simple thing yet I can't begin to tell you how many disgusting apartments I take buyers to. If the place was clean, the buyer wouldn't walk around the property with a grunt on their face the entire time.

6) quote accurate square footage; lying will get the buyers hopes up as they view the property online and disappoint them when they come to see it. A disappointed buyer is a buyer who doesn't submit a bid; and if they do, it's likely to be on the low side.

As to moving the property, obviously with a higher motivation to sell pricing becomes way more important. If you truly price right, you should get buyers into your open houses and hopefully a few bites within the first 3-4 weeks. If you aren't getting any traffic, re-analyze pricing and ask your broker how the property is being marketed weekly?

Good Luck to all!

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Try This Pricing Strategy

A: I have been asked by more than six UrbanDigs readers in the past 2 weeks why their properties are not selling, even though the price seems right! And these are the sellers themselves or friends of the seller, but in each case IT WAS ANOTHER BROKER TRYING TO SELL THE PROPERTY! Yet they come to me for advice. Here is a piece I did for sellers last April but the strategy still applies today. For all you soon-to-be sellers out there who are curious to know HOW your property should be priced, try this pricing method.

Make 2 data ranges consisting of PAST COMPARABLE SOLDS IN THE LAST 12 MONTHS and CURRENT COMPARABLE ACTIVES now on the market in your building. Its the easiest way to get the most likely range of what your home will sell for on the open market. The fine tuning of the pricing strategy based on current buyer demand, your property's unique features, and your timeline to sell is where it gets a bit tricky.

First let me define 'comparable' for all those who don't understand what this means.

COMPARABLE UNIT - A comparable unit is a unit of the same layout (or very similar in interior size) as your own property in either the building you live in or a similar building nearby. When doing a pricing analysis, it is very important to compare apples with apples! If you own a 1BR w/ dining alcove (JR4 layout), then it is best to do research to see what other JR4's with the same layout have been selling for. Comparing the price per square foot (PPSF) of a 2BR or 3BR that sold a few months ago to yours really doesn't make much sense because quite simply there are fewer 2BR & 3BR property's in Manhattan; and less supply means the product should trade at a premium! In short, your 1BR w/ dining alcove should trade at a slight discount to true 2BR's and 3BR's while taking into account the unique features your property has to offer over past sold units.

Okay, so that is out of the way. Moving on, you need to ask your broker (actually you shouldn't have to ask, the broker should provide this data to you when they discuss the sale of your property) to provide the comparable sales for the past 12 months as well as ALL units that are currently on the market; and the CONDITION THEY ARE IN!

Here is an example (1BR Co-op) of what I do when I visit a potential sales client:

PAST COMPARABLE SOLDS (last 12 months)

30A - SOLD FOR $515,000 (GOOD Condition); 675 sft - closed 10/18/2006
10A - SOLD FOR $547,500 (MINT condition); - 675 sft - closed 10/11/2006
2B - SOLD FOR $510,000 (GOOD Condition) - 675 sft; closed 2/14/2007
16F - SOLD FOR $520,000 (MINT Condition) - 650 sft; closed 10/20/2006
25F - SOLD FOR $590,000 (MINT Condition) - 650 sft; closed 11/17/2006

Range between $510,000 (good condition - 2nd Floor) ---> $590,000 (mint condition - 25th Floor)

CURRENT COMPARABLE ACTIVES (now on market)

Ranges between $600,000 ---> $635,000

Similar report done...(no need to post here, you get the point)

Conclusions? Well, its clear that similar units are selling between the low $500,000's and high $500,000's while current actives are ALL over $600,000! Now that you know the data on what comparable units sold for and what your current competition is, you MUST look at the unique features of the property and do some comparisons to the data just analyzed. These include:

Condition of Property - FAIR, GOOD, EXCELLENT, MINT?

Floor - The higher the floor, the better the views and natural sunlight (usually). Higher floors should trade at a premium to lower floors and in co-ops, higher floors are allocated more shares per floor to account for this added value. Recall that in co-ops the shares allocated are also used to determine maintenance expenses owed by the shareholder. A shareholder of apartment 2A will own less shares than the shareholder of apartment 30A and will have to pay a lower maintenance expense!

Views/Light - Taking the above mentioned feature one step further. Are the views/light MUCH better than similar units.

Balcony/Outdoor Space - Sometimes similar lines on higher or lower floors have outdoor space while others do not. A premium must be added for this feature.

FINAL VARIABLE - Timeline To Sell

Finally, and most importantly, we must take into account the seller's expected and desired timeline to sell! After all, time on market and current buyer demand will be directly related to the initial pricing of the property!

Therefore, I provide clients with three pricing strategies based on all that I discussed above to cover all needs. I would present pricing options something like this.

Property Description - 1BR, 12th floor, Mint Condition, No Outdoor Space, Must sell fast

1. TEST MARKET - $590,000. Price at the high range of past solds and under the current competition. Still might take the longest time of the three options presented to move the property.

2. MARKET VALUE - $575,000. Priced right and based on 13 floors lower than last MINT condition unit to sell at $590,000. Should get the most demand of all the property's on the market and result in a shorter time on market for the seller. Probably will sell between $550,000 - $575,000, so this presents the top of the expected range.

3. AGGRESSIVE - $560,000. In mint condition this property should get 30+ people at the first open house, especially if the first showing is delayed giving more buyers/brokers time to find out about the listing. The goal here is to get a bid from a qualified buyer within the first few weeks and hopefully a bidding war! In the end, the seller will only accept a price that is agreeable to them and that meets their timeline to sell.

UrbanDigs Says: On both the premium and discount side of the equation you MUST look at what the features of the property in question has to offer in terms of selling points and marketability on the open market! Based on the data of the past comparable solds and the current competition, a pricing strategy could be derived. Pricing options should be created AFTER this analysis based on the unit owner's TIMELINE TO SELL! When it comes to getting the deal done, its the brokers job to fully market the property properly and the seller's job to agree to correct pricing! In the end, the market dictates the market value of the home, NOT the broker!

ADD-ON: Ask yourself, does YOUR broker know what kind of market it is right now keeping you ahead of the curve? Or, do you find yourself being convinced of price cuts lagging the market, playing catch up, and therefore behind the curve? In addition, find out where your listing is being marketed, whether the description in print ads is being altered every few weeks, and if the broker is testing out more aggressive marketing venues if things aren't working with the ones they use now.

Originally Published April, 9th 2007!

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New To Market? Delay & Build Interest

A: It's been a while since I discussed a new tip for sellers, so when I noticed this one I thought it would be perfect for those about to put their property on the market! Assuming you are using a broker and understand that maximum exposure means maximum profit potential, it's a good idea to ask your broker to market your property to the brokerage community one week before the first showing! That way, if your apartment is priced right, you will generate plenty of interest for the first showing and create a sense of urgency for prospective buyers.

A few things have to be assumed for this concept to work properly, so lets get into these first:

1. Listing With A Broker - If you go it alone then your main medium of advertising is online and in print. Its hard to apply this strategy if you are not getting full distribution to the Manhattan brokerage community. Check out my posts on FSBO Tips & FSBO Checklist if you decide to go it alone!

2. Full Distribution to Manhattan Brokerages w/out Delay - Some brokerage firms have policies in place that delay the distribution of the new listing to other brokers for a couple of days. If the brokerage firm you are listing with does this, you will have to add a couple of days to the time line so that ALL brokers know of the property a week in advance before any showings.

3. Property is Priced Right - Yea I know, your home is worth more than everyone else's. Its a common tale and I don't buy it unless your property has something to offer above and beyond its competition; outdoor space, amazing views, unique style, etc..To maximize interest by keeping the property restricted for 7 days, it also must be priced right. If you decide to test the market and overprice, don't expect a crowd on the first day of showings which obviously will generate no sense of urgency; which is the ultimate goal here. Check out my post on Priced Right Apartment Sells in First Month to see why I think pricing is so important!

Assuming your property meets these 3 criteria, here is what you do:

ASK YOUR BROKER TO LIST THE PROPERTY FOR SALE TO THE ENTIRE MANHATTAN BROKERAGE COMMUNITY 1 WEEK BEFORE THE FIRST SHOWING OR OPEN HOUSE

The goal here is generate interest and give time to all brokers who have buyer clients to find the listing. Clearly stating, "FIRST SHOWING NEXT SUNDAY's OPEN HOUSE" in the listing description or similar will do the job! There is no doubt that the majority of deals in Manhattan real estate are co-broke's where both buyer and seller are represented by a broker. So, you must take advantage of this aspect of your target buyer pool and reach out to the brokerage community as much as possible.

UrbanDigs Says: It's a little thing and something most brokers don't do, but when applied correctly this could be a very powerful way to start off the marketing of a new listing! If its an open house that is the first showing, just the fact that so many buyers will show up with brokers and on their own should create a psychological sense of urgency and might get the seller a few bids for fear of losing the apartment! In addition, the thinking that goes on in the buyer's heads are that this property must be a great value if so many people are coming in to view it. Both situations are favorable for the seller. Hopefully its enough to get you a serious bid. The only downside to this is if the seller gets caught up in the action and decides to get greedy in response to bids that might come so early! As I mention in my post, "Don't Mess Up In Here", most of your action will happen in the first 3-4 weeks so be sure not to dismiss an early offer just because it came early! In the end a quick sale is generally what most sellers want!

Originally Published March 15th, 2007

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Utilizing All Marketing Tools To Sell

A: Its been a while since I wrote about this sell-side topic, but I have been asked recently by fellow brokers and individual sellers what marketing efforts I like to use to provide services 'above and beyond' what normal full service brokerage firms offer. In terms of selling at top dollar, I believe in the maximum exposure = maximum profit potential model. In the end, its the traffic/feedback received, or lack thereof, that is the best indicator of whether you are priced right or not and what level of action may be needed.

In today's world, buyers are very savvy! The convergence of technology and blogging has brought a wealth of information and individual perspectives to the computer screens of buyers out there adding transparency and information to an otherwise very mysterious transaction process. Thats all a good thing! But for brokers that do their best to market a client's property and get them top dollar, sometimes things don't go as planned. Is it the broker's fault? The brokerage firm? The seller? The property? The price? The marketing services? What?

Well, it could be a combination of any of those things but there is a way to assure your seller that it is not your fault or the quality of marketing efforts. That is why I inform my clients exactly how I will go about marketing their property when I first meet them, as well as provide them with REAL DATA on what their building and comparable units are selling for. No need to mess around here with lies about promising a selling price $200/sft higher than a recent comparable sale. If the seller is that stupid to work with the agent that promises the highest price, than I don't want to waste my time with their overpriced property! So, I choose the honesty route and hope that the quality of service is appreciated.

Broad based marketing covers the listing's inclusion in ALL brokerage systems at my disposal: TAXI, OLR, ROLEX, LIMO, etc. to share the property's details with every brokerage firm doing business in Manhattan. I fully understand the importance of co-broking (some 7/10 deals are co-brokered) and inviting the brokerage community to view my listings. Then I do the standard corporate marketing services that include the brokerage's webad, feeds to sites like nytimes.com, nymag.com & streeteasy.com, building mailings, brokerage office emails, brokers I know that do business in that building, and weekly NY Times print ads. Going out of your way to show the property when a call does come in is an individual character trait. But what else can I do to pro-actively get more exposure for my clients listing? Here are two highly efficient services that I like to utilize which are not covered by most standard brokerage marketing services:

1. Feature The Listing on Streeteasy.com

My use and feelings about streeteasy.com are known here. I think its a great buy-side search site with a wealth of information about NYC listings, neighborhoods, buildings, past solds, and school zoning. But for brokers, they also offer a 'featured listing' service for an extra fee of $50/week. A no brainer in my mind. For that cost, your listing will rotate with other brokers that bought this service on their main site and at the top of all search results. Here is an example of how this added service can help gain exposure for a property listing; in this case for my seller of a Trump Place 1BR/1.5BTH Condo:

If I can get a few phone calls from this marketing service and find a buyer that otherwise may have missed the NY Times print ad or the listing that was combined with every other similar listing out there at this price point, then its worth it!

I know that Streeteasy gets over 150,000 unique visitors a month, and I want my listings at the top in plain view of all those prospective buyers!

2. E-Blast Manhattan Brokerage Community

There are two companies that offer brokerage e-blasts to pro-actively promote a listing (great for open houses or price reductions) to brokers. The hope here is to reach out to a broker who may have a client whose needs match the details of your client's listing! You can't just assume that all brokers know how to find a particular listing and you never know who has that perfect client looking for just the type of property that you are trying to sell. What if that broker missed your listing and never brought it to the attention of their client?

You never know. I have sold properties before using this kind of service. I usually send out an e-blast to advertise a open house or a price reduction. You have to be careful though not to overuse this service and stale out the listing!

The two firms that I consider using for e-blasts are:

A) OLR
B) Gotham Photo Company

UrbanDigs Says: Never just put a listing out there and wait for a call to show it! These are relatively low cost options that can greatly expand the exposure that the listing gets; and in this business, marketing is everything! If the marketing efforts are high quality and you use every known medium at your disposal plus these added efforts to maximize exposure and still aren't getting the traffic, then its a price issue. Giving your client transparency with your overall traffic and feedback from prospective buyers that do see the property is absolutely crucial information that the seller should know! Sometimes its NOT the broker's fault! Sometimes, its the market and the price that is to blame and unfortunately there is nothing that we can do about the market. Which leaves us with the price! Don't be ashamed to ask your seller for a price cut, especially if you put in the extra effort and go above and beyond what is provided by your full service brokerage firm to get the word out. Cutting the asking price is still the most direct way to stimulate traffic for any listing so be sure you stay on top of recently closed sales in the building and surrounding area to assess where you currently stand! Good luck!

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Living In A Tougher Lending World

A: I think back to November 2001 when I first bought real estate here in Manhattan. For the most part, the memory is still there although being almost 6 years ago. I was a NASDAQ Equities trader with Tradescape (at the time I was trading for over 3 years) and recently went through 2 very dramatic events; the dot com crash and 9/11. Trading was not only volatile but it was physically and emotionally draining at that time. As a contrarian investor seeking to buy my first piece of NYC real estate, I was disappointed that I couldn't get what I wanted for the price I was able to afford. I started following NYC real estate aggressively in 1999 when I started making money. With 9/11, the NYC real estate market had a brief but sudden correction; nobody wanted to hold on to properties and all of a sudden deals were to be found. My eyes lit up and I signed a contract in November 2001 and closed on the property on April, 5 2002; some 5 months later. Why so long? Because I had such a tough time getting my loan! The past has finally caught up with us!

I recall the seller being super pissed. I recall my attorney doing everything he can to buy me more time to secure the loan. I recall weeks and weeks of phone calls with my lender demanding more documents to back up my income. This is February & March of 2002. This is before lending standards starting loosening up so drastically which helped power the recent national housing boom. This was the time when the 30 YR fixed rate fell to 6.875%, and continued to fall for years after; I ultimately refinanced in 2005. This was the time I thought I would lose the deal of a lifetime.

I purchased a 1,093 sft JR4 condo at 245 East 93rd street for $500,000; Denice Rich of Corcoran was the selling broker. Actually, the sellers were asking $479,000 for the property because they wanted the place sold in '2 weeks time'; a bidding war erupted in the first 3 days after 40+ people packed the Sunday open house. An aggressive strategy that was common for that time period in New York City as residents had the fresh scare of terrorism in their minds and buildings were still being evacuated at least once every week or two for safety precautions; sellers wanted out! A crazy time to be buying to say the least but a good time for any contrarian investor who sees the longer term reward potential that comes with buying an asset that is down & out with mainstream investors.

But I almost lost the deal. I had trouble getting the damn loan commitment because...

1. I was a self-employed Equities Trader working AFTER the market crashed
2. I had declining income reported in 2001 compared with 2000
3. I had to come up with the last 3 years Tax Returns
4. I had to take a higher interest rate that I originally had a problem with
5. I had to provide bank statements & pay checks for last 3 months
6. I had to get a expected income verification letter for 2002 from my CPA saying my income would rise from 2001's.

It was hell. The whole process totally drained me. As if trading in a post stock market crash environment wasn't enough I had to deal with angry sellers, relentless sellers' attorney's, a tough lender, a hard trading market, and the questioning that comes with buying after the worst terrorist act in recorded US history. But the deal was too good to pass up on and I was determined to put up with the headache of getting that loan commitment so I can proceed to closing. I did and I finally closed on the property in early April, 2002.

The only reason it took so long was because I had to prove to my lender that I actually earned what I said I earned and that I could actually afford this property going forward. And for those that say, 'why didn't you call a different lender', I did! No one else would talk to a self-employed equities trader after the markets got hit so hard! Oh, one lender offered to work with me at a rate of 8.75% for a 30YR fixed; I didn't bend that far!

My Point: We are returning to a lending environment more like this! We are in the very early stages of tighter lending and underwriting standards after we got so used to no standards at all for the past 3-4 years! Looking forward, buyers will have to prove their earnings and employment. As Michael McGivney, a Wells Fargo Private Banker, said back on Aug. 10th:

Last week, a client getting approved for an interest only product, like a 5 year ARM, on a $500,000 loan qualified on the payment of $2604 at a rate of 6.25%.

Today, that same client, to qualify for the same loan, will need to have enough income to qualify for the "fully indexed, fully amortized" payment. That means they MUST qualify at a rate of 11.25%, fully amortized. That means a payment of $4863!!!!!! That's nearly DOUBLE the payment. That means they must have nearly DOUBLE THE INCOME!!!

And they will need to have the documents to prove that income before the loan gets committed to! Adjust accordingly and be prepared! This credit squeeze is only 5-6 weeks old in the tradable markets minds; although many have been waiting for this to happen for years.

It's going to take more than a few months to adjust to such a different world after years of loose lending standards. For any seller thinking about accepting a deal from a buyer whose income is derived 100% via self-employment, be sure that they can back that up with documents so you have no issues with the deal closing!

For more in depth talk on this topic, read my post last week titled, "Adjust Your Risk Tolerance For Loans".

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Adjust Your Risk Tolerance For Loans

A: Pre-approvals mean sh*t! Thats right, I said it, and it had to be said! I've been advising clients on both the buy and sell side of this for about 2 years now as the typical offer when submitted includes an offer letter, financial statement, and pre-approval from a lender. In this new world of high cost risk, limited loan options, drying up of liquidity in RMBS markets, liquidation of assets to cash, and tighter underwriting / lending standards it is absolutely crucial that the dealmakers focus on the loan aspect of the transaction and making sure that will go through!

This post is for BUYERS & SELLERS of Manhattan real estate, or any market really, as you adjust to changing market conditions due to macro economic events unfolding; specifically in the credit markets as liquidity dries up.

I've posted before on what you need to do to submit an offer for a property here in NYC, which basically includes:

1. Offer Letter - Includes your initial offer, your job position and company, length at job, total salary, liquid assets leftover AFTER closing, attorney info, expected closing date, and lender info.

2. Financial Statement - Includes a snapshot of your financial situation such as total assets (liquid and not liquid), total debts (include min payments if high), total salary and bonus.

3. Loan Pre-Approval - 1-page document from lender with building address shown and loan amount minus down payment. Don't worry if loan amount you are pre-approved for is higher than what you plan to bid, it is for strengthening your offer ONLY and NOT to give away your negotiating hand.

In today's world of high cost risk, limited loan options, tighter underwriting standards and uncertainty, it is critical that both buyers and sellers do their homework BEFORE submtting and accepting a bid. The last thing you want is to do a deal with an unknown lender that can't come through with a loan commitment days before your expected closing. This should now be viewed as a real possibility for any buyer with:

weak credit

self-employed / limited docs available to define income or paid taxes

use of an out of state, unknown lender because a lower rate is quoted

As Tanta of Calculated Risk timely states the quote of the day yesterday from Washing Post article:

"What I'm telling people is that they should not shop around for the lowest rate necessarily," Binstock said. "Go with the lender who you think is going to be there in the end."

Thats SOLID advice!

UrbanDigs Says - BUYERS ---> For the best rates, stick to dealing directly with a bank rather than a broker or middleman that makes a commission on the deal. Also, go with a bank that has a large presence and is absolutely based in Manhattan. I'm thinking of the Wells Fargo's, Chase's, Citibank's, etc. that do business here.

UPDATE: 12:28PM - Manhattan Mortgage Company is also worth a phone call as I am hearing that rates are as competitive as direct lenders and they are a big presence here in Manhattan. If anything, call a few for comparative purposes and let me know if this has changed in past few days, but I dont think it has!

SELLERS ---> Its not all about what price you get, it's also about buyer quality and ability to get a loan commitment so the deal gets done! Now is NOT the time to mess around with iffy, subprime borrowers that are self employed and wrote off 60% of their stated income in their past 2 years tax returns! Give more weight to buyers that have solid jobs, have solid income, minimal debts, and are able to produce any and all required doc's to a lender as the underwriting process starts AFTER the contract is signed and appraisal is ordered!

A pre-approval does NOT mean a loan commitment!! That is your new mantra!

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Playing NYC Housing With Credit Fears

A: First off, everybody needs to relax, take a step back, and re-analyze their own personal situation. Take a deep breath. The world is not coming to an end. The era of ultra liquidity is coming to an end. The era of stupid loans being made to buyers who never should be buying is coming to an end. The era of no doc loans, 100% financing, stated income, etc. is coming to an end. But Manhattan housing will always have value. While our marketplace is not immune to a recession, time and again NYC has proven to lag in housing downturns and lead in recoveries. Which brings us to to YOU!

Whether or not you should be buying or selling in the current New York City real estate marketplace is a decision tailored to your own unique situation. You should not make rash decisions about an article you read in the paper. You should not sell your home because Bear Stearn's announced that two hedge funds went under. You should sell your home if you find yourself in financial disarray due to a job loss and dwindling savings account. In short, take a step back, look at your own situation and then make an educated decision GIVEN the current environment we are in. Here are some tips starting with our current environment.

The New World - This is a changing lending environment where job security, salary, and credit actually mean something! The days of no doc, stated income, 100% financing are over! Lucky for us that really doesn't apply for us in Manhattan. Lets not forget that Manhattan is 75% co-op (down from 80% or so given all new construction) which requires a strict set of financial guidelines for prospective purchasers.

However, just how exposed our buyer pool is to wall street and interest rate increases is still yet to be seen. It's something to keep an eye on. For now, the credit crunch is hurting suburban markets and highly speculative urban markets (like Miami or Phoenix) way more than it is hurting us. In New York, there is just no shortage of qualified buyers who are fully capable of getting a loan! You can't even attempt to buy something here if you were hoping for no down payment and stated income loan. Forget about it. We never had those types of buyers here, nor did we have the level of speculative investing that other markets had. On the contrary, the current Manhattan real estate marketplace could be described as having limited inventory, plenty of willing and able buyers, high salaries, very limited rental alternatives, high and rising rental rates, and foreign buyers taking advantage of currency trends. Certainly a market that I would feel safer investing in and working in compared to many other local US markets when looking at the fundamentals driving it.

For Prospective But Nervous Buyers - Re-analyze your situation! Plain and simple. Stop trying to time the market or get caught up in all the headlines in the media. The media is enough to drive a man insane, especially if that man doesn't understand the current environment we are in and reads a doomsday article. Instead, focus on the four items that I talk about often here on urbandigs.com.

1. Job Security - Do you have a job? The word for today is Job! J - O - B! Before even thinking about buying a new apartment, you should be sure you are happy and comfortable with your current job and that there is very limited chance that you will get fired or relocated in the very near future! Job security should be viewed as a blanket of comfort.

1. Salary - Assuming you answered 'Yes' to #1, what is your gross salary? Is it high enough to provide you with a debt to income ratio of 30% or under? To do this, add up all your current monthly minimum payments (or debt payments you are required to pay) and add in what your total monthly costs of living would be with your new purchase. Take that # and divide it by your monthly gross take home pay. What do you get? Here is an example:

Minimum Debt Payments (Car, Credit Cards, Student Loans) = $750/Month
Mortgage Payment (including interest before tax benefits) = $1,800/Month
Maintenance Costs = $600/Month
Real Estate Taxes = $400/Month
-----------------------------------------------------------------
TOTAL MONTHLY COSTS - $3,550

Buyer Joe Shmo Earns $120,000/Year (including bonus) OR $10,000/Month Gross

To get the debt/income ratio divide $3,550/$10,000.

3,550 / 10,000 = 0.355

Joe Shmo has a debt/income ratio of 36%. Joe Shmo could be OK buying a condo but should make sure the bank will lend given his higher than hoped for monthly expenses. Some banks like to see a debt/income ratio under 28% and most co-ops like to see a debt/income ratio closer to 25%. In the real world, Joe Shmo could pull this off, especially if he does not live a luxurious lifestyle and is a bigger saver than spender! Joe Shmo could easily put more money down to lower his debt/income ratio to closer to 28% if he has the liquid assets. Lets get to that now.

3. Liquid Assets - You need to have some savings before you buy a new property. It costs money to buy or sell a home, so you need to take into account how much down payment plus closing costs will come out to. AFTER these closing costs, you should have liquid assets leftover to show the board, or if its a condo, for your own emergency funds.

For co-ops, a general rule of thumb is to have at least 1 years worth of maintenance plus mortgage in liquid assets after closing. Stricter co-ops can as for 2 years worth of assets.

For condos, its more up to the buyer's comfort level but 6 months of maintenance plus mortgage in liquid assets should be viewed as a minimum after closing. You would rather be closer to 1 years worth of assets, but if your salary is high, you could pull it off with less!

4. Timeline To Own - Very important. You should have a timeline to own of at least 4 years! Preferably 5 if possible! That way, you have enough ownership time to take advantage of tax benefits via deductions of interest and taxes, paying down equity and building wealth, and appreciation of the asset. If your timeline to own is 2 years or less, don't even consider buying. The transaction costs alone will make the investment hard to profit from. If its in the middle at 3 years, you have a decision to make; if renting out afterwards is an option then lean towards buying, if not then don't.

For Prospective But Nervous Sellers - Don't make rash decisions based on articles! This one is easy. Only sell right now while credit concerns is headline news if you are in:

1. Financially Disarray - If you lost a job, took a huge pay cut, or are using savings to cover living expenses than I would stop messing around and liquidate your biggest asset; i.e. sell your house! If you can't afford to live in your home then chances are you will be forced to sell at a later time, and that is a position that no seller should be in if they want to get top dollar at resale. Having a time pressure to sell forces you to aggressively lower the price of the property to move it quicker! Instead, sell now when inventory is so tight and buyers are still plentiful to avoid what could be a bad situation to sell in at a later time.

2. You Know 100% You Will Sell In Near Future - If you are completely certain you will be selling your property within the next year, and have options at your disposal to move in elsewhere or be relocated, then consider selling now. No one knows how these credit issues will ultimately play out and if you will be forced to sell in say 6 months but have a time pressure to close the deal by, then I would rather you sell now when you are not in any rush!

See the consistency here? I want you to avoid being a seller in a distressed situation and would rather you choose to sell sooner rather than later if you are in financial trouble or know for a fact you will have to sell in the very near future!

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How To Handle A Bidding War

A: I got an email from a FSBO (for sale by owner) the other day asking me for advice on how to handle a multiple bid situation. She knows about bidding wars and priced her property low enough to produce one, but she didn't know the best way to handle a bidding war. Very understandable given this seller is on her own and without a broker to advise her on how to proceed. Here you go.

First off, you must know how to interpret when a bidding war exists (especially if you are selling a co-op with board requirements)! It is NOT as simple as getting 2 verbal offers. A bidding war should arise when you receive COMPLETE BIDS IN WRITING (see Brady's post titled, "The Art of the Offer: How To Submit A Bid" for details on how to submit a complete bid) that are:

Within the ACCEPTABLE PRICE RANGE / TIMING FOR CLOSE of the seller AND Financially Qualified to buy and pass the board

Assuming that two or more bids are received that meet the above mentioned criteria, you could create a bidding war situation. It is very important to note that the intended seller strategy of a bidding war is to encourage a sense of urgency via potential property loss and NOT to install fear into the prospective buyers. I can't begin to tell you how important this is. By installing fear into the bidders rather than encouragement to participate in the bidding war, chances are you will 'scare away' and lose one of the bidders messing up the entire goal of the war.

The ultimate goal of the bidding war is to procure the highest & best bid that generates a signed contract for the seller! Let me repeat that so as to keep the ultimate goal very clear!

The ultimate goal of the bidding war is to procure the highest & best bid that generates a signed contract for the seller!

If you get a great bid because of a bidding war that fails to produce a signed contract, than you got nothing out of the deal and are back to square one with only 1 bidder who may feel questionable about why the first deal fell through. So, here is your step by step guide as to how to handle this situation that is in the best interests of the seller and the prospective buyers that are participating in the bidding war.

Step 1: Confirm A Bidding War Could Exist - Did you receive multiple bids in the acceptable range of the seller that are financially qualified to purchase the apartment and pass any board requirements? If a bidder fails to meet one of these criteria than you don't really have a bidding war situation since one of the bidders is meaningless.

Also, make sure both bidders don't have any restrictions on the time line to close the deal that may conflict with the seller's time line for closing.

Step 2: Announce the Bidding Procedure & Deadline - Announce to ALL parties the bidding procedure plus deadline for submitting their final bids. It may look something like this:

"Due to the high level of interest the seller has decided to give all interested parties the opportunity to present them with their "Highest and Best" offer by 11 AM Friday May 11th. The seller will accept the winning bid by 12 noon Friday and the contract of sale will be delivered to the buyer's attorney shortly thereafter."

You will also want to include the items expected with any bid in writing. You could say something like:

"All offers must include the following information.

1) Offered price with financial analysis. Please specify if it's contingent upon financing or not and how much. Pre-approval letter should be provided from Manhattan based lender.
2) Proposed closing date.
3) The buyer's full names, address and social security numbers.
4) The buyer's attorney details. (Name, address, phone and email)"

Step 3: Announce Expectations For Winning Bid - Announce to ALL parties before hand what the expectations are for the winning bidder. The reason you do this is to ensure all bidders that the winner will be given X amount of time to have their attorney complete diligence and generate a signed contract. It could look something like this:

"The winning bid will have until 12 noon May 18th to deliver a signed contract with 10% down payment to the sellers attorney. If the sellers attorney is not in receipt of the contract by set time the seller will move forward with the back up offer immediately."

Lets not forget the meaning of 'BEST & FINAL' and that a deadline was presented to the bidders. You must honor this deadline and give the winning bidder a chance to generate a signed contract. Should the winning bidder NOT produce a signed contract by the previously disclosed timeline, the seller can move on to the other offer. In the real world deals fall through and buyers get cold feet. There is nothing you can do about this other than be prepared to move on to the next qualified bidder.

Step 4: Announce Any Unit/Bldg Info - Now is NOT the time for surprises! Be sure to announce any assessments, delayed/expedited closing dates, inclusions, or any other matters of fact that will ultimately come out when the winning bidder's attorney does diligence.

Step 5: Announce Complete Marketing Until Signed Contract - Announce to all parties that the property will continue to be shown and marketed until a signed contract of sale is provided to the seller's attorney with 10% deposit! This does not mean you will go behind your word of giving the winning bidder a chance to produce a signed contract! It just means that the apartment will be considered ACTIVE & ON THE MARKET until a fully executed contract of sale is reached.

The rest is up to you!

UrbanDigs Says - Bidding wars are a very desirable situation for a serious seller. However, you can mess one up if you don't know what you are doing! By being too demanding and fearsome in your demeanor you may scare away potential bidders. By being too lax, you may open yourself up for a confusing and troubling situation should one party fail to act accordingly. You must find the middle ground to encourage participation by the prospective buyers and at the same time lay down the rules that are in the sellers best interest and fair to the bidders. In the end, if you stick to this method you should do just fine!

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How Brokers Sell Their Own Apartments

I bought my Village studio with help from my grandfather in 2003. After living there for 2.5 years, I've been subletting it out for 1.5 years and making positive cash flow. I would have kept it forever but the building only allows subletting for 2 years out of every 5 years in one year lease periods. When it was time to sell, I didn't want to annoy my tenant with constant showings. She was planning to move out May 1, so I put my apartment on the market April 1 with the plan to sell it quickly so that it wouldn't sit vacant for too long. Here is some insight on how a broker sells her own home. I hope you find it helpful!

1. Looked at comps in my building. The last studio in my line went for $365K, but it was a sponsor unit and didn't require board approval, which commands a higher price. Still, the market is a little hotter now than it was in the winter, and I'm on a higher floor, so I determined that my apartment was worth $369K. The highest price ever received for a studio in my building is $380K. That apartment was completely gut renovated with a new wall mounted plasma TV and surround sound and it had a much nicer view than my own, so I knew I wasn't getting $380K.

2. Price the apartment $10K lower than it is worth, $359K, to get lots of people in the door, multiple offers, and a price above the asking price. TIP: If you want to sell your apartment quickly, price it 2 - 3% below market value and you will generate so much interest that you end up getting what you wanted in less time, or you will get more than you were hoping for. Every time an owner has allowed me to price an apartment below the market price, this has happened. When New Yorkers see that a dozen other people are interested in an apartment, they get competitive and they want the apartment more. Once someone has offered $359K for an apartment, it isn't much of a stretch for them to offer a few thousand dollars more to out bid someone else. If you have a 30 year fixed mortgage, it is only $30 a month to finance an extra $10K.

3. I believe in "the system." A property gets the most exposure when it is on the market at a 6% commission. Even though I'm a broker and I could try to market my apartment without my company in order to "save" money, I know that the way to get top price for a property is to use a brokerage firm. 85% of apartment sales are co-brokered deals, not broker direct to buyer or owner direct to buyer. To bring in the most *qualified* buyers in the shortest period of time, I fill out an exclusive agreement with my company, Citi Habitats. It is worth paying the extra money - you get what you pay for.

4. Luckily, my tenant attends Parsons School of Design and the apartment looks better than when I lived there. The paint colors and furniture are fantastic and appeal perfectly to someone looking for a Village studio. No need to paint or stage the apartment, SWEET! (If the apartment needed a coat of paint, or if her furniture was horrible, I would have waited for her to move out and then I would have staged the apartment in order to get top dollar).

5. Line up cleaning service, virtual tour and professional photos (which my company pays for when we have an exclusive listing) for the week before the apartment will go on the market. That way the listing is perfect when it hits the market - great description, quality photos, and a virtual tour. Allows me time to prepare a postcard mailing to the building announcing the listing (Citi Habitats also pays for this).

6. Call the mangement company to confirm the building open house policy. Building doesn't allow them. Damn. It is so much harder to sell an apartment when you have to show by appointment. I can only show 8 people an apartment in 15 minute intervals on a Sunday between 12 and 2pm by appointment, whereas I always get 20 - 35 people at my first open house for a new listing. Some people only search open houses, or they sit down with the NY Times in the morning and circle all of the open houses. Apartments not having an open house can easily be forgotten, simply because of the inconvenience of having to make an appointment when a buyer can just drop in to 10 other apartments. Confirmed the maintenance, assessments, sublet policy, financials, planned capital improvements, etc, with the managing agent.

7. Spent two hours making sure every detail about the apartment and building were accurate in our database, which we share with our sister company, Corcoran. Wrote and re-wrote the description for the apartment so it would be perfect the first time. Otherwise, we have to change it in the database and show sheets and send a separate email to our sales department to get it fixed on our website. Better to get it right the first time.

8. Got the photos within three days of the shoot, upload them to the website, database, and postcard mailing and send them to our marketing department so they can create show sheets. It takes them a few days to prepare the sheets and I want to have them for the first showing.

9. Contact my mortgage guy to do a handout with different mortgage rates and what the monthly payments would be at various rates before and after tax deductions. It helps buyers to see in print exactly what they are going to be paying.

10. Sign the exclusive agreement and send it to our sales department to put it into the database on a Monday. It takes about 48 hours for the listing to make it through the various database feeds and show up in the databases used by all 200+ member firms of the Real Estate Board of New York. By putting it in on Monday, everyone should see the listing on Wednesday, giving them plenty of time to work me into their Sunday schedules.

11. Sent out postcard mailing.

12. Drafted the NY Times ad (Citi Habitats pays for a NY Times ad every weekend). Deadline is Tuesday for the next Sunday paper.

13. Decide to run a potentially controversial "open house by appointment only." Make it VERY clear in our database and on our website that all showings are by appointment. Give a list of everyone who has an appointment to my doorman as proof that I am showing by appointment and not through a true "open house" in case someone balks.

14. Advertise the apartment on Craigslist to get some direct buyers. Especially with studio sales, buyers don't always have a broker yet. The target market for a studio in a building that doesn't allow pieds-a-terre is a 22 - 27 year-old first-time buyer. This generation uses Craigslist for everything. Additionally, our website ads feed into the NY Times on-line version on Thursdays, so to reach out to buyers early, Craigslist is a good place to start.

15. Before posting the ad, I draft an email explaining the financial qualifications buyers needed in order to purchase in the building. My building requires 25% down, doesn't allow students or pieds a terre, and isn't kind to freelancers or others who don't have a steady, fixed income. They also require 2 years of mortgage and maintenance payments in reserve after the down payment. I determine that my buyer must have at least $145K in the bank and must make over $105K. This is a ton of money! There are a LOT of unqualified buyers on Craigslist, so an email spelling out the financial requirements eliminates my wasting my time showing the apartment to unqualified buyers. Despite my disclaimer email, there is a ton of interest in the apartment, and I quickly line up 6 appointments for Weds night and 6 for Thursday night in 15 minute intervals. I make sure to casually mention which appointments are already taken so buyers know how desirable the apartment is. About 50% of the total inquiries that I receive realize that they aren't financially qualified for the apartment after they receive my email. Such is the nature of Craigslist buyers.

16. I advertise my apartment in my e-newsletter, which goes to over 2,300 friends, former co-workers, clients, and other agents. Basically, everyone who has emailed me since I started in this business goes in my e-mail list. They can remove themselves by the simple click of a button so I don't feel guilty for spamming.

17. Brokers and buyers start calling and emailing, so I know the apartment has officially hit the market. So exciting! I schedule 10 appointments for Sunday between 12 - 2pm. I receive an very unhappy call from the management company regarding the "open house," even though it clearly states that ALL viewings are by appointment only. I take down my "open house by appointment" ad, and try not to sweat it too much because all of the appointments are already full. I am still annoyed because it is very clear that this isn't a "free for all" open house. I have a list of everyone coming, what time they are coming, and I am escorting them to and from the lobby, so there is no security concern of people wandering the building unaccompanied. Either someone on my board is so bored that they scour the NY Times weekly to catch brokers having open houses in our building, or the other real estate agent who lives in my building tattled on me. The managing agent chuckles when I mention said broker's name, essentially confirming that she was the narc. I decide she is just bitter and must have nothing better to do so I go back to what I love most and do best... Selling and marketing apartments!

18. On the second Sunday, there is so much demand to see the apartment that I can't fit everyone in. I have a brief panic attack when I envision someone on the board seeing 5-10 people in the lobby backed up waiting for their appointments, but my problem solving skills kick in. I enlist two agents from my office so we can double up showings between 12 and 2pm. If they see people in 5-10 minute increments, I can get in at least 16 people.

19. Showings are a tremendous success and offers are coming in. I schedule "best and final" offers. In 10 days on the market I have 4 offers at or above the asking price. Two offers are from buyers who aren't really qualified, one who doesn't have a social security number and one who the board might consider a pied a terre. I choose the most qualified buyer. His broker was also smart enough to offer an odd numbered price, beating out the other offer by $1,200. Three hours later, I have already accepted the offer and sent out the deal sheet to the other broker when another offer comes in that is even higher than the "highest and best." I struggle with what to do, but I can't help but consider this other offer - the broker swears she didn't realize the offers were due by noon, she thought it was just sometime that day. I go back to the original buyer and ask them if they will match the new offer. They do! YAY!

The contracts are signed in under a week and the board package is being assembled as we speak. The buyer has better than a 25% debt to income ratio and has more than 2 years of mortgage and maintenance payments in reserve. He just started his job in September, so I ask the buyer's broker to let the buyer know that he may have to put maintenance in escrow since the building can be tough on new hires.

Toes says... Pricing is KEY, but planning and strategy is also very, very important. All your ducks should be in a row before formally putting an apartment on the market. The way you time your marketing pieces and advertising is critical to a successful first week on the market. The serious buyers all come in the first two or three weeks on the market, so you want to sell the apartment in less than 30 days or buyers will wonder what is wrong with it and why it has been on the market for so long. An apartment should come onto the market with a bang, not a whimper!

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Market Report: Transition To A Buyers Market

A: Its already starting to happen folks! Its May 1st and already I am noticing the beginning signs of a slowdown in Open House activity! After being on record since January 10th for stating that market activity has begun to surge, I am now going to go on record for stating that market activity is beginning to wane at public open houses. What we are seeing now is the transition in the Manhattan real estate marketplace from the sellers market of January - April to what will eventually be a buyers market as we get closer to the months of July & August. Sellers, its time to pass the torch back on to the buyers!

Brokers, Buyers, & Sellers - After reading this post I would love to hear your comments on what I am seeing as this is really only the 2nd week I have noticed things starting to slow a bit! Are you noticing the same thing?

Its important to note that media outlets differ from blogs because they usually lag in their reports to the readers after waiting for the event to happen and data reports to show a trend or surprising number. In the blog world such as UrbanDigs, I'm doing my best to tell you what I see right now!

And what I see right now is slowing open house activity! I went to three open houses this past Sunday and the most traffic out of any of them had only 2 other people there at the same time we were. The others we were the only ones there for the 10 minutes or so we stayed. Compare that to what I said back on January 10th:

After spending a few of the past 3 Sunday's with her going to Open Houses, I can tell you firsthand that most of them had very good traffic; by that I mean at least 4-5 different buyers were there at the same time we were. And that was ONLY 15 minutes or so of a 2 hour open house!

I've also had talks with a few other agents holding OH's and they report to me a noticeable, 3x or so, pickup in activity and this is across a range of price points across the city! This is the kind of reporting that you can take advantage of if your in the hunt to buy in the very near future! I'm not making this stuff up. If I had to estimate, I would say my own business has picked up about 4-fold in the past 3 weeks alone; most of it in the past 7-10 days!

As for my own business, I am noticing continued activity from brokers via appointments scheduled during the week. Most of my deals are co-broke and I usually rely on the Manhattan brokerage community heavlily to bring to the table the most qualified and highest bidder for my sales clients. Once this starts to slow I know I am in the dog days of summer.

My last open house was two Sunday's ago and we actually had a decent showing with about 12 people stopping by; not uncommon for the first open house of a new listing. I'm certainly curious to see how my first open house for my other new listing goes this coming Sunday; I'll report on that one next week although first open houses are not the best gauge to notice any new trends.

If I were to visually design for you how the NYC real estate market is seasonal, it would look something like this, for months JAN - SEPT. I left out OCT-DEC because those months seem to me to be very erratic; sometimes hot and sometimes cold. The months of JAN - SEPT have market characteristics to them that are easy to notice and eventually take advantage of:

To prove this, recall Jonathan Miller's chart breaking down the AVG Price Per Square Foot per quarter by clicking here. I wrote about his findings in my post titled, "Data Shows NYC Real Estate is Seasonal", and stated:

I talk often how buyer demand in the months of JAN - MARCH are normally much more active than any other 3-month consecutive range of the remaining calendar year. The months of MARCH - MAY are transition months where activity from buyer demand tends to move from very active --> to active --> to good ---> to slow. Once we get into the months of JUN - AUG, the market is typically significantly slower with only a few serious buyers coming to open houses and much fewer appointments during the week!

UrbanDigs Says: During the month of May I expect brokers to start noticing a gradual slowdown in total buyer activity; mainly buyers working on their own. If brokers were getting between 20-30 buyers at an open house during the months of JAN - APRIL, I would think that number will shrink down closer to 10-15 towards the end of this month; a noticeable 50% reduction in traffic. As we head into the months of July & August, expect that traffic to shrink closer to 7-10 people per open house with the overpriced listings getting more like 5 people to show up! For all you sellers out there who are under a time pressure to sell, I discussed your 5-week warning last week with thoughts of what to do based on your strategy!

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Five Week Warning: Get Your Home Sold!

A: This is my 5 week warning for all you sellers out there! As we head into the first week of May, its up to you to get your apartments sold! The choice is yours. For all those sellers out there that have legitimate reasons for selling and/or are under some sort of time pressure to sell, strongly consider a price reduction if you have been on the market for 6+ week with no offers! In short, it will be harder to procure as strong of a bid as the NYC housing market transitions from a sellers market back to a buyers market. Here is why.

Things are still sugary for sellers of Manhattan real estate even as the rest of the nation deals with a continuing slowing housing market. In case you forgot what its like outside of New York City real estate, take a look at the latest two datasets regarding foreclosures and existing home sales that were released in the past few days.

Foreclosures Surge on Mortgage Woes -

Foreclosure filings surged during the first quarter of 2007, as home price increases slowed or even reversed and borrowers fell behind on payments once their adjustable rates began resetting at much higher levels.

The number of filings climbed 27 percent in the first quarter compared with the fourth quarter of 2006 and 35 percent from a year earlier, according to a report released Wednesday by RealtyTrac, an online marketer of foreclosure properties.

There were more than 430,000 foreclosure filings nationwide, one for every 264 households.

Home Sales: Worst Drop in 18 Years -

Home sales posted their sharpest drop in 18 years in March, a real estate group said Tuesday, as problems in the subprime mortgage sector pushed sales well below what economists had forecast.

Sales of existing homes fell 8.4 percent to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989. Economists surveyed by Briefing.com had forecast sales would fall to an annual rate of 6.45 million in March.

David Lereah, the Realtors' chief economist, said that bad weather earlier in the year may have cut down on sales that closed in March. "We may be seeing some losses as a result of the subprime fallout," he said in a statement. "It's too early to measure a significant impact from tighter lending standards, which should moderately dampen activity."

The weakness in sales came despite the continued slide in home prices, which had been helping to lift sales in some previous reports. The median home price slipped 0.3 percent to $217,000 from a year earlier, the group said. It was the eighth straight month that measure has fallen and the ninth decline in the last 10 months.

But this is Manhattan! We are the financial Capital of this country, enjoy a growing population, are 75% co-op whose stringent board standards keep speculative activity low, enjoy low rental vacancy rates with rising rents, and whose residents make plenty of dollars! So we are immune right? Wrong.

While New York City real estate is its own animal and cannot be compared with many local markets experiencing plenty of housing pain right now, we are not immune. Our market is seasonal and in terms of real estate cycles, tend to lag in slowdowns and lead in recoveries. That makes our market a much stronger and safer investment. But we are heading towards the slow season and its up to you to believe me or not.

As we head into summer months, expect traffic to slow significantly from levels seen between the months of JAN - APRIL. Slower traffic means less buyer demand which results in more control for the buyer.

Here is my advice to sellers leaving you with the job of placing yourself (if you happen to be selling right now) into the proper category.

Sellers w/ Time Pressure (Must Sell Now) - Don't mess around! If your apartment has been on the market for more than 6 weeks and you have had more than 30 buyers stop by with no offers, you need to lower your asking price! Its not rocket science. If your under a time pressure to sell and must sell now, don't dare risk delaying a price cut for another month or so. DO IT NOW and get your place into contract before June 1st!

Read my post, "My Apartment Won't Sell...Help!" for a more detailed discussion on freshening up a stale listing.

Sellers w/ No Time Pressure (Want To Sell, But In No Rush) - If you fit in this category you really need to ask yourself how much longer you can wait before you close. Keep in mind how long it takes to close under normal circumstances; about 1-2 months for a condo and 2-3 months for a co-op. Deduct the high end of that time line depending on what property type you have and come up with a month that you must be in contract by!

For example, if you own a condo and MUST close by September 1st, than plan on having a signed contract by July 1st the latest! That leaves 2 months (July & August) to close by your deadline and you better keep on your agent to make sure the buyer abides by this and completes the purchase application and loan process in a timely manner.

Since you have some time you can certainly hold off on a price cut, but keep in mind your chances of getting the highest bid will be over the next 5 weeks; before the summer months. Once June 1st hits, chances are that the drop off in demand will yield a less aggressive bidder.

Sellers Testing The Market (Have A Great Product & Waiting For Your Price) - Well if you are testing the market than you know you are priced high and waiting to see if someone will fall in love with something about your apartment and pay up! If its been over 8+ weeks with no bids near your desired price, it is probably too far out of whack.

If you got bids close to your desired price but just a little off, you may want to re-think how much you want to sell. Why are you even testing the market to begin with? Read my post titled, "To Sell or Not To Sell" and see if any of the reasons listed match your situation.

In short, if you haven't gotten your price yet, chances are you wont get it during the summer months! So, consider either a price cut to the desired price that you want to sell at or remove the listing altogether from the market and put it back on the market next wall street bonus season.

UrbanDigs Says - The NYC real estate market is still strong! With stocks soaring via strong corporate profits, the economy strong, jobs healthy, salary's high, rental vacancy low, rent prices trickling higher, and buyer demand holding you still have a chance to get a great price on your new home! Investigate your building for comparable sales and repeat the analysis with your broker to see if you are priced high, and if so, how high are you? In the end, the market dictates the purchase price of your home, not the agent, and its up to you to wake up from reality that your home may not be worth as much as you first thought. Question is, do you wake up to this reality today and do something about it while its still a sellers market? Or do you delay, and realize in 6 weeks when it most likely will transition back to a buyers market?

Remember, an agent being honest with you and passing on advice based on past experience selling in the Manhattan marketplace is an agent doing his best to get his/her client the highest price possible! Don't get mad at your agent if they recommend a price cut to you after weeks on the market; in the end, their job is to procure a qualified buyer at or slightly above market value if possible. Asking your agent to fetch you $100,000 more than the last comparable sale in your building is like asking your stock broker to buy a stock today significantly below what it currently trades at! If the stock broker says "sure, no problem", then they are lying to you!

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Data Shows NYC Real Estate is Seasonal

A: I don't link out to superstar appraiser Jonathan Miller's blog, Matrix, enough. Maybe its because he gets so much press as is, that whats a little more going to offer him? Nah, thats not it. Fact is, Jonathan puts so much time into forwarding to readers what he sees in his business (trends, data, charts) based on so many different datasets that he deserves every bit of press he gets! I certainly appreciate the effort! His latest chart shows how average price per square foot in Manhattan real estate sales differs based on time of the year (quarterly) and adjusted for inflation. It shows what I have been saying here on UrbanDigs since the beginning, that NYC real estate is seasonal!

Manhattan Co-op/Condo Average Price Per Square Foot By Quarter (1989-2007) via Curbed.

What we see here is simple:

Blue & Pink Lines (represent months JAN - JUNE) --> generally higher percentage change from previous quarter

Green & Orange Lines (represent months JULY - DECEMBER) --> generally lower percentage change from previous quarter

In other words: NYC REAL ESTATE IS SEASONAL!

For the most part, the months of JAN - JUN show a higher average price per square foot for both co-ops and condos in Manhattan than the months of JULY - DEC do! This is not surprising! I talk often how buyer demand in the months of JAN - MARCH are normally much more active than any other 3-month consecutive range of the remaining calendar year. The months of MARCH - MAY are transition months where activity from buyer demand tends to move from very active --> to active --> to good ---> to slow. Once we get into the months of JUN - AUG, the market is typically significantly slower with only a few serious buyers coming to open houses and much fewer appointments during the week!

My advice would remain the same as I said in the past:

For Sellers: Try to get a contract signed BEFORE June! Its not rocket science when declaring that sellers get the most money at resale when there is the most activity on the property! As activity slows, so does the chance of getting top dollar! For those sellers that MUST sell and are not simply testing the market, try to get that deal done before the summer months because if you don't you will have a much harder time matching an offer that may have been presented only a few months earlier!

For Buyers: If you are not forced by a time pressure, try to wait out the market a bit. If you find a place that blows you away and the price is right then by all means go for it! But if you are not in a rush, time is on your side, are looking to build your cash reserves, or just haven't found your dream home yet, there is one thing I can assure you: you should gain more control over negotiating during the summer months at the expense of less inventory to choose from!

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Sell-Side Marketing Launches

A: Its been 20 months since I started blogging here on UrbanDigs, and its been one hell of ride. I have to say, that I learned a lot over this time from all the feedback, live chat questions, and comments that you guys left to help increase my knowledge of New York City real estate. I hope that you found the posts helpful during the buying or selling process, and that you made a little bit more money because of it. That is what it is all about; making more $$$! So, after a year of planning and fine-tuning, I decided to introduce my 3 step approach and service for sellers of Manhattan real estate.

I have to admit, I was VERY worried about introducing this service onto the blog; for fear of ruining the open atmosphere and ultimate goal of this site which still remains, 'to discuss how we all may be able to better profit from our New York city real estate transactions'. I had to come up with some way to continue my daily postings on the site and keep the discussions going, continue to grow my own business through savvy investment strategies, and extend that philosophy of transacting real estate without any application loss so that you can work with me.

So after months of planning I bring to you strategic marketing services focused on providing maximum exposure through creative and standard marketing techniques to ensure maximum profit at resale! On this page you will find my last three customer testimonials describing their experience with me during the selling process of their property.

Sell-Side Marketing

STEP 1: Property Valuation / Listing Agreement - A free no-obligation property valuation for those ready to sell their Manhattan real estate. Paul & I will meet with you to evaluate the open market value of your property and provide you with past sales and current competition that is so vital to your specific selling strategy. We will also consult with you on how to get your property in the best condition possible at the lowest cost to you to maximize resale potential.

STEP 2: Strategic Marketing Services - Citi-Habitats will hire a professional photographer to shoot your property in the best possible light. A virtual tour will also be done to maximize the details of your property to web seekers. We will run a Sunday NY Times print ad every week and hold open houses until a contract is fully executed. Additional marketing strategy will be discussed when I meet with you. The property listing will be distributed to the entire Manhattan brokerage community without any time delay to ensure maximum exposure. In addition, your property will be advertised on:

NY Times Online

NYPost.com

Streeteasy.com

International Herald Tribune

Citi-Habitats.com

STEP 3: Buyer Pre-Qualification / Board Package - All bids received will be forwarded to you for review until a contract is fully executed - without exception! Before a bid is submitted, I will make sure the prospective buyer provides a thorough financial snapshot and pre-approval letter so we can pre-qualify based on your building's specific board policies & requirements. Any signs of weakness that pose a potential risk to board approval will be pointed out to you before entering the negotiating process. We will oversee completion of the board package to be sure that all items requested are delivered in a timely manner.

So, there it is! I will continue to focus on writing content and the live chat for UrbanDigs.com so that you are always given street level information as it happens in the world of Manhattan real estate!

In meantime, if you or someone you know is thinking of selling their home and would like me to meet with you to discuss property valuation, marketing strategy, the selling process, tips for preparing your property for maximum showing effectiveness, weekly print advertising, etc..please just tell them to click on the SELL-SIDE MARKETING link on the right side of ALL UrbanDigs.com pages:

In case you missed some of my posts advising sellers how to efficiently market their property for maximum resale, here they are:

My Apartment Won't Sell: Help!

Don't Mess Up In Here

Pricing Your Way To A Sale

New To Market? Delay & Generate Interest

Part 4: Contract Signed in 3 Weeks

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My Apartment Won't Sell...Help!

SELL MORTIMER SELL!!

A: If your property has been on the market for months (either with a broker or not) and has still not sold, there really is only one thing you can do to spur activity: LOWER YOUR ASKING PRICE! The sooner you come to this realization the faster your property will move. Originally published August, 21 2006

Advice #1: LOWER YOUR ASKING PRICE TO BELOW MARKET VALUE! Its not rocket science. Its just a matter of waking up and realizing that what you thought your property was worth or what your broker promised to get for you is not realistic. Your goal should be to offer a good value to buyers and bring in as much traffic activity to your property as possible. In the end, the MARKET dictates the MARKET VALUE of your apartment, not the BROKERS!

Advice #2: This will sound anti-productive by its nature (since you might want to sell as soon as possible) but take 1-2 weeks off of advertising in major media outlets such as NY Times, NY Post, or online websites. Don't hold an open house for 1-2 weeks and only cater to individual appointments. Give your listing a break and try to 'freshen' it up for future display to a newer audience after some time off. Combine this with a price reduction and you should get renewed interest in your property.

Advice #3: Make sure your property is clean and NOT cluttered with furniture during open houses and showings! If possible, put some furniture in storage temporarily to show off the true size of the property. Also, do your best to only show the apartment when you get the most natural sunlight. If you get the best sun from 2:00-5:00PM, then don't run an open house from 12:00-2:00! Sunlight sells if you have it, so use it!

Advice #4: LOWER YOUR ASKING PRICE TO BELOW MARKET VALUE!

Notice a trend?

Im gonna say it because no one else will, especially to your hired broker who promised you those astronimcal asking prices just to gain an exclusive listing:

IF YOUR PROPERTY HAS NOT RECEIVED AN OFFER AFTER 35 UNIQUE VISITORS HAVE SHOWED UP, THAN YOUR PROPERTY IS OVERPRICED!

SELLER TIP: AVOID BEING TRICKED BY LIERS

Do the right thing. Bring your asking price closer to that of the last comparable sale in your building. If that last sale was more than 12 months ago, than add some time value into it. But don't make the mistake of 'testing' the market as it will only set you back further. And another thing, if there are similar units being offered for sale in your building at the same time as yours, than make sure your priced accordingly.

It amazes me to see some brokers promise such an out-of-market price for their client's property. Now it is true that some agents are exceptional at the art of marketing and selling, and that they creatively built up their business to a level that offers more services for their clients than the average broker. An example of this excellence can be seen in Douglas Elliman's Jacky Teplitzky & the team and Citi-Habitats agent Danny Davis. Now both of these agents have proven to build an amazing business around their talent and marketing skills, but there is a limit to what premium they can get for you. What you need to look out for is the agents that have NOT exemplified top notch marketing skills and rather is simply promising you a substantially higher sales price to increase the likelihood that you sign that exclusive listing contract with them! The end result here is an overpriced property that receives normal marketing and has to be reduced in the near future if expected to move.

I'll probably get some heat over this post from the brokerage industry, but hey, I'm an independent contractor and as such I feel that I can independently post my opinions.

I SAY TO THE SELLERS: Look at pricing of the real estate market as you would look at pricing of corporate stock. If INTEL, NASDAQ: INTC, is trading a $19/Share and you own it, it would be foolish of me (your broker) to promise you I can sell it for $25/Share. How can I do that? Someone else is selling it for $19/Share, and the short term direction it goes is unknown! Well, if someone has a similar apartment to yours (a block away or in building) and is offering it for substantially less than you are, you know what you need to do!

UrbanDigs Says: Offering your property at a price below market value will generate traffic and hopefully get you multiple offers! If time is on your side, than try a series of smaller price reductions until you see a spur in activity. If you MUST sell now than do one aggressive price reduction.

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Don't Mess Up In Here...!

A: If you are a new seller, 4 weeks or less, then this post is for you. Fact is, if you take a step back and in hindsight look at the traffic patterns of any given exclusive, a pattern becomes clear. That pattern is sometimes the difference of tens of thousands of dollars in the end; IT WAS FOR ME! Originally Published October 23, 2006

Unless the apartment is aggressively priced, most of the activity will happen in the first 2 weeks and in the final 3-4 weeks (due to price cuts).

THE FIRST 2 WEEKS (The 'Should Have' Period)

I like to call the first two weeks of every exclusive the 'should have' period. The first 2 weeks is the period of time where you get a bunch of appointments scheduled from 'B' buyers who are trying to learn the inventory of their price point and their agents who just want to do a deal already. Maybe you'll get a few 'A' buyers too. Most likely, you'll get a low ball bid. Many times this very early bid is the nightmare for sellers 5 months later. So, I refer to it from the seller's point of view as the, "I should have accepted that bid and saved 5 months of agony".

It makes me think of that scene in Casino where Joe Pesci stares down DiNero as he goes to pick up his wife, Sharon Stone, at Pesci's restaurant. You know that scene, where Pesci snears, "Hey! Don't Mess Up In Here...!"...

(not the scene but has that same look)

In Hindsight, every financial decision is 20/20; including whether or not YOU, THE SELLER should accept that offer.

It is during the first two-three weeks of listing your property that you will get the most interest and if lucky, an offer. The offer will not be high but will be very close, the same, or most likely HIGHER than what you eventually accept down the road after multiple price cuts!

I SAY TO YOU, THE SELLER, DON'T MESS UP IN HERE! And if you do mess up and ignore the offer because there is so much activity and you won't sell below a certain price in the first 4 weeks, to NOT blame it on your broker for failing to move your property at the highest & best price possible down the road.

MY STORY: When I had my condo on the market at Astor Terrace, I showed you the work I did and how I was going to market it, I got the most activity during the first 3 weeks. Every open house was packed and I was thinking JACKPOT! I even got a bid. I was asking $1,075,000 (much higher than I knew it would sell for but it was my home, and my home is worth what I say...yea right!) and got a bid of $950K. I shrugged it away without a response and played hardball. Yea, real smart.

Four months later I found myself $6,000 into weekly NY Times advertising and other marketing expenses, tired, worried, and 2 price cuts down to $975,000. Traffic dried up and I was getting very nervous. HOW COULD I HAVE DISREGARDED THAT OFFER! Nights became sleepless and bills seemed threatening to my financial well being.

I winded up accepting a $935,000 one time take it or leave it bid, up from $925,000 orginially. It was all cash and 'looking to close within a month' that made the offer a no-brainer for me. But the mistake was made and the lesson was learned.

THE LESSON: Think about any bid that you receive in the first two to three weeks! Think about even if it is well below your asking price. If you decide NOT to accept a low offer in the first 3 weeks, than be prepared to possibly have your apartment on the market for the next few months! I'll explain why right now.

3rd TO 16th WEEK OF YOUR LISTING

During weeks 3 to 16th of your listing, assuming your property was on the market for 4 months or more, your traffic is pretty much the same; SLOW. The broker is showing the apartment 1-2 times a week, and you are having 2-4 people per open house. Not a good sign. The listing seems to have staled up, and feelings of nervousness fill both the agent and the seller as thoughts of 'problems with marketing' begin to arise. I usually hear questions like, "Why are'nt you showing the apartment more often?", or "The ad in the NY Times wasn't big enough", and the best one, "I want this place SOLD, so get to work and SELL IT!". Yea, ok.

You know what I think at this point? I hate to be the bearer of bad news but if you had 30 buyers through your property with no bid submitted, than your asking price is too high and needs to come down to reality; i.e. YOU HAVE TO WAKE UP!

I've said this over and over here on UrbanDigs:

YOUR HOME IS WORTH ONLY WHAT SOMEONE IS WILLING TO PAY FOR IT

It doesn't matter that you are so close to the subway station, or that you have brand new stainless steel appliances, or even that you have a terrace (cause I had a sick one!). It only matters what a buyer will bid for it and whether or not you HAVE TO sell it right now. The problem is that as a seller, you get emotional and ONLY look at the positive attributes of your property when you price it and review offers! The solution should be to be as unbiased a seller as possible! Notice if your apartment is on a low floor, or has no views, or gets no sunlight, or is on a very busy/noisy street, or has a floor-through layout, or has low ceilings, or whatever! This is what buyers will be thinking about when they bid. A biased seller will be unable to make rational decisions when it comes to accepting an offer.

Moving on.

FINAL 3-4 WEEKS

Traffic begins to heat up as you already hit your turning point and have succomb to price reductions. It happened for me after 12 weeks on the open market and 11 open houses. A very long time for any nervous seller!

I didnt get a contract signed until the 18th week and 16th open house and for lower than what I was offered 16 weeks ago!

Your price comes down and activity picks up. Wow. I can't believe it. It's amazing how this works. Why didn't I think of this earlier? Why didn't I respect what my broker originally told me 15 weeks ago about where to price my unit? Why was I so blind?

BECAUSE YOU ARE HUMAN. BECAUSE ITS YOUR HOME. BECAUSE ITS HARD TO SELL ANYTHING THAT HAS EMOTIONAL TIES, MEMORIES, GOOD TIMES & BAD.

But you must not be clouded in your financial decisions. You must be able to recognize when to move on an offer. You must be able to realize that a highly qualified buyer may NOT be so easy to find!

This post was based entirely on the notion of hindsight and what I have noticed AFTER looking back at my clients and my own exclusive listings, to see if there were any patterns. There were. If anything should be gained from this post it's that you must have the vision and the will to accept a reasonable offer if:

1. It comes very early and from a qualified buyer
2. Is reasonable in the sense that you were going to price your apartment at 750K but decided last minute to raise that to 800K. Now you get a 700K offer in first 2 weeks.
3. You are under time pressure to sell

Don't Be Stupid. Don't Be Greedy. Don't Mess Up In Here!

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New Dev Sizing: Double Counting

A: Here's something most people do not know. When it comes to the quoted size of a new development condominium property, some developers include the portions of all common areas such as hallways, elevators, lobby's, roofdecks, etc. that are allocated to an individual unit; also known as 'common elements'. So, for anyone who went to new development sales office recently and was shown a floorplan that quoted a unit's size higher than it appeared to be on the layout, now you know why.Originally Published January, 19th 2007

First, a little investigating into what common elements are defined as. Its called Real Property Law 339-i and goes into detail how the condo unit-owner's common elements are calculated.

According to Habitat Magazine article titled, "Condominiums: A Primer To Ownership Interests":

An owner in a condominium has no lease. He/she actually owns a unit. That unit (usually an apartment), like a private house, is measurable. In Manhattan, such a unit is generally contained in a high-rise multiple dwelling. To get to that unit, one must walk through the lobby, ride the elevator, and walk down a hallway. These areas are used in common by other unit-owners to enter and leave their unit (apartment).

Additionally, embedded in the walls and floors of each unit (apartment) are girders, pipes and conduits, which service not only that unit, but also other units within the building. Accordingly, the legislature had to establish various forms of ownership so as to fully account for the ownership of the entire building in which an apartment exists. To solve this problem, they established "units" and "common elements." The units being the apartment in chief and the common elements being those portions of the building generally used by all other unit-owners to enter and leave each apartment, support the building, and bring all necessary services and utilities to a unit.

So, the legislature mandated the determination of one's percentage of common interest in 4 ways...

(a) proportion of floor area of the unit in relation to the floor area of all units

(b) fair market value of the unit in relation to the fair market value of all units

(c) equal allocation for each unit, or for each unit in a particular class

(d) floor space of the unit plus unique factors affecting relative values, such as availability of common elements for exclusive or shared use.

That last one seems relevant here. Let us review once more:

floor space of the unit PLUS unique factors affecting relative values, such as availability of common elements for exclusive or shared use

Jonathan Miller, of the amazing Matrix blog, corrected me as I first thought this practice is common to ALL condominium units listed for sale on the open market.

Noah asks Jonathan: Stuck here trying to write a post about how the total size of a condo unit is quoted by most brokers and new dev sales teams. Wanted to point out that this total size INCLUDES the unit's allocated percentage of the common elements, which is why the apt size itself may seem smaller than the quoted size. Can you please CONFIRM or DISPROVE what I just stated? Is my thinking here correct? I investigated Real Property Law 339-i for this post to back me up.

Jonathan responds: No thats not true. The % of common elements is based on the total square feet of the unit / total square feet of all units in the building. This percentage is then used to allocate expenses. Lately we have been reading about developers who have been taking liberties with including common area in the square feet calculation, (double counting), so it makes the square feet look larger, driving down the ppsf.

Thanks Jonathan for a detailed clarification of this new trend.

UrbanDigs Says: The total square feet quoted on some new development condominium property listings includes the total common elements allocated to the unit-owner. Be sure to ask the sales team if the new development you are thinking of buying into has included the allocated common elements into the unit you are considering. Your attorney could explain this in more detail especially when the offering plan is reviewed before you sign any contract of sale! Its all about being educated!

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More Transparency Can Clean Up Industry

A: I recently had a realization as I was submitting a bid on behalf of a client and was told by the listing broker that a higher offer was submitted and that we had one chance to up our bid. I was told the offer was accepted already, but that no contracts were sent out so that my clients had one last chance to get the property; so we upped our bid and I had to advise my client on the hardest aspect of my job --> how high to go. And then it dawned on me. If there were only a one-stop site that has complete data on co-op and condo sales in Manhattan, only then will I be able to see whether or not the listing broker was being honest or unethical.

A little over a week ago the NY Times had a story called, 'Agents of Angst', which went into detail on how real estate agents are a step below used car salesman in terms of reputation. Here is an excerpt:

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.)

To start with, brokers are salespeople, so buyers with suspicious minds would naturally suspect brokers of trying to sell them something they don't necessarily want or need. But brokers also admit that some real estate agents help to perpetuate stereotypes with classic bait-and-switch schemes and by putting their own desires to close a deal over a client's best interests. The fact that brokers themselves sometimes find it hard to trust one another only compounds the level of suspicion in real estate.

Yea yea yea.. I know all of this. Which is one of the reasons I started blogging in the first place so potential clients have a window into how I work, think, view the markets, and treat clients. But how could it get better?

MAKE REAL ESTATE TRANSACTIONS COMPLETELY TRANSPARENT!

Think about it. If an agent knew in advance that the actual price of the property would eventually be made public and be accessible to anyone with internet access, than how could they get away with unethical behavior when the deal is closed? The situation would in essence change the playing field, I would think, as agents could now be accused of unethical behavior or not observing their fiduciary responsibilities to their client (the seller) and risk losing their license and credibility in the field. Well, assuming they have credibility.

For example, consider this situation in a world where ALL transaction data is made public within a week of closing:

Sally Seller Broker is hired to market property at $500,000 ---> Buyer Broker Bob submits a bid of $465,000 on behalf of their client ---> Sally Seller Broker receives bid of $455,000 from a direct client with NO buyer broker ---> Sally Seller Broker ONLY submits direct client's bid to seller ---> Deal closes for 455,000

Although the deal is now closed and Buyer Broker Bob can't do anything to reverse it, he will be able to see very clearly that Sally Seller Broker acted in their OWN best interests and never disclosed a competing bid to their client, the seller. Sally Seller Broker was acting this way to ensure a higher commission for herself; and the seller never had a clue. But Buyer Broker Bob does and can now contact REBNY, DOS Licensing Services, MEDIA outlets and perhaps even the seller if he kept proof of the bid being submitted before any contract was signed.

Perhaps if Sally Seller Broker knew in advance that unethical behavior (that caused this industry to get such a bad reputation in the first place) would be easily revealed at the close of the deal, they would be less likey to commit such acts and more likely to behave ethically and in their clients best interests. Which is all we can strive for.

SITES TRYING TO HELP

Streeteasy.com - One of my favorite NYC real estate aggregators and search engine. I use it quite often for my own clients and find it very useful. Recent upgrades in services offered allow you to pay $10/mth for access to comparable sales data collected.

ACRIS System - City provided Automated City Register Information System. Has co-op sales and is free to use. Need to know LOT/BLOCK # or NAME of buyer. Cannot enter building address.

PropertyShark.com - All purpose building/unit data resource. Co-op comps listed by date after you go in and select a neighborhood.

UrbanDigs Says: Its hard being an honest salesman! But hopefully help is on the way. By making real estate transactions completely transaparent, brokers, buyers, and sellers will be able to tell whether or not their higher offer was ever submitted to the seller by the hired listing broker. Should you find that the deal did in fact close for a sizeable amount UNDER what your client's bid was, and you know for a fact that your bid was submitted BEFORE any offer was accepted and contract signed, well then you now have a complaint to file against the unethical party involved as long as you have the records to prove it. Hopefully this new world of transparency that is soon to be upon us will help CLEAN UP this industry of some sorts of foul play via the realization that it won't be so easy to get away with anymore!

Now that my client's bid of $1.7M is in, its just a waiting game to hear whether it was accepted or not. Should it not be accepted, I certainly will keep my eyes open to what this apt eventually sold for by looking it up on public records. Only then will I know what we were up against and whether or not there really was another higher bid submitted!

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A Caution Against Buying Too Soon

I have an amazing exclusive at 7 W 96th Street, a 600 sq ft one bedroom for less than $417K. The apt is crying out for a buyer to give it just a little TLC. I like to say that each apartment has a story, and this apartment's history is long and a little bit sad.

In 2005, the sellers were working with a broker who put a student with parents paying cash for the apartment up for board approval. They went to contract at $520K when NYC was at the absolute height of the market. The sellers, thinking they were going to net over $460K from their sale, bought a new apartment.

The building does not allow parents buying for students, so naturally, the buyer was turned down. The sellers put the apartment back on the market, this time with the building's management company as the listing firm.

A Toes Tip: In general, I caution against using a small management company to market your apartment. Typically they have few sales agents and no one has ever heard of them so no one is visiting their website to check out their new listings. So unless a management company sales agent is very aggressive with NY Times and Craigslist ads and open houses, and keeps the listing very current in the Real Estate Board of New York's (REBNY's) database so other brokerage firms know about it, the apartment is not going to get very much exposure. The less exposure your property gets, the lower the price it is going garner.

The apartment sat on the market for months, beginning a steady price decline as the media touted the "Bubble," which scared buyers out of the market. Finally, the price landed at $425K, and remained there for several months.

After an apartment is on the market for about 8 weeks, buyers and brokers start thinking that something is wrong with it, and they stop showing it unless there are significant price drops. A full year and a half after the apartment went on the market, my manager brought me in to take on the listing because I have had success in reviving stale listings. I took on the listing at the same price as the last broker, $425K, and began my usual marketing blitz. Here is the listing today:

Asking Price: $417,000
maintenance: $784
Doorman: Yes
Size: Aprox 600 sft from floorplan
PPSF: $695
Flip Tax: None
Pre-War: Yes

**OPEN HOUSE** Sunday Feb 11th, 2:00 - 3:00PM

I had a professional photographer take photos and do a virtual tour, sent a mailing to the three closest buildings, put it on our website and in the NY Times print and online editions, advertised frequently on Craigslist, and featured the apt prominently in my e-newsletter, which goes to 2,350 friends, clients, and other contacts.

The result was quite incredible:

1st Open House: Over 30 people

2nd Open House: Aprox 20 people

3rd Open House: Aprox 20 people again

Only 3 buyers had seen the apartment in its past life on the market, which had been just 2 weeks before.

The rule of thumb in the industry is that if 30 buyers see an apt and/or 30 days go buy, and you don't receive offers near the asking price, you are overpriced. Offers came in below $400K, but the sellers, having taken a bridge loan to buy their other property, simply can't take anything that low. I requested that the sellers drop the price to $417K, which was the lowest they were willing to go. Essentially, unless they get a certain price for the apartment, they are going to be in debt.

For every open house, I wash the windows, I put out flowers, I light scented candles. The apartment is as "staged" and as "renovated" as the seller's are willing / able to do, and really, it looks quite lovely. I've communicated the number of showings, feedback from brokers and buyers, sent them comparable listings, and educated them on the current market conditions.

Buyers are VERY savvy these days and they simply will not buy an apartment for more than what they think it is worth. So at this point, I am at a loss of what else I can do and I'm open to your suggestions!

TOES says: Make sure you and your broker know what will and will not fly with your building's board. If a candidate is borderline, run the info by the management company and see if they will give you a preliminary yea or nay.

TOES says: Don't buy something new before you know that your buyer has passed the co-op board. You can always try to negotiate terms in the contract allowing you to "rent back" from the buyers for a certain period of time so that you can close on a new home.

TOES says: If you must buy something new before knowing whether your buyer has passed the co-op board, be extremely conservative with what you think you are going to net on your sale. Have a contingency plan in case your buyer doesn't pass the board and you have to sell the apt at 20% below what it is in contract for. Investigate taking out a home equity line of credit on the apt and renting it out.

TOES says: Sellers: If 30 people have seen your apartment in 30 days on the market and you are not getting offers near the asking price - your apartment is overpriced for the current market conditions.

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Pricing Your Way To A Sale

A: This post is for those who are thinking about or currently in the midst of selling their apartment. As you interview real estate agents and seek representation, be careful NOT to fall prey to those seasoned agents whose current 10 exclusives must mean they are 'the best' and who promise you a higher purchase price than everyone else because they are a Senior VP! This is a fools paradise that you must overcome by realizing that agents do not determine the value of your apartment, the market does that!

With that said, you should at least find out what the last 2 comparable sales were in your building and similar nearby buildings (as well as current ACTIVES) when deciding an initial asking price for your property. Then, ask your real estate agent for hopefully an honest assessment of what premium or lack thereof your apartment demands due to sunlight, views and renovations.

For sake of ease, lets make up a situation that is similar to the real world so that I can put my thoughts into numbers.

Christine Condo owns a 750 sft 1BR condo (naturally) in a luxury doorman building in Gramercy, close to subways and restaurants. Christine owns apt. 8B in a building with 20 floors and enjoys southwest views and tons of sun. Here is the deal:

First, analyze building comps that sold and closed to get an idea of what a past buyer paid for your unit type.

BUILDING COMPS (1BR's ALREADY SOLD & CLOSED)

Apt. 5B: 750 sft 1BR sold for $699K 5 months ago ($932 PPSF)
Apt. 16B: 750 sft 1BR sold for $710K 7 months ago ($946 PPSF)

AVG PPSF = $939

Second, anaylze nearby building comps that sold and closed to get an idea of what a past buyer paid for your unit type.

NEARBY BUILDING COMPS (1BR's ALREADY SOLD & CLOSED)

Apt. 3F: 800 sft 1BR sold for $725K 3 months ago ($906 PPSF)
Apt. 12G: 825 sft 1BR sold for $699K 2 months ago ($847 PPSF)

AVG PPSF = $877

Third, anaylze what similar apartments are currently asking for in your building.

CURRENT BUILDING ACTIVES

Apt. 6B: 750 sft 1BR asking $700K ($933 PPSF)
Apt. 17B: 750 sft 1BR asking $725K ($966 PPSF)

AVG PPSF OF ACTIVES = $950

Finally, price in your specific apartment details to either ADD ON or DEDUCT from these averages + taking into account CURRENT market conditions

CHRISTINE CONDO'S APT DETAILS & MARKET CONDITIONS

Views - Excellent
Sun - Excellent
Renovations - None. Entire apartment needs TLC
Current Market Conditions - Slow. Buyers Have Control

With that said, here is how I would break it down for the client given the building comps, nearby building comps, apartment condition and features, and current market conditions.

HOW TO PRICE & WHAT TO EXPECT

$725,000 ---> If you want to test the waters and price higher than the past 2 building comps than expect 4-7 MONTHS time on the market with the possibility you will have to reduce your price at some point.

$675,000 ---> Most accurate price reflects current market and should result in a 2-4 MONTHS time on market.

$650,000 ---> Aggressive price offers a PPSF of $866, below the last 2 comps sold in building, and should attract good activity at OH's and showings during the week. Expect a 1-2 MONTHS time on market as buyers find value compared to other listings currently on market in same building.

KEY POINT: To move a property quickly your only option is to aggressively lower your asking price. Switching brokers or putting a slightly larger ad in the NYT Sunday Print will NOT do it! The sooner you realize this the sooner you will be able to react and move your property.

REAL LIFE EXAMPLE: Look at Eileen Mintz's listings at 245 E 54th street.

This large 1BR, listed at 862 sft, was first listed on January 22nd, 2007 at $550,000. The price per square foot at asking was $638 in a building whose last few sales were between the ranges of $623/sft - $789/sft.. So, by pricing right this seller got an OFFER ACCEPTED after only 2 weeks on the open market.

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To Sell or No To Sell

A: I wrote this post for the Yankee Blog swap that I had with Kris Berg over at the San Diego Home blog, but decided it was time to publish it here after having a conversation with a client about whether they should sell or not. When making the ultimate decision to sell or not, you MUST understand your own personal situation both financial and other before making a decision. Believe it or not, there are wrong reasons to list your apartment for sale, especially if you will owe a hefty tax bill because you don't meet the primary residence tax benefits or 1031 exchange requirements.

I want to briefly go over the two most popular types of tax benefits that real estate investors can cash on when they report a gain, as failure to achieve either benefit could be reason NOT to sell your home:

1. PRIMARY RESIDENCE OWNERSHIP & USE TESTS (Out of 5 YR Period)

Owned the home for at least 2 years (the ownership test), and

Lived in the home as your main home for at least 2 years (the use test)

2. 1031 Exchange ('Starker' Exchange)

Allows a tax payer to defer the paying of taxes on a gain when an investment property is SOLD & a new property of like or greater value is PURCHASED. In other words, if you first purchased a property for $400K, and then 1 year later sold it for $500K, you can then defer the payment of taxes on the $100K Capital gain in this transaction, as long as you purchase another property worth $500K or more.

Now, lets get right into selling for the right reasons.

REASONS TO SELL

Relocation - If you are being relocated for work, or plan on moving permanently, than making the decision to sell is no decision at all. Price your apartment aggressively based on the last comparable sale in your building or neighborhood, and list your property now. Don't wait to see where you might be headed or to see if the housing market might turn around in the near future, because chances are it will take longer than you expect to get a bid that is acceptable to you.

Need To Upgrade - If you have outgrown your property and need more space, buying an upgrade is a very good reason to sell. If you dont qualify for the USE & OWNERSHIP tests that are required for the main primary residence tax benefits of your gain, you can use a 1031 exchange to buy a property of LIKE or GREATER VALUE than your sale and DEFER tax payments on the gain until the next sale. Buying an upgrade is a necessity, not a luxury, especially if your family is growing and space is tight in your current home!

QUICK TIP: It's always better to SELL first before signing any contract on your new home. While I am a firm believer of knowing product knowledge and being comfortable with the available inventory that you might be buying into, I worry that your home may not sell as quickly as you think; especially if you test the market and price high. Keep in mind the possibility of paying 2 mortgages if you decide to buy first, and whether or not you can weather that kind of financial storm.

Financial Hardships - If you bought more than you can chew, or experience a pay cut or layoff, than you should seriously consider selling your home. The worst thing you can do is to pull money out of your home just so you can continue to get by! Wasting equity in your home is like wasting money on unnecessary luxury's. It's just not a smart financial decision.

If you find yourself increasing your bad debts (i.e. credit card debt or taking out a HELOC to afford your current lifestyle), than sit down and seriously consider cashing out your home and paying off these debts to regain your financial independence. Chances are you still have some great equity left in your home and cashing out a hefty gain to avoid bad debts will never be the wrong move. Suck it up and rent for the short term until your luck improves and your income gets back on track! If your not making it, then stop spending it!

Plans To Sell In Near Future - Assuming you qualify for tax benefits, if you were planning on selling your home within the next 12-24 months, you might be best listing your apartment for sale now, rather than later. The housing market is a market like any other and as such does have its ups and downs. Because of its illiquid nature, that is that doing a real estate transaction takes time (unlike a stock trade), once the housing market turns from its peak it may be years before a bottom is realized. Right now we are still searching for a bottom that could be many years away!

REASONS NOT TO SELL

No Tax Benefits - One reason why investing in real estate proves time and again to be a savvy long term investment is because of the tax benefits afforded to the buyer both in monthly tax deductions and exemptions in gains at resale. If you don't meet the primary residence tax benefits requirement and you do not intend to buy a new property of like or greater value, than you MUST talk to your accountant to see if selling is the right choice.

I almost had a sales client that was thinking of downsizing and selling her 4BR home and buying a 2BR home to cashout and keep the difference. Only one problem. She only would get a 250K exemption from capital gains on what would have been a $1.7M profit or so since she bought the home 35 years ago. Thats $1.4M or so of taxable gains and her accountant advised her that a tax bill of $300,000-$350,000 would be due the following tax year. If she sells for $1.7M, then buys a $900K-$1M property, after taxes she would have very little left. The numbers just didnt make sense. So, do yourself a favor and crunch the numbers and ask your accountant what tax benefits you will get or not get by selling your home.

Can Afford Rental Investment Strategy - If you are able to afford to hold onto the property and rent out for investment income, than do it. Even if you are only getting 85% or so of the total cost of the property back in rental income, I still think it is worthwhile to keep this income producing asset in your portfolio. However, if you are highly leveraged with a number of rental properties and too much exposure to real estate in your total portfolio, it might be best to sell 1 or 2 of the lowest performing properties and lower your exposure to the real estate sector for a short while. Talk to your financial advisor about this in more detail if you are in this situation.

To Increase Quality of Life - If your only reason for selling is to be able to afford more vacations, or a wedding, or a car, or some other type of temporary luxury, than you are selling for the wrong reason. We Americans are a spoiled bunch. We like to spend when we should be saving. The equity in your home is no different. Too many people have used their homes as ATM's over the past years and lowered the equity they now own in their home. Do yourself a favr and make the right decision. Don't sell and hold onto your home equity for a real rainy day or bigger payoff down the road when the housing market turns around again!

You Found A Incredible New Home - I'll keep this short and quick. If you are super rich and could afford it, fine, go for it. But assuming you work hard for your money and like most people, have to work even harder managing it, than keep EMOTION OUT OF YOUR HOUSING DECISIONS! I'm not saying don't buy the home you fall in love with. I'm saying don't sell your home now because you found an inredible new home, that is much bigger and much more expensive that you normally would buy!

Too often I see buyers reaching way beyond their budgets to buy a home that is $100K, $200K or sometimes $300K more than their actual budget. In this day and age, even the worst credit history's can get a huge loan. So, you must exercise discipline and learn to not fall in love with any new home, especially if you can't afford it!

Selling your current home to get the cash to buy the home of your dreams is a big no-no! Trust me, you don't want to sacrifice quality of life to live in a incredible home that could very well be the spark to a financial fire!

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Part 4: Contract Signed After 3 Weeks

A: Remember this series of posts I did last month? I wanted to show you how I advised my client to prepare their property for resale, and prove to them that pricing right in this market will generate enough activity for a quick sale. In fact, after 2 weeks on the market the apartment got into a soft bidding war between 2 buyers and went into contract just under ask a week later.

Here is a recap:

Part 1: Prepping For Sale - What To Do

Part 2: Prepping For Sale - The Work

Part 3: Ready For Marketing - Before & After

And finally, today's 'Part 4: A Done Deal' and a very happy seller! This apartment was in a non-doorman building, had good size, reasonable monthly's, and a back of the building view. So it was quiet, but didnt get that much natural sunlight.

The sellers told me that they preffered to sell FAST and didnt mind if they had to put money into the apartment to get a better price. However, I advised them not to do so as the cost and time of renovating in this type of market might not get the premium that most people expect to get from these kinds of upgrades. So, I advised them to refinish the floors, paint, remove the security cage on the windows, and get a cleaning company in which cost a eye-whopping total of $1,500!

In the end, the apartment showed great and got a signed contract within 2 weeks! We could have tried to price a bit higher or spend an additional few thousand dollars and build a wall to make it a JR1, but that would have made the apartment much more dreary than it already was and pricing it significantly higher could have had a negative affect on their timeline to sell fast. So, I think the way we did it was right and in the end, they were very happy with the result.

The last 'A' line was on the 4th floor and sold for just under $300,000 in December of 2004. The last sale in the building was a 'C' line full 1BR apartment that was fully renovated and in mint condition; which sold for $489,000 in December 2006. So, I think we did just fine!

UrbanDigs Says: It's still a buyers market in the sense that buyers can negotiate a seller's price down; especially if the unit is way overpriced. So, high end renovations don't pay off as well in these types of markets leading me to advise clients to do the low-end work that prepares the property for sale on the open market. These include a floor refinishing, paint job, full cleaning, and anti-clutter measures to make sure the apartment shows well. Having a property with dull floors, old paint, dirty bathrooms & kitchens, and tons of furniture and pictures on the walls just won't bode well during showings. You need that first impression to be a positive one and doing the work I suggested will achieve this goal; especially the floors and de-cluttering of your home to show off the true size of the property.

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Property Tax Cut Coming..?

A: Mayor Bloomberg is proposing to cut property taxes by as much as 5% as '...New York enjoys the bounty from its booming economy and real estate market...". The proposed tax cut would apply for at least the next fiscal year, and would combine with a sales tax cut for clothing to total $1 billion of the city's $55 billion budget.

This is both good news & bad news for homeowners:

Good News - A property tax cut is good news because it will lower the monthly costs to the homeowner at the end of the day. Although the tax cut won't be as fruitful as it sounds because the homeowner is already writing off their real estate taxes come tax-time, as one of the benefits of owning. However, lower monthly expenses associated with any property should increase affordability on the open market; as long as buyer demand remains healthy enough to support price appreciation.

Bad News - Generally speaking, property taxes are directly associated with the city's assessed value of your home on the open market. Therefore, as property taxes rise it is because the value of your home has increased. In this case, a property tax cut could be the city's first official acknowledgment that home prices have hit a standtsill and may even had started to dip a bit. The theory continues, as property taxes fall it is because the value of your home has also dropped a bit.

According to Wikipedia: The taxing authority requires and/or performs an appraisal of the monetary value of the property, and tax is assessed in proportion to that value

NOTE: Mayor Bloomberg boosted property taxes a total of about 21% or so between 2002-2004 when the housing market realized incredible gains. I recall my own property taxes being raised from $650/month or so up to about $800/month during this time; causing what is known as a shortage spread in my monthly mortgage payments and a temporary surge in my monthly living costs to correct the issue.

The question that comes to my mind, is what Bloomberg really knows about the city's budget and generated revenues both now and in the future. For example, all those new developments that have been sold and now occupied will eventually lead to growing tax revenues as the city's granted tax abatement expires on each building and homeowner. So, there will be much more property tax revenue going to come into the city reserves from these guys. This makes me wonder whether or not the proposed property tax cut is a result of flattening/falling property values or good fiscal planning and management.

In today's NY Times article:

The tax cuts represent a departure for Mr. Bloomberg, who last year used the bulk of a $5 billion surplus for a reserve fund to pay future health care costs and to offset projected deficits. This time, Mr. Bloomberg concluded that given the city’s overall fiscal health, revenues that had come in so much higher than expected should be shared with taxpayers and plowed back into the economy, aides said.

The proposals are likely to further burnish the mayor’s reputation among New Yorkers, which took a heavy beating during his first term, when he pushed through an 18.5 percent tax increase. Mr. Bloomberg is in his second and final term, and has drawn increasing interest as a potential candidate for national office, and his decision to cut taxes fuels speculation about his future.

But, they said, the city was flush enough to set aside $750 million for the property tax cut, at least for the fiscal year beginning in July, which would translate into an average overall reduction of 5 percent. The average yearly tax bill for a condominium owner is $6,449, so a 5 percent cut would translate to $322 annually. The average tax bill on a house is $3,098, and a 5 percent cut would save $160.

Interesting Stuff! Stay tuned on what happens here.

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Part 3: Ready For Sale

A: Well the apartment is finished and ready for the open market once the new year begins. The floors came out great, the paint job neatened things up, and the cleaners finished it off. I also removed the security cage on all the windows as it was limiting the amount of sunlight the apartmet gets. I'll just keep them in the closets for the new buyer to either throw away or re-install. Although we could have done more work to this apartment, there really wasn't any point. Here's why!

A while ago I wrote a post about renovating in a cooling housing market touching base on why high end contracting just doesn't make much financial sense. I stated:

IN A SLOWING HOUSING MARKET YOU WANT TO DO THE LOW RISK HIGH REWARD RENOVATIONS THAT COULD PAYOFF AT RESALE. THESE INCLUDE FLOORS & BATHROOMS, NOT KITCHENS!

The reason is that you don't want to spend too much money on renovation work when it's a buyers market in the sense that buyers can negotiate! The headache of going through the renovations process should be rewarded at resale as you get a premium for not only the upgrades you installed, but also the 1-3 months of paperwork, noise, dust, and migraines that come with it.

That's one of the reasons why renovations pay off so well in New York City real estate! But when its a buyers market with the element of negotiability alive and well, that premium could get wiped out! So why risk it!

Here are the 'BEFORE' pictures again of APT 1A at 314 West 56th Street:

And, here are the web ready pictures taken at 1PM on a sunny weekday afternoon:

Its amazing what a few dollars and good photo shoot can do to liven up a place for resale! The floor refinishing brightens the space on its own and gives a great first impression when buyers first enter. The kitchen and bathroom came out just fine when deeply cleaned (although can use a renovation) and the amount of natural sunlight literally doubled when I removed the security cage on the windows. Although the apartment # is 1A, it is actually one floor up giving you a view of other unit's garden level below.

By keeping costs and the 'amount of work' low, we should be able to maximize profit at resale and still get top dollar for what alcove studios in midtown west in a well-maintained elevator building are getting. Time will tell. I'm hoping to provide my client with a buyer within 10-12 weeks for this one.

If we would have decided to renovate the kitchen and bathroom, it would have cost aproximately $30,000 - $35,000 in materials and labor and about 6-8 weeks in total for paperwork, architect work, board approval, and contracting. We would have added $50K to asking price and ask $400,000 instead of $350,000, and HOPE to get at least $50K more than if we didnt do the work; $35,000 for work + $15,000 premium for renovating!

I think we made the right choice by minimizing work done and pricing right at $636/sft, as the low monthlys should convince someone that buying this property is better than renting!

What do you think? A mistake? Should we have done more work?

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Floors & EasyClosets.com

A: Do some research and ask around for a few reputable contractors to give you a quote for sanding, staining, and poly'ing the hardwood floors. It will probably be about $2.50/Sq. Ft. for a good company which will prove to be well worth it. Then, go to www.easyclosets.com and follow the on-screen Closet Design Wizard to create your new closets based on your own needs.

First lets discuss the floors. The impression a potential buyer has on a property when they FIRST open that door is critical. Based on my own experience I would tell you that within the first 30 seconds my clients know whether or not this is the apartment they will ultimately place a bid on. Having said that...

Having a good floor that shines back out at you and just looks fantastic will almost certainly gaurantee you a 'admirable' first impression as buyers come in.

Floors is another renovation that varies with each apartment but generally speaking I would look to put about $3/sq. ft. aside for floor refinishing. After a quick search on Google I found these:

SpotLessFloors
Masterpeice Floors
NY Hardwood Floors

Now on to the closets. Most apartments in NYC dont have incredible closet space and most dont have them furnished either. For a very little money and about 30 minutes of labor you can really maximize and enhance your closets with www.easyclosets.com.

Using the Closet Design Wizard on the link above you first select the shape of the closets that you will be renovating. Then enter in the actual dimensions and you will be sent on to the design wizard. Its actually pretty cool after a good 5 minutes or so of figuring the thing out. For me, I tried to keep my budget at $450 a closet so I can get both of mine done for under $1,000. Here's how 1 turned out:

One very important note I can offer you is to be sure to use the togglebolts (which are the v-shaped bolts that are pushed through your drywall to add stability to the support bar) as you follow the install instructions or else the support bar may not be able to withstand the weight of the closet, and it will fall to its impending death. FYI: Below is an image of a toggle bolt and its screw on the left and exactly how this bolt is used on the drywall to the right.

If you are a seller with limited funds or a buyer/owner looking to enhance your new property, then this broker advises you to invest in refinsihing your hardwood floors and furnishing your closets!

Originally Published 01/03/2006

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Part 2: Prepping For Sale

A: Here are more pics from the apartment I got that needed some work done before hitting the opne market for sale. I left out the kitchen and bathroom last time because the pics didnt come out good. Also, I added the choices of stains that the floor could have been refinished in. The apartment will be ready for showings on Tuesday.

In a cooling housing market, sellers MUST be very cautious over what renovations they decide to put their hard earned money into and how long this work will take!

In this case, we are talking about a low end apartment type (alcove studio) in a good location in Midtown West. Although the apartment is not a view apartment and gets minimal natural sunlight, it does have exposures in the back of the building giving the new buyer peace and quiet in an otherwise very busy neighborhood. As the hired broker to market this property, I must find the goods in every situation to get my client the highest price possible from the open market.

Back to some pics. Here is a pic of the Kitchen:

And the bathroom:

Besides doing great work, I like to use Marc at FloorWorks New York services because they don't just show you a chart of stains to choose from leaving you hoping that the right decision was made. Rather, they take 20 minutes or so to sand down a section of your floor and plot out 4 of your choices of possible stains so that you can see in living color which looks best before you decide. In this case, here is how the test stains showed on this alcove studio's floor:

Obviously the floors had to be done, the question was in what stain! The apartment should be ready for showings on Tuesday so I'll put the finished product up so that you can see what else we decided to do, or not do!

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FSBO Tips

A: I haven't discussed much about going at it alone and trying to sell your apartment by yourself, but if you do, here are some tips that I really hope you would follow; especially if you plan on actually selling your apartment.

FSBO Reality: By choosing to sell on your own you are removing the brokerage community from the sales process and ALL THE BUYERS that are working with brokers as well. If there is no incentive for a broker to do a deal with you, then they will NOT disclose your property to them during the buying process.

I would estimate that 75% (3 out of 4 buyers) that are looking to buy NYC real estate are working with a broker one way or another. By eliminating the brokerage community, you are in essence only marketing your property to 25% of the buyer pool for your price point. Needless to say, the less people that know about your property for sale, the longer the sales process and tougher it will be to fetch top dollar.

Lets get right into it:

1. PRICE RIGHT - No rocket science here. Do your research to see what other comparable units are asking for in your building, and what past units have sold for within the last 12 months, and price more aggressively! Remember, you are saving a brokers fee but as a result only marketing your property to 25% or so of the complete buyer pool that is looking to buy in your price point. So, you have to stimulate the most activity/buzz for your property by pricing it aggressively!

2. TAKE PROFESSIONAL PHOTOS DURING MOST SUNLIGHT - Gotham Photo Company is a good place to start. I would also advise sending out a email blast to the brokerage community marketing a open house and an incentive for bringing a deal to the table

HINT: Pay for the design work on their end and do a generic template with no specific dates so it will be cheaper to send out future email blasts with no changes to the design!

3. MARKET - definitely list with the NY Times and run weekly ads in Sunday print advertising open houses along with the best selling features of your home. A good ad might look something like this:

301 E 24th St; Apt 12H For Sale By Owner
OPEN HOUSE SUNDAY 12-2PM (Banner - 2 Lines)
Tons of light, open layout, 750 sft
S/W exposures, 24HR DRMN, Gym
Roofdeck, Low Monthly's, Brokers Welcome

Also, as I noted before, send a email blast to the brokerage community using Gotham's email services
as long as you decided to offer that 3%, or 2.5% incentive to brokers for bringing a deal to the table! Trust me, you should. More on this below.

You can also put a free listing on sites such as Zillow and Craigslist but I wouldn't expect many high quality leads from either of these well known sites.

4. ASK FRIENDS TO HOLD OPEN HOUSES - Never hold an open house as an owner! This should be the mantra of all for sale by owners. Meeting buyers on your own opens up a situation for biases, poor marketing, and emotions; all of which should be absent during the marketing process. If possible, ask a friend to hold an open house for you and try to take as many personal photos down/away so that when buyers come they do not see any pictures of you and your family. Don't ask, its just better that way. Buyers should focus on the apartment and the best selling features, not your family trip to Negril.

5. OFFER 3% TO BROKERAGE COMMUNITY - Hey, 3% is better than 5% or 6% right. If your going at it alone, its because you dont want to hire a brokerage to professionally market your property. So, it s a money thing. Fine. I understand. But at least offer 3% to the brokerage community either through what is called an OPEN LISTING with a discount brokerage firm (we dont market open listings anymore because we are a full service brokerage) and put a 'BROKERS WELCOME' note in your NY Times ads every week!

Its making the best of the situation given that you decided to sell on your own and try to save a few bucks. Good Luck!

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Part 1: Prepping For Sale

A: WHAT WOULD YOU DO? I'm asked this all the time by sellers who are considering putting their apartment on the market and not sure whether or not they should renovate their apartment beforehand. Fact is, every apartment is unique but with a new exclusive that I am about to get on the west side at 314 West 56th street, doing some minor work to prepare the apartment for the open market is a no-brainer. Before I reveal what I decided to do and not do, what are your thoughts to get the most money at resale taking into account the current housing market?

The apartment is vacant and my client is not in a rush to sell but would like to get the apartment on the market soon; although a quick sale would be preffered. A fairly good situation for me as I dont have a time pressure that would adversely affect pricing and having it empty will allow buyers to see the true size of the apartment w/out the presence of big cluttering furniture. Here, take a look at what the apartment looks like right now:

Reverse Living Room

Alcove w/ Exposed Brick

Pic of Floor for Before/After

Living Room & Hallway

So, the questions that come up is what should be done with this apartment besides cleaning it up? Should we renovate the kitchen? The bathroom? The floors? A Paintjob? Add closets? New Windows? Crown Moldings? Etc.., you get the point!

By the way, the kitchen and bathroom are in need of a renovation as well. Will try to get new pics of these and post back up here.

Since the housing market is in the midst of a correction, even though there is a healthy number of buyers looking to purchase a home in New York City, it is still a buyers market in the sense thath buyers can negotiate the final purchase price as sellers seek to move their property. However, some fundamentals still apply to getting top dollar and renovation is NOT one of them!

The apartment I am about to sell is about 500 sft or so, has maintenance charges of $610/mth which includes taxes (very reasonable for size), is not a view apartment and gets some sunlight as it's exposures are of the back of the building. While buyers like to see light and views, this apartment has its location, quietness, large size and great closets for alcove studio, exposed brick, and lenient board working for it. So, I will focus on that during the sales process.

So, WHAT WOULD YOU DO TO PREP THIS PROPERTY FOR SALE GIVEN MARKET CONDITIONS?

I'll post an update on this property as work is done and show you the before and after to see if we made the right choices.

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Priced Right Apt Sells In First Month

A: Just a great example of how this real estate market COULD treat a seller if they price right. Take a look at this listing on 70 East 96th street as it just got a contract signed in the first month of its original listing. Sellers facing ANY type of pressure should definitely read this post and learn what needs to be done to get a deal in this housing market.

70 East 96th Street: Apt 8A

First Came on Market: 11/1/2006
Asking Price: $1,675,000
Contract Date: 11/30/2006 (Price Accepted N/A)
maintenance: $2,158
Size: 1,674 SFT
PPSF: Asking $1,001
Marketed By: Robin Solod of Halstead

So, what makes this apartment desireable? Well, the Location is fine between Park Ave & Madison Ave. The description mentions "Six stunning rooms with excellent light" giving us Natural Sunlight. No word on views. Size is fine at 1,674 sft and Monthly's are reasonable at about $1.28/sft. And the apartment offers a "working fireplace" which is a rare feature that could sometimes replace another permanent feature (such as views) that get top dollar at resale.

What's interesting about this listing is that it is in need of TLC, as noted by the words,"...waiting for your custom renovation" in the description. I did not see the apartment so I cannot tell you from first-hand experience that most likely the apartment needs work but is NOT a wreck apartment in need of a complete rehaul. This proves what I wrote about a while ago in the post titled, "Renovating In A Cooloing Housing Market", where I discussed using caution when deciding what type of renovation to spend money on when the market is slow; basically major renovations don't get you as much of a premium as in a booming market:

Past history tells us that money spent on kitchens, bathrooms, and floors get you the most money back at resale! But thats in a booming housing market, not a cooling one. IN A SLOWING HOUSING MARKET YOU WANT TO DO THE LOW RISK HIGH REWARD RENOVATIONS THAT COULD PAYOFF AT RESALE. THESE INCLUDE FLOORS & BATHROOMS, NOT KITCHENS!

This apartment is in need of a custom renovation, was priced at $1000/sft and got a contract signed in 1 month!

Renovations didn't matter here. In fact, if it was renovated and asking top dollar, it probably wouldn't have sold so fast. In this case, the buyer paid for location, light, possibly some city views on 8th floor, and a working fireplace. The seller didnt have to do any major renovations, even in this cooling housing market, and still got a PPSF close to what a comparable unit sold for back in March of 2005, when the housing market was in bidding wars!

Take a look at this:

APT 7A

Sold For: $1,651,000
Contract Date: 3/29/2005 (A Bidding War Occurred For This Property)
PPSF SOLD FOR: $1,032

So, a lower floor apartment sold for $1,032/sft in a housing market that was very different from today. However, apartment 8A found a buyer that probably paid very close to $1,000/sft in a housing market that is much slower and defined by price cuts and negotiations, without any renovation work. A nice job if you ask me.

WHY? Because of pricing. This seller priced right, a bit lower ($32/sft lower than last comparable sale) than the last sale in the building taking into account the current market, and created a buzz amongst the target buyers that this apartment is a deal. Add in the renovation work needed and this seller probably got a price consistent with Apt 7A that sold in a much better market.

UrbanDigs Says: Sellers should use this example and learn from it. The way you price your property will affect your time on market. If you MUST sell due to some type of time pressure, than be sure to calculate current market conditions into your asking price based on past solds in your building. Price it right. If you have time to test the market, fine, but know that your best activity is in the first 3-4 weeks. If you are testing the market and got a lower than expected bid in the first 3 weeks, read THIS ARTICLE and "Don't Mess Up In Here"!

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Would The Real Sellers Please Stand Up

A: I'm often asked to describe the current market by my buyer clients and to offer my thoughts on where the market might be going in the short term, as most of my buyers have some sort of time pressure to buy their new apartment; whether it be a lease expiring, tax reasons, or other. Tough question, but I think the best way to describe the current market is by explaining to my clients that out of ALL the inventory currently available for sale, perhaps only 55% or so are serious sellers!

But how could this be? If someone isn't a serious seller, then why would they list their apartment for sale? One answer: TO SEE IF THEY CAN GET THEIR PRICE!

Have you tried to bid on a property AFTER you did all your research to come up with current market value of the property only to get a 'no response' from the seller? Did you find that the seller didn't even come close to meeting you halfway even though you are more than financially qualified to buy their home? If you answered 'yes' to either of these questions, than you will understand what I am talking about.

Today's New York City real estate market is mainly comprised of some sort of combination between SERIOUS SELLERS and what I like to call TESTERS. Here is my quick unofficial definition of both:

Serious Seller: Quite simply, a seller that must sell their home with at least one type of time pressure! The time pressure could be a divorce, financial burden, re-location, or other. A serious seller owns a property that ultimately doesn't want to be owned. They are pressuring their hired agent to generate traffic, holding OH's every Sunday, reducing their asking price as the market activity deems necessary, and flat out doing everything they can to create a buzz about the property. It is these sellers that buyers are trying to find and do a deal with as they will respond to your offer reasonably.

Testers: Testers are sellers that really don't have any pressure to sell. They would like to move, but only if they get their price. Testers don't mind if their property has been on the market for some time, as they usually start out asking well above market value to in essence 'TEST THE MARKET'. If a building is selling for $900/sft and a property is currently asking $1150/sft, then it is pretty safe to say that this seller is a tester. Even if they get a bid of $900/sft, they will only respond with a price that equates to $1,050/sft. Testers are adament about getting the highest sales price in the building and will not be bullied by finacially secure buyers or those looking to pay all cash. Testers are not easy for buyers to deal with and will only do a deal if they get their price; otherwise the listing will eventually be removed from the open market. Testers might reduce their price, but it will only be from the original way out-of-line asking price to a modestly out-of-line asking price.

Is there anything wrong with testing the market? NO, abosultely not! That's the thing. Buyers can be as frustrated as they are but when they eventually go and resell, they are going to expect top dollar for their property unless their is some type of pressure that is causes them to unload the property for market value.

If I were to estimate from experience the breakdown of all Manhattan real estate sellers to see how many were testers and how many were serious, it would probably look something like this pie chart:

Now, what to do? Unfortunately there really isn't much anyone can do to convince a 'tester seller' to change their mindset. Put yourself in their place, if it was your home that you were trying to sell and wanted to test the market to see if you can get a certain price range, would your broker be able to convince you to take a lower offer? Probably not! In fact, you would probably fire the broker and sign with someone else for the insult.

The best way to handle a 'tester seller' is to submit your HIGHEST & BEST PRICE possible. This does NOT mean submitting a verbal bid or a simple email to the broker! This means faxing a hand written bid, with all your financial information, your pre-approval letter, your attorney info, your mortgage broker info, and your financial anaylsis form for review by the seller. Remember that ALL bids must be submitted to the client for review. By giving in your highest bid presented in the best possible light and showing off all your qualifications as a buyer, you are putting the ball into the 'tester seller's' court for a response. Chances are the response won't be what you hope, but its your best shot at getting a property whose only chance of selling is convincing a tough seller to let go.

For serious sellers, well its up to your negotiating skills and the skills of your hired broker to get a deal done. The question with a serious seller is not whether you can get the property, but at what price!

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Seller Denial Leads To Brokerage Switch

A: After reading a post on Matrix the other day regarding seller denial in realizing that their home may not be worth they hoped it was, I decided to go ahead and write this post that I was planning on writing a few weeks ago but hesitated. I hope I don't get slack from colleagues over this discussion as I will be focusing on a specific high end property on 5th Avenue.

Apartment 4A at 1158 5th Avenue, now marketd by Sotheby's Int'l broker Reginald Fairchild, has been on the market since September of 2005; thats not a typo as this unit has been on the market for over 14 months now. Originally an 8-room apartment, the seller renovated to the 7-room property that is marketed today with plenty of sunlight and direct Central Park views from all rooms. So, why isn't it moving? One word, PRICE!

You can argue that because it is located between 96th & 97th streets that its the location that is hurting this property's chances of selling, but I wouldn't. According to Wikipedia:

Known for its "suburban" family-friendly atmosphere, Carnegie Hill boasts many fine restaurants, upscale boutiques, and gourmet food stores. Following New York City's tradition of similar stores residing next to one another, the stretch of Madison Avenue that runs through Carnegie Hill is known for its numerous children's clothing boutiques. The neighborhood also includes several schools, including Dalton, St. David's, Nightingale-Bamford, Trevor Day School, Convent of the Sacred Heart, and HCHS.

In short, its a desireable neighborhood to live and raise a family and will always retain value because of its proximity to Central Park and leading schools.

To understand one of the fundamentals that is currently powering NYC real estate at this price point (seller denial in valuing their home), we need to look at the listing history of this property. Here is a chart showing the price changes since the listing first hit the open market:

Now, let's anaylze. The seller priced the apartment high late last year to start. Fine; many sellers do this and should be prepared for price cuts within the first 2 months. The first price cut was a big one of $620,000 but wasn't done until May of this year, some 8+ months after the property hit the open market. Not Fine; generally speaking if you have had 25 buyers come through your property without a reasonable offer submitted than your asking price is too high. Moving on, the original marketing broker got another price cut to $3,200,000 two and a half months later. Fine; actually the original broker did a great job getting the property down to realistic market levels although it was about 6 months too late.

So, what happens? The broker loses the exclusive listing, the seller switches to another brokerage firm (because it must be the broker and NOT the price that is contributing to the property not selling), and then get this, RAISES THE PRICE BACK UP TO $3,400,000!

WHY WHY WHY! The apartment had a 8 week fire sale being offered to the public for $3,200,000 yet was unable to catch any fish. While I understand the switch to another brokerage firm (as it could be a number of reasons why the seller decided to go with another broker and company if they were unsatisfied with the level of service they were getting), I do NOT get the price increase?

Jonathan Miller had a great post the other day on seller denial which included this statement that I agree 100% with:

Sellers are used to being in charge - The economy is slowly weakening as evidenced by the erosion of GDP but its still relatively solid. Sellers have enjoyed a dominating postion for much of the past nine years, not quite as long as the Republicans have controlled Congress (sorry, but election day is still ringing in my head). Perhaps thats the reason for the seller's delay in adjusting to the market (not the shift in power to Democrats). They are simply used to the way things have been.

Perhaps this seller feels the same way and now that a new broker is in charge of marketing, the seller wants to regain control of the listing that was lost after 13 months on the market with the old broker and price cuts totaling $800,000!

Smart? NO! The seller finally got over the initial denial that plague's many sellers in today's real estate market only to revert back to the old devil with a fresh start that was offered by the new brokerage firm. I don't expect this listing to sell above the $3.2M price that was being offered a few months ago and any good buyer broker should advise their clients of this property or any other property for that matter listing's history.

LESSON TO BE LEARNED: As a broker, you should educate your seller's on the current market conditions and explain to them honestly and confidently why they should lower their price if they expect you to sell it within a specified period of time.

As a seller, you should listen to your broker's advice without emotion as he/she tries to do their job and sell your property for the highest and best price possible. That may mean a few price cuts! When you do finally get over the denial that your home is probably not worth what you thought it was worth, be strong! Don't revert back to a higher price as that will only do more harm than good; especially if you must sell. If you really don't need to sell and are just testing the market to see if someone will pay $1,500 a square foot for your apartment, I offer you my best of luck and hope that the broker you hired is not counting on this commission to pay bills anytime soon.

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Upgrading Apartments? Sell First!

A: A very important post for those existing homeowners in NYC or anywhere actually, looking to sell their home and upgrade to a bigger one. This post doesn't apply as much to those looking to cashout and downgrade, leaving them with extra cash as 'extra cash' or lack thereof is exactly the purpose of this article. In a nutshell, SELL FIRST, then look to buy!

In the world of real estate, searching for a home is usually more exciting than selling a home; this rings true especially in today's market that is seeing a combination of rising inventory and slowing buyer demand. But, you MUST be careful not to fall into the very big trap of buying first and selling after; unless of course money is one luxury you do not have any worries about.

For the most part emotion plays a critical factor in this scenario as most homeowners who plan on selling hold off on putting their apartment on the market, and start to look for a 'place to go' first. That is fine and nothing wrong with that, except that if you are counting on the equity from the sale of your home to finance the new and bigger home, you could run into some very big problems. Mainly:

1. The Unknown Factor of Price - Before you buy a home you must always do the math! What do you have, what can you afford, what interest rate will you get, what will your monthly payments be, and is it feasible? First time homeowners with no home to sell must do this to make sure they are NOT buying too much house. Existing homeowners must do the same. Until you know exactly what price you will get for your co-op/condo/townhouse, you should NOT sign a new contract of sale!

Information is power! Lack of information puts you in a weak position. Before you do the math of calculating how much house you can buy, WAIT UNTIL YOU HAVE A SIGNED CONTRACT ON YOUR EXISTING HOME so you know exactly how much profit after the deal is left in your hands! You never know what the eventual sale price will be, especially in this housing market!

2. Longer Time on Market To Sell - A no-brainer here. If you have been reading ANY real estate section in any major paper, you will know that in the major markets housing is slowing, # sales are declining, inventories are rising, and time on market is growing. With this knowledge I ask you:

DO YOU REALLY WANT TO BUY FIRST AND BE FORCED TO SELL LATER WHEN YOU WILL NEED ACCESS TO YOUR PROFITS TO BUY THE NEW HOME?

The answer is NO, you don't! The worst position you could put yourself in is buying a home first with the anticipation of using the proceeds from a later sale! What if your home doesn't sell in time? What if your home sells for a lower price? Too many what if's, and big ones too! Don't let your emotions take control of your financial decisions and be disciplined to pass on what may be the perfect dream home if you still haven't sold your home and are planning on using the profits for the next purchase! I know its hard, but at least you won't be in a position where you are forced to sell super fast and the only way to do that is to lower your asking price to way below market value to attract a fast buyer!

So what do you do? Assuming a 2-3 month timeframe between contract signing and closing, here is a simple 1-2-3 guide to use should you fit into the situation described in this post that will help you avoid making the mistakes mentioned above.

Existing Homeowners Guide To Upgrading

1. List Your Apartment For Sale & Learn Product Knowledge For Your Upgrade - Market your property and before you get a signed contract for your home, go out and learn product knowledge for the price point that you think you will fit into for the upgrade. If you are selling a 1BR, then learn what 2BR's are selling for in your neighborhood of choice. If your selling a 2BR, then learn what 3BR's are selling for in your neighborhood of choice; and so on. What are average monthly expenses for your price point? What amenities are you getting? Is light and views hard to find? Do most have light/views leading you to focus on a better location? What interest rate can you lock in? And so on.

NOTE: That I mention 'learn' product knowledge and NOT 'buy' on impulse! This first step is to simply give you an idea of what you might be able to get, and what it might cost you. In essence, you should become an expert on the new home you are planning to buy BEFORE you buy it.

2. Get A Signed Contract on Your Existing Home - List your apartment for sale, learn product knowledge of the price point you are thinking of buying later, and WAIT for a contract of sale on your existing home. This might take 2-5 months, so you have no excuses for NOT being an expert on your future home purchase before you buy. Avoid impulse buying and be disciplined to wait until your deal is done and you know your purchase price and the amount of profits expected that can be used for your future purchase!

3. Move Into High Gear & Go For It - The fun part. Now that you have a signed deal on your home and are an expert in your price point, go into full gear! Hire a broker (no fees) and tell them your ready to go ASAP, or spend at least an hour a day on your own looking at current inventory. Go to at least 4-5 open houses on Sunday's and try to see at least 2-3 places during the week! You are now free to make a bid and you can even use the contract of sale on your existing home as an asset on the board package to show profits expected.

NOTE: You are in a buyer's market and just like you most likely did when you negotiated the price of your existing home, you can negotiate the price of your future home! This really is an artform and you should structure your bids according to the ultimate purchase price you wish to pay for the new home!

Not rocket science I know, but something that existing homeowners sometimes fall prey to and look back on as one of their bigger financial mistakes! If you buy first, it better be because you have the luxury of unlimited funds. If you don't, then take my advice and SELL FIRST, BUY LATER! Ideally, you would like to sign a contract within 3-4 weeks of getting a signed contract on your existing property so as to co-ordinate the closing dates as close as possible. You might need to extend the closing date for your existing by 1-2 weeks and expedite the closing of your new home by 1-2 weeks to do so, but that is certainly something you can prepare for.

Good Luck!

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What To Do With Your JR4 Apt?

A: Turn the Dining Area into its own, expanded 2nd bedroom. Add a closet (small is fine) and add electrical switches/outlets. It should be as large as possible and use up what I consider to be non-useable space that lies between the alcove and the living area. Make the 1/2 Guest Bathroom into Full Bathroom if possible.

The logic here is that you will market this property as a 2BR/1.5BTH Apt. and you will be reaching a target group of potential homebuyers that you normally wouldn't, with a lot more money to spend.

NEVER ASSUME THAT THE BUYER OR BROKER WILL FIND YOUR LISTING FOR A 1BR / 1.5BTH, WHEN THEY ARE LOOKING FOR A 2BR

You need to get to that next level from a marketing standpoint, when it comes to the real estate game in New York City. Brokers do it all the time with the "cozy", "charming", and "spacious" talk. Im talking about doing it with the layout, the floorplan. Try to change the floorplan, in a very nice way, to create more of what is not there. This will catapult your listing into a higher bracket when you go and advertise it. In this case we are going from a 1BR apartment to a 2BR apartment, for what could possibly be only a $5000 job.

I find that marketing a 1BR property and calling it a Convertible 2BR is way overrated. In the end I dont think it sells as well as pure presentation. From a risk/reward perspective you are spending $5,000 with some imagination and creative touch, for a possible $50,000-$100,000 increase in selling price.

If you don't do the renovations and spend 4x as much money on redoing the kitchen and bathrooms, how much more will you really get considering the final cost? 10K? 30K?

Be smart. If there is a constant gap in selling prices between 1BR & 2BR property's in this city, sometimes as much as $400,000, then you need to get your property at the lower end of the 2BR stockpile. Psychologically your property will be viewed as a VALUE to those buyers seeking a 2BR property. To them, all of a sudden here is a 2BR / 1.5BTH (which is fine for an expecting family), that is priced about $150,000 under the rest of the 2BR's! Look at this # analysis if your having trouble catching on here:

AVERAGE SELLING PRICE 1BR / 1.5BTH CONDO IN UES
$750,000

AVERAGE SELLING PRICE 2BR / 1.5BTH CONDO IN UES
$850,000

AVERAGE SELLING PRICE 2BR / 2BTH CONDO IN UES
$1.1 Million

If you can make the 1/2 bathroom (Guest Bathroom) into a full bathroom using space adjacent to the bathroom, then DO IT! It will be a big headache and probably cost about $15,000-$20,000 when all is set and done with all the labor, construction, materials, board filings, department of buildings filings, and architect fees. But in the end, you will be able to add on a good $75,000, possibly more, to your purchase price and put your listing with the 2BR/2BTH's that are out there.

SOME JR'4s CURRENTLY FOR SALE (listings from Feb 19th, 2007):

201 East 79th - $995,000

1036 Park Ave - $975,000

200 Central Park South - $949,000

60 East 9th Street - $895,000

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Before & After: Floor Resurfacing

A: Back by popular demand is the BEFORE & AFTER of floor resurfacing which includes sanding, staining and poly'ing your hardwood floors in an attempt to save $$$ but make your home glow again! I constantly get asked about redoing hardwood floors by buyers in the field, and most already assume they have to rip up the old floor and install brand new flooring. Not so, as this quick and easy renovation will save you time, money, without much of a sacrifice in quality.

These guys at FloorWorksNY did a fantastic job re-finishing my hardwood floors. The Sedona Red Miniwax came out great and the last minute decision to go with the High Gloss water based poly instead of the Semi-Gloss was a good one! The work speaks for itself and the floor just looks incredible; and at 1/10th the cost of laying down a high quality new floor!

A BIG THANK YOU to Marc and the workers at FloorWorksNY! This agent recommends them to any seller looking for a low-cost MUST renovation before their property hits the market!

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Recognizing A Selling Opportunity

FRENZY: Intense usually wild and often disorderly compulsive or agitated activity

A: From January to May of 2005 the NYC housing market experienced a frenzy due to the lack of available inventory, rising lending rates signaling the beginning effects of Greenspan's monetary policy to slow the economy, and the sudden surge in buyer demand to lock in morgages which powered 7 out of 10 deals into bidding wars. Looking back, homeowners trying to sell now should realize that in 'times of frenzy' is when you will get top dollar for your property! Will greed kick in and cloud your investment vision the next time the 'frenzy' hits NYC real estate?

Selling today? Then you missed the top! Your NOT the best, and despite everything your broker or friends have told you chances are your apartment is worth a bit less than you would like. Buyers do have control in this market and will negotiate! Should you have sold? If so, than at the very least make sure you learned something!

Once you come to the realization that your apartment may NOT be worth what comparable units were getting 12 months ago, you will be able to get back to savvy investing strategy which is a constant learning experience. Although many homeowners are still pricing their units using comps from the year ago period, buyers just aren't biting! Therefore it's those homeowners offering the best deals right now that are getting the deals, forcing comparable units to stay on the market longer and reduce their price at a later, more desperate time.

If anything seller's should come out of the experience wiser after having lived through the experience of a 'buying frenzy' (JAN-MAY 2005) where the majority of transactions were going into bidding wars from mulitple buyers. The question of the year ago market was, "...how high do I need to go over ask?". The question of today's market is, "...how low can I get this seller down to?".

Not to say it was a bad time to buy 1 year ago, as I've seen a few studio and JR1 apartments recognize nice gains over the past 12 months. Its just that in hindsight you realize that 'buyer frenzies' are the types of times that savvy investors from years ago should lookout for to take profits in! Let me repeat that:

SAVVY HOMEOWNERS BUY FOR THE LONGER TERM AND LOOK FOR VALUE IN TERMS OF THE HIGHEST QUALITY PERMANENT FEATURES OF THE PROPERTY - SUPERSTAR INVESTORS RECOGNIZE TIMES OF FRENZY AND TAKE THE OPPORTUNITY TO SELL AND CASH IN PROFITS

If you bought a 'starter property' in the past year or so (with the strategy of owning then renting/selling) then be sure you remember what the NYC market was like from JAN - MAY 2005; the next time its like that you will want to SELL and realize the gains when buyers pay top dollar due to limited inventory and low lending rates (nyc real estate is cyclical and will rebound in the future). That should be your EXIT STRATEGY as you recognize the selling opportunity and cash out. Until then, you should live in your property and recover from the initial financial effects of homeownership (down payment + closing costs + renovation costs add up). So what if your sacrificing your lifestyle temporarily as you are on the right path to building wealth. After your save up enough liquid assets after taxes look to lease out the unit for rental income and wait to sell when the next buyer frenzy sets in.

Will you recognize it the next time around?

Examples of Savvy Investors Selling During Past 'Buyer Frenzys':

1. Mark Cuban Selling Broadcast.com to Yahoo for aprox. $1B (in pocket) in early 1999.

2. Donald Trump/Hong Kong Investors Selling Land on Manhattan's Westside to Extell/Carlyle Group in Mid 2005 for $1.8B.

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Market Trends: Flippers becoming Landlords

BACK IN TIME: It's springtime 2004, the anxious buyer is gleaming across the closing table at the seller with the cheekiest of grins. The seller is staring at their watch with only one concern...how fast can I get out of here and away from this self rightous a**hole. The buyer's broker is seated in the corner, anxiously awaiting the closing to end not only because he is getting paid or has somewhere else to be, but because he will leave the closing with a check in hand and a brand new exclusive listing to put back on the market. Long story short: In the 3 months between the accepted offer and the closing, this property has increased in value by nearly 40%!!

Don't hate the buyer for having foresight and certainly don't hate the broker for finding and negotiating a great deal. All is fair in love and NYC real estate!!

PRESENT DAY: It's Springtime 2006, both the buyer and seller at the closing are taking advantage of the 1031 property tax exchange. The vibe is cordial. The seller who held on to the property less than a year did not receive a great return but is very happy to have recieved a return at all. The purchaser is aware that this is a much longer term investment strategy and it could take a few years to build up enough equity to make a nice profit. Because of this he must make a downpayment of at least 50% of the purchase price (50% financing) in order to break even every month on his rental investment. The brokers in the room are quiet, perhaps a bit humbled and tired to say the least. The listing broker has spent considerable time and money marketing the property and the selling broker has spent much time and energy showing apartments and educating his buyer. The property has already been rented for a record setting rent. The new tenant will move in after the closing.

This is a glance at what is happening today in the Condo market. There is still not an abundance of resale inventory on the market but properties are sitting on the market for much longer. The savvy seller now has 2 options:

1. Keep the property on the market for sale but pay close attention to the amount of showings and buyer reaction. Demand maximum exposure and advertising from your broker and most importantly, remain patient, realistic and negotiable.
2. Rent the property. The rental market is facing a massive shortage of inventory (.067% in April) and now with the prime rental season ahead this is a landlords dream.

Refer to the May 15th article in the Daily News titled Rental Crush for a more detailed analysis of the current rental market in NYC.

At the end of the day sellers should not be discouraged. There is still not alot of good inventory available and interest rates are still historically low (if you don't believe me ask anyone the purchased a home in the 80's). For aggressively priced properties, the open houses are very busy and brokers will agree that there are still plenty of people buying NYC real estate.

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Housing Futures Go Live Monday

A: The CME will be going live on housing futures Monday with some minor changes to the final structure of trading. Here are some updates for those investors seeking to hedge against real estate holdings in their portfolio if they believe a housing slowdown is going to continue in the most speculative markets.

WHY HEDGE?: Buying puts or selling calls (both tradable options products w/ the same bearish bet) on housing in a particular tradable market, such as Miami, means that you are betting the housing market will fall and will earn a PROFIT if it does!

Speculators take these risks to protect their real estate heavy portfolios against a housing market slowdown; as the market and their real estate holdings decline in value their profit on the options contracts owned increase in value limiting the potential loss.

CITIES YOU CAN TRADE ON: Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, Washington D.C.

Here are some changes that I was made aware of by Dave Smith of the CME:

1. Minimum Price Fluctuation (TICK) for Futures Trading - The minimum price fluctuation or "tick" shall be 0.20 index points. Originally, the futures contracts were to trade similar to that of options trading and use 0.10 index points per tick.

2. Trading Hours for Futures - Housing futures will begin trading on SUNDAYS until THURSDAYS at 5PM(CT) and will go on overnight continuing to 2PM(CT) the following day. There will be a 3 hour trading rest before resuming again at 5PM(CT).

3. Trading Hours for Options - Housing Options will trade in the GFCI Pit (Goldman Sachs Commodities Index) beginning MONDAY through FRIDAY from 8AM - 2PM(CT).

**Trading Futures & Options are very risky and complicated. Be sure to discuss this investment strategy with your financial advisor before making any investments of your own. As with any tradable security, you can lose money trading housing futures and you should know that Options trading involves a time element tied to the value of the contract bought (meaning every trading day that goes by you are losing a bit of value in 'time value' as your options contract gets closer to its expiration date)! You can read up on Options Trading Here.

WHAT I WOULD DO: I consider myself a conservative investor after living the front lines of the dot com boom and bust as a NASDAQ equities trader and now the housing boom and, well we don't know what to call it yet, as a real estate agent. So, since this is such a new tradable market I would limit my investing to BUYING PUTS in a highly speculative market such as Miami, until we can see how this whole thing works in the real world.

By BUYING PUT CONTRACTS you are putting a set amount of money into the investment with no chance of losing more than the initial capital. Also, by betting on a highly speculative market such as Miami, where condo development has been overextended, I think all that inventory will at some point lead to lower asking prices. Since you bought PUT CONTRACTS, you bet that the market will fall and will realize a profit.

I WOULD NOT bet against New York City with a brand new options & futures trading market until we learn more about how the CME futures market behave based on actual market conditions. Plus, I strongly believe that NYC Real Estate is NOT AS OVER-VALUED as cities such as Miami, Las Vegas, Phoenix, Boston, & Los Angeles. Manhattan is mostly co-op (75% or so) and limited to speculative activity, an island with limited developable land, experiencing very low vacancy rates and rising rents, and is continuing to grow at an astounding rate.

With futures and options trading you MUST have volatility and sharp short term movements to make a lot of money! So, stick with the most overvalued housing markets I mentioned before.

WHERE TO TRADE HOUSING FUTURES: You can open an account at R.J. O'Brien to trade housing futures when they go live on Monday. R.J. O'Brien is a privately owned Futures Commission Merchant (FCM) and one of the oldest and best known independent futures brokerage firms in the industry. RJO is a founding member of the Chicago Mercantile Exchange

For more information on housing futures please feel free to contact Dave Smith at the Chicago Mercantile Exchange at 312-634-8921.

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Are You A Distressed Seller?

A: My heart goes out to the sellers in today's market who made the mistake of 'testing the market' by pricing their property too high or who agreed to do business with the real estate broker who promised the highest purchase price in exchange for an exclusive listing agreement. It is something that should be a learning experience for any first-time seller as they live through their first slow housing market in NYC. If you are having trouble selling your apartment, here are a few tips to hlep out.

THE DAYS OF $1,200+ A SQUARE FOOT ARE GONE (UNLESS YOU ARE A NEW DEVELOPMENT OR A PENTHOUSE ON FIFTH AVENUE). IN TODAY'S MARKET LOCATION AND RENOVATIONS DO NOT GET WHAT THEY USED TO AS BUYERS LOOK TO GET THE MOST SIZE FOR THEIR DOLLARS!

TIPS TO HELP SELL YOUR APARTMENT

1. RE-EVALUATE PRICING: Ask your broker, or go to Streeteasy.com and do a FIND YOUR BUILDING lookup, for a list of properties currently on the market in your building. Then divide the asking price by the total square feet for each unit to get the PPSF (price per square foot) that each property is currently asking. Now, do it for yours. Where do you stand? Are you asking the highest PPSF in your building? In the middle?

Some features that would warrant your property being the highest PPSF property for sale in the building include: HIGH FLOOR, VIEWS, & RENOVATIONS.

UrbanDigs Says: Lower your PPSF so that you are the BEST VALUE currently for sale in your building! I know its tough and that your property is always worth more than somebody elses similar unit in the building, but GET OVER IT and DO WHAT YOU HAVE TO DO to sell it in todays market! Remember that brokers do not determine the value of your property, the MARKET DOES THAT! By being the best value in your building you can tell buyers that come to view your property to compare your apartment to others listed for sale in the building; explain to them that your apartment is currently asking the lowest PPSF!

2. TAKE 1 WEEK OFF ADVERTISING BEFORE PRICE REDUCTION: Another tough concept for distressed sellers to understand. Believe it or not listings that have been on the market for 12+ weeks GET STALE! The same pool of buyers see the same listing at the same price in the NY Times and simply ignore it!

After you spent some time re-evaluating your asking price, take a week off of advertising in the NY Times before marketing the new asking price. The goal here is to offer a fresh ad (change text in ad too) with a new asking price that hopefully will capture the attention of new and existing buyers that are looking every week in he NY Times for their home.

UrbanDigs Says: Add a 4-point phrase of "PRICE SLASHED" or "MUST SELL" to the print ad with OH banner & apartment features underneath. A 7-8 line ad in the NY Times shouldn't be an issue with your representative agent and should be large enough to catch most readers attention. In the end, the ad's goal is to bring activity to your OH. Think to yourself, what would catch your eye if you were browsing for a property similar to the one you are trying to sell?

3. REQUEST A EMAIL BLAST TO BROKERAGE COMMUNITY: This is the type of market that sellers must be proactive in, NOT passive! If you already signed a exclusive agreement to sell with a brokerage than you have accomplished a few very important marketing tactics: LISTING INCLUDED IN CENTRAL SYSTEMS, PRINT ADVERTISING, BUILDING MAILINGS, WEBSITE EXPOSURE, etc..

However, the main marketing tactic will always be LISTING INCLUDED IN CENTRAL BROKERAGE SYSTEMS since most NYC real estate transactions are Co-Broke's; meaning that another broker brought in the buyer and shared in the transaction with your representing broker. Now, just because your listing is included in the brokerage central systems doesn't mean that your listing is being seen by brokers who are currently representing buyers that would be perfect for property! We need to bring your listing to the eyes of the brokerage community!

UrbanDigs Says: Ask your broker to do a email blast to the entire brokerage community that will include your property description, pictures, floorplan, and next open house date! Two popular companies that have been exploiting this new marketing tactic are Gotham Photo Company and On-Line Residential. OLR is a brokerage based system so if you are a For Sale By Owner than go with Gotham Photo Company to send an email blast!

4. ENCOURAGE BUYERS TO SUBMIT OFFERS: Its such an easy concept yet one that most sellers are afraid to do for fear of appearing too desparate. Forget that notion altogether and make sure you tell every buyer that comes in that your asking price is negotiable and that you encourage them to submit any offers within reason.

UrbanDigs Says: Buyers have control right now and they know it! By showing a property and having the attitude that you are ONLY accepting full ask offers is simply the wrong way to go. Instead, let buyers know that you know that they have control by telling them that your asking price is negotiable. So how do you do this?

When a buyer first enters your property you welcome them and encourage them to sign in and take a showsheet. Then you tell them to 'feel free to browse and let me know if you have any questions'; no buyer likes to be followed around by an owner/broker and hounded with seller babble! Assuming they stay for 5 minutes or more, you gently approach them and ask them if they know about the building details, "...by the way, are you familiar with this building and the amenities that are offered"? Chances are they will say 'No' which leaves the door open for you to take control. Describe the building amenities and financials (if you know them) and then pull a 360 and go into the best features of the apartment "...have you seen the renovated kitchen, incredible sunlight, or huge walk-in closets". After you stress the strongpoints of the building and the apartment tell the visiting buyer, "...just so you know the asking price is negotiable and that the seller advised me to encourage and review all bids submitted".

**Important Note** LOWERING YOUR ASKING PRICE WILL ALWAYS HAVE THE GREATEST EFFECT FOR SELLERS. THE OTHER TIPS I WROTE ABOUT SHOULD BE LOOKED AT AS COMPLIMENTARY TO A PRICE REDUCTION AS DONE ALONE WILL PROBABLY NOT SPUR ENOUGH INTEREST TO SELL YOUR PROPERTY FAST! SELLERS MUST UNDERSTAND THAT THIS IS A DIFFERENT MARKET THAN A YEAR AGO AND THAT LENDING RATES ARE MUCH HIGHER THAN THEY WERE AT THIS TIME LAST YEAR. AS MONEY GETS MORE EXPENSIVE TO BORROW, BUYING BECOMES LESS AFFORDABLE!

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How To Retain The Most Re-Sale Value

A: If I were to rate in order the most important features of a property that will help you retain the most money in terms of ultimate re-sale value in a slower housing market, than it would be: 1. View/Sunlight, 2. Location, 3. Size, 4. Monthly's

In a slower market there is always more competition and less buyer demand. Put those together and there are a few MUST HAVE's that buyers will always look for and pay more money for. Lets go into the minds of a couple looking to buy a 1BR apartment in Gramercy with a budget of $550K. What would you look for?

View/Sunlight: If you have great sunlight and clear city views than you are in the perfect position to ask for top dollar value when pricing your property for sale. These days, I find buyers willing to sacrifice location (at least on a small scale) and consider nearby areas to live in as well. For the homeowner that makes the permanent features of your home that much more important; in this case, the VIEW and the NATURAL SUNLIGHT.

Location: I place location a very close 2nd behind view/sun. The only reason I dont rank this as #1 is because of buyers willingness to consider other areas. Simply put, buyers are tired of getting priced out of a market that is driven by prime location. The slowdown in demand is enough to cause some type of slowdown in the high end market (read my post on High End Blues).

Size: Raw Space in a good location with sun and views that is in horrible condition! Ahhh, the dream of so many wise real estate investors! Look for the wreck! Who cares if you don't have the money now to renovate. Suffer and live in a craphole until you can muster of enough money to renovate the kitchen, and then the baths, and then the floors. Size is the standard by which we calculate the purchase price and value. Damn, that is so important Im gonna say it again.

SIZE IS THE STANDARD BY WHICH WE CALCULATE PRICE & VALUE

Your broker should always tell you what the apartment you saw is asking per square foot? $800/Sq. FT? $1,200/Sq. Ft? You must know this. You also must know what the very last comparable (same unit) that sold per square foot? This is the info the appraiser will look into when calculating whether or not the apartment is really worth what the buyer has offered to pay.

Monthly's: Your monthly's are the total charge of the monthly maintenance and the monthly real estate taxes that you pay. If your monthly's are high, than you must lower your asking price to compensate. Vice Versa, except how much higher you set your asking price due to very low monthly's is still limited. In the end, the lower the monthly's are in the building you buy matter!

When you look to buy, think about when you will look to sell. Use view/sun, location, size, and monthly's as the main selling points when making your ultimate decision. These are the deal makers and breakers! Renovations can be done after and at your financial leisure and discretion. Do NOT use renovations as a deal maker if you are looking to buy; rather, try to find the wreck that is asking for less money and then renovate it yourself!

Originally Published 1/19/2006

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Black & White Report Released

A: The Citi-Habitats Black & White Report is a comprehensive analysis of the Manhattan Residential Real Estate Market released semi-annually. This 8th report from the fast growing company covers JULY - DECEMBER of 2005.

Knowledge is power and the executives behind Citi-Habitats, Inc. know this philosophy very well; which is why they invest in understanding every aspect of Manhattan Real Estate and analyze every piece of available data that has to do with Manhattan Real Estate. The Black & White Report allows them to actually see the changes that are occurring in this great city as they are happening.

Here are some details directly from the report that you may find educational about the current state of New York City Real Estate:

~ Vacancy Rate in New York City dropped to 0.89%: NYC vacancy rate is down from June's rate of 1.01% and is currently at a 3 year low. Not only is the majority of newly constructed buildings condo rather than rental, but many rental buildings have been converted to condos to take advantage of sales trends. This means fewer and fewer rental apartments for an ever-expanding NYC population.

~ East Village & Murray Hill Sees Increased Renters: The two areas that did see an increased number of renters in the second half of 2005 were the East Village & Murray Hill.

~ Studio & One Bedroom Apt's Rents Rise City-Wide: The most pronounced of which occurred in the East Village studio category and Murray Hill one bedroom category.

~ Median Price of Condos Increase City-Wide: This was the case for studio and one bedroom co-ops as well. East side studios and one bedrooms saw healthy gains too at 16% and 9.6% respectively. For condos, the other standout gains were seen by downtown one bedrooms which rose 24% from a median price of $588K in the previous reporting period to $720K in this reporting period.

The complete Black & White report is available for download on the Citi-Habitats.com website.

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2nd Avenue Subway Update

A: Believe it or not the 2nd Avenue Subway project is alive and well as we near the beginning of tunnel construction below 96th Street on 2nd Avenue. Although I missed the community meeting on Monday, PeakGuy did go and found out that construction is set to start in 40 Months!!

Tunnels are expected to begin construction in 3 1/2 years from 92nd Street to 62nd Street with new stations at 96th, 86th, 72nd, and expansion of a existing Lexington Avenue/63rd Street station. Also set begin construction are track and systems from 105th Street to aproximately 62nd Street. Download the .pdf from MTA site.

Here is a conceptual drawing of Phase 1:

In case you missed the Discovery Channel on how Tunnels are built, they will be using a boring machine that looks something like this and will use the streets as entry points 1 section at a time....

According to Wikipedia: Tunnel boring machines are used as an alternative to drilling and blasting (D&B) methods. A TBM has the advantages of not disturbing surrounding soil and producing a smooth tunnel wall. This significantly reduces the cost of lining the tunnel, and makes them suitable to use in built-up areas. The key disadvantage is cost. TBMs are expensive to construct, difficult to transport and require significant infrastructure.

A conceptual drawing of the boring process:

What To Expect During Build: Streets to be completely demolished during the boring process and tunnel build. Local businesses on 2nd Avenue will have a rough time and will most likely go out of business temporarily with some type of city support program kicking into effect. A few years of loud noises, construction barriers, air pollution, and big time machines.

What To Expect Upon Subway Completion: A spike in real estate values for properties surrounding this brand new, technologically superior subway line to ease congestion on NYC's eastside. Buying a property that is discounted because it is too far East right now is probably a very wise idea when the subway construction begins; York Avenue & East End Avenue are my sleeper picks for 8-10 years down the road when subway is complete.

A conceptual drawing of what the 2nd Avenue Subway line will look like when it is completed in the summer of 2065; sorry couldn't help it.

Thanks to Glenn over at The Oil Drum:NYC, a great blog covering the energy markets, for going to the 2nd Avenue Subway community meeting Monday night and providing me with this latest information:

* They are going to have to reclaim some street space at the 96th Street station entrances to make it fit. Entrances on 93rd (east and west sides) and then another on the West side of 96th street. Either they are taking out parking or they might have to take out a lane of traffic. I'm guessing the parking...

* Because the 96th Street station is close to the surface (Cut and Cover technique) there is going to be massive construction for the 96th street station in the middle of the street for many months. This will create traffic chaos unless they do something to reduce the number of cars coming into Manhattan. Perhaps they could divert it to the FDR or York. Lexington Ave is already a disaster area.

* The 72nd Street station will be very deep and will not require the cut and cover technique. Entrances on 69th and 72nd. One of them will occupy where Patsy's Pizza is now. They are going to have to tear down a building on the NE corner of 72nd street for ventillation.

* There will be a meeting in May to discuss the 86th street station.

* Bids are going out in December and construction should begin in 2009 and last for 2-3 years. I think they said the first phase (96th to 63rd) will be done in 2012-13.

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Spring Ahead for NYC Real Estate

A: Continuing on from an article on CNN Money today, the NYC real estate market is entering its best months before heading into the dog days of summer. With interest rates still rising, frustrated sellers, and serious buyers waiting on the sidelines I suspect a short term burst in activity during April & May that you probably won't hear about in the media until these deals close in July/August. Here are some tips mentioned in the article and some of my own for buyers & sellers out there.

FOR BUYERS

1. Get Pre-Approved For A Loan: Mentioned in the article, this is a MUST for any serious buyer. As you learn product knowledge and educate yourself of what your target property is 'going for', you will eventually find an apartment that meets your needs and is priced right. Will you be ready to submit your bid? The first thing you will need to do is get your pre-approval letter from your mortgage broker as you will need this when you submit your initial bid!

2. Get A Real Estate Attorney: Your attorney will review 2YRS building financials, contract of sale, offering plans, and board minutes in his/her diligence for your transaction. It is at this time that potential red flags should be disclosed to you as your attorney reviews and evaluates the meat of the deal.

3. Get Credit & Financial Assets In Order: Especially for those buying Co-ops, you should be working on paying off your unpaid debts and raising your credit score. In addition, make sure you have sufficient liquid assets on hand to be able to pay for the down payment + closing costs. If you intend to get a family gift, do it NOW so that the money is in your accounts early enough to get the paper trail going for when you will need to submit hard copies to back up your assets in the board package. Generally you want to submit hard copies that are 1 month AFTER the gift is transferred so as NOT to raise any red flags in the eyes of board members. Condo buyers do not need to worry about this as much as Co-op buyers.

4. Do Your Math: Measure the property on your own to verify that the apartment is as big as the broker claims it is (the offering plan should disclose this info as well). Check recently sold's in the same building before bidding and price in renovations, views, and natural sunlight or lack thereof.

FOR SELLERS

1. Price Your Apartment Correctly: Unless you have tons of time and are in no rush to sell, be sure to price your apartment correctly. The NYC real estate market is NOT AS HOT as it was a year ago. If you decide to test the market and price high, be prepared to have your apartment on the market for a good 4-6 months at least.

2. Market Effectively: For all you FSBO's out there be sure to read my post on the FSBO Checklist. The NY Times Print ads are a must and sending out an email blast to the brokerage community disclosing any buyer side commissions you may be offering is a great way to help spread the word. Gotham Photo Company is one service you can use to send out a e-blast.

3. Clean The Clutter: Make sure your property is NOT cluttered and clearly shows off its true size. Many buyers do not have the ability to visualize what a property could look like, so the seller must do it for them! CLEAN CLEAN CLEAN is a MUST!

4. Show When There's Sun: Do you get the most natural sunlight from 3:00 - 5:00PM? Then that is when you advertise and run your OH for! Buyers love sunlight as it is one of the few essentials that will always help in re-sale value.

Spring is here, rates are rising, sellers are frustrated, and buyers are ready! The formula is right for a nice little uptick in the housing market so everyone should be prepared. For buyers, be sure to lock in a rate ASAP if you know you will be buying something soon. For sellers, do NOT overprice and do NOT get insulted by a low ball offer; its a different market now and buyers are testing the waters with their initial bids. Good Luck ALL!

~ Spring Home Buying Season -- old rules, new tools

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Closing Costs For Sellers

A: I got this very useful information from Broker Scott Claster's website. It outlines the estimated closing costs that a seller will have to pay to close their real estate transaction.

*NOTE: You should always contact your attorney beforehand to go over what all your closing costs will be. There is a chance that future tax laws for New York City will change that affects what closing costs your are required to pay. Below is a good guide to go by to get a estimate of what your total closing costs will include.

CONDO CLOSING COSTS FOR SELLER

CO-OP CLOSING COSTS FOR SELLER

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Place Your Bets: Housing Futures Launched

A: Like most other markets, the housing market now has futures contracts to be traded via a partnership between The Chicago Mercantile Exchange and Tradition Financial Services. This is right up my alley as a former NASDAQ Equities trader for Tradescape (which is now E-Trade Professional) as it offers investors a way to safeguard themselves against a housing market crash (known as a 'hedge') or bet on which way you believe the housing market will go.

The Skinny: Now you can participate and cash in on a housing market boom or housing market crash without the hassles, transaction costs, and time that is involved with buying and selling real estate.

On Tuesday, the Chicago Mercantile Exchange and Tradition Financial Services, together with Fiserv Case Shiller Weiss and Standard & Poor's, announced the launch of S&P CME Housing Futures and Options.

According to the CNN Money article:

These derivatives will enable investors to take a position on the direction of home prices either for the nation as a whole or for 10 major cities to start, including New York, Los Angeles and Chicago. Of the three major asset classes, the bond, the stock and the housing markets, only the housing market, which represents some $20 trillion in assets, cannot be speculated on easily, said Robert Shiller, the Yale economist and author of "Irrational Exuberance," the 2000 book that foresaw the bursting of the tech-stock bubble. Shiller sees these derivatives mostly as tools that large, institutional investors can use to reduce risks. Mortgage bankers, for example, could hedge against falling real estate markets that would increase their exposure to delinquencies and foreclosures.
But John Labuszewski, of the CME, says, "Although the main customers will be institutional, there is a surprising amount of interest on the part of retail consumers."

It looks like there will be a few ways to trade housing futures which include:

1. By Direct Investment: Investors could buy futures in housing prices and profit if home prices continue to increase (if the investor goes long) or if they fall (if the investor goes short).

2. By Locking in Home Equity: Home owners intending to sell within a year or two can go short in home price futures. If the price of their house drops, that can recapture the loss on the investment.

Talk of Home Equity insurance is also mentioned in the article. Home Equity Insurance would be like any other type of insurance that you can buy which would protect your investment against losses should the housing market fall forcing you to sell at a loss.

It's interesting the timing of the launch of these futures as it comes at a time when many financial and real estate experts are predicting a slow down after 4-5 years of unsustainable growth.

UrbanDigs Says: Don't start messing with these contracts until you fully understand how they work and could affect your long term goals. If you are planning to live in your house for 15+ years there really isn't much need to start trading housing futures to protect against a possible near term collapse. However, if you are a speculator whose primary business is buying and flipping, this could be a perfect hedge against your business model should the housing market take a tumble. By selling short (bearish on housing) on the housing futures you will actually profit if the market falls allowing you to recoup losses from the eventual sale of property. If there are options contracts available, it's always better to write a call (bearish) or sell a put (bullish) so that you do NOT have the time value component working against you. For those interested, here is a Quick Options Tutorial.

~ New Way To Bet on Real Estate

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Say Goodbye To City Noise

A: Passing this one along. Thank you to Carol Taxon of Corcoran for bringing me this tip for everyone out there that is tired of New York City Noise. CityQuiet.com focuses on installing QUIET WINDOWS that supposedly reduces City Noise by up to 95%. A great tip for any homeowner on a heavily trafficked avenue, especially if you are looking to sell; buyers want quiet!

CityQuiet's Product Features Include:

According to the website, CitiQuiet will fabricate and install a custom Interior Soundproof Window to mimic the existing window, in style and function. It is also noted that the simple installation does NOT require any construction or alteration to the existing window.

Current styles of windows that can be soundproofed are shown below.

*NOTE: I would love to hear some feedback from anyone that has actually used this company. Carol Taxon has mentioned that she heard nothing but good things about CityQuiet, but I personally have never used them!

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Hot in NYC: Fireplaces Coming Back

A: In Sunday's NY Times there was an article titled Fire: The New Granite, reffering to the increase in demand for fireplaces in New York City apartments and townhouses! Thinking back over the past year or so, I have to agree as I recall a few of my clients specifically telling me that they MUST have a fireplace.

The article starts out:

A Dusting of snow is falling outside, and the family is gathered together in the living room around the warmth of a crackling fire.

Ummmm...paints a nice picture doesn't it! You can see the appeal of the fireplace which apparently is making a big comeback these days; so much so that developers are starting to use fireplaces as an added selling point in their projects. A few developments that have jumped onto the 'fireplace bandwagon' include 170 East End Avenue, 21 East 96th Street, The Stanhope, & The Remy.

I would assume this is more for Townhouse owners, but if you are a homeowner looking to install a fireplace in your apartment (obviously has to be building compliant), check out Jealan Fireplaces. WHY use Jealan if I've never used them before and do not know anyone that has, you think quietly to yourself? Here, this is what they say on their website:

Jealan has furnished and installed Majestic fireplaces for builders for over 30 years. We are one of the few "fireplace specialists" in New York City certified by the Hearth Products Association. We are authorized by the manufacturer to install their products in compliance with New York City building codes and provide warranty service.

If you are a buyer, check out these 1BR apartments across New York City that offer you either a wood or gas burning fireplace!

Upper East Side: $975K - 929 Park Avenue Marketed By Judith Durham of Stribling

Murray Hill: $829K - 67 Park Avenue Marketed By Richard Silver of Corcoran

Upper West Side: $699K - 336 Central Park West Marketes By Deborah Straubinger of Eychner Associates

Upper East Side (photo above): $1.48M - 70th St & Lexington Ave Marketed By Beverly Goodwin of Sotheby's Int'l Realty

If you are looking for something in a different neighborhood or price range, drop me a line and I'll try to help!

~ Fire: The New Granite
~ Jealan Fireplaces

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FSBO Checklist: Check it Twice!

A: So you decided to sell on your own and save the commission that brokers charge to mass market your property. Here is a checklist of items you should follow in order to maximize the marketability of your property, since your listing will NOT be circulated in the brokerage community.

**Important FSBO Note: Most qualified buyers do not have the time or the experience to find and then assess value as they prepare to buy a new home. I know that my clients not only rely on me to send them price reductions and new listings as they come in, but also to help them analyze a property's current asking price and to asess value so that they can negotiate the best possible purchase price. A good strategy is a must before you place that first bid! As a FSBO listing, your property will NOT be disclosed to brokers' clients since there is no incentive being offered to the broker for bringing in the buyer. In essence, a FSBO is only marketing their property to about 30% of the buyer pool; so you must do so effectively!

FSBO CHECKLIST

1. Prepare your apartment for showing: This includes any planned renovations, mass cleanups, putting away personal photos and jewelry, and putting into storage all x-large furniture that clutters the property. A clean and spacious apartment is a sellable apartment!

2. Price your apartment: Go to PropertyShark.com and find out what the last comparable (same line or unit type) sale was in your building and surrounding buildings. If you own a Co-op, then ONLY look at recent Co-op sales in your immediate neighborhood. Add on some value for renovations, views, light, and lower monthly's if you have them.

3. Take Quality Pictures: Pics sell! You will need high quality pictures of your apartment for NY Times online ad and the showsheets that you will design.

4. Design Showsheets: It doesnt have to be pretty but it helps if it is! A showsheet should include the building and contact information, apartment details, monthly expenses, a brief description, building amenities, and some pictures of the apartment and floorplan. Leave these out for buyers to take as they come to view your apartment.

5. Write A NY Times Online & Print Ad: Think about this for a little while before sending the print ad in (deadline is 6PM Wednesday for Sunday Print). You must separate yourself from the other ads out there so be sure to advertise your apartment's most desireable characteristics. These will include outdoor space/balcony, park views, W/D in unit, great light, etc..In the end a 4 or 5 line ad must include the building and apartment #, your contact info, apartment features, and Open House information! **Setup the Open House at a time when you get the MOST natural sunlight!

6. Get ready to be hounded!: The first few calls you will receive will probably be from brokers asking how they can assist you in selling your apartment. Try not to get frustrated as this is how brokers make their living! Instead, be prepared with a "...thanks for your call but I am not talking with brokers at this time" skit.

7. Run an Open House: Its always best to run an Open House on Sunday (early afternoon) and Monday (late evening). Again, be sure your place is clean and not cluttered with furniture and personal junk. Buyers must be able to see the space they might be buying! Keep showsheets and sign up sheet out and ask buyers to sign in as they arrive. If you want to go the extra mile, put an apple pie in a warm oven about 30 minutes before the open house; it will make your apartment smell delicious! Some flowers always helps too (not too much though!).

8. Real Estate Attorney & Building Doc's: Assuming you priced your apartment to market value and spend your marketing dollars in the NY Times, you should get a reasonable offer. When you accept an offer have your real estate attorney send over the contract of sale, offering plan, and 2 years building financials to the buyer's attorney for review. Expect a signed contract and 10% deposit back within 5 business days.

This is a quick guide that ALL sellers should review before deciding to bypass a broker and sell as a FSBO. Remember, selling as a FSBO will never fully market your property as buyer brokers will not be bringing their clients to your listing. So, be sure to price aggressively and prepare well in advance before your first showings!!

GOOD LUCK!

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Marketing Square Footage: Be Careful Not To Lie

A: This is a post for FSBO's and the brokerage community on how I feel about those who lie or round up in their marketing packages about a property's total square footage. Yes, a very specific post! I think it is a 'self-defeating' practice whose day is up, and if a client asks you to do this you should display your professionalism and refuse the exclusive.

It is such a different market out there right now than it was a year ago, and everything about how you market a property needs to be given a second thought to attract and eventually appease buyers as they come to your open houses and showings.

Maybe I'm wrong (and if so I would love to hear from you why), but in a market where the "power" or "dynamic" has shifted more into the hands of the buyers, we as brokers should ROUND DOWN the square footage instead of rounding up or flat out lying.

I went to a showing last week with my clients to view a 3BR, 2BTH property that was said to be 1,600 square feet. I tell you this apartment was closer to 1,450 square feet, tops!

Why? Why do it. The look on my clients' faces of disappointment and frustration was clear from the moment they walked in. There is no way these people will even consider placing a bid when they were blatantly lied to. It also makes me look bad because my clients count on me NOT to waste their valuable time. The brokerage community must acknlowedge that buyers are smarter these days and have been on the sidelines viewing properties without bidding for them for months now. They know how big a 1,600 square foot apartment should look after seeing 12 of them already!

Buyers have more control now than they did a year ago! If anything you should advise your client to agree to under-estimate the square footage a bit and let buyers be 'pleasantly surprised' when they come for a showing. After all, happy buyers are more likely to submit an offer!

UrbanDigs Says: If the apartment is listed between 400-450 square feet in the offering plan than list it at 400! If the apartment is between 450-500 square feet in the offering plan than list it at 450! Use this strategy all the way up to high end listings too for as long as the overall market is flat and make buyers happy when they show up.

For Example: An apartment listed at 738 sq. ft. in the offering plan should be listed at 700 on the website and print ads. An apartment listed at 986 sq. ft. on the floorplan should be listed at 950 on the website and print ads.

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More Interest Rate Hikes Likely

A: Unemployment rate hit the lowest level since 2001 as employers added 193,000 jobs in January. In addition, Hourly Wages rose 7 cents to $16.41, a 0.4 percent increase that suprised analysts who were expecting a 0.3 percent rise. Story.

What does this all mean for housing? Everything! As the economy gets stronger via more jobs created and higher wages, the Fed and new chief Ben Bernanke has to take on a tightening stance with interest rates to make sure the economy doesn't grow too fast too quickly. So what is he to do? Raise rates!

To combat inflation indicators such as the price of gold and oil, and to thwart off a growing economy in terms of unemployment and hourly wages, the fed is likely to raise rates 1 more time to cool things down.

In my last post on the latest 1/4 point rate hike by Greenspan in what was his last meeting as fed chief, I estimated the chances of another rate hike at about 50/50. I would revise that consensus upward now, leaning more towards another rate hike at the next fed meeting; the first for Ben Bernanke.

By pushing rates higher one more time, the feds funds rate will hit 4.75% which will result in lending rates rising across the board. It won't happen right away, as it usually takes a few weeks for the rate hike to funnel down to mortgage rates. But with another rate hike bringing the fed funds rate to 4.75% looking more likely, it will put more pressure on the housing markets as money gets more expensive to borrow for future homebuyers.

The ripple effect of rising interest rates on housing is simple to deduce:

Rates Rise ---> Borrowing Costs Become More Expensive ---> Housing Get Less Affordable ---> Asking Prices Come Down To Compensate

~ Unemployment rate lowest since 2001

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New Search Site & Trulia Adds New York

A: As I browse Inman News Blog, I noticed a new real estate search site has made it's debut; Real Estate Advisor. While I dont see what they are advising you on it does seem like a decent, but nothing special new addition to the online real estate search community. On a side note, Trulia.com has added New York & Brooklyn to their search site.

It seems Real Estate Advisor covers more territory than does Trulia or Streeteasy, but they seemed to copy Trulia's template of listing information. While I'm not a fan of copycats taking away from the originality of the first do'er, I don't see any new features on Realestateadvisor.com that would prompt me to use it over Trulia.com or Streeteasy.com.

In fact, I still think Streeteasy.com is the best NYC real estate search site because of the detailed data and links they offer to users; such as School Zones, Find Your Building, Most/Least Expensive, New Developments, & Condo Conversions. I hear that even more useful searching features are on the way. I'm hoping to get more details on this later.

Im sure its only a matter of time until Trulia.com, soon to be Zillow.com, and now Realestateadvisor.com copies Streeteasy and their useful searching features; but this agent will stay loyal to the original do'er. After all, its the only thing that separates me from the animals.

I would pass on Realestateadvisor.com and I see this web startup having trouble finding its footing unless they launch some kind of mass advertising campaign nationwide. And even that has its limits as it uses up so much capital.

Meanwhile, this online real estate world is getting awfully crowded. With Zillow.com coming soon this sector will be saturated. Where are users going to go to find a new home to buy? There will be like 5 choices. It will be interesting to see which websites make it and which ones whither away. Look for the one with the best content, most up to date listings, and the best system for displaying Open House searches to come out ahead when the dust settles!

On a side note, Trulia.com has added New York, Brooklyn & Rochester searches to their website. It appears they got the feeds to Corcoran, Bellmarc, Halstead, Elliman, & Brown Harris Stevens to start off. Not a bad group of brokerages!

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Online Real Estate Landscape is Changing

A: With the emergence of Streeteasy.com, a 2nd round of financing at Trulia.com, and the coming of the Rich Barton project titled Zillow.com, the online real estate landscape certainly is changing. Here's the lowdown.

STREETEASY.COM

According to the ABOUT page:

StreetEasy was born out of the frustration we experienced when we set out to buy an apartment in New York. Not only did we have to check multiple sites, but also we could never search by the things most important to us (like by school) or get information that was important to us (like the real deal on a condo or co-op board).

I think Streeteasy.com has the best search technology so far, although I'm only comparing it to Trulia.com as Zillow.com has yet to be launched. However, they really did their homework and seems that the site was designed truly from the minds of frustrated buyers who wanted a better resource to find sales listings in New York.

Search features offered include FIND YOUR BUILDING, MOST/LEAST EXPENSIVE, NEW DEVELOPMENTS, RECENT CONVERSIONS, SCHOOL ZONES, A BLOG, MOST ACTIVE LISTINGS, & STREET FACTS. A comprehensive suite of data laid out in a very user-friendly manner! Search technology is pretty good too.

Here are the results of a search for 1BR condos in the Upper East Side around $500,000.

TRULIA.COM

Trulia is an independent and unbiased residential real estate search engine that gives you free and open access to real estate information.

Well thats what the ABOUT webpage says anyway. Trulia focuses on real estate in California and has a fairly good search technology to power its mission. Its got a search engine feel and simply asks you to enter a CITY or ZIP CODE in California which then yields you properties for sale and a bunch of statistics about the desired location; such as Neighborhoods, Pricing Breakdown, # Beds, # Baths, Size, & Type.

A search for 'San Francisco' brings us THESE RESULTS with the most expensive listings getting priority. Click on any of the trulia logo's on the Google map and you get instant access to more listings. Under the map is a quick FACTS chart about San Francisco in terms of Average Housing Prices.

With a 2nd round of financing of $5.7M just secured, I would bet Trulia expands to other markets first before enhancing their site with more bells & Whistles.

ZILLOW.COM

Zillow is a 'soon to be launched' online real estate website that is being led by Expedia.com founder Rich Barton. Other than what was released to the general public, we really don't know much about this startup other than that it will be huge! With 32M in funding and 75 active employees (mainly engineers), it is sure to change the online landscape when it launches later this year.

In the meantime, Inman News Blog is holding a contest to see who guesses the closest business model to what Zillow actually will be when it launches.

I think it will be a combination of NY Times property search technology, Craigslist model of using brokers/agents to post content for public, and Ebay model of user feedback and reviews for self governance and to create a barrier to entry for future competitors. Read my recent post on Zillow.com.

What do you think Zillow will be?

In the end the brokers will have to adapt to this changing marketing environment as potential homebuyers realize new and improved online resources to find properties they might buy or rent. It doesnt pay to ignore these entities. Rather, the big firms will be striking deals with these sites as their traffic grows to get their xml feeds of corporate listings integrated.

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Time To Be A Sellout...Migdol Says Yes!

A: An article in today's NY Post sites Harlem developer Jerry Migdol as the latest insider to admit, ..."If you want to make money, the secret is to buy low and sell high. It's so high now it's crazy NOT to sell."

One key aspect of the article discusses using the 1031s Exchange Tax Benefit to use profits of a real estate transaction for future purchases without paying Capital gains. Read my post on 1031 Exchange. Clearly, Migdol believes that the combination of very high prices and Republicans in office make it wiser to NOT use the 1031s exchange and rather pay the low taxes now and put the money in the bank for another day! He says:

'Everyone doing 1031s is nuts..They don't realize that the Capital gains taxes under the Republicans are low: 15 percent to the feds and 7 percent to NY State. Prices themselves can drop 25 percent.'

This broker and homeowner agrees. Those using the 1031 Exchange to rationalize their next higher priced property purchase are taking on more risk than the possible reward they can reap. Its worth a second thought if you are in this situation.

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When a Co-op is not cooperative?

A: If your co-op board has rejected your buyer, there is unfortunately not a lot you can do about it. I have seen on occasion buyers resubmitting information to the coop boards through their attorney, but it is rare that a board will reconsider their decisions. The best thing that you can do is pre-qualify your buyers. Don't be willing to accept an offer from a buyer based on the monetary offer alone.

Here are a few general tips to use when prequalifying buyers.

1. Debt/Income Ratio: Monthly mortgage and maint. payments should not exceed 25% their income. For stricter co-op boards I would also consider: mort. + maint. + current debts to not exceed 25% of monthly income.
2. Mortgage Pre-Approval Letter: Be sure to get the loan pre-approval from the applicant's mortgage broker and review loan conditions required for approval. Also, just because it's a cash deal doesn't necessarily mean it's a done deal.
3. Tax Returns: Review their past 2 years tax returns and measure their income according to the Adjusted Gross.
4. Employment History/Salary: Look for solid work history and consistency of income. Also pay attention to the type of job and consider that their income may fluctuate with the industry in which they work.
5. Liquid Assets After Closing: As a general rule I would look for 2 years worth of monthly mortgage and maintenance payments LIQUID AFTER CLOSING. This may vary from building to building; some will allow less and others may require substantially more assets to be available after closing.
6. Gifting Money: Are the applicants being gifted money? If so, be sure to include the proper tax documents (Gift Letter) that were used for by your accountant.
7. Gaurantor Needed: Does the applicant need a guarantor? Be sure to check with the managing agent first to make sure the board will allow it.
8. Pied-a-terres/Pets: Pied-a-terres and pets (be sure to ask how many, breed and the weight) also must be permitted by building rules.
9. Credit Score: Review the applicant's credit report for major red flags. You can obtain a copy of the credit score/report from the buyer's Real Estate Broker or the buyer's Mortgage Professional.

The requirements of a co-op board for transactions amongst shareholders varies from building to building. As the seller, you better be sure to fully understand what your board requires for approval BEFORE you accept any offer. Its not just the highest offer, it's also the best qualified offer! No one wants a board turndown.

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Why NYC Real Estate is Seasonal

A: Because year end bonuses combine with a pickup in buyer activity during the first few months of a new year. Meanwhile, the summer is generally a time for NY'ers to get out of the city as much as possible with hot, humid weather settling in.

Its just the way it is. During the hot summer months of June, July & August most NY'ers want to jump from A/C filled work rooms to A/C filled cabs to A/C filled apartments. Being outside during these times with the heat reflecting off the building and streets, and brutal subway station waits, is a nightmare for all of us. Going out of your way to view apartments you might buy is usually not a priority. Rather, weekends at the hamptons and trips upstate or to VT/NH are the main thoughts in your head.

On the flip side, the months of January, February, & March are filled with year end bonuses, new year's resolutions, financial reflections, and residual holiday spirit. Plus, we are all here in the city! Open houses are usually filled with more would be buyers during the first 3 months of the year than they are during the dog days of summer!

Looking at it from a different viewpoint, humans are generally a group minded species. What does this have to do with it? Everything!

If you go to an open-house and see no one there, you will probably think LESS of the apartment and be in no rush to place a bid. However, if you go to an open-house and see a ton of people there with you, you will be MORE interested in the property and probably have a feeling of more time-urgency in placing a bid.

Its during the first 3 months of the year that you will see more people at the open houses. I recall the first 4 months of last year being a time of packed open-houses, multiple bids, best & final declarations, and offers over asking prices. Will it be the same this year? Probably not due to all the negative press in the papers recently about housing slowing. But it certainly will be more active than the past 4-6 months which saw the NY markets slow down a bit.

To sum up, the NYC real estate market is seasonal. We are about to enter what normally is a very active period for our markets. I know I will be keeping my eyes open to see if we are indeed normally active, or if we are abnormally slow which could point to some deeper underlying problems in the housing industry.

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I've Decided to Sell...Now What?

A: Price It. Prepare It. Market It. Show It. Negotiate It. Go Into Contract. Prepare Board Package. Close.

If you decide not to employ a professional real estate agent to handle your next real estate transaction and you are unfamiliar with this process, then you really should read this post to educate yourself before you put your property on the market.

NOTE: It is very hard to maximize your profit by selling on your own, due to the fact that your listing will not be included in the MLS system and the brokerage community. Most qualified homebuyers work with buyer brokers, and if there is no incentive for the broker, then that homebuyer will not see your property!

Now that this is out of the way, the first thing you need to do is PRICE your property. To do this, you need to find out what the last sold comparable units were in your building, and in surrounding buildings. Use your building last sold's as the more accurate guide and then price yours based on similarities/differences of yours to that one; i.e. Renovations, Views, Light, Condition, etc..Your monthly charges should also affect your asking price; lower charges = higher asking price. DO NOT OVERPRICE! Its better to UNDERPRICE the market, bring in a lot of activity, and hope for a bidding war!

PREPARE IT.Once your price is set, you need to get your apartment ready for showing. Paint, Clean, & Remove Big Furniture to make your apartment as spacious as possible. Put away your personal pictures. Always show the apartment when you get the most natural sunlight and put up some plants in the corners to liven the place up a bit. It helps!

MARKET IT. The most important place to market your property is on the NY Times website and Sunday edition print. It will cost about $150 or so for a 5 line ad in Sunday's paper, and about $125 for 2 weeks of online exposure. Be sure to mention the Open-House you plan to run for the coming Sunday! This is a must as any other newspaper or online website just wont bring in the qualified traffic that the NY Times will.

SHOW IT. Set up a Sunday Open House between the hours of 12:00 and 3:00PM, and put out some snacks and showsheets with your property's information, pictures and contact info. As people arrive, greet them and then leave them to browse. No one likes to be followed around as they look at an apartment they might buy. After they spend 5 minutes looking around, very politely, tell them of the building amenities and then subtly stick in the best points of your apartment; i.e. the southern exposure, the renovated kitchen, the Bosch appliances, etc..

NEGOTIATE IT. If priced right, you should receive an offer within 5-7% of your asking price within 3-4 weeks. If you don't, then you overpriced it and should strongly consider lowering your price, unless you are in no rush to sell. If an offer is too low, tell them you have "NO RESPONSE" to that offer. If the offer isn't too low, meet them halfway and see what their response is. Be sure to pre-qualify the buyer and check into their salary and liquid assets after closing costs! In the end, you should know what your lowest selling price is.

GO INTO CONTRACT. As offers start to come in, you should be contacting your real estate attorney, who will prepare a contract of sale, building financials, and offering plan. Once you accept an offer, have your attorney send all documents to the buyer's attorney for review. You should expect a signed contract and 10% deposit sent back to your attorney within 5 business days. If 5 business days past and you have nothing, then your attorney should start pressing the issue to find out why.

BOARD PACKAGE. When you prepare a board package be sure all information requested is provided, and all financial numbers are backed up by hard copies. For co-ops, its always best to type up the package and triple check that everything is in order. Bank documents usually take the longest to get to complete a board package.

CLOSE. Assuming board approval, the attorneys will co-ordinate a closing date that is convienent for both buyer and seller and lending institution. Usually this is 3-7 business days after board approval.

Good Luck!

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Sell Now? Or, Wait Another 1-2 Years.

A: If you intend to SELL within the next 1-2 years, and you qualify for 1 of the 2 most popular Tax Benefits (see post), then YES, plan to put your apartment on the market NOW, and specifically in the middle of January.

With interest rates still moving up and the current consensus being another one 1/4 point rate hike, possibly 2, it might be wise to cash out in the coming months as year end bonuses bring buyers back to the market.

If 30YR fixed rates are around the 6% mark right now, they will most likely move to the 6.375% - 6.5% range by this time next year, making it more expensive for buyers to borrow money for housing. While that is not enough to cause a nation-wide or city-wide housing crash, it is enough to slow down the housing market. From a risk-reward standpoint, it seems there is more downside risk than upside risk as we move towards the end of 2006.

If you own your apartment and were thinking of selling in the next 1-2 years, it might be safest to sell sooner rather than later, and take your profits to a 4% yielding money market account; such as EmigrantDirect.com. After all, 4% is not all that bad!

If you have owned and lived in your home for at least 2 out of the last 5 years OR if you intend to put your profits to work in real estate that is of equal or greater value than the property you just sold, it is also advised to sell your property sooner rather than later.

However, if you do qualify for either of these tax advantages but you planned on living in your home for the next 10 years, then try as best as you can NOT to evaluate what MIGHT happen in the housing market over the next 1-2 years. Over the long haul housing has proved time and time again to be one of the most solid investments you can make, and there are certain circumstances that would lead me to advise you to sell now. If those circumstances do not fit your long term investment plans, then dont act irrationally.

MY PREDICTION: Expect a housing correction between April 2006 and December 2007, leading to a good buying opportunity during the summer of 2007. Those homebuyers who have bought more property than they can afford and rationalized the purchase by taking out a short term creative mortgage product, will find themselves paying hundreds more in monthly costs as their ARM's expire. As sad as it is to me, expect disgraced homeowners to be forced to sell their properties at a loss over the next few years, when they discover they cant afford their mortgage payments.

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