Ask an Expert: My co-op needs cash. What's the least painful way to get it? Q. My co-op building has been hit hard in recent years by property taxes on top of a huge elevator replacement project. Our…... Read more >

Ask an Expert: My co-op needs cash. What's the least painful way to get it?

Q. My co-op building has been hit hard in recent years by property taxes on top of a huge elevator replacement project. Our maintenance charges are already on the high side and we are trying to avoid another increase or an assessment. 
Can you suggest some other alternatives for raising money that would be less painful?

For example, one idea that has been suggested is dividing up our undeveloped roof area and selling it to shareholders.  

A.  You're on the right track, say our experts, who shared some common and not-so-common ways co-ops and condos are building up their coffers nowadays.

"In the past, many co-ops executed longterm leases for antenna roof rights, and while that is still a source of income, the market is somewhat mature," says co-op and condo attorney Dean Roberts of Norris McLaughlin & Marcus.

Instead, he says, see what services your co-op can provide to shareholders, such as developing unused basement space or other areas into storage lockers.

"There are several companies that will provide storage lockers for shareholders, including the complete buildout of the room in exchange for a longterm agreement," says Roberts.

For the rest of the story, please visit http://www.brickunderground.com/blog/2013/05/ask_an_expert_my_co_op_building_needs_money_whats_the_least_painful_way_to_get_it

 

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For May 2013 publication Mann Report Residential Manhattan Market Watch DOUBLING DOWN: THE SMART GAMBLE OF COMBINING APARTMENTS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership…... Read more >

For May 2013 publication
Mann Report Residential
Manhattan Market Watch

DOUBLING DOWN: THE SMART GAMBLE OF COMBINING APARTMENTS
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Combining apartments to create larger residential spaces is not a new concept, but it’s also not an everyday occurrence. Despite Mayor Bloomberg’s advancement of affordable pint sized micro units, the demand for large properties continues as does the practice of putting together multiple units. Even developers of new condo products are going back to their drawing boards to combine apartments to capture higher price yields per square foot. Given the current shortage of sizeable properties, one wonders whether we will be seeing more combinations.

Two purchasing scenarios exist for joining apartments. Buyer A buys the apartment of the neighbor(s) to the right, left, above and/or below the apartment he already owns to combine them. Buyer B buys two separate apartments to join them. Occasionally, buyers have the enviable opportunity to recombine apartments that had been separated previously (probably during the Great Depression) to restore them to their original footprint. Always, the procedure comes with challenges and often higher than typical maintenance fees. Done well, however, the process is definitely worth undertaking.

I’ve seen some fine examples of joined apartments where the combination is seamless, all the floors and baseboards have been redone, and the space flows gracefully in well laid out proportionate rooms. I’ve also seen disasters with mismatched floors and uneven ceiling heights, disconnected hallways and a patchwork of unrelated chambers. Not all contiguous apartments are worthy of being joined. The main problem with combinations, particularly in postwar buildings, is their tendency to stretch out horizontally so the result feels ‘railroady.’ It’s the wise homeowner who enlists the aid of a professional designer or architect upfront to determine whether combining will create a satisfactory end product.  

Since November 1997, when the NYC Department of Buildings changed Building Code, the approval process for combining residential units has been streamlined. For combinations from 1968 to 1997, it was necessary to obtain an amended building Certificate of Occupancy because the combination reduced the total number of units. Today, the process is less arduous: the job can be self certified by a licensed architect after which the DOB issues a Letter of Completion to acknowledge the units have been combined legally. 

“Whenever the opportunity arises,” says Attorney Neil Garfinkel of Abrams Garfinkel Margolis Bergson, “most owners, if they can afford it, will look to expand their residences.” Neil cites the example of a current client who slipped a note of inquiry under a neighbor’s door. In the contract Neil is preparing, he will acknowledge the buyer’s intention to combine the units, but won’t include a contingency that the co-op board approve the combination since the board must first approve the purchaser and only after that, the buyer will submit full architect’s drawings for board review.

Before entering into an agreement to purchase a “knock thru,” it’s critical to consult with a loan specialist to determine any special requirements. “It’s a greater risk to make a loan on two separate properties that are yet to be combined,” explains Melissa Cohn, EVP Manhattan Division of Guaranteed Rate. “If one apartment is already owned and the other is to be purchased, any existing loan will need to be refinanced so that the financing is secured against both apartments.” When two separate apartments are purchased, some banks will require borrowers to put money in escrow ($10,000 or .5% of the cost of the project, whichever is higher) which is released either upon completion or once the bank sees that the second kitchen has been removed.  

With condominium apartments, the process is more complicated since condo units have separate tax lots. It’s best to consult with counsel to determine whether a new lot number from the Department of Finance is necessary for the newly created unit prior to filing the combination and whether amendments to the condominium declaration and offering plan are also required. If the units are not combined into one tax lot, a higher commercial tax rate may apply when the apartment is either financed or sold. 

Attorney Craig L. Price of Belkin Burden Wenig & Goldman sees a problem when either the buyer or seller inherits an improperly filed preexisting combination. “Questions arise,” he explains, “about who will deal with the lack of certification.” He estimates it can take upwards of 6 months to remedy and as much as $10,000 to draw new plans and expedite DOB paperwork. “If this is not done,” he warns, “there will be problems with financing and closing up the road.”

Susan Zises Green, owner of the eponymous Susan Zises Green Inc. Interior Design, describes a recent Upper West Side project as “double the trouble, a third of the cost of purchasing new and triple the investment!” When an adjoining two bedroom apartment came up for sale next door to the owners of a three bedroom, Susan’s clients grabbed it. “It was easy to see how rooms could be repurposed,” she observes. “The second kitchen became an elaborate storage/laundry room. We were able to cordon off the second apartment where the contractors contained their work areas while the clients remained in their original home. They have since had offers extraordinarily above what it cost to buy and renovate.”
In real estate parlance, the whole is worth more than the sum of the individual parts. If you’re a two bedroom owner and thinking about selling, knock on your neighbor’s one bedroom door and call in an experienced real estate professional for advice on joining forces to present the possibility of a 7 room combination. If the opportunity arises, there’s clear economic advantage to doubling down in the current market. 

Shirley Hackel
NEW YORK RESIDENTIAL SPECIALIST
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For April 2013 publication Mann Report Residential Manhattan Market Watch THE YEAR OF THE SMART SELLER By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership March 10, 2013. …... Read more >

For April 2013 publication

Mann Report Residential
Manhattan Market Watch

THE YEAR OF THE SMART SELLER
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

March 10, 2013.  I’ve been penning a monthly Manhattan Market Watch column for a trade publication for nearly ten years and have a sizeable library of articles about New York’s residential real estate market and its trending issues and cycles. In July 2009 at what turned out to be the nadir of the market, I wrote about “The Buyer’s Advantage” and two Januarys later, I characterized 2011 as “The Year of the Buyer.” In sharp contrast, today’s real estate climate favors savvy sellers. The Year of the Smart Seller is now.

Who are smart sellers? They come in all neighborhoods and in all property sizes. They and their brokers share an understanding about market timing and a respect for trading psychology. Their objective is to capture bidding attention in the first three to six weeks of marketing. How they present their homes matters. How they price and handle negotiations is all important. 

Since there are no second chances for first impressions, a property ought not to come to market until it is squeaky clean, artfully staged and welcoming. Investing dollars upfront is wise to remove peeling wallpaper, paint walls, refinish floors, repair whatever is broken, edit furnishings, declutter surfaces and organize closets. Experienced brokers and talented staging professionals know how to present a home to its best advantage to maximize its value.

The reality is there are also few second chances with pricing. While some owners choose to test the market with a higher than advisable price, they ultimately do themselves a disservice. Not only do they add days to Time On The Market, which delivers a discounted price in the end, they miss the enthusiasm that comes during the initial marketing period. Overpriced properties are ignored, and as Days on The Market pile up, brokers and buyers become increasingly skeptical about why some properties linger. 

My experience has shown that less is always more—with both apartment staging and pricing. When furnishings are spare and tidy, buyers are less distracted and better able to envision themselves in a particular space. When a price is lean and on target, buyers are more motivated to begin a negotiating dialogue. A tight offering price causes everyone to take notice, creates urgency, stimulates competitive bidding and yields the greatest return. 

With low supply and high demand, the pace of trading today has accelerated. Buyers are scouring online listings, crowding open houses and making offers. As multiple purchasers make similar bids, Best and Final scenarios are reoccurring with greater frequency. In these situations, I try to avoid the expression “bidding war” because it connotes hostility and disorder which have no place at the negotiating table. Effective negotiations depend on trust and should be void of antagonism and absent of ego.

Two of my own recent experiences illustrate the unpredictable nature of Best and Final negotiations. In one where I represent the buyer for a Greenwich Village two bedroom co-op, we were outbid. It turns out there were four other qualified bidders. My buyer was disappointed of course, but had no regrets because he followed my advice and offered the last dollar beyond which he would not kick himself for having lost the property. We were in first position as back up should the winning bidder not sign a contract in five business days. And that’s exactly what happened. Days later, a contract was sent to my buyer which is being reviewed now. Once my buyer signs, he’ll become a smart seller, because we’ll be putting on the market his highly desirable one bedroom co-op on lower Fifth Avenue which we will price (hopefully) on the money. 

In another current situation where I represent the seller of an eight room Park Avenue estate, in order to flush out the boldest and best buyer from among the multiple bidders, I set a seven day deadline for Best and Final along with complete deal terms, full financials and personal bios so the executrix and I can evaluate not only price but each candidate’s qualifications which weigh heavily for co-op board approval. One buyer offered significantly over the ask, but then withdrew the following morning, which often happens.  At the moment, we’re reviewing back up positions as we continue to show the property. 

In 2013, smart sellers guided by experienced brokers will seize the day.

Shirley Hackel
NEW YORK RESIDENTIAL SPECIALIST
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Ask an Expert: How often do co-op maintenance fees go up? Do they ever go down? Q. How often should I expect my co-op maintenance charges to go up?  What's a normal increase and why? Does it ever…... Read more >

Ask an Expert: How often do co-op maintenance fees go up? Do they ever go down?

Q. How often should I expect my co-op maintenance charges to go up?  What's a normal increase and why? Does it ever go down?

A.  Expect your maintenance charges to go up every year or two, say our experts, and expect the increases to be well above inflation.

Maintenance fees cover the costs to run the building, and "in recent years a big challenge facing co-op boards has been rising fuel and real estate tax costs--which are rising faster than overall inflation," says real estate appraiser and market analyst Jonathan Miller of Miller Samuel Real Estate Appraisers & Consultants.

For the rest of the story, please visit http://www.brickunderground.com/blog/2013/03/ask_an_expert_how_often_do_co_op_maintenance_fees_go_up_do_they_ever_go_down

 

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For March 2013 publication Mann Report Residential Manhattan Market Watch AS JANUARY GOES, SO GOES THE YEAR By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership February 3, 2013.…... Read more >

For March 2013 publication

Mann Report Residential
Manhattan Market Watch

AS JANUARY GOES, SO GOES THE YEAR
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

February 3, 2013. Does the direction of January predict the course for the year? Wall Street where the adage originated thinks so. The first month of 2013 scored impressive gains with the S&P up 5.05% and the Dow gaining 5.77%—signaling the best January since 1987 and rising above 14000 for the first time in over five years. In Manhattan’s residential marketplace, a similar scenario is occurring on the Main Streets of our city with 859 contracts signed in the first month of 2013, up 30% compared to January 2012 and the highest January according to Noah Rosenblatt since his online UrbanDigs began compiling real time analytics in 2009. Following a gangbuster December when players raced to close before January 1 tax changes, and contrary to expectations for a beginning of the year slowdown, properties in January were snapped up by buyers who competed aggressively and speedily for a limited supply of homes.

Will competitive bidding become as commonplace in 2013 as it once was in 2007 when the market was at its peak? Today as then as high buyer demand and low quality inventory converge, when a well priced offering comes to market, crowds of buyers and their agents rush to view. Within days, brokers are collecting multiple bids, and the property goes to contract within weeks. For sure there are similarities to 2007, but there are also notable differences.

In 2007 at the height of the market after successive years of escalating prices, buyers could hardly imagine a downturn in Manhattan real estate. A combination of windfall Wall Street bonuses, easy lending practices and exotic mortgage products fueled the run up in prices from 2003-2007. Rates hovered at 6%, interest only and no income verification loans were prevalent, nearly anyone with a pulse could secure a mortgage and lenders readily approved nearly all buildings. Buyers leveraged highly with little concern for risk, and apartments flew off the shelves, often trading 10-15% above asking prices.

Current interest rates, while inching up slowly remain at historic lows—as of this writing 3.5% fixed for 30 years. But the lending industry is over regulated today. Both borrower and building are scrutinized exactingly and repeatedly, and clearing to close is fraught with delays. Citibank’s Jeff Appel observes, “In the last year, lenders have become better at interpreting the new blitz of regulations. But as the CFPB (Consumer Finance Protection Bureau) prepares to roll-out the long awaited QRM (Qualified Residential Mortgage) guidelines, we will have to see if there is any net positive traction for consumers who have struggled while seeking a new mortgage.” At the same time, there’s considerably less cash bonus money around to fill shopping purses. With few exceptions, financial professionals are being paid with stock options and little or no cash, and many firms are capping bonuses or deferring them based on long term performance.

Today’s buyers are more risk averse than their predecessors. Instead of frothy excess, they are seeking value, and when it surfaces, they are acting quickly and assertively to purchase. The current climate is indisposed to low ball offers and favors cash buyers first, and second those purchasers who can waive a financing contingency.

While there is increased velocity in all sectors of the market and all price ranges, not all properties are uniformly rushing to contract. Indeed, properties in mint condition are achieving astonishing results. Two from last week are noteworthy examples: a stunning high floor prewar 6 with a terrace and views on Park Avenue in the 70’s is purportedly going to contract 20% above the asking—a cool $1M over the $4.595 ask; in Tribeca, a Hudson Street loft designed by its architect owner received the first of several full price $3.395 offers during the first hour of the first open house. Meanwhile other homes that are either overpriced or have obvious shortcomings like a lack of sunlight, poor condition, or an out of the way location are being ignored.

In the current climate where the pace of activity is quick, the market poses challenges for everyone. Often it takes losing a property for a buyer to understand the elements that go into an offer, and that there are no second chances with Best and Final negotiations. Sellers need to appreciate that an inflated asking price not only diverts bidder attention but fails to capture the possibilities presented in the first weeks of marketing. Both principals need to acknowledge that a rising market creates problems with appraisals which are coming up short with more frequency. Appraisals that fall below the contract price not only affect the karma of a transaction, but also negatively impact the loan to value ratio, significantly reducing the amount a lender will lend; most vulnerable are jumbo loan borrowers and buyers of co-ops which limit financing to a specified percentage of the appraised value.

A spreading optimism is feeding the current market. As the economy improves, consumers who feel more secure are more likely to make a move. Maybe even inventory of resales will grow. While global uncertainties and a 7.9% U.S unemployment rate will keep overconfidence in check, January is a likely barometer for how the year will progress: 2013 figures to be very good.

Shirley Hackel
NEW YORK RESIDENTIAL SPECIALIST
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Ask an Expert: Should we sell our apartment when there's competition in the building? Q. We were planning to put our apartment on the market next month; however, two other one-bedrooms in our line were…... Read more >

Ask an Expert: Should we sell our apartment when there's competition in the building?

Q. We were planning to put our apartment on the market next month; however, two other one-bedrooms in our line were put up for sale last week. They're asking about 10-15% less than what we were planning to list ours for.

Both are on higher floors than ours and need a decent amount of work, while ours was gut reno'd two years ago.

What is the impact on the price we're likely to get? Is it better or worse to wait until they sell before we put ours on?

A. Among other things, the answer depends on how fast you want to sell, the quality of your renovation, and how much better the view from you neighbors' higher-floor apartments really is, say our experts.

Assuming your apartment isn't overpriced, "having two other apartments in your line for sale at the same time as yours is not necessarily a bad thing because buyers like to comparison-shop," says real estate broker Gordon Roberts of Warburg Realty. Moreover, he says, "if open houses are scheduled so all three are open for inspection at the same time, you could get additional traffic."

But as much as buyers love competition, notes real estate broker Mike Akerly of Akerly Real Estate, "if your listing is overpriced, it will not sell before your neighbors’ apartments and may not sell at all."

Much depends on the quality of your renovation, says real estate broker Shirley Hackel of Warburg Realty.

For the rest of the article, please visit http://www.brickunderground.com/blog/2013/02/ask_an_expert_should_we_sell_our_apartment_when_theres_competition_in_the_building

 

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Ask an Expert: We want to buy a co-op as a pied a terre. What does it take to get approved? Q. My wife and I want to buy an apartment in Manhattan to use on the weekends. We would rather buy a co-op as…... Read more >

Ask an Expert: We want to buy a co-op as a pied a terre. What does it take to get approved?

Q. My wife and I want to buy an apartment in Manhattan to use on the weekends. We would rather buy a co-op as they're more affordable than condos, but many co-op buildings don't allow pied a terre purchases and some say they'll consider on a 'case-by-case' basis.

What criteria do boards consider? How can we help ensure that we'll be approved?

A. Co-op boards have two primary reservations about residents who intend to use the apartment as a secondary residence, say our experts.

"Some are concerned that pied a terre purchasers will not be able to afford a second home if financial trouble comes and that it will take second priority," says Roberta Axelrod, a real estate broker and asset manager at Time Equities. "Some are concerned that it is simply a cover for investors who will rent out the apartment or use it as a hotel--either for money or for friends and family."

Documenting that "you can afford the apartment and being willing to pay a year's maintenance up front or put some money in escrow does the trick if the concerns are financial," says Axelrod. "Explaining who will be using the apartment and under what circumstances can be very helpful for use concerns."

An acceptable explanation might be, "We want the apartment so that we can stay over after going to the opera, and we will not have guests in the apartment when we are not there," says Axelrod.

Agrees real estate broker Shirley Hackel of Warburg Realty, "If you can show that you have a business in New York, and you will be using the apartment a night or two a week, and that you and your spouse are cultural aficionados with season weekend tickets to the opera, theater and ballet, and that your grown children live happily in their own apartments, you’re likely to be considered favorably. If the board, however, is left to imagine that you will be giving the keys to your children, relatives and friends, you can be sure your application to purchase will be rejected. You need to provide the board with a comfort level that your use of the apartment won’t create either noise disturbances or traffic distractions to shareholders."

For the rest of the story, please visit http://www.brickunderground.com/blog/2013/01/ask_an_expert_buying_a_pied_a_terre_in_a_coop_building

 

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For February 2013 publication Mann Report Residential Manhattan Market Watch NEW YORK—STRONG AND STRONGER By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership December 26, 2012.…... Read more >

For February 2013 publication

Mann Report Residential
Manhattan Market Watch

NEW YORK—STRONG AND STRONGER
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

December 26, 2012. There’s plenty of data available to support a U.S. housing recovery even in areas that were hardest hit by the downturn like Miami and Phoenix. New residential construction is on the rise nearly everywhere, and home builders like Toll Brothers, DR Horton and Lennar have been posting significant gains monthly since October 2011. While the housing market indeed is improving across the nation, New York City continues to dazzle as it attracts not only foreign buyers who have found safe haven for sovereign money, but the brightest and the best who make NYC their home.

Demand remains strong in all segments of the market. At the top end in the over $10M category, trading volume and price levels have been climbing steadily since the second half of 2010, following a two year activity hiatus after Lehman’s fall when lavish spending was considered ostentatious. In sharp contrast, today those with the greatest wealth from the U.S. and around the world are buying with enormous confidence. While some seek a hedge, others are purchasing primary shelters and second homes. Many, in fact, are buying from plans again even before sales offices and model showrooms open officially. Beginning in early 2012 with sales at the Touraine, a 15-story Toll Brothers condo at the corner of East 65th and Lexington Avenue, deep pocketed purchasers have resumed signing contracts uptown, downtown, east side and west, even before they walk the actual spaces.  

In the mid to high range, a lack of resale inventory is the overriding concern. A short supply will probably contract even more in the near term until owners settle into the new reality of changing tax laws.
Owners of larger residences have hit the pause button and are staying put. Warburg President Frederick Peters predicts, “It’s likely to get worse particularly…where tax ramifications are virtually holding inventory hostage. Facing the prospect of huge capital gains, sellers would rather hold onto their rambling apartments and have their heirs deal with the taxes.” When an already thin supply of 4 and 5 bedroom apartments shrinks even more, 3 bedroom dwellers have fewer purchasing options so they don’t list their homes narrowing the choices for 2 bedroom buyers. This spiral however translates into good news for sellers who price their homes realistically as it stimulates competitive bidding from inventory starved buyers. The tight local stock also works to mitigate the impact of global uncertainties.

Even if current historically low mortgage rates creep up slowly this year, rents are expected to remain high increasing buyer interest for one and two bedrooms. Like their parents and grandparents, Gen X and Y believe in home ownership to build equity. Lending requirements however remain tight and will probably not ease up any time soon. Reviews and re-reviews of both the borrower and the property are as stringent as ever. In an effort to stop overleveraging and the giving of bad loans, regulators have altered the financing landscape measurably and have actually inhibited borrowing for many. 

On the other hand, money has increased for venture capital. According to the social media news blog Mashable, funding for new start ups in New York is up by 40%. Moreover, a rapidly expanding tech sector now challenges Silicon Valley’s dominance as prominent companies like Facebook, Yelp, Tumblr and Foursquare follow Google’s lead and set up shop in The Big Apple. A presence in New York for businesses, both national and international, has always been important, but never more so than today when it seems to be a requisite for success. 

On the educational front, plans have been approved for the building on Roosevelt Island of Cornell NYC Tech—the Bloomberg inspired joint venture between Cornell University and Technion-Israel Institute of Technology. Although the first phase of the graduate school won’t be completed until 2017, classes begin January in temporary space donated by Google at their Chelsea headquarters. “By adding a new state-of-the-art institution to our landscape,” notes Mayor Michael Bloomberg, “we will educate tomorrow’s entrepreneurs and create the jobs of the future… [and] make New York City home to the world’s most talented workforce.”

According to the most recent census, New York’s population of 8,244,910 is expected to grow to 8.7M by 2020 and to 9.1M by 2030. Unique among the world’s cities, New York attracts a vibrant populace—those who seek opportunities in learning and business, those who respect innovation and entrepreneurial spirit, those who strive for a quality of life, those who seek safe haven and also those who desire to show off their trophy homes. Fueled by a confluence of factors including a deep buyer pool, New York real estate continues to outperform the rest of the nation feeding an appetite for both residents and investors from around the world which is bound to grow even stronger. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Ask an Expert: What are the best businesses to have below an apartment building? Real estate experts say that grocery stores, restaurants and bars are the least desirable tenants to have below a building…... Read more >

Ask an Expert: What are the best businesses to have below an apartment building?

Real estate experts say that grocery stores, restaurants and bars are the least desirable tenants to have below a building from a quality of life perspective.

Q. What are the best and worst kinds of businesses to lease out the commercial space beneath our co-op, in terms of quality of life for residents, financial security for our building, and resale value of apartments?

A. Our experts agree that grocery stores, restaurants and bars are typically the least desirable from a quality of life perspective.

Restaurants and bars in particular "have to be the worst because of late hours of operation, noise potential, and pest potential," says New York City real estate attorney Adam Stone of Regosin, Edwards, Stone & Feder. "They are also the types of businesses that have a smaller chance of succeeding and higher rate of turnover."

On top of that, they can do a number on resale values.

"Buyers have a strong bias against restaurants, bakeries, supermarkets and food shops because of garbage disposal, pest control and odor issues," says real estate broker Shirley Hackel of Warburg Realty.

Their concerns are well founded, says pest control expert Gil Bloom of Standard Pest Management. Moreover, he says, oftentimes a food establishment's need for "storage and, worse, refuse storage exceeds their allotted space, which can then spill over into building areas. These establishments can tax the waste system and discolor the exterior sidewalk with pest attracting grease and debris."

Real estate broker Gordon Roberts of Warburg Realty notes that though restaurants raise some serious concerns, these anxieties are not necessarily insurmountable.

Visit www.brickunderground.com for the rest of the story ... 
 

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For January 2013 publication Mann Report Residential Manhattan Market Watch WHAT WE TALK ABOUT WHEN WE TALK ABOUT NEGOTIATION By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership…... Read more >

For January 2013 publication

Mann Report Residential
Manhattan Market Watch

WHAT WE TALK ABOUT WHEN WE TALK ABOUT NEGOTIATION
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

The Art of Ethical Negotiation, part of a series of master classes in the NYRS program, takes place in the wood paneled boardroom at the Real Estate Board of New York. It’s an intimate venue that allows 30+ participants to engage in a lively discourse about bargaining and winning. It’s less about revealing real estate war stories and more about successful professionals discussing best strategies. For the past several years, it’s been led by Warburg’s President Frederick Peters and his life long friend, veteran investment banker Alec Haverstick, a principal at Bessemer Trust. Following is my take-away on guidelines for conducting a successful negotiation. 

By definition, negotiation is a communication process between two or more parties whose aim is to reach a mutually satisfactory agreement. For a smooth real estate transaction to occur, good relationships must be fostered and all sides must win.

Establishing strong alliances with our co-brokers is arguably as important as developing trustworthy relationships with our buyers and sellers. Over the course of our careers, we may be fortunate to close handfuls of repeat deals and even more referral business with each buyer and seller, but we will interact with our co-broker colleagues week after week and year after year. The agent whose email offer pops up suddenly in the sellers’ agent’s Outlook Inbox without having made a preliminary “feeler” phone call misses not only an opening to build rapport but also the opportunistic chance to learn something about motivation, rejected offers, and even emotional triggers. The agent who is arrogant, overbearing or confrontational reveals an adversarial hand and foreshadows an unwillingness to be a cooperative ally during the next all important step of preparing the co-op board presentation.

Advisors, Advocates and Architects

As advisors to our buyers and sellers, effective agents mix product knowledge with the realities of the marketplace. Armed thoroughly with as much information as we can uncover, our task is to persuade each side to raise or lower expectations while always advocating for each side and portraying the parties in the best light. Cultivating good will between buyers and sellers, we refrain from speaking badly of the other, filter any negative comments, defuse any bad feelings and keep emotions in check to maintain distance and objectivity. When we promote mutual understanding, we make room for empathy and flexibility to follow.
 
As architects of the deal, we devise a bargaining structure at the outset when a bid is first offered or received, and we prepare for successive moves. While each negotiation is different and there’s no one size fits all formula, generally all offers merit a counter. A token response to even low bids signals good faith to continue the bargaining dialogue. When that occurs it’s important to add the qualifying caveat “but unless your next offer is significantly higher, I won’t be able to get you another response.” If we were to follow the textbook negotiation sequence, there would be three moves of diminishing amounts. Compromise or splitting the difference is best reserved to bridge a narrow gap at the end of the progression.

In a successful negotiation each party needs to have a vested interest in the exchange in order to feel good about the outcome. If the time is too long, momentum and even interest are at risk; if too short, a deal that’s won too easily is questioned. Hitting the pause button when negotiations are moving too quickly to take a 24 hour breather from communication helps each side to reset to consider the other. Adding reverse psychology to a stalemate—“This isn’t working, so let’s move on to another property/buyer”—often gets a deal back on track.

Managing the negotiation process requires self discipline. Part of the negotiating skillset is the ability to listen. The agent whose silence makes room for the other side to speak stands a better chance of advancing a position. Allowing the principals to think they originated a compelling maneuver and complimenting them goes further than taking personal credit.
At the bargaining table there’s no room for ego, hostility or bullying. I’m always especially pleased to do a deal with another NYRS agent. There’s no question that to reach an agreement, we will demonstrate mutual respect and good faith and will treat all parties fairly. It will be win-win as we exchange bargaining chips as equal counterparts aligned to make deals happen.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Ask an Expert: Can we renegotiate the price because of Hurricane Sandy? Q. My mom is in contract for a co-op in a neighborhood severely damaged by Hurricane Sandy. Her building had minimal damage and…... Read more >

Ask an Expert:
Can we renegotiate the price because of Hurricane Sandy?

Q. My mom is in contract for a co-op in a neighborhood severely damaged by Hurricane Sandy. Her building had minimal damage and there was none to her unit, but real estate agents I have spoken to say the local real estate market is 'toxic' and could take several years to recover.

I am concerned that the property value has greatly decreased and what she negotiated on in September greatly changed when the storm hit.

Does she have any chance to renegotiate the price?

Her attorney said he could try, but also asked on what grounds does she want the price negotiated.  I told him unusual circumstances due to a major storm that has greatly affected home prices.

He has a very good relationship with the other attorney and the management company. In my opinion, he wants to keep peace and is not offering clear advice or direction.  He said this is uncharted territory and he is not sure what to tell me. 

I am at a loss on how to proceed. If you have two cents to share, I am all ears.

A. In light of the fact that neither the building nor the apartment was materially damaged, there is likely no legal way out of the contract, says real estate attorney Jeffrey Reich of Wolf Haldenstein Adler Freeman & Herz.

Instead, our experts suggest that you and your mother take a page from 2008, when the real estate market took a sudden downturn following the collapse of Lehman Brothers and the subsequent credit crisis. 

Visit www.brickunderground.com for the rest of the story ... 
 

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For November/December 2012 publication Mann Report Residential Manhattan Market Watch BULLISH ON MANHATTAN By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership October 15, 2012. …... Read more >

For November/December 2012 publication

Mann Report Residential
Manhattan Market Watch

BULLISH ON MANHATTAN
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

October 15, 2012.  There’s a palpable boom at the top of the new development market as a growing supply of high end products sizzles with through-the-roof pricing.   At the same time, price conscious home buyers are choosing from a shrinking inventory of resale properties.  Both phenomena are reasons for optimism. 

At the market’s upper end which is buoyed by foreign demand, a growing crowd of global moneyed buyers is setting all time price records.  Gary Barnett’s One57, which has been billed by the New York Times as the city’s newest “Billionaires’ Club,” will offer concierge services from the 5-star Park Hyatt Hotel which sits at its base.  Though the 1,004’ glass curtained skyscraper is not expected to be completed until late 2013, a purported 60% of its 90 residences have gone to contract since the sales office opened last December.  The numbers realized are staggering and unprecedented:  $115 million, $95 million, $90 million to cite a few.  Featured this week in NY Magazine as the residence that will be bought by the “Kings of New York,” this steel and glass tower developed by Extell near Carnegie Hall is being likened to a safe deposit box where global citizens can park their currencies in a relatively safe haven, adding a Manhattan trophy to their collection of homes much like a new piece of art.
 
Vying with One57 and creating much broker buzz is 432 Park Avenue now a hole in the ground at 56th and 57th Streets.  Rivaling One57 as New York’s tallest residential building, Macklowe’s ground up construction will climb nearly 1,400’ high.  Formerly the site of the Drake Hotel, its 90 stories will offer 129 residences above a retail and office complex and is anticipated to open by April 2015.  Ten full floor 8,000 square foot homes starting at $64 million will be available in addition to smaller apartments of approximately 1,400 square feet.  The Penthouse with helicopter views is for sale at $85 million even before a show room opens by year end. 

Indeed selling from floor plans has returned.  Another example is Walker Tower at 18th Street west of Seventh Avenue in the heart of Chelsea.  Even before this project officially opened its sales office in late June, approximately 25% of the units had been spoken for.  Meeting the demand for a high end new development product downtown, this outstanding conversion of a 1929 Art Deco building offers homes ranging from 1,350-6,500 square feet with price tags from $4.5-$50 million and is attracting celebrities, entrepreneurs and techies.  The historic building’s wedding cake shaped structure has multiple terraces, widened windows, 12-14’ ceilings and will probably average out at $3,500+ a square foot. 

Uptown, on the Upper East Side in a 19 block span from 60th to 79th Streets, Park to Lexington Avenues, there are at least eight high profile projects that will offer about 400 apartments averaging $3,000 per square foot.  After a four year hiatus, the current wave of new development projects either from ground up construction or rental conversion underscores that developers are not only confident and bullish on New York, but they are properly leveraged and capitalized. 

While the upper end of the market seems to be running away with itself, in sharp contrast, everywhere else buyers are supremely price conscious and continue to hunt for value.  An expected flurry of activity before year end to avoid an additional 3.8% capital gains tax next year has yet to materialize.  For some time now, rising rents and low rental vacancies have been contributing to an expanding pool of first time buyers seeking to secure historically low mortgage rates.  All the while cash purchasers continue to be preferred over those who are unable to waive a financing contingency.  Because the lending climate is so radically altered with regulatory scrutiny and delays caused by time consuming checks and balances, sellers are recognizing that it’s often worth more to take less from an all cash buyer.  Increasingly, loan approvals are averaging 45 days or longer with equally comprehensive examinations of the borrower and of the property being financed.  Clearing to close can take weeks more as the property and borrower get reviewed a second and even third time with repeated requests for more documentation. 

In all price ranges, the number of sales continues to outpace the number of new listings coming to market.  With inventory levels of resales at the lowest they’ve been in seven and a half years, even if demand remains flat, sellers who price realistically will achieve a good outcome.  There is every reason to believe that for the foreseeable future, the Manhattan market will sustain a high level of activity.  If there is price movement ahead in resales, it is more likely to trend up rather than down.  Bolstered by capital flight, the spiked pricing of the flourishing high end broadcasts confidence to the rest of the market. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For October 2012 publication Mann Report Residential Manhattan Market Watch A PLAN FOR ALL SEASONS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Is there an optimum time to…... Read more >

For October 2012 publication

Mann Report Residential
Manhattan Market Watch

A PLAN FOR ALL SEASONS
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Is there an optimum time to list a property?  Yes and no.  Spring is the season of perennial promise when inventory, demand and activity peak.  But buying and selling occur year round, and while the seasonal calendar affects the volume and velocity of sales, there are two more important considerations than the time of year a property comes to market—namely the life stages of buyers and sellers defined by marriage, birth, death, and employment and the life cycle of a listing which is shaped by pricing and condition.

During spring, the forces of nature conspire to spike all numbers.  Warmer weather and longer daylight hours contribute to increased showings during April, May and June.  Lush green lawns, flowering gardens and landscaped terraces maximize curb appeal, so there is greater product and choice.  Families opt to settle their children before a new school year begins, so more contracts are signed in spring. 

More often than not, however, life gets in the way of making a seasonal move.  Couples have babies and need room to raise another child.  Professionals relocate to accommodate job losses or position transfers.  Estates require money to pay taxes.  Overriding the residential real estate calendar, life events can not always be planned.

That’s when the cycle of a listing needs acknowledgement.  Nothing quite equals the surge of energy that comes in the first few weeks of a well priced new offering no matter the time of year.  This initial period when the savviest brokers and the most motivated buyers come through is nearly impossible to recapture once missed either because of a calendar interruption or because the property fails to show well or is mispriced.  The bloom on the rose is transitory.  As a result, the critical first three to six weeks of marketing need deliberate planning. 

There’s every reason to take the time and spend some money to prepare a property to show to its best advantage.  The stage needs to be set not only for the buyer but first for the camera. Today’s purchasers who begin their searches online take little notice of those homes with unappealing settings or cluttered rooms.  If a property is uninviting online, it may be overlooked entirely.  With home staging, less is more.  Most properties benefit from editing out unnecessary furnishings and accessories.  Buyers will always walk to a window, so anything that blocks a straight path is best removed and stored.  There’s value to painting with neutral colors so buyers can envision how their own possessions will fit in a space.  Similarly, there’s a benefit to organizing and uncramming closets and repairing anything broken.  Buyers respond to homes that are clean and depersonalized.  First impressions are critical, and there are no second chances for sellers.  Staged properties sell faster and for more money than unstaged ones.  

The allure of freshness that attracts large numbers of lookers to a property’s first few open houses fades with time on the market.  A crowd of more than dozens of interested buyers  during the first couple of weeks  is halved typically in later weeks and trickles down to a mere handful in three months.  Always interested to know how long a property has been on the market, buyers today can ascertain “days on market” on sites like StreetEasy with the stroke of a key.  Before the advent of these public website portals, brokers responded directly to questions from buyers to explain why a property might be lingering on the market.  StreetEasy provides a cold hard number for Days On Market which only resets if the listing has been off the market for six months or more.  StreetEasy also features Price Drop alerts which help to bring new attention to stale listings.  If after three months, a property fails to attract an offer, a price adjustment is warranted.  But rather than chip away with successive small increments, it’s best to reduce by 5-10% to be noticed.

The weather and calendar events impact a listing.  Heat waves and snow storms can put a drag on activity, so there’s less competition, and there’s something to be said for encouraging the contrarian off season principal.  Thanksgiving causes a slowdown with holiday distractions that extend through much of December and the first week in January.  Spring school vacations, Passover and Easter also suspend showing activity more often than not.  Another market deceleration occurs before Labor Day when the vacationing real estate community doesn’t usually resume business in earnest until the Monday after Labor Day.  In Manhattan, The Jewish High Holy Days influence showings.  This year, with Rosh Hashanah and Yom Kippur occurring early and not late, the start of the fall selling season is pushed back.  Many sellers will list in October this year so as not to interrupt and thus diminish the initial excitement of their new listings. 

October 2012 is expected to be especially busy despite the uncertainty of an election year.  Smart sellers and wise brokers will be marketing new offerings that have been staged carefully and priced realistically to capture buyer attention and stimulate early bidding action.  If spring brings promise, then autumn conveys wisdom. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Experts Tell Us How To Buy Pre-Construction The Smart Way Buying pre-construction has its perks. You can be part of a unique and special project, like a brand new condo in the West Village, or have first…... Read more >

Experts Tell Us How To Buy Pre-Construction The Smart Way

Buying pre-construction has its perks.

You can be part of a unique and special project, like a brand new condo in the West Village, or have first dibs on the penthouse in the latest hot building.  

More practically speaking, you can also, in many cases, take advantage of some discounted early phase pricing (more on that below).

But how do you buy an apartment without touching, seeing, or walking through it? How will you know what the views from the 31st floor will really be like? How do you buy pre-construction smart?

Here's some advice from the experts:

1. Let the offering plan guide you
“That document needs to be considered the Bible for the purchasers,” says Shirley Hackel, executive managing director at Warburg Realty.

Visit www.brickunderground.com for the rest of the story ...

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For September 2012 publication Mann Report Residential Manhattan Market Watch TIGHT INVENTORY FAVORS SAAVY SELLERS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership August 4,…... Read more >

For September 2012 publication

Mann Report Residential
Manhattan Market Watch

TIGHT INVENTORY FAVORS SAAVY SELLERS
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

August 4, 2012.  We’re at an interesting moment of time in the current residential marketplace.  On the one hand, an already thinning inventory of apartments has been shrinking steadily since the second quarter of this year.  According to analytics provided by Noah Rosenblatt’s www.urbandigs.com, as of this writing, a total of 5,659 apartments are on the market in Manhattan—the lowest number in more than four years.  At the same time, there are 3,012 pending sales—just 189 deals short of the highest number of signed contracts achieved during this same period on June 14th of this year.  Properties in all price ranges are being absorbed at a faster rate than new properties are coming to market.  With supply dwindling and demand rising, sellers who price realistically have the edge today. 

In Manhattan, the real estate market continues to demonstrate an inherent strength and relative balance despite negative macro economics.  Europe’s debt problems will not stabilize any time soon, and they are as disconcerting as they are distracting.  Worrisome too is the future of China—the proverbial elephant in the room.  Our own U.S. stock market confounds us with its volatile swings.  In New York, while job creation is up 2.9% for the first half of this year, especially in tourist-driven hospitality and retail, unemployment still hovers at 10%.

At the market’s upper end where demand exceeds supply, a remarkably buoyant audience of buyers is setting all time records.  Several highly publicized transactions have achieved eye-popping numbers, and not all have been bought with foreign money.  This past February, a Russian industrialist purchased the penthouse at 15 Central Park West for $88M, and international capital is rumored also to be behind two recent $90+ contracts at One 57.  Not so at Ritz Carlton Towers where Steve Wynn paid $70 million for the penthouse in June; the Courtney Ross’ duplex at 740 Park was purchased for $52.5M in May by a couple relocating from California; a business woman from Connecticut bought the Ted Forstman estate at 2 East 70th for $40M in June.  Adding up the trades for this category in the last six months, 19 additional properties over $20M and 32 homes priced between $10M and $19.5M have closed.

At the opposite end, there is high volume and strong velocity in the market below $2M which is thriving for two reasons mainly.  Consistently high priced rentals are driving first time buyers to capture historically low mortgage rates.  As of July 26th, Freddie Mac reported average 30 year rates at 3.49% and 15 year rates at 2.80%—the lowest in history.  These are not expected to rise significantly for the remainder of 2012.

There is a marked difference in the buying patterns of the middle market, very loosely defined as everything between $2—9M.  Once dominated by Wall Streeters with frothy bonus checks, these buyers are more conservative than their predecessors, and their ranks comprise far fewer financial professionals (with the exception of hedge funders) and more real estate developers, entrepreneurs, attorneys and surgeons.  In this category where housing stock is particularly short, when a well priced resale is listed, generally it sells within three months, if not sooner, and frequently in competitive bidding.

In this climate of tight inventory, there is broad demand from four distinct groups:  overseas buyers seeking a safe haven, wealthy U.S. citizens looking for a trophy home, New Yorkers trading up or down, and out-of-towners desiring a piece of the Big Apple.  The environment seems favorable for new development projects which are making a timely comeback.  Scores of new condominium ventures are rising once again in all areas of the city after a virtual four year hiatus.  Stalled projects have been recapitalized, and commercial investments have rebounded with multiple high end developments in the ground alongside up market rental conversions.  This current wave of development will not only boost inventory levels for new properties, but will undoubtedly lead to increased numbers of resale apartments.  Typically, as confidence spreads, more sellers list their homes, and nearly always, the power of the market moves from the top down.

Many of the new condo ventures are trending to larger spaces with ambitious prices for the ultra luxury market.  On the Upper East Side in a 19 block span from 60th—79th Streets, Park to Lexington Avenues, there are at least seven high profile projects that will offer mostly large apartments for about $3,000 per square foot.  Creating more choices for buyers, these shiny brand new offerings will bring renewed energy to the marketplace. We’ll have to wait to see whether these developers will hit their impressive numbers.

There is every reason to believe that the market in Manhattan will remain stable for the foreseeable future. Despite global and U.S. economic troubles, demand for quality homes in our city at this point in time is high enough to balance a tight housing stock, favoring sellers who prices their properties realistically and market intelligently.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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New York Residential Specialists Launch New Super Site New York's top brokers have taken to the information super-highway to help "raise the bar" in residential brokerage. In partnership with The Real…... Read more >

New York Residential Specialists Launch New Super Site

New York's top brokers have taken to the information super-highway to help "raise the bar" in residential brokerage.
In partnership with The Real Estate Board of New York, the Executive Committee of New York Residential Specialists (NYRS) has launched www.nyrs.net, an online home for REBNY's NYRS program and its agent network. The site includes a directory of nearly 200 agents from more than 25 different companies who have achieved the NYRS designation.

The new professional credential, the highest awarded by the Real Estate Board of New York, identifies those who have achieved an advanced level of study and the top tier of success in residential sales.

The site includes a blog with posts from agent contributors, as well as links to entries on Facebook and Twitter and announces its underlying purpose on the homepage: "Raising the Bar in Residential Real Estate."

"For the industry, the new designation and website are all about maintaining high standards of professionalism, ethics and leadership. For consumers, the credential is the industry's quality control and veritable seal of approval," said co-chairs Shirley Hackel (Warburg Realty) and Frank Russo (Halstead Property) during a celebratory launch party attended by more than 125 industry leaders and supporters.

Sophia Cicilioni, sales manager at The Marketing Directors, added: "In this new market of evaporating inventory, with more and more agents looking for a piece of the same pie, we need to rise above the pack to show that NYRS brokers are truly a cut above and have the expertise and co-operation of a top broker network in New York."

Web developer Jared Seeger of Knightsbridge, said the NYRS website empowers agents to connect to one another, reach potential buyers and sellers, and distribute relevant information to industry leaders. It isn't a monologue, but a dialogue in which anyone can participate."

Limited spaces are available for the fall semester which begins October 1, 2012. Participants must be recommended by their managers and meet qualifying criteria.

 

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For August 2012 publication Mann Report Residential Manhattan Market Watch THE YEAR OF “MAYBE YES”— CO-OP BOARD CONDITIONAL APPROVALS By Shirley Hackel, Executive Managing Director, Warburg Realty…... Read more >

For August 2012 publication

Mann Report Residential
Manhattan Market Watch

THE YEAR OF “MAYBE YES”— CO-OP BOARD CONDITIONAL APPROVALS
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Last December as the year was coming to a close, the New York Times characterized 2011 as “The Year of the Turndown.”  In addition, the reporter acknowledged that it was becoming more common for co-op boards to grant provisional consent to buyers, requiring that significant sums of money be held in escrow to ensure that monthly charges would be paid on time.  This year, co-op board rejections and conditional approvals have not diminished; in fact, they are on the rise.

Although it’s nearly impossible to quantify the number of board rejections, brokers can spot the snubs when properties come “BOM”—Back on Market.  Only sometimes, however, and then only anecdotally within our own companies, do we overhear when boards request that buyers meet certain conditions before their purchase applications can be approved.

Few turndowns make the headlines.  Unless the denied is a celebrity, of course, and then it’s newsworthy.  Like when Nixon was rebuffed by a Fifth Avenue cooperative after he resigned as President.  Or when the San Remo said no to Madonna.  Or in 2005 when the Dakota declined to interview Antonio Banderas and Melanie Griffith.  Or very recently when Sheik Hamad bin Jassim bin Al Thani from oil rich Qatar was rejected at 907 Fifth Avenue, it was easy to understand why someone with two wives and fifteen children, a ministerial entourage and diplomatic immunity might not be welcome.  Some board turndowns can be baffling, however, and all cause anguish, embarrassment and financial hardship for buyers, sellers and their agents alike.  The broker’s role in assembling the required documents for the board and in managing the expectations for both principals is critical. 

The boiler plate language of the contract states that the “sale is subject to the unconditional consent of the Corporation,” which means that if the board stipulates any conditions then the  buyers can either agree to the provisions, renegotiate with the seller because of the conditions, or walk away and take back their 10% deposit.  The Board might ask the buyer to finance less than the amount specified in the contract, or to not finance at all, or to provide a third party guarantee for the maintenance, or to deposit several years of maintenance with the co-op in escrow for an undetermined amount of time.  Recently, one Park Avenue board asked a candidate to post into escrow a staggering 10 years’ worth of maintenance fees for five years for the privilege of purchasing in that building—an amount exceeding $350,000. 

The “business judgment rule” for co-ops gives board members great latitude as long as they act within the bounds of authority provided by the co-op’s by-laws and proprietary lease and as long as their decisions are not discriminatory.  In New York City, Fair Housing Laws protect twelve specific categories including age, citizenship, familial status, handicap, marital status, national origin, occupation, religion and sexual orientation.  If discrimination is proven, individual board members can be held personally liable.  When they reject a candidate, they are not required to give reasons, nor are they required to interview the applicant.  In fact, when a board intends to reject a purchaser, the interview never happens.  Although the New York City Council has tried numerous times to enact legislation requiring boards to disclose reasons for a turndown, it is unlikely to be passed any time soon. 

Board turndowns and conditional approvals are a particular phenomenon in Manhattan where cooperatives still make up approximately 70% percent of real property ownership.  This year, with nearly every deal I handled, whether I represented the buyer or the seller, I began a conversation early on in the process about provisional consent and the possibility that the board might request maintenance in escrow.  When my Park Avenue seller accepted a bid from a divorcee who’s only income source was a trust fund plus alimony that would expire in eleven years, we asked for a side letter to the contract in which she agreed to put up to two years of maintenance in escrow to be held up to two years should the board require that as a condition to her approval.  Similarly, we have side letters for my West End Avenue and Central Park West deals that are in contract with financial professionals where their bonus money is substantial but out of favor with co-op boards because of market volatility.  On a deal where I represent the buyers of an east side one bedroom whose board does not permit guarantors, where father and son are co-purchasing an apartment where the son will reside, the co-op’s Managing Agent emailed last week to ask whether they would consider putting a year of maintenance in escrow.  I encouraged the buyers to look beyond the short term of wounded pride to the long term, and then succeeded in getting the seller to split this amount with the buyers. 

Throughout Manhattan, in every size category and every price range, co-op boards are stepping up their scrutiny of candidates— checking and rechecking that financial statements add up and are sufficient and verifying personal references with searches on Facebook and Google for anything that might undermine social acceptability.  With the board package, the purchaser has one chance to make a first impression; second chances are rare.  It’s up to the real estate professional to guide buyers and sellers through this new normal.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Is it better to buy an apartment with a lax co-op board? Q. From a resale perspective, is it better to buy into a building with a liberal co-op board or a strict one? A. While there is no clear answer…... Read more >

Is it better to buy an apartment with a lax co-op board?

Q. From a resale perspective, is it better to buy into a building with a liberal co-op board or a strict one?

A. While there is no clear answer to your question, our experts put forward several persuasive theories:

Liberal. "Given the choice between a liberal and a strict co-op board in general from a market perspective, it is better to have the liberal board," says Roberta Axelrod, a real estate broker and asset manager at Time Equities. "Purchasers want to be approved and sellers want their buyers approved. Owners want to be allowed maximum freedom to live in their units as they choose to and are wary of buildings that are overly restrictive. On the other hand, no one wants to buy into a building where owners can't pay their maintenance so there needs to be a balance between no review and a building that gets a reputation for being overly strict. It is always best to have a board which is in line with the norms of the market."

Visit www.brickunderground.com for the rest of the story ... 
 

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For June 2012 publication Mann Report Residential Manhattan Market Watch CONSIDERING COMPETITIVE BIDDING By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Five years ago on 4/30/07,…... Read more >

For June 2012 publication

Mann Report Residential
Manhattan Market Watch

CONSIDERING COMPETITIVE BIDDING
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Five years ago on 4/30/07, I wrote a column about Best and Final offers. The real estate market was at its peak, and competitive bidding was commonplace in all price ranges and categories. Discretionary Wall Street bonus money jingled with frothy cash payments, interest rates hovered at 6%, buyer demand was high, and quality inventory was tight. Open houses were crowded with as many as 30 people showing up in an hour, and activity was brisk. Apartments were not staying on the market very long, often trading 10-15% above asking prices.

Fast forward to 2012. We're deep into a strong spring selling season, and multiple bidding has returned, but its flavor is very different. Prices are stable and except in the “uber” category north of $25 million, buyers are more restrained, and sellers are more realistic. This time around, short supply, high demand and historically low 4% interest rates are combining with rising rents to push up buyer confidence. Non-financial professionals are being favored over Wall Streeters, all cash offers continue to trump all others, and direct buyers are testing the boundaries of dual agency.

Though the climate is decidedly different, the steps required to navigate competitive bids remain largely unchanged.  In my view, there are four critical steps: 1) Hire A Pro, 2) Line Up Your Ducks, 3) Go The Distance and 4) Rush To Contract.

Hire A Pro

Today more than ever, it's important to collaborate with an experienced real estate professional. Although sales information is readily available online, the principal who goes it alone is at a disadvantage—even more so when there are multiple bids. Contrary to lay opinion, veteran brokers acknowledge that when each side has separate representation, the transaction proceeds more smoothly and with less risk of derailing. While NY State recognizes dual agency, in a direct deal, both buyer and seller give up the right to an agent's undivided loyalty.

Line Up Your Ducks

Pre-approval is essential for purchasers who intend to finance. Though neither binding nor a guarantee that an actual commitment will follow, being pre-approved by a lender serves as evidence that a borrower's credit score was checked, income and employment histories were reviewed, and asset and liability statements were documented—all satisfactorily.  Buyers who are able to waive a contractual financing contingency but need bank funds to complete the transaction, should have their mortgage agent qualify the building in advance and also order the appraisal to ensure that the report doesn't fall short of the contract price. Those purchasers who will not remove the financing contingency should offer a short 14-21 day timeline.

There are factors besides money to make an offer more attractive than a rival's. The highest bid is not always the best. In competitive situations, the terms of the deal matter, and the buyer's qualifications weigh heavily especially in co-ops where board approval is required. Your offer should include a clear net worth statement and employment profile to give it substance. If you can, express flexibility that matches the seller's time frame for closing and occupancy dates. Personal notes help to humanize negotiations. If a common ground is discovered with the seller, such as schools, charitable interests or club memberships, do include this reference. When everything else is equal, intangibles can tip the scales.

Go the Distance

In a best and final scenario, there are no second chances. The difference between a winning and losing bid is sometimes insignificant. When I'm representing purchasers, I advise they go to the last dollar at which they will feel good about entering into a contract of sale, and beyond which they won't kick themselves for having lost the property. When I'm representing co-op sellers, I often raise the subject of conditional approval for a buyer whose liquid assets may be low or whose income history may be volatile. I look for a willingness from the prospective buyer to enter into a side agreement to put maintenance in escrow should the board request this and grant conditional approval.

Rush To Contract

When your bid is accepted, instruct your attorney to complete due diligence promptly. With back-up bidders in the wings, delay could cost you money and the property. Once an offer is accepted, it's best for a seller to stay with the deal and continue to show for back-up only. Sellers should be prepared to issue a contract to the buyer's attorney within 24 hours along with supporting documents including the last two year's financial statements, house rules, proprietary lease, offering plan and amendments. Set a time limit for a buyer to return a signed contract. Five business days is realistic. If your buyer pulls out for whatever reason, sellers should go directly to the first back-up bidder.

Unlike the Best and Final scenarios of 2007 which brought out the boldest of bidders, today's buyers are demonstrating more restraint and deals are getting signed just below, just above or at more realistic asking prices. Skillful broker management remains key.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For May 2012 publication Mann Report Residential Manhattan Market Watch THE BAR IS SET FOR EXCELLENCE By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership New York Residential Specialists…... Read more >

For May 2012 publication

Mann Report Residential
Manhattan Market Watch

THE BAR IS SET FOR EXCELLENCE
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

New York Residential Specialists stand out above the crowd.  The new credential—the highest offered by the Real Estate Board of New York—encourages the best among us to step up to be recognized for our commitment to professional excellence and advanced education.  The designation—or its acronym NYRS—identifies those who meet qualifying criteria and complete an eight week educational course with renewal classes biannually.  For the industry, the new designation is all about raising the bar and maintaining high standards of professionalism, ethics and leadership.  For brokers who achieve the new title, a certain competitive edge is gained. For consumers, the credential is the industry’s quality control and veritable seal of approval.

Endorsed by REBNY, supported by its affiliate firms, and nurtured by a passionate 11-member NYRS Committee that I co-chair with Halstead’s Frank Russo, the program began in the fall of 2007.  Since then, with the most recent graduating class on April 2nd, more than 200 agents have achieved the status.  One of the beauties of the program—and there are many—is that it crosses the party lines of individual brokerage companies with representatives coming from more than 25 different firms.  The elite group comprises 2% of the 9,111 residential members of the Real Estate Board of New York, and the ranks are growing.  With courses offered in the spring and fall yearly, about 60 professionals are added to the NYRS network annually. 

From the beginning, the program has attracted successful agents looking to gain new perspectives and stay competitive.  Developed for brokers by brokers, the program addresses the unique challenges of New York City’s residential market.  Industry leaders and experts
teach such classes as zoning, taxation, real estate law, development, negotiation, ethics and social media.  The curriculum, updated regularly, reflects changing market conditions and emerging issues.  Class size is kept small to encourage thoughtful participation and an open exchange of ideas.  Seventy-five percent of class hours satisfy state licensing requirements for license renewal, but a high percentage of agents who enroll are veterans with more than 15 years of experience for whom the continuing education requirement is waived. 

Getting the word out
In the weeks and months ahead, we’ll be introducing a new NYRS logo, launching a website, initiating digital advertising and embracing social media to raise awareness for the credential.  Jared M. Seeger, President of Knightsbridge Strategies who is overseeing the branding initiative notes, “Our team is thrilled to be able to work alongside the NYRS group.  These are some of the best agents I've seen in the business, and our focus is on helping buyers and sellers learn about these outstanding professionals.  Also, we're excited to reach out to prospective members who aren't aware of how the accreditation can help them in their business lives."

To date, eight companies have provided funds to underwrite the NYRS marketing program. Lead sponsor Citibank’s Sales Manager Jeffrey Appel observes, “We strongly believe in the importance of creating a distinct designation for real estate brokerage professionals who have established themselves among the top tier in their field through their outstanding sales volume, reputation, and commitment to their own professional development.  We’re confident this elite group of NYRS board certified brokers will continue to set the standard for excellence in our market.”

Among industry peers, the NYRS signature signals immediate credibility.  It connotes experience, expertise, and a demonstrated record of sales achievement.  NYRS Co-Chair Frank Russo, Halstead VP remarks, “The better educated and experienced professional—whether it be lawyer, doctor, tax advisor or real estate agent—is naturally sought after by consumers.  Buyers and sellers of New York real estate who are looking to hire an accredited professional will look for the preferred NYRS credential.” 

As the program grows and develops, networking opportunities are expanding.  The NYRS network brings high visibility to client listings through “NYRS Only” Open Houses maximizing exposure to New York City’s most influential agents.  The advance of the NYRS program is particularly important in today’s digital age where information is accessible and transparent—where buyers and sellers need to be able to identify the best professional who will add value to what is arguably the single most important financial transaction in their lives.  As a 30 year industry veteran, I’m proud to be among the leaders of the NYRS program and its network of agents who can be counted on not only to keep up with industry standards but to deliver results with professionalism and integrity.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For April 2012 publication Mann Report Residential Manhattan Market Watch WELCOMING A STABLE SPRING By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership March 5, 2012.  What’s…... Read more >

For April 2012 publication

Mann Report Residential
Manhattan Market Watch

WELCOMING A STABLE SPRING
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

March 5, 2012.  What’s a buyer and seller to think when on March 1 we read on wsj.com about a “weakness in sales” and a deepening real estate slowdown during the first two months of this year, and then on March 2nd urbandigs.com highlights the highest deal volume since 2008 in February? Shut the front door, we say, as we proclaim that February was an especially strong month. We expect the first quarter of 2012 to finish on an uptick, signaling continued stability as we enter the spring market.  

Josh Barbarnel’s reporting for the Wall Street Journal is based on closed sales filed with the city’s Department of Finance. Although these postings capture actual closing prices, they lack immediacy and less relevance in terms of timing, because not only do they lag behind actual closing dates as they are filed late, their numbers represent deals that were made at least 2 if not 3-4 months earlier, since it takes about 2 months after contract signing to secure financing and even longer to gain board approval in the case of co-ops. On the other hand, Urban Digs’ Noah Rosenblatt compiles statistics in real time for signed contracts which REBNY broker firms are required to submit within 24 hours. In February, Rosenblatt counted 871 new deals that went to contract in Manhattan. As a reflection of actual activity, Rosenblatt’s analysis is a more reliable indicator of the market pulse. 

There are reasons to be optimistic. Last month, the financial sectors achieved significant milestones:  the Dow closed above 13,000 on February 28 following 5 consecutive months of gains; on the same day, the S&P settled over 1,370; and on February 29th, NASDAQ reached 3000. 

Bonus money may be down, but encouraging market indicators abound. Investment real estate sales recovered in 2011 with commercial property sales approximating $25.8 billion—a whopping 88% more than 2010. Unemployment is down to 8.3% in January from 9.1% last July, declining at a more rapid pace than expected. Consumer spending is up, and consumer confidence was at its highest in a year in February, according to the Conference Board. Car sales have improved by 16% to a pre recession peak in spite of rising gas prices, because of pent up demand. Likewise, retail spending is strong, attributable in large part to a warm winter—a factor which also led to lower heating oil needs. Homebuilder confidence was at its highest level in February since May 2007, according to the National Association of Home Builders/Wells Fargo sentiment gauge.

Sustained stability, balanced activity

In some parts of the city, we’ve seen a return to the pre-recession trend of buying from plans. At the Toll Brothers 15-story condo designed by Lagrange at the corner of East 65th and Lexington, 17 of the 22 units have reportedly sold, though the building won’t be ready for occupancy until next winter at the earliest. Extell’s One57, the 90 story tower being built at 57th between 6th and 7th Avenues, is attracting foreign buyers to the tune of $4000/sf for one bedroom apartments and over $6000/sf for 3 bedrooms. Recently the building’s duplex penthouse price was raised to nearly $100 million after 15 CPW’s penthouse realized $88 million in a resale. At 323 Park Avenue South, which is a hole in the ground at the moment at 24th Street, Tessler Development has opened an office to presell 18 units in a 10 story condo designed by Gwathmey Siegel.   
Despite the upbeat news, however, it’s foolhardy to think that we might return to the heady days of a rapidly rising boom market. It’s important to keep any euphoria in check and acknowledge that the business of doing real estate in Manhattan has become increasingly complex. Securing financing is exceedingly complicated as Dodd-Frank reforms have created major impediments to lending in New York’s co-ops and condos.  Although credit availability has improved, banks and mortgage brokers continue to adjust to new regulations. On top of that, it’s been a brutal year for co-op board difficulties. Turndowns and conditional approvals are on the rise as boards tighten their scrutiny or ask for huge escrow deposits. 

While the problems of the European debt crisis remain, at present they are balanced by a steady upturn for the U.S. economy. In his semi annual report to Congress on February 29th, Fed Chief Ben Bernanke described a slow and “uneven” recovery and predicted “modest” growth for 2012. On the same day, the housing market was also characterized as “improved somewhat in most districts.”

In New York, the market is best depicted as stable and busy. With quality inventory still tight, buyer demand strong, and interest rates still at historic lows, there is every reason to believe that prices will stay steady or gain small increments over the next 24 months. Cautious optimism remains the hallmark for today’s sellers who are advised to use discipline to set appropriate prices to generate action and stimulate bidding, and not misinterpret confidence as a reason to set unachievable levels. More and more purchasers are stepping up to buy often to compete in multiple bidding for well priced desirable properties. A robust rental market is sending renters out to explore purchasing options. As the ducks line up on both sides of the trade, a more balanced and vibrant market has emerged with brokers working harder than ever to guide buyers and sellers to the closing table. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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The New York Times March 8, 2012 GREENWICH VILLAGE CO-OP $815,000 MANHATTAN: 111 Fourth Avenue (at 12th Street), #12C A one-bedroom one-bath loft with 12-foot ceilings in a prewar doorman building. Shirley…... Read more >

The New York Times
March 8, 2012

GREENWICH VILLAGE CO-OP $815,000
MANHATTAN: 111 Fourth Avenue (at 12th Street), #12C
A one-bedroom one-bath loft with 12-foot ceilings in a prewar doorman building. Shirley Hackel, Warburg Realty
MAINTENANCE: $1,340 a month
PROS: Eight-foot-high steel-framed windows add an interesting design element and provide great light and sweeping city views. The unit has new bamboo floors.
CONS: The kitchen appliances and bathroom could use updating.
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For March 2012 publication Mann Report Residential Manhattan Market Watch THE CONUNDRUM OF RISING REAL PROPERTY TAXES By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership The Real…... Read more >

For March 2012 publication

Mann Report Residential
Manhattan Market Watch

THE CONUNDRUM OF RISING REAL PROPERTY TAXES
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

The Real Estate Board of New York is bringing critical attention to an issue of great complexity. Their recently released seven minute video, appearing on www.rebny.com and titled “Property Tax Fairness—No Margin for Delay” focuses on New York City’s rising real property taxes. The subject is as convoluted as it is complicated, and as political as it is inequitable. It’s tough to even speculate how solutions will be tendered to a problem of such complex proportions. 

Property taxes contribute the largest share of tax revenue to New York City. Half of the city's annual tax receipts comes from real estate—more than the combined total collected from personal income tax (24%), sales tax (17%) and corporate tax (8%). In ten years, NYC property taxes have increased a staggering 100%. Last year, they generated $17.6 billion. The revenue is essential to the city’s coffers, but at the same time, rising taxes are an obstacle to New York’s economy as they impede growth and capital investment.

I researched the subject online and consulted with recognized tax specialists to gain a cursory understanding of a very sophisticated and sometimes mystifying tax structure.  The current tax model and separation of property into 4 classes dates back to the early 80’s when the state legislature enacted S7000A or Chapter 1057 of the Laws of 1981. At that time, properties were divided into four categories:
• Class 1: 1, 2 and 3 family homes
• Class 2:  Multiple dwellings of 4 units or more including rentals, co-ops and condos
• Class 3:  Utilities
• Class 4:  Commercial buildings, stores, hotels, garages, theaters

Three factors determine the amount of tax imposed on a property: the tax rate for the property class, the assessment ratio and the property’s market valuation. Each year, tax rates are set for each property class by the Mayor and City Council who together have the authority to make changes to the rate as needed to balance the city’s budget. Rate tables can be found online at www.nyc.gov. The Department of Finance determines the assessment ratios, and every January mails property owners a Notice of Property Value. With the exception of Class 1 properties whose market values are based on actual sales, property values for Classes 2, 3 and 4 are calculated according to income formulas. State law requires that the Department of Finance value co-ops and condos as if they were rental apartment buildings—even though co-ops and condos do not generate income. Each year, the Finance Department publishes a comprehensive online list of comparable rental properties according to size, age and number of residential units; however most tax attorneys will tell you that the selected comparables are not at all similar to the buildings being valued.

In 2011 increased assessed values resulted in property tax hikes of 7.5% for co-ops, 9.6% for condos, 2.8% for single family homes, and 8.1%-9% for rental apartments.  The law caps assessments exceeding 6% in one year or 20% over 5 years for Class 1—with the exclusion of assessments due to physical improvements. There are no limitations on assessment increases for Class 2, 3 or 4 properties, but increases must be phased-in over a 5 year period for classes 2 and 4. As a result, even though actual market value may have declined, Billable Assessed Value may increase and it may take several years for assessments to catch up with market value increases or decreases.

In the city’s “Annual Report: The New York City Property Tax FY2011” prepared by the Office of Tax Policy, August 2011, lies the perplexing statement:  “Because of the property Tax’s unique role in balancing the budget, it is the only tax over which the City has the discretion to determine the rate without prior legislation from the State” (p.25). 
 
Attention must be paid to some jarring realities: 
• Increasing property taxes is the default position for New York City’s budget shortfalls.
• New construction properties pay more tax than existing properties.
• Homeowners pay much less tax than owners of rental property of similar value.
• Non profit and government exemptions are huge— last year alone exceeding $10 million from tax breaks on properties owned by foreign embassies, government related entities like the MTA, religious buildings, hospitals and health care facilities, private schools and universities, foundations and charitable organizations.
• Tax abatement incentives like 421A and J51 have been eliminated for new projects. 

Glenn Borin, co-manager of the real estate tax practice at Stroock & Stroock & Lavan, observes, “The basic measures of the fairness of a property tax system are that it treats like buildings alike and that the property owner can understand how the assessment will be determined. The City has made efforts to improve accuracy and transparency but it has a long way to go, and the complexity of the state law makes for a very difficult route.”

Rising, uncapped property taxes threaten the fabric of our city. They increase costs for homeowners, renters and corporations. If more and more businesses relocate to Connecticut and New Jersey with only satellite offices in New York, and if more and more developers choose to build their office buildings and rental developments in cities other than New York, both commercial and residential markets will feel the pain. With so many different interest groups to acknowledge, and an equal number of politicians straddling the fences, changes to the current tax structure seem a very long way off.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For February 2012 publication Mann Report Residential Manhattan Market Watch Measure for Measure, Part 2 By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Price per square foot,…... Read more >

For February 2012 publication

Mann Report Residential
Manhattan Market Watch

Measure for Measure, Part 2
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Price per square foot, or ppsf, is only one of several factors that contribute to a property’s value. Other considerations include condition, view, layout, light, time on market and market conditions. Yet ppsf has become the common denominator, if not the virtual currency in which real estate properties trade. Although it’s a basic unit of measure for floor area, the square foot is not always absolute and sometimes grows bigger by degrees depending on who is doing the measuring.

Without industry approved standards to calculate square footage, comparisons between properties are problematic. In condominiums, the methods for measuring square footage have changed over the years. In the early 80's, floor area measured interior space for the most part. In sharp contrast, square footage of new condo construction of the 90’s and 00’s was and continues to be measured from exterior brick to exterior brick and also includes a percentage of common elements. While variations may be minimal between smaller units, when comparing larger apartments, the disparities are proportionately greater. As a result, comparing condominium apartments in different buildings is a lot like equating apples and pears. 

The practice with condos is to rely on the number provided in the Offering Plan.  Michael Vargas, Principal and Co-Founder of Vanderbilt Appraisal Company LLC finds that “… many banks are now requiring appraisers to re-measure for accuracy, and you will not be surprised that we have found most units are 5-15% off in the offering plan quoted square footage.” 

James Lanfranchi, President at Archer Meade Appraisals notes, “The real problem comes into play when considering comparables. Since most of the time we haven't personally measured them, we must rely on what is reported in the schedule A or in the offering plan. Appraisers at Archer Meade are directed to do "take-offs" from floor plans with an architect's ruler to better consider the interior floor space of a comparable.” 
 
With co-ops, the property’s prospectus lists the total number of rooms and the number of bedrooms and bathrooms, but not square footage. Vargas notes that he approached REBNY for help to establish measuring standards for co-op apartments, but “did not get very far.” 

A Google search for measuring square footage shows some standards are available in some markets:

- In 2008 Building Owners and Management Association (BOMA) and International Facility Management Association jointly published “A Unified Approach for Measuring Office Space” –a 36 page illustrated manual that was the result of a three year effort by field experts to establish best practices for measurement in commercial office buildings. BOMA also publishes guides for industrial buildings and multi-unit residential buildings.
- Buildingareameasurement.com has been around since March 2000 and offers expert witnesses to resolve disputes. Their website says they provide “voluntary standards that serve to bring measurement consistency and comparability between properties.”
- The National Association of Home Builders publishes guidelines for single-family homes.
- The North Carolina Real Estate Commission mandates that “real estate agents are expected to be able to accurately calculate the square footage of most dwellings” (effective since May 2001) and provides “helpful hints” and measurement guidelines.

It would be good to have consistent methods to use on a voluntary basis especially when comparing similar properties. Some of the obvious steps:

- Start with as accurate a floor plan as possible. If stated dimensions seem incorrect, use a steel tape measure or laser distance device to measure. The latter is especially useful in crammed spaces when furniture blocks a straight line. Total area includes bathrooms, hallways and closets.
- To simplify calculations, the floor plan can be broken down into several rectangles, and occasionally into a triangle. Then arithmetic formulas determine area:  for a rectangle, multiply length times width, and for a triangle, multiply base by height and divide by two. 
- One website advises to keep a record of supporting drawings and any documentation to show how total square footage was determined. 

Some of the not so obvious considerations:

- Are six inches sufficient to add for exterior walls, as one website recommends, and four inches for an interior wall? When measuring brick to brick, thickness of walls vary—especially between postwar and prewar buildings. In corner apartments, there are two exterior walls to consider.
- What about stairs in multiple levels and interior elevators?
- Do you round off to the nearest whole number, nearest inch or nearest 0.01 square foot? With large apartments, I’ve seen agents round off to the nearest 10, 50 and even 100.
- Do you include loft bed areas in square footage calculations? How high would the ceiling height have to be? 
- A 2% tolerance seems to be the accepted standard for commercial real estate.  What would be wiggle room for residential spaces?

Even with uniform standards, disclaimers are necessary given the litigious nature of our culture. Square footage should be qualified as “approximate”—which according to Wikipedia means “inexact representation of something that is still close enough to be useful.” Or to paraphrase Warburg President and blogger Fred Peters, even without uniform standards, if we measure comparable properties using the same inexact methods, our totals may be off, but they’ll be off proportionately, so that’s close enough to be beneficial.

Granted price per square foot is only part of the value equation. Other factors, some quantifiable and others incalculable need to be considered and weighed to determine and compare prices,  Nonetheless, measurement standards would definitely help both agents and consumers.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For January 2012 publication Mann Report Residential Manhattan Market Watch Measure for Measure? By Shirley Hackel, Managing Director, Warburg Realty Partnership Square footage is a critical consideration…... Read more >

For January 2012 publication

Mann Report Residential
Manhattan Market Watch

Measure for Measure?
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Square footage is a critical consideration in determining and comparing property values. Yet there are no uniform standards for measuring space in New York’s residential housing stock of co-ops, condo’s and townhouses.

When I first started in the business, we sold apartments by the number of rooms, making distinctions for post war and prewar products and for location. That was before loft conversions in the late 80’s and the condo explosion of the 90’s and 00’s.  “Price-per-square-foot” has become the common denominator and currency of our marketplace, but until consistent guidelines are developed to measure spaces, it’s an unreliable metric for determining the value of a property. 

It’s time to develop approved and accepted industry wide methods to calculate square footage in residential spaces.  If we are to help our data driven buyers and sellers to evaluate a property’s value and also to compare it to other like properties, then we need to be able to measure qualitatively and quantitatively and match up apples to apples. 

Since the late 90’s when the buyers of a Park Avenue co-op backed out of their purchase contract, suing both seller and broker in a claim that the apartment fell 15% short of what was advertised, brokers have been reluctant to cite square footage for co-ops.  Though I know of this one lawsuit only which was settled ultimately out of court, numerous complaints have been filed against brokers and developers for inconsistencies and inaccuracies, and many deals have gone south because of discrepancies and disputes. 

In condominium offerings, the practice is to rely on the number published in the Offering Plan in which the developer is required not only to specify square footage but also to disclose how it was computed.  However unless we read the book length prospectus to understand what went into the gross calculations, comparisons between buildings are often very challenging.  Variations abound because developers include a prorated share for a variety of common elements such as elevators, corridors, stairwells, mechanical columns and pipes.  Their inclusion in gross area distorts actual apartment square footage.  With condos selling an average $1,130 per square foot (and over $10,000/sf in a recent sale at 15 CPW), anything greater than a 2% measurement tolerance in floor area translates into significant sums of money.

By definition, residential square footage comprises the floor space within a home’s perimeter walls, including closets and hallways.  One would think that multiplying length times width to determine the area would be straightforward arithmetic.  However, if you were to ask a tax assessor, appraiser, architect, developer, broker and homeowner to measure the same apartment, you are unlikely to get identical area results and more likely to get six very different responses.  Similarly, if you were to ask a carpet installer to compare a 2000 square foot condo in one building to another in a different development, you’re likely to come away with two very different carpet estimates. 

Do the benefits of industry guidelines outweigh the risks?

Although REBNY provides guidelines for commercial brokers to measure floor space in office buildings and stores, no industry standards exist for the residential market.  Effective since January 1987, REBNY has been offering commercial agents precise recommendations “to facilitate a comparison of the cost of space among buildings,” acknowledging “loss factors” and dissimilarities between structures in order to determine usable and rentable area.

I asked REBNY’s President Steven Spinola whether something similar could be provided for residential agents.  “We looked at this in the past,” he notes in an email. “A good number of legal concerns were raised over a broker articulating square footage and then being sued over the number that was given.  On condo units no one should use anything other than what is listed in the Offering Plan.  I am willing to explore this for co-op units but the lawyers will argue against.”

I checked with three attorneys; two were dubious, and a third encouraging.  Neil B. Garfinkel of Abrams Garfinkel Margolis Bergson, LLP, said, “From the perspective of representing real estate brokers, I would not be in favor of it.  I think that even if you were to come up with a standardized method, I would not want it to fall to the real estate broker to participate in the calculation of square footage—there is way too much risk!” Craig L. Price of Belkin Burden Wenig & Goldman LLP agrees:  “You need to weigh the potential liability versus the value of the data to the market. I am not sure the ‘need’ for data outweighs the inherent risk associated.”  Luigi Rosabianca of Rosabianca & Associates, PLLC disagrees however:  “This is a matter of great dispute within our industry, but we need uniformity, and I am definitely in favor of exploring industry standards.”

In 7 states—namely Connecticut, New Jersey, Vermont, Colorado, Alaska, Indiana, Minnesota, Nevada, and West Virginia—square footage has been defined by law since 1994.  In New York, where the stakes are incredibly high, square footage is too important not to be addressed by brokers.  Floor area is a huge component in the valuation of residential assets and influences negotiations.  It’s time we as an industry took voluntary responsibility (before the state mandates it) to devise clear, logical, and easy to compute objective methods to calculate floor space.  Guidelines would not only assist the broker in measuring square footage to achieve measurement consistency and comparability between properties, but it would also offer consumer protection. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For November 2011 Mann Report Residential Manhattan Market Watch NEW YORK’S ENDURING MAGNETISM By Shirley Hackel, Managing Director, Warburg Realty Partnership October 2, 2011.  I’ve taken to…... Read more >

For November 2011
Mann Report Residential
Manhattan Market Watch

NEW YORK’S ENDURING MAGNETISM
By Shirley Hackel, Managing Director, Warburg Realty Partnership

October 2, 2011.  I’ve taken to begin these columns with a dateline because the global economic picture is unclear and can change on a dime.  There’s no magic bullet or one government tool that will repair our struggling world economy.  Are we headed for another recession as some economists forecast?  Pimco’s Mohamed El-Erian sees a financial crisis looming again as European sovereign debt spreads well beyond Greece and observes that all intervention despite being “massive” has not been enough to function as a “circuit breaker” to contain the quandary. 

If we head towards another meltdown, what will happen to residential real estate in New York?  If you ask industry insiders, we’ll land on our feet, and come out on the right side of even. 

Three years after a global financial meltdown, New York is still one of the most attractive markets for investors.  As the beneficiary of capital flight, our city has played host to foreign purchasers from around the globe, especially China, Russia, Brazil and Australia.  2010 turned out to be a banner year for the condo market with Russians buying trophy double digit million dollar apartments and Chinese investing in multiple smaller million dollar units. 

Ten years after 9/11, the World Trade Center has been rebuilt and downtown Manhattan is vibrant again.  Tourists are visiting in record numbers demonstrating that our city is not only resilient, but healthy and strong.  Real neighborhoods have grown in Brooklyn and Long Island City, and our streets are cleaner and safer than ever. 

This is Jay-Z’s New York “where dreams are made of”—a city that generates excitement and energy, whose diverse citizens sit on the boards of cultural and philanthropic organizations.  It’s where venture capital is found, and entrepreneurial spirit is nurtured.  It’s where the talented and the young want to be.  In the last 10 years, census reports show the population of 20-29 year olds has increased 8%.  Talent is drawn here and wants to stay here.  By 2030, our city’s population is projected to increase an additional million. 

Even as housing reports everywhere but New York are nightmarish, we in the big apple have much to be grateful for.  While the rest of the nation was feeling pain as early as 2007, New York real estate wasn’t significantly affected until after Lehman fell.  From October 2008 until about mid 2009, we experienced the fallout first hand, learning that we were not immune.  Although we had been insulated and protected by the predominating co-op model whose financing limitations precluded that our housing would ever be underwater in sharp contrast to the rest of the nation, when we got hit in New York, we managed to work through the housing malaise and subsequent recession better than most other cities, outperforming DC, San Francisco, Boston and LA. 

Unlike the stock market, which is super sensitive to both good and bad news, residential real estate is a brick and mortar investment with utility whose prices don’t swing dramatically.  Wall Street’s volatile stock market gyrations have created some super losses, and probably even more wealth which will impact our market in 2012 and 2013.  More $10M+ properties will be selling, boosting confidence throughout the marketplace.  

While everywhere else there’s a surplus of inventory, in New York there are segments with a real shortage of product.  There was no rush among sellers to list after Labor Day, so early fall housing stock fell short of expectations.  While condo properties may be plentiful, co-op inventory for large apartments is thin particularly on the West side.  In all areas of the city and all cost ranges, supply decreases as prices increase.   

On the development side, mostly smaller scale projects are underway, with more conversions from rental to condo than ground-up new construction, because the former is far less costly per square foot.  The condo construction loan is the least favorable today among lenders, with lack of credit as the reason for 600 currently stalled projects.

On the other hand, residential mortgages are returning to normalcy.  Jumbo lenders are back, and interest rates will probably remain at their same low levels through the next election.  However, it’s still taking reams of documentation to qualify and about 45 days to get a commitment.  Effective this month, confirming limits are lowered to $625,500.

The Fed’s newest flavor stimulus of the month "Operation Twist,” aimed at lowering long term interest rates, is designed to ease a restrictive lending environment.  Reaction to this latest attempt to revive the U.S. economy has been mixed.  Will it boost consumer spending?  Will it stimulate loans so companies can build new factories and hire more workers?  

Although employment numbers continue to disappoint and hover at 9%, and  layoffs at financial institutions persist, jobs are being added—albeit slowly—in private sector start-ups and in industries such as health care and especially higher education—serving to balance Wall Street’s former dominance.  Expansion plans are notable at CUNY, NYU, Fordham and Columbia.  In 2013, a much anticipated extension of Palo Alto’s Stanford University campus will bring new opportunities and fresh status to Roosevelt Island with a hi-tech graduate center for applied sciences.  In a report on 9/26/11, Stanford’s President John Hennessy explained that he chose New York because of the megacity’s ability to attract students and faculty from around the world and because of the initiative of its visionary Mayor Bloomberg.

In New York, the residential real estate glass is half full.  Come sing with Jay-Z—“Welcome to the melting pot…  / No place in the world that can compare… / These streets will make you feel brand new / Big lights will inspire you, / Let’s hear it for New York, New York, New York.”

Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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MANHATTAN MARKET WATCH: REALITIES FOR A NEW NORMAL August 8, 2011.  A dateline is essential when faced with a 2 month advance deadline for an October publication issue—especially when it’s 3…... Read more >

MANHATTAN MARKET WATCH: REALITIES FOR A NEW NORMAL

August 8, 2011.  A dateline is essential when faced with a 2 month advance deadline for an October publication issue—especially when it’s 3 days after Standard and Poor’s downgraded the credit rating for U.S. Treasuries from AAA to AA+.  The Dow plunged today 635 jaw-dropping points, the biggest stock market decline since December 2008.  It will take time to absorb the full impact of this unprecedented measure, and all eyes will be watching as events unfold.

For more than two years, we’ve been dealing with a “new normal”–a condition coined by Pimco’s CEO Mohamed El-Erian to describe a slow moving improvement for the foreseeable future for global markets.  El-Erian characterized an environment with higher unemployment, greater government regulation and a weakening U.S. dollar, and forecast slower growth worldwide that could last until 2014 or beyond.  With the exception of a three month wave from March through May when sales performance and prices in Manhattan were exceptionally strong and high, with a number of noteworthy outlier transactions, residential real estate activity settled into a “new normal” where prices have remained largely flat this year. 

There are benefits to slow growth in a fragile economy:  an incremental pace is sustainable, and there is less reliance on credit and debt.  But in a slower paced market, there’s less pressure for prudent buyers to act quickly, so properties remain on the market longer.  When sellers are uncertain about their future, fewer products come on the market.        

A new normal in residential real estate acknowledges some old and some new realities. 

1.  The market for affordable rentals is shrinking.   Did you know that owners of real estate in Manhattan are in the minority?  Our housing stock is separated into approximately two thirds renters and one third owners.  This year, we are experiencing an unprecedented vacancy rate below 1%.  Consequently, rents are higher than ever, and landlords have stopped offering concessions to tenants or incentives to brokers.  Savvy investors are recognizing this is a particularly good time to make a condo purchase and lease the unit.

2.  There’s no privacy any longer.  Co-op sales prices have been a matter of public record since the summer of 2006 when then Governor Pataki signed into law a bill that required the disclosure of cooperative sales prices along with details of ownership and financing.  While purchasers of condominium units may mask their identities by buying in the name of an LLC, it’s more difficult for co-op buyers to protect privacy as co-op boards for the most part require individual ownership.  With privacy jeopardized, the full details of a transaction are available to anyone who takes the time to look.  Not only celebrities are exposed by the press, but mainstream citizens are helpless and unable to protect their privacy.     

3.  Condition matters, and staging has gained increased importance.  There’s no good reason for a property not to show to its best advantage.  Armed with practical advice from brokers and tips from apartment stylists, today’s sellers understand the advantages of presenting a property for maximum visual and emotional appeal.  Staged apartments sell faster and for more money.   

4.  Pied-a-terre buyers should keep residence records.  New York State has been aggressively auditing the returns of non-residents.  Out-of-towners who maintain a residence in New York, either rented or owned, who spend more than 183 days of a taxable year in New York are required to pay city and state taxes on all income whether or not the earnings are from work physically performed in New York State.  During a residency audit, the burden of proof rests with the taxpayer.  Accountants advise that individuals record their location each day in personal diaries that are consistent with credit card receipts, phone logs and E-Z Pass registers.  According to the State’s Nonresident Audit Guidelines, revised in 2010, a day in New York is counted as a day regardless of whether it is for business, shopping, dinner, or a medical appointment. Although hospitalization does not count for statutory residency, outpatient care and visiting someone hospitalized in New York counts as days spent in the state.        

5.  The roadblocks to financing continue.  While interest rates as of this writing are still at historic lows, Fannie Mae and Freddie Mac guidelines are not very efficient for lending in Manhattan.  It’s important to be connected with savvy mortgage experts to keep up with a changing climate.  Loan approvals are averaging 45 days or longer with equally comprehensive examinations of the borrower and of the property being financed.  

6.  Phase 1 of the Second Avenue Subway is testing our patience.  Once completed, transit service will run from Harlem to Lower Manhattan.  Phase 1 excavation and construction from 105th to 72nd Street is expected to finish December 2016 with stops at 69th, 72nd and 96th and will be a huge enhancement to the area.  Until then however, area residents and shopkeepers are dealing with a mix of issues ranging from poor air quality, compromised sanitation, safety concerns and noise.  Apartment sales along this corridor of the city are hurting, and prices have taken a nosedive. 

7.  New York is one of the most insulated real estate markets in the nation, if not the world.  Compared to the rest of the country, Manhattan real estate is holding its own.  While other markets struggle to regain their footing, New York has been demonstrating relatively stability.  Short sales and foreclosures are minimal in our borough, mainly because of the prevalence of co-ops requiring large down payments and significant post closing liquid assets.  In addition, NYC remains a magnet for the world’s super wealthy and talented labor force.  Similarly, foreign buyers continue to find a safe haven for their yen, euro and drachma.  In short, Manhattan is where people want to live, work and play. 

Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For September 2011 publication Mann Report Residential Manhattan Market Watch A FINE ROMANCE By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership In mid July, Fred Peters posted…... Read more >

For September 2011 publication
Mann Report Residential
Manhattan Market Watch

A FINE ROMANCE
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

In mid July, Fred Peters posted a blog about the complexities inherent in a broker’s job “as well as the multiple pleasures.”  He mused, “Our business involves strategizing . . . relationship management . . . aesthetics . . . negotiating skill, and it often involves being a strong hand within the softest velvet glove,” concluding, “There is no other work quite like it.” I love my work.  It’s meaningful, challenging and satisfying.  Over the years, I’ve had the privilege of providing service to hundreds of buyers and sellers with whom I’ve developed many very special connections.  I’d like to tell you about one of my recent clients—a very special lady I’ll call Helena (not her real name) because it reads like a lovely love story. 

Helena is an elegant, gutsy octogenarian who was referred to me by our mutual investment manager.  She’s petite, small framed, but no pushover.  Her blue eyes sparkle when she speaks, so you barely notice the lines on her silky cheeks and brow.  She’s a lover of the arts, especially ballet.  A widow for 29 years, she was interested in exploring purchasing options and also selling her Sutton Place South apartment that had been her home for 33 years.   Her needs were very specific:  she required a 2 Bedroom/2 Bath apartment close to her Club on East 66th Street with a washer/dryer, central air conditioning, a view of trees, monthly charges under $2000 for a budget of about $2 Million. 

I was heading for a 10 day trip to Amsterdam and Prague so we set a first meeting for when I returned.  She was clear, nearly apologetic.  She said she didn’t want to waste my time and was not really sure she was either a buyer or a seller, and that she was “shopping around”—which I took to mean that she was interviewing other brokers also.  When we met, it was love at first sight, and I made her a promise.  If we could find her next home and sell her current one, I would do everything in my power to make the process easy for her. 

Helena was adept at the computer and could easily navigate the listings I forwarded and evaluate their potential.  Once we identified the building that matched all her conditions, I suggested that we bring in her designer to see how her traditional furnishings would translate in the modern light-filled space. 

The new space had everything on Helena’s wish list, but the closets were not as generous as those she would be leaving, though there was ample space where more could be added.  I measured in linear feet all the hanging, shelf and drawer areas in Helena’s current home so we would know how much more she would need to build in the new place. 

Helena asked for an attorney referral, and I chose one who had previous experience at the condo where we were buying with the caveat that she would need kid glove treatment every step of the way, including personal trips to her apartment for contract review and signing.

Once contract negotiations were underway on the new place, I tackled preparing Helena’s apartment to show.  She was a very willing participant in the process, and accepted nearly all my suggestions.  Although at first averse to removing an old fashioned dark wood trellis in the kitchen’s dinette, she quickly understood how repainting the area would brighten the space.  With the help of a building porter, I removed several accent tables and scatter rugs to her basement storage, repositioned a number of other pieces, and pulled out some pretty accessories from her cupboard.  I bought new cabinet knobs to freshen the overall look of a kitchen that a new purchaser would probably gut anyway. 

Helena was reluctant to hire a professional declutterer, so we started together to purge her closets of 33 years of accumulating belongings.  For three days, we worked side by side tackling one deep closet at a time, creating separate piles for discards and give-aways.  I repositioned the items on her built-in library shelves which were crammed with books and knick knacks to display them more artfully.  Once she was on a roll and confident that she could continue on her own, she was quite industrious to complete the task by herself.  She bought decorative baskets and matching hangers for her closets.  Her daughter-in-law came to pack up the Minton china which was shipped off to a granddaughter.  USA Shred collected three industrial size garbage bags stuffed with business papers, financial statements and tax returns.  The handy man lifted one of the linoleum tiles in the Living Room to reveal gorgeous herring bone wood floors beneath.  The windows were washed.

At the eleventh hour before closing on the new place, Helena panicked.  Her late night email was fraught with jitters:  “There's no rest for the foolish people who decide to move. . . I'm not sure what I am doing.”  I picked up the phone, and we talked through her anxieties which were legitimate—she needed guidance on moving her funds to close, and where would she put the wet mop when I showed her apartment.

We’ve closed on her new place, and are negotiating now on the sale of her Sutton Place South apartment.  We’re close on that, but no cigar yet.  “I’d like nice people to live here,” she told me.  I’ve shared with her tips on moving and taken her shopping at Gracious Home where with my 10% discount, she purchased an assortment of door stops, bathroom and closet accessories, and new Bona products for her wood floors.  She and I have a very strong mutual admiration society going.  She calls me her “incredible special angel,” and to me, she’s an incredible model of courage.  I so admire the strength of will it took to embark on this move at this stage in her life.  At one point she reflected, “This is so much better than going to a retirement home.”  At our celebration dinner after closing, I discovered that she was a foodie, and we shared a love of fine dining and wine pairing.  What a joy to make a new friend and close two deals in the process.  

Shirley Hackel,  Executive Managing Director
Warburg Realty Partnership, 212-439-5197, shackel@warburgrealty.com

 

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Ask an Expert: Buying a co-op when you're self-employed Q.  I've been an independent marketing consultant for five years and I want to buy an apartment. Income-wise, I had one bad year three years…... Read more >

Ask an Expert: Buying a co-op when you're self-employed

Q.  I've been an independent marketing consultant for five years and I want to buy an apartment. Income-wise, I had one bad year three years ago but other than it's been pretty steady at around $225,000 a year. Still, I've heard co-op boards have a bias against self-employed buyers. Should I even bother looking at co-ops? If so, do you have any suggestions for how to present my income and self-employed status in the best light?

A.   Co-ops have historically been cautious about approving freelancers and entrepreneurs, but the times they are a-changin', according to some of our experts.

Visit www.brickunderground.com for the rest of the story ...

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BROKERS WEEKLY PROFILE Tooled-Up Hackel, A Master of Her Craft, by  Roslyn Lo When New York City was on the verge of declaring bankruptcy in the 1970s, Shirley Hackel was an English professor at…... Read more >

BROKERS WEEKLY
PROFILE

Tooled-Up Hackel, A Master of Her Craft, by  Roslyn Lo

When New York City was on the verge of declaring bankruptcy in the 1970s, Shirley Hackel was an English professor at Queens College looking for a means to prosper during grim times.

After switching careers to real estate in 1980, witnessing the start of the 21st century and the transformation of Manhattan, Hackel is now the Executive Managing Director at Warburg Realty and was ranked among the Top 10 Women of 2010 in Residential Magazine last year.

She co-chairs the Real Estate Board of New York’s NYRS masters program, blogs at www.warburgrealty.com, and is mom to two grown children and a Standard Poodle named Bailey. And, after 30 years in the industry—most of them as a top-10 producer at her firm—Hackel has no intention of slowing down.

“Real Estate is not a business you can do part time. I take it very seriously,” Hackel said.

When she first started out in the business, working with the legendary Barbara Corcoran, Hackel recalled, “Park Avenue properties were approaching $500,000, and we thought ‘will they ever hit a million?’”

A crime clean-up, dot-com boom and Wall Street gold rush have all contributed to an ever-shifting market, according to Hackel, but one of the biggest influences on how the business is conducted today has been technology.

“The computer made everything much easier,” said Hackel. “We used to walk around with thick three-ring binders for our listings. We would have two or three hours of administrative work daily, copying and pasting listings and updating information.

“The Internet has changed all that; now information is more transparent. We interpret and add perspective to data. The business is changed—it’s critically important now to have good relationships with other agents.”

Though technology has reached a level that gives nearly everyone easy and free access to information, Hackel knows that her knowledge is still vital, and that the difficulties that arise with selling and buying property are not issues a client should self-diagnose.

“Hire a good broker— don’t go out there to do it on your own. You might try, but you will lose valuable time,” is her advice.

Outside of technology’s inevitable influence, Hackel believes in the human side of the business, and insists that the foundation of real estate thrives on building relationships. In fact, the vast majority of her clients come from the best kind of advertisement: word of mouth.

Loyal to keeping up with her clients throughout the years, Hackel does not limit herself to certain niches in the New York City market. Besides brokering deals in coveted luxury apartments, such as her current $6.5 million three-bedroom listing in 110 Central Park South, Hackel has worked all over the city, from Harlem, the Upper West side, and most recently, DUMBO, Brooklyn. 

“I go where my buyers take me. I want to work with them, I prize the relationships. I sold to a couple and then I sold to their children years later!

“Every happy client will lead to the next successful transaction. After each deal, you add something to your toolbox, you refine another skill, and you figure how to adapt that skill to a particular market.”
It’s a philosophy that earned Hackel the distinction of co-chairing REBNY’s New York Residential Specialist (NYRS) masters program, a credential that identifies city agents who have completed a graduate level of study tailored specifically to the New York residential marketplace.

“The curriculum is written for brokers by brokers,” said Hackel. “We study the nuances of the New York market, including commercial real estate, law, negotiations, ethics and technology.”

She also pens the Manhattan Market Watch, a monthly column for the Mann Report which demonstrates not only her commanding knowledge of the marketplace, but also sets an example of professionalism for others to follow.

For Hackel, though, it’s more simple than that. “I write about what I see,” she said.

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For August 2011 Manhattan Market Watch By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership WELCOMING CONFIDENCE AGAIN This spring, as the real estate market rebooted, there were…... Read more >

For August 2011
Manhattan Market Watch
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

WELCOMING CONFIDENCE AGAIN
This spring, as the real estate market rebooted, there were signs of recovery and stability everywhere in Manhattan.  A little over three and a half years after the worst financial tailspin in recent memory, activity and sales were robust again. As buyers and sellers grew more in sync, the spread between asking and closing prices narrowed, and the numbers of signed contracts and closings increased.  Confidence was up in Manhattan during the second quarter of 2011. 

When the year began, the pace of trading started tentatively picking up steam towards the end of February.  By March, April and May, competitive bidding had surfaced again, and some deals were being made as much as 5% over ask.  For much of spring 2011, brokers were humming in rhythm with buyers and sellers as renewed optimism spread.

For the most part, Manhattan is a need driven market, and sales are accomplished when buyers make quality of life choices.  This spring, prices were driven up for properties over $2 million primarily because of limited supplies and pent up demand.  High end sales were particularly strong with 28 recorded closings over $10 million between April and June.  Previously the highest number of recorded sales over $10 million was 38 in the second quarter of 2008. 

It’s instructive to review the stats offered by Noah Rosenblatt at UrbanDigs.com in an analysis of the numbers of pending sales (signed contracts) according to submarkets by price.  Using real time statistics, his figures not only confirm that activity in the second quarter was significantly higher than in the first quarter, but that the market tilted up favoring sales of higher priced properties and percentage increases rose proportionately with price:

• Pending Sales <$1M market— +8.9%
• Pending Sales $1M-$2M market— +15.1%
• Pending Sales $2M-$5M market— +27.8%
• Pending Sales $5M+ market— +50%

This year the rental market has also shown significant strength with the lowest vacancy rate in years.  Rents are up, and landlords are no longer offering incentives to tenants with free month concessions, perks or give-aways.  More renters are considering purchasing options since the edge today is to buy and not to lease. For the high end tenant, fifteen thousand dollar and up properties are proliferating, and the pool of tenants is widening to include high income earners who want to hold onto their liquid assets.  Condition and amenities are driving this particular segment of the market.

At the same time, foreign buyers have returned in increasing numbers to New York.  Seeking residential as well as commercial properties for their mostly all cash investments, foreign nationals continue to view Manhattan as a relative safe haven and the US as a stable government with a recovering economy when compared to their own. 

On the other hand…
The pace of deal making in June decelerated from April and May—perhaps more the result of European economic instability and the caution it engenders than because of a seasonal summer slowdown. As of this writing, Greece is averting default, as European finance ministers prepare a complicated $17.4 billion first installment bailout. 

Challenges in the US economy remain despite the rebound in manufacturing and the seesaw stock market where the Dow closed at 12,582.77 on the first of July at a two year high.  With unemployment hovering at 9%, however, reports continue to describe limited job growth and more expected layoffs.  Many financial institutions are again announcing broad cutbacks in staffing amid worries about how banking regulations will affect earnings and profits.  The widespread industry job cuts, not seen since early 2009, will streamline bottom line operations.  Anticipated pink slips before the end of this year have already been announced by Goldman Sachs (230), HSBC (700), Morgan Stanley (300), and Credit Suisse (600).

Uncertainty can cause volatility, but it can also uncover opportunity.  Credit has eased, and banks and other financial institutions are lending again.  Interest rates remain historically low and may go even lower before 2012.  While it’s still taking longer to vet borrower applications, the good news is that loans have become obtainable again.  In the next several months, there will be a flurry of sales activity in properties priced under $1.5 Million as principals rush to close before October when new limits for Fannie Mae and Freddy Mac government backed lending will fall from $725,750 to $625,500 in New York. 

Overconfidence is certainly not to be encouraged—it’s what got us into trouble in the first place.  However, there are solid reasons to stay positive moving forward.  We’re in a stable period—sellers who are wise are not overpricing, buyers who are prudent are not overleveraging, and brokers who are astute are making deals happen.  Happy summer!

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Home mortgages elude the self-employed When Brian White, a self-employed theater production manager, tried to obtain a bank mortgage for a co-op apartment in Harlem, he found the task shockingly insurmountable.…... Read more >

Home mortgages elude the self-employed

When Brian White, a self-employed theater production manager, tried to obtain a bank mortgage for a co-op apartment in Harlem, he found the task shockingly insurmountable.

Mr. White, 40, spent much of 2010 seeking financing for his new home—a two-bedroom unit at West 152nd Street and Amsterdam Avenue selling for $150,000. During that time, he consulted with two mortgage brokers and filled out applications at five banks.

The ol' Bank of Mom and Dad
“Half the time, the banks wouldn't return phone calls,” complained Mr. White, who has supported himself as an independent contractor since 1996. Eventually, he says, he borrowed the money directly from his parents in an intra-family mortgage.

While the financial collapse of 2008 has resulted in tighter credit all around, many self-employed people are having an especially difficult time obtaining mortgages as banks toughen their lending criteria, said professionals involved in the housing industry.

“The rigid climate is really causing havoc for the sole proprietor,” said Manhattan-based real estate broker Shirley Hackel, executive managing director at Warburg Realty Partnership. She says that many of her clients, who typically have high incomes, are simply paying cash for property, rather than attempting to find financing.

One major factor driving the heightened requirements from banks stems from independent contractors' fluctuations in cash flow.

“At any point, you could go through a period without any income,” said Kristie Arslan, executive director of the National Association for the Self-Employed, which has 650 members in New York state.

The result, she says, is that her organization's members are often subject to more scrutiny from banks than salaried borrowers are, even if they have comparable credit histories.

Tighter requirements
Bob Donovan, a senior vice president in the home mortgage division at Bank of America, acknowledged that banks require more paperwork from self-employed borrowers, but said that BofA does so to assure itself that an applicants' income is sustainable.

“It's only responsible that we verify somebody's ability to repay,” he said. “As opposed to a W-2 [form] and two pay stubs, we may be asking a sole proprietor for two years of tax returns, including Schedule C's.”

Mr. White says that one reason for his trouble centered on his business expenses. While he typically earned between $40,000 and $65,000 annually, he also was able to claim many more deductions than his salaried counterparts. For instance, he says, taking a client out for drinks or to a Broadway show was a legitimate business expense, but such deductions deflated his taxable income.

Many self-employed people find themselves in the same position, according to Jeff Appel, sales manager at MetLife's home loans division.

“The only measure we have for income is what is filed,” Mr. Appel said. “In certain instances, people can be very aggressive in the way they handle their taxable income.”

Kathleen Stevens, 56, a self-employed accountant who works mainly with clients in Manhattan, didn't anticipate any problems obtaining a mortgage for a $160,000 three-bedroom townhouse in North Carolina, where she plans to eventually retire. She was taking in $3,400 a week when she applied and, she says, her credit score exceeded 700.

But Ms. Stevens' attempts to obtain financing hit a snag: For the past seven years, she has worked as an independent contractor, a fact that didn't go over well with bankers. “You could hear the change in their attitude and voice once I said I was self-employed,” she said. “It was like I said, 'I'm retired; I've no money.' “

Ms. Stevens ultimately obtained a 30-year, fixed-rate mortgage at 5.125% from Centex Mortgage, a subsidiary of homebuilder Centex; she closed in March 2009. Even so, she was able to obtain only a “conditional” mortgage that didn't become final until five days before she closed on the house, preventing her from locking in a rate early.

Nonstop paperwork
Meanwhile, in the six-month period leading up to the closing, the lender asked for three years' worth of tax returns, copies of all invoices that she sent to clients, monthly bank statements and various deposit slips, according to Ms. Stevens.

“They would look at every deposit I made and asked for proof of the source of this money,” she recalled.

In the past, some small proprietors with good credit scores bypassed questions about their tax returns by obtaining “no-doc” mortgages, notes Michael D'Alonzo, president of the National Association of Mortgage Brokers, based in Lanham, Md. These mortgages typically came with a slightly higher interest rate but didn't require proof of income.

No-doc mortgages all but disappeared from the market in 2008. But some brokers say they're slowing starting to return—though only for buyers who can put down a minimum of 50% of the purchase price and have credit scores of at least 740.

 

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Mortgages A Guide for the Co-op Neophyte ANY out-of-towner able to handle the shock of New York City real estate prices must prepare to absorb another anomaly: especially in Manhattan, that money buys…... Read more >

Mortgages
A Guide for the Co-op Neophyte

ANY out-of-towner able to handle the shock of New York City real estate prices must prepare to absorb another anomaly: especially in Manhattan, that money buys a different type of home than it does anywhere else in the country, and that will affect financing.

Most Americans live in owner-occupied single-family houses. In Manhattan, the minority own rather than rent, and they own in multifamily buildings. Many of those apartments are co-ops, a singularly New York phenomenon. Except for a handful in cities including Washington and Chicago, market-rate co-ops are in New York. (Some places also have “limited-equity co-ops,” for which affordability rules govern sales.)

In the first quarter of this year, there were 1,430 co-op sales in Manhattan, compared with 964 condominium sales, according to a survey by Prudential Douglas Elliman. The average co-op price was $1.05 million; the median price (the midpoint, at which half the sales were for more and half for less) was $642,500, because lower-priced studios and one-bedrooms made up a much bigger share of the market than $1 million-plus luxury units.

In a co-op, owners hold stock in a corporation and have proprietary leases that permit them to live in their apartments. In a condo, residents own their units and share ownership of common facilities.

The biggest difference, from a buyer’s perspective, “is the lack of the right of alienation,” said Neil B. Garfinkel, a partner with the law firm Abrams Garfinkel Margolis Bergson. That’s the legal term for being able to rent or sell your property to whomever you choose. In a co-op, the board of directors has the right to turn down a buyer for any reason except those deemed discriminatory under fair-housing laws.

“Co-ops have always had the ability to reject,” Mr. Garfinkel said, “and the largest reason they would reject would be based on financial considerations. They never changed that, even in the crazy days of 110 percent financing. So, anecdotally at least, there have been significantly less defaults in the co-op marketplace.”

Co-op boards want to see “strong employment history, strong income and liquid assets,” said Shirley Hackel, an executive managing director of Warburg Realty. Boards disregard bonuses and commissions when weighing financial status, and they want to see low ratios of debt to income.

The difference between boards and banks was especially marked during the housing bubble, but in the last few years, lenders have become more conservative. “I used to say boards are much tighter and stricter than any bank,” Ms. Hackel said, “but I can’t say that anymore, because the banks have tightened up.”

Plenty of lenders are comfortable with co-ops — not only big banks, but also portfolio lenders, thrifts and credit unions, said Sari Sardell Rosenberg, a managing director of the Manhattan Mortgage Company. All review the building as well as the borrower, she said, examining its finances over several years. Since the financial crisis, lenders have insisted that buildings meet criteria like having sufficient insurance. For a while, that gummed up deals, but most Manhattan co-ops now conform with those rules, she said.

Loans insured by the Federal Housing Administration do not cover multifamily co-ops, Ms. Rosenberg said. But that is moot, because the big advantage of F.H.A. loans is a low down payment, and co-op boards often require even more than the 20 percent down that banks want these days. There are co-ops that require as much as 50 percent down, she said, and some on Fifth and Park Avenues allow only all-cash deals.

As with any loan, prepare to document your finances. “Typically,” Ms. Rosenberg said, “what I need from you is what the board will need from you. But I don’t need letters of reference telling how wonderful you are. We just care if you pay your bills on time.”

 

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 It's Free to Look: Just in Time for Summer Warmer weather is here, finally, after so much rain and snow, so isn't it about time you got into some digs that let you take all the warmer weather in?…... Read more >

 It's Free to Look: Just in Time for Summer

Warmer weather is here, finally, after so much rain and snow, so isn't it about time you got into some digs that let you take all the warmer weather in? If you've got $6.5 million, Warburg has you covered with this condop on Central Park South.

The 2,391 square foot property features three bedrooms, three and a half bathrooms, three full height Viking wine cellars, new hardwood floors and, of course, park views.
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For May 2011 Manhattan Market Watch By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership ANOTHER LOOK AT SOHO’S A-I-R REQUIREMENTS, PART 2 In a previous column I posed the question:…... Read more >

For May 2011
Manhattan Market Watch
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

ANOTHER LOOK AT SOHO’S A-I-R REQUIREMENTS, PART 2

In a previous column I posed the question: Isn’t it time to drop SoHo’s AIR requirements? Several brokers wrote to say they would welcome an opportunity to join in a concerted effort to accomplish this. A number of attorneys said they were actively involved with clients to effect a change. A handful of non-SoHo homeowners were astonished that such outdated laws were still on the books. One reader expressed regret that artists were being displaced and that the area “has turned into a mall.” 

Today’s stepped up efforts by city inspectors to enforce AIR zoning restrictions that were previously ignored is interfering with sales and creating vulnerability in an area of the city that should be thriving. As the DOB cracks down on artist certification compliance, the ramifications have ranged from buildings being unable to obtain final Certificates of Occupancy, to lenders refusing to lend to individual purchasers, to apartment owners being denied renovation permits. All those I consulted agreed that the issue is highly charged politically and that it was far simpler to create loopholes to the law than to change the actual zoning which has been in effect since the early 70’s.

Some history

In the early 60’s, artists populated SoHo’s manufacturing district illegally. Attorney Margaret D. Baisley remembers when the area was largely deserted and unpoliced: “You had to step over the homeless who slept aside piles of rubble and scraps of manufacturing cloth. The artists were manufacturers of sorts,” she observes, “because they manufactured art. When they came into the area, they took huge risks moving into buildings with rickety manual elevators, no fire protection, no proper venting, no garbage pickup, limited hot water and no place to buy a cup of coffee. There is great respect for these pioneers who started SoHo’s gentrification, and it’s a myth to think that artists would be thrown out if zoning laws were repealed.” 

In 1971, the city created the Joint Living Work Quarter for Artists—JLWQA—which allowed artists certified by the Department of Cultural Affairs to live and work in SoHo’s manufacturing buildings legally. From the beginning, however, the laws were not enforced. Few certified artists had the financial means to purchase SoHo’s rising residential stock. The “SoHo letter” soon became part of co-op board packages to acknowledge the law, and deals were made with a “wink and a nod,” according to one attorney who wished to remain anonymous.   

In 1982, The New York City Loft Board was created to ensure that residences were up to code and to oversee the conversion of lofts from commercial/manufacturing use to residential use. A “Loft Law” was adopted and a new classification of buildings was created—interim multiple dwellings or IMDs which lacked residential certificates of occupancy. If a building could show residential occupancy by three or more families living independently between 4-30-80 and 12-1-81, it could file for a waiver with the Loft Board as an IMD for legal residential status, and AIR certification was waived. Similarly and more recently, another time window was added to the Loft Law to cover 1-1-08 to 12-31-09 to legalize the residential use of IMDs and to waive AIR certification.

There are those who argue that changes in zoning would alter the fabric of the neighborhood. “That’s untrue because the community has already changed,” notes Robert Jacobs of Belkin Burden Wenig & Goldman who in 2009 formed the presently inactive Coalition for SoHo/Noho Zoning Reform. In 1985, a city survey showed that 30% of SoHo’s population was artists. “Today, that number would be halved at best,” says Jacobs. In an attempt to convince city planners to change zoning laws to reflect actual population, Jacobs formed the Coalition which was interrupted by the recession. “Most of SoHo’s artists cashed out on their expensive residential assets long ago. It’s the responsibility of the City Planners to design zoning that accurately reflects the realities and expectations of the community, that addresses conflicting land uses and improper development but does not ignore reality. A small faction is clinging to the delusion that SoHo remains an artist community, and they don’t want to see current zoning laws repealed.” The character of the neighborhood, however, changed long ago. There simply aren’t enough certified artists to create a pool of buyers for SoHo lofts. 

Enforcement of zoning law today is “arbitrary and capricious” according to Margaret Baisley.” “It’s a real waste of city manpower,” she continues. “The city is creating violators of people who move to SoHo who are not certified artists and who want to upgrade their properties and the area.”

What advice do attorneys give to buyers considering a SoHo purchase today? “The zoning statute does not require that an owner of a loft be a certified artist,” explains Baisley. “It only requires that an artist ‘occupy’ the space. But since there is no definition of ‘occupancy’ in the regulations, owners may identify family members, friends, or associates to ‘occupy’ the lofts with them and have the artist file for certification with the loft address as well as the artist's name on the AIR document. This is entirely legal and if an inspector ever inquires, the owner of the loft can produce the AIR certificate and meet his burden of proof.  However, it is a tortured and contorted way to legalize one's loft ownership, and in my opinion, entirely outmoded.”

At heart, the issue remains political. A study costing several hundred thousand dollars would have to be conducted and most assuredly co-op owners would be reluctant to admit that they are residing illegally. At present, REBNY is in the process of collecting anecdotal information from brokers about deals that have been affected by AIR zoning.  Many like REBNY’s Senior Vice President Mike Slattery believe that the best solution will come from within the SoHo community and that the city would support a community driven change. A recent vote at the SoHo Alliance, an activist group led by Sean Sweeney, showed 49-51% in favor of keeping the statute which means half of the contingency welcomes a change. Perhaps the compromise solution is to waive AIR requirements for purchase transactions and to retain artist certification for renters, thereby protecting SoHo’s heartland. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For April 2011 Manhattan Market Watch By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership ISN’T IT TIME TO DROP SOHO’S AIR REQUIREMENTS? Selling a prewar loft in SoHo has become…... Read more >

For April 2011
Manhattan Market Watch
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

ISN’T IT TIME TO DROP SOHO’S AIR REQUIREMENTS?

Selling a prewar loft in SoHo has become problematic of late because of renewed attention to AIR—artist in residence—zoning requirements. Though the law has been in effect since the early 70’s, it’s been virtually ignored—until now.  Although the reasons behind the new focus are sketchy, it’s clear that if the zoning rules currently on the books for SoHo were enforced strictly, real estate values would be undermined.  It’s time to amend the outdated ruling and acknowledge that SoHo is a different place today than 40 years ago.

Originally zoned for light industrial and commercial use, the masonry and cast iron buildings of SoHo were populated by artists in the 1960’s illegally.  During the next decade, the city enacted rules permitting artists to live and work in converted lofts in the M1-5A and M1-5B districts if one member of the family was certified by the Department of Cultural Affairs. 

From the beginning, the zoning requirement in co-ops (and later condos) was a veritable Catch 22:  only a certified artist could purchase, but certified artists rarely had the financial wherewithal with which to buy.  Loopholes were found and restrictions were passed over as mainly corporate professionals, bankers, traders, celebrities, entrepreneurs and foreign investors purchased SoHo loft spaces.  The neighborhood changed dramatically from the 80’s to the present, and property values rose steadily and substantially.  The attorneys I surveyed who all preferred to remain anonymous were in agreement:  “We didn’t worry about it,” said one.  “Everyone knew the law, but everyone including city inspectors looked away.”

The application from the Department of Cultural Affairs, available online, defines an artist as someone who on a regular and ongoing basis “is engaged in the fine arts, not the commercial arts, including but not limited to painting, sculpture, choreography and filmmaking, and the composition of music.”  There is no fee to apply and reference letters are required as well as copies of the body of work.  On the application, the Artist Certification Committee states that their purpose is not to judge the applicant’s work aesthetically, but “to evaluate the applicant’s degree of commitment” and determine whether there is “need for a large space in which to carry out such work.”

Over the years, when not all apartments in a building housed a certified artist, the city would issue temporary certificates of occupancy instead of permanent certificates.  For their part, co-op boards would ask buyers to sign a “SoHo letter” which was an affidavit acknowledging zoning requirements. 

A variety of reasons have been offered for the recent crackdown.  Certainly tighter lending guidelines is one explanation since traditional lenders will not lend in a building where the C of O is in jeopardy.  One attorney suggested that inspectors may be under pressure because of potential scandals.  Another speculated that the city may be looking for ways to raise revenue.

None of the attorneys that I spoke to believed that the city would ever evict loft dwellers because they could not produce proof of artist certification.  However, they agreed that city inspectors could make life difficult and expensive by issuing multiple property violations if the building came up short of certified artists.  Another lawyer suggested that under the terms of a co-op’s proprietary lease, a shareholder could be held in default.

Brokers and attorneys are divided on how they are advising buyers.  Until there is more clarity from the city, some are recommending that purchasers wait.  After advising about future repercussions, others described sophisticated investors who have negotiated significant price discounts and bought.

It’s unclear why the city is not prepared to change a zoning law whose intent no longer applies.  Certainly there is an element who wants to preserve the artistic character of SoHo’s neighborhood.  But doesn’t attaching a specific occupation to city zoning border on being discriminatory?  In 2009, housing law added “lawful source of income” and “lawful occupation” to the list of what landlords can not discriminate against.  

Though deals are being made in SoHo today, a good many buyers are turning away from quality loft resales because of uncertainty.  While you can negotiate a better price when there is risk, to maintain property values, fair trading should not be restrained by a very outdated and irrelevant AIR requirement. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Warburg broker to help oversee REBNY residential credential program Shirley Hackel, an executive managing director at Warburg Realty, has been named a chair of the New York Residential Specialist Program…... Read more >

Warburg broker to help oversee REBNY residential credential program

Shirley Hackel, an executive managing director at Warburg Realty, has been named a chair of the New York Residential Specialist Program with the Real Estate Board of New York, according to Warburg. In her new role, Hackel will help oversee the NYRS certification program, a 30-hour continuing education class that identifies graduates as experts in the residential field. Only agents who have five years or more experience in the field and have completed upwards of $50 million in sales transactions (or $17 million in rental transactions) are eligible for the program, which was launched in 2007. Hackel said that she hopes to increase the NYRS program's profile in her new role. "The NYRS program is still in its infancy," Hackel said. "I'm delighted... to embrace the challenge of not only maintaining our standards but also raising awareness for the credential among consumers." TRD

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For March 2011 Mann Report Residential Manhattan Market Watch A NATION OF GOOGLE AND FACEBOOK By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership “We are a nation of Google and…... Read more >

For March 2011
Mann Report Residential
Manhattan Market Watch

A NATION OF GOOGLE AND FACEBOOK

By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

“We are a nation of Google and Facebook.”  That particular phrase from the President’s State of the Union Address resonates strongly with real estate professionals.  There’s a great deal of pressure in our business of late to keep up with fast changing technology and with online social networking trends.

While the Internet has made our lives simpler, it has transformed the way we do business and has impacted our buyers and sellers.  Consumers are smarter, more informed and more demanding.  To be successful today, more intellect and greater marketing savvy are required of brokers.  We’ve evolved from gatekeepers of information to trusted advisors, and we are taking strides to learn all we can about social networking and blogging. 

To help sort out the overwhelming array of technological advances, and to present a very basic primer for agents, I consulted with tech guru Steven O. Goldschmidt, Warburg Senior Vice President, and my friend. 

What are the most relevant tools for today’s broker? 

SOG: There’s a myriad of tools proliferating faster than we can understand how to use them to maximize our business. So it’s hard to rate any one “tool” or “tools” as being most relevant.  There are real estate search engines, CRM’s (customer relationship managers), analytical tools, online news and information sources and social networking sites, not to mention the evolving technology for smart phones and tablets and the thousands of “apps” available for free or at minimal cost.

Among the social media forces, Facebook dominates with more than 550 million users and growing.  Why is social networking so important?

SOG: I don’t think a broker can prosper in today’s real estate world without understanding the power of social media.  Sites like Facebook and LinkedIn represent a paradigm shift. Newcomers to the business, when applying for their first real estate job, used to be asked about their personal network or “sphere of influence.”  Today, you can throw away your phone book and country club membership directory.  But before you do that, “friend” them all.  If you’ve resisted getting on Facebook, or felt that it compromises your privacy, get over it!  But do more than just sign on and friend your high school classmates. There’s a lot more to social networking than posting a status update or sending a tweet. Study social media, take a class or two and learn how to use it to your benefit. Even if you don’t want to tweet, you should understand how Twitter is being used by individuals and companies to market their products.  Knowledge is power and learning about this new medium is essential for today’s broker.

Increasingly social networks are breaking down the walls between our professional and personal lives.  What would you say to those brokers who consider it intrusive to talk about business on a social site?

SOG: I would say that before brokers dismiss the possibility of using social networking sites for business, they should study the applications to see how others are using this medium. There is a “right” way and a “wrong” way to work social media.  Agents who want to promote their businesses on Facebook, for example, should create and use the “fan page” so that their personal page isn’t littered with business posts. On the other hand, your friends should still know about your business – they are a prime source for referrals and business.

Can you provide an example of how social media benefited your business? 

SOG: That’s easy.  One of my Facebook friends was an old client with whom I had occasional contact over the years. She noticed my postings, comments, family and travel photos, and she happened to read one of my posts – I think it was an article on some political issue I found interesting enough to share – just after she and her husband discussed selling their apartment. Needless to say, the stars were in proper alignment: her real estate plans evolved as my posting came up on her radar screen. The result? A $1.3 million listing!

Where does a novice begin?

SOG:  Most social media sites are simply constructed, and it’s easy to get started and free. Once you sign up to Facebook, start “connecting” by looking up old and current friends, past and current colleagues and clients. “Like” and comment on some of their posts.  Upload an interesting neighborhood photo, or attach a link to an article.  While learning the many features that might benefit you personally and professionally, you’ll be building a fan base.  Don’t be embarrassed to take a course, buy Facebook for Dummies, or ask a teenager to help. LinkedIn is built on the same premise as Facebook but is mostly used for businesses, jobs and HR.

How much time does an agent need to invest in this? 

SOG:  I’ll answer your question with a question: how much time do you spend canvassing for clients, customers and listings?  The answer is probably “not enough.”  Spending an hour or so on social media sites at the end of the day, a few hours on the weekend, or during some down time during the workday, is one simple way to correct this. It’s not playtime; it’s serious business.

Serious business indeed.  And to Steven’s primer, I’ll add these 5 tips: 

1.  Be an observer first to get comfortable with the medium.
2.  Be natural and find your own voice.
3.  Take a stand and have an opinion, but be respectful and don’t offend.
4.  Don’t provide TMO—too much information.
5.  Engage with and give something to your network of friends.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For February 2011 Mann Report Residential Manhattan Market Watch HALEVAI, A SUBSTANTIAL RECOVERY By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership On December 24th as 2010 was…... Read more >

For February 2011
Mann Report Residential
Manhattan Market Watch

HALEVAI, A SUBSTANTIAL RECOVERY
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

On December 24th as 2010 was drawing to a close, a front page New York Times headline reported “Experts Citing Rising Hopes for Economy.”  Heralding a “new optimism” and quoting forecasters and policy makers who were revising earlier predictions, the Times journalist declared that our recovery “will gain substantial momentum in 2011.”

The key word above is “substantial” and to that we add the Yiddish word “halevai.”  Pronounced phonetically in three syllables, sometimes dropping the initial “H,” ha-le-vai is a wonderfully expressive sentiment.  From the Hebrew meaning “would that,” it has come to mean “it should only be so.” 

Less than six months ago, another lead Times story—“Existing Home Sales Hit 15-Year Low”—informed us that these sales were at their lowest level since 1995.  Less than six months later, the trend had reversed itself and by December, National Association of Realtors’ Chief Economist Lawrence Yu observed that after bottoming out in July, residential sales nationwide had regained traction in November with stabilizing prices.  Despite an expected slight rise in mortgage interest rates, Yu predicts a year of growth for 2011 with modest appreciation. 

As I write this column, days before the New Year, numerous economic factors are contributing to a renewed optimism.  Retail sales have been improving steadily, rising 5.5% in year-end spending with a gain of 8.4% in jewelry purchases; large corporations are reporting strong profits; both the Dow and S&P 500 reached a two year high Christmas week; and new claims for unemployment benefits declined this December.

We’re on significantly firmer ground than we were three years ago as we begin 2011 and move from a stalled to an improving economy.  As our jobless recovery continues to gain strength, consumer confidence is growing.  We’ve definitely turned the corner, but as the European debt crisis spreads and as U.S. unemployment statistics hover at 9% levels, we remain vulnerable.  Thus the reason for the refrain “Halevai.”

A short primer for buyers and sellers

For buyers:  If you’ve been thinking about buying, now is the best time to take action.  Hire a broker to help you to navigate open houses and to evaluate purchase opportunities.  You won’t be saving money by going it alone.  On the contrary, you’re more likely to lose the property you want because you lack broker representation.  In point of fact, in today’s challenging market, although a direct deal means more dollars to the seller’s broker, by and large experienced agents prefer to do a deal with another experienced broker representing a buyer than dealing directly with the buyer because of inherent conflicts of interests.

For sellers:  If you’re thinking of selling, now is the time to prepare your home for showing.  Consult with your broker and staging professionals, strip the place of clutter and scrub everywhere.  Sales activity is increasing steadily, and quality inventory is still lacking.  Interview several agents before hiring an exclusive broker.  Resist the temptation to choose the one who tries to win your business with a high but unachievable price.  When you price above the market, valuable time is lost, and subsequent price reductions serve only to devalue the property by raising buyer doubts—why has the property been on so long, what’s wrong with it?  Rather than test the waters with an unrealistic number, it’s advisable to set a price that is close enough to the target to generate interest and stimulate bids while still leaving room to negotiate. 

The best bet for buyers and sellers alike is to enlist the services of an NYRS certified agent.  New York Residential Specialists comprise a new breed of top brokers from the city’s leading brokerage firms.  Dedicated to providing the finest customer service, they are experienced, skillful negotiators, committed to ethical behavior, and understand the highs and lows of real estate cycles.

First awarded in 2007 by the Real Estate Board of New York—REBNY—the NYRS designation identifies those Associate Brokers with a minimum of 5 years experience and $50M in sales who have successfully completed an advanced graduate program designed specifically for the nuances of the New York City market.  Created by brokers for brokers, these courses are taught by industry leaders and cover real estate law, macro-economics, commercial real estate, ethics, negotiation, marketing and technology.  For a complete list of NYRS certified agents, see the Leadership Directory at https://members.rebny.com/nyrs_why_hire.jsp.

As our recovery gains momentum, the balance between buyers and sellers is being restored.  Halevai.  May it be so. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For January 2011 Mann Report Residential Manhattan Market Watch THE YEAR OF THE BUYER By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership After a major downturn in Manhattan’s…... Read more >

For January 2011
Mann Report Residential
Manhattan Market Watch

THE YEAR OF THE BUYER
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

After a major downturn in Manhattan’s real estate market, we turned the corner and regained our footing during 2010.  We managed to repair the imbalance wrought in the tumultuous aftermath of Lehman’s collapse.  In less than two years, we emerged from the crisis, and we look forward to a continued gradual recovery.  Collective wisdom posits this next year of 2011 as a period to secure a firm foundation from which we will grow incrementally.   

I see 2011 as a time to buy Manhattan properties at still depressed prices.  By far, a real estate purchase in our borough ranks as the greatest investment.  Where you live is still the best place to park your money.  It’s insightful to compare stats for the end of the third quarter of 2000 to the end of the third quarter of 2010.  In this decade, consider the following: 

-  the Dow is up 7.5% —10,650 vs. 11,407
-  the S & P is down 15% —1,436 vs. 1,223
-  the NASDAQ is down 30%—3,672 vs. 2,580
-  Manhattan real estate is up 40%

Market timing yields 20:20 vision in hindsight only.  From 2000 through 2006, with successive years of rapidly escalating prices, who could have forecast 2007 would become the peak of the market from which we would fall precipitously to a trough in mid 2009?

For much of 2010, media talk about foreclosures and short sales around the country created false expectations among our buyers, causing a lethargy and ambivalence in decision making.  In point of fact, foreclosures in Manhattan have been minimal, and there’s no guarantee that a short sale which is fraught with seemingly endless difficulties will actually close.

Though transaction volume was up considerably in 2010 from 2009, for the most part buyers were taking their sweet time to make purchasing decisions.  They might make an offer one day, and then you didn’t hear from them for weeks if at all.  Except for isolated instances of competitive bidding, the market lacked urgency, as buyers sat on their bids waiting for new inventory to surface and hoping for further price erosion which didn’t come.  In today’s market, it’s the sellers who are doing most of the compromising. 

Make Way for the Buyers
 
The resurgence of the market’s over-$10-million high end in the 2nd half of 2010, after nearly two years of inactivity, demonstrates the return of buyer confidence.  With dozens of jaw dropping, record breaking closings in all areas of the city, Manhattan’s top sector has been particularly busy spreading confidence through all market segments. 

For Europeans, New York real estate provides more than shelter.  As a safe haven from European debt worries, foreign investors have been returning to the Manhattan market.  Beginning with Greece in the spring, then Ireland, Portugal and most recently Spain, debt woes in the sovereign states are worsening and threatening the euro.  These rippling waves of global instability will keep Manhattan prices flat for the near term at least. 

With interest rates at historic lows, there’s never been a better time to borrow.  Stringent Fannie Mae guidelines wreaked havoc on our market in 2009.  Sari Rosenberg, Managing Director at The Manhattan Mortgage Company, characterized 2009 as “traumatizing” but sees the lending industry in far better shape today, pointing to “many lenders who are able to provide loans above the Fannie Mae limit of $729,750 for those who can prove they qualify.”  Last September, Congress extended the loan limit through 2011 in New York and other high cost markets.  Without the change, the maximum government-backed mortgage would have fallen to about $625,000.  Before 2008, the limit was $417,000 which is the level for most of the nation.

Opportunities abound for buyers today in both the resale and new development condo markets; during the downturn, as the latter struggled, many closed sales offices which have only recently re-opened.

Now is decidedly the time to collaborate with your broker to identify the right property for your specific needs.  With new online tools available for the trade and the public, buyers and brokers can work in partnership to search inventory.  At UrbanDigs.com, Noah Rosenblatt offers statistics on the pace of Contracts Signed in real time demonstrating actual buyer demand in an ever changing marketplace.  Coming soon will be a break out by category of Contracts Signed by co-ops, condos and townhouses.  Over at Streeteasy.com, a new Folders feature provides “a collaborative environment” to help users organize searches and communicate with each other. 

Although the economic recovery remains stalled with unemployment as the impediment that won’t go away, our market continues to buck national downward trends.  Manhattan is still one of the super cities of the world.  In 2011, savvy buyers will be out shopping with their brokers in increasing numbers, taking advantage of deep discounts and reaping the benefits of living in their brick and mortar investments.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Shirley Hackel and Gordon Roberts on today's brickunderground Q.  If I go to an open house on my own and sign in under my own name (i.e., without listing a broker, because I’m not working with…... Read more >

Shirley Hackel and Gordon Roberts on today's brickunderground

Q.  If I go to an open house on my own and sign in under my own name (i.e., without listing a broker, because I’m not working with one), can the seller’s broker stop me from bringing in my own broker later? Or can I bring in my own broker at any time?

A.  According to the real estate brokers on our expert panel, it’s perfectly okay to bring in your own broker later even though it may make the seller’s broker (who stands to earn the entire commission instead of half by representing both sides) a bit cranky.

Visit www.brickunderground.com for the rest of the story ...

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For November 2010 Mann Report Residential Manhattan Market Watch STRONG BUT SIDEWAYS THIS 4TH QUARTER By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership We're poised in these last…... Read more >

For November 2010
Mann Report Residential
Manhattan Market Watch

STRONG BUT SIDEWAYS THIS 4TH QUARTER
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

We're poised in these last months of 2010 to finish the year with an improved 4th quarter.  After a tumultuous 2009, our market rose slightly and hesitantly as 2010 began, picking up unexpected steam steadily through April, May and June, but then slowing and falling flat through much of the summer.  Following on the heels of Labor Day, market activity resumed, and the mood is upbeat again.  As of this writing on a crisp October 3rd morning, the possibilities loom that the spring momentum can be repeated in the next eight weeks before Thanksgiving. 

On September 20th, the National Bureau of Economic Research announced that the recession that started December 2007, had ended this past June, lasting two and a half years.  Economists identified June as the trough or low point of the economy, and reasoned that we were at the end of a declining phase and at the start of a rising phase.  Doomsayers, some forecasting another double dip recession, were quick to point out that unemployment statistics are nearly the same now as they were at the start of the recession, holding relatively steady at 9 percent.

The ensuing press reports have been conflicting.  What's a buyer or seller to think?  Is another dip coming?  Are home prices in Manhattan stabilizing?  For sure, the U.S. recovery has been slow and uneven.  But again, New York has fared better than the rest of the nation.  Manhattan's housing sector is more stable than the rest of the country because of its preponderance of co-op inventory which sets limits on purchaser financing.  Additionally, with improved profits at financial institutions and resulting increased hiring in financial areas, a recovering Wall Street—our local industry—is contributing to the city's economic health.  
  
A New Normal
We’re decidedly past the market’s bottom which probably occurred some time in mid 2009.  Although buyer mentality of maybe-we’ll-be-able-to-buy-for-less-next-week is fading out, it’s not gone entirely.  Neither activity nor pricing is likely to become exuberant again any time soon.  On the contrary, growth is expected to be slow and steady over the next few years.  Recently Pimco’s Managing Director Bill Gross defined a "new normal" for future investment gains as “saying goodbye to double-digit returns.”  Similarly, a “new normal” for residential real estate will mean modest near-sideways incremental price increases. 

Often a herd mentality drives Manhattan’s marketplace.  This spring, the $3-5 million category was most active with apartments trading at asking price or better in competitive bidding with prices jumping an astonishing 8% in isolated instances.  Then in mid summer, a temporary push back came as some buyers exited the market, walking away from contracts about to be signed at $4.5 levels.  In September, a record breaking price (reportedly at $15 million) for an eight room apartment in the South Tower of The San Remo buoyed the top end of the market.  New offerings at this Central Park West icon have asking prices of $20 million for an 11 room corner apartment and $15 million for two apartments that can be combined into a duplex of approximately 4400 square feet.

Buyers with substantially deep pockets are coming out again to search for trophy apartments, breathing new life into the high end of the marketplace.  As the top end resurges, confidence is spreading through all market sectors.   

Supremely price conscious, buyers continue to hunt for value in all areas of the city.  Price reductions abound for apartments that were mispriced, buyers are making offers and sellers are listening as brokers bridge the gap toward a meeting of the minds.  Realistic pricing at the start of a new offering continues to be the best advice, as the first 3-6 weeks of marketing are most critical in identifying a buyer at the best price. 

As transaction volume increases, our market gains a more solid footing with appraisers.  Banks are lending again, though the process is still fraught with time consuming checks and balances.  Historically low interest rates are motivating buyers to take action.  Because of uncertainties, however, there are more and more contingent contracts, and more and more conditional co-op board  approvals.

In the aftermath of the U.S. recession, the world economy remains fragile.  With new concerns about global budget deficits and failing European banks, uncertainty lingers.  The years ahead will be leaner than those with froth that came before, and there will be less leveraging.

Buyers with cash continue to rule the roost, able to buy with fewer dollars than those who offer to pay more with contingent bank loans.  Sellers with plum properties in mint condition can expect to achieve superior results.  Everyone else needs to be guided by market realities and demonstrate flexibility.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Should I paint my exposed brick wall before selling? Q. I own a junior one-bedroom in Manhattan that I'd like to put on the market within the next year. The apartment overall is in mint condition and…... Read more >

Should I paint my exposed brick wall before selling?

Q. I own a junior one-bedroom in Manhattan that I'd like to put on the market within the next year. The apartment overall is in mint condition and I wouldn't expect whomever lives here next would need to do much (if any) work before they move in.

However, I have one wall that is exposed brick that I'd really like to paint white. I've asked around, and most people say that I shouldn't paint over it, and then they wax poetic about how much they love the look of exposed brick in general.

I, too, am fond of the look. However, my wall is not is the static, neat looking kind that most people think of.

It's messy with mortar caked over the brick in some places, the bricks are different colors in spots and (most significantly) there are several areas and large holes that have been cemented over the years that make the whole wall just look messy.

Would painting the brick negatively affect my resale value when it comes time to put it on the market? In photos, the wall will probably look great, but up close, it's like a hot mess.  What do buyers think when they see exposed brick or when they see it painted?

Visit www.brickunderground.com for the rest of the story ...

 

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For September 2010 Mann Report Residential Manhattan Market Watch LESSONS LEARNED DURING RESIDENTIAL RENOVATIONS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Renovating an…... Read more >

For September 2010
Mann Report Residential
Manhattan Market Watch

LESSONS LEARNED DURING RESIDENTIAL RENOVATIONS
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Renovating an apartment in Manhattan presents a set of unique challenges.  I’ve written on the subject before, and with the perspective of my recent 6th renovation behind me, I offer some advice to the uninitiated. 

First Do Your Homework

Talk to as many people as you can who have been through the process.  Get recommendations, ask questions and take notes.  Interview your primary professionals carefully, visit their past projects, and check references.  When evaluating bids, take into account reputation and experience as much as you consider price.  Determine whether projects were finished on schedule.  When checking references, ask how each trade handled problems that surfaced during and especially after the job.  The lowest bidder may not be the wisest choice.
 
Your drawings should refer to an attached comprehensive plan itemizing in words the full scope of your project.  These papers will form the basis of your eventual contract.  Include precise specifications for everything from materials to appliances to door knobs—even if you intend to provide the supplies separately.  Specify thickness and edging for granite and marble.  Be clear if you want painting to include meticulous skim coating, taping and sanding prep work.  The more complete your plans are up front, the less room there is for interpretation, and also fewer opportunities for surcharges.  Ask your bidders to itemize their estimates by trade in order to compare quotes easily.  Expect estimates to vary widely.    

Before you sign a contract, approximate on how long the job will take from start to finish, and write projected start and end dates into your agreement.  Barring interruptions beyond a contractor’s control like strikes, broken elevators and unavailable materials, consider a per diem penalty for a grossly delayed project.  Also build into your contract a specific procedure for change orders.  Some changes will arise because of unforeseen conditions, but others might occur because you’ve changed your mind and want something different or additional.  In the case of the latter, you should have the opportunity to rescind the change order because a price is too high.  Your contract should also include a proposed payment schedule and an estimated timetable showing how work will proceed from demolition to punch list. 

Unless the renovation you are contemplating is purely cosmetic, before your job can begin, board approval is required in co-ops as well as condos.  While boards may not unreasonably withhold consent, they are concerned with preserving the building’s infrastructure and with protecting the quality of life and safety of residents.  It’s important to study your building’s specific alteration agreement since each building has its own set of requirements, fees and security deposits.  Increasingly, because of issues of accountability, more and more buildings are requiring that jobs be filed with the city’s Department of Buildings.  If that’s your case, then your plans should be prepared by an architect. 

There are scores of questions to consider.  What hours is work permitted?  Does the board limit construction to summer only months?  Is there a specified time period in which to complete the work, and what is the per diem charge for delay?  Are reservations needed when moving materials into and out of the building?  Can more than one renovation occur at a time in any one elevator bank?  How must hallways and elevators be protected?  Does the building expect workers to be certified in lead-safe practices per the new EPA legislation effective April 22, 2010 requiring that contractors have special certification for jobs in buildings built before 1978? 

Always Respect Timing

Probably the biggest unknown for a renovation project is the time that it takes to get board and DOB approval.  Varying from building to building, the span can range from weeks to months.  It’s impossible to predict what other concerns will take precedence over reviewing your application.  Since the board president must sign DOB permit applications, delays are tough to anticipate.  Additionally, since there are no real standards to follow, the board will need time to consult with its Managing Agent and the building’s architect.  Detailed plans plus insurance policies and trade licenses are essential for prompt review.  Requests for omitted information cause unnecessary delay. 

Consult frequently with your building’s superintendent.  His hands-on knowledge of the building’s operating systems will be invaluable.  Moreover, he’ll be able to provide access to other apartments from which you can model your own improvements or learn what not to do. 

Understand the hierarchy from the architect/designer to the contractor to the trade subcontractors to the suppliers.  Acknowledge that each is dependent on the work of another.  If problems or questions arise—and they will—discuss these with the primary professional who should have ultimate responsibility and who, much like a symphony conductor, manages expectations and orchestrates each progressive movement in the total job.

Once your renovation is in full swing, keep extensive lists and check on progress with regular site inspections and meetings.  Expect setbacks to occur.  Wait until your punch list is entirely completed, before you make your final payment.

As of this writing, I’m on my fourth and hopefully final punch list.  I’ve learned more on this job than on my others.  This last renovation took twice as long as anticipated with 17% in cost over charges.  Nonetheless, not only have I increased my property’s worth, I’ve achieved immeasurable personal satisfaction and real delight in the execution of a renovation well done.  

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For August 2010 Mann Report Residential Manhattan Market Watch RESIDENTIAL BROKERAGE:  THEN AND NOW In late June, Fred Peters wrote in the Warburg Blog about how real estate brokerage has changed…... Read more >

For August 2010
Mann Report Residential
Manhattan Market Watch

RESIDENTIAL BROKERAGE:  THEN AND NOW

In late June, Fred Peters wrote in the Warburg Blog about how real estate brokerage has changed since 1980 when he first got started in the business.  I began as a broker in the same year, and Fred’s musings got me thinking about how remarkably different our business was then, and how it has evolved. 

In the early 80’s, when 7 room prewar apartments on Park Avenue were approaching $500,000, brokers were mostly providers of information.  Fred’s description of us as “ladies in mink carrying keys” is not too far off the mark.  Exclusive listings were the exception and not the rule.  Sellers would usually list with more than one agency, and each would advertise in the New York Times, while competing brokers worked like detectives using clues from weekly ads to uncover the building, apartment number, and then seller’s name and ultimately phone number to sign up the listing for their particular agencies.  In those days, we earned a considerable amount of money in listing fees.  Today, listing commissions are nearly extinct at the major firms. 

At Corcoran, where I began in 1980, we had weekly listing breakfasts, where over coffee and muffins, we would comb the Times real estate classifieds which we considered our Bible.  Then we would set out for about two and a half hours to walk the streets of our assigned territories.  We would schmooze with the doormen and supers on our individual routes and develop a rapport with each that lasted for years.  My turf was the 90’s from Fifth to Park, and I would crisscross the streets and stop to talk about news in their buildings.  We discussed who might sell—who was pregnant, who had died, who was divorcing, and who was being transferred— as we piled up leads for follow-up phone calls and letters.  Listing breakfasts ended some time after the mid 80’s. 

Before the computer transformed businesses, we stored listing information in thick three ring binders and each night, we had at least two hours of administrative homework.  We would get daily copies of updates and new listings, and each night, I would cut and paste strips of information into expanding notebooks.  Regularly, we replenished our supplies of glue sticks and reinforcements for our hole punched pages. 

Moving to a new world
Information was tightly guarded and rarely shared—if ever—between firms.  With the advent of exclusives in the late 80’s, however this began to change.  When co-broking became prevalent, good working relationships between co-brokers became all important, and frequently we traded information discretely.  It wasn’t until 2004 that co-op selling prices became a matter of public record, and until then, we relied on each other’s good will to exchange closing information.  We still do when recorded information lags behind closing dates.

In the early 80’s, when I negotiated on a property, more often than not, I was the direct link between the principals with a buyer on one side of the deal and a seller on the other—and a whole commission was earned when we closed.  Today, it’s more likely for a broker to have access to only one of the principals, and to work with a co-broker who represents the other side—and to split the commission. 
It was always important to present a property in its best light, though we didn’t refer to it as “staging” in New York until about 2004.  I would advise sellers about cleaning, painting and de-cluttering.  Often I would often ask a designer friend to come over to help reposition furniture.  Today, brokers regularly enlist the services of a professional stager. 

Before the Internet, brokers bought print advertising weekly as much to attract buyers as to sell apartments.  The same apartment might appear in a single Sunday Times section more than five times, since sellers would list with multiple agencies who each advertised the property making it look to the buyer that there was more inventory to be had than was actually the case.  Confused buyers depended on brokers to direct them to properties for sale.  Today, print advertising is minimal.

With the Internet today, information of all kinds is readily accessible.  Buyers can turn to websites like ResidentialNYC and StreetEasy to see what’s on the market.  The public can search ACRIS, the city’s online register, by name or address to view recorded prices, mortgages and filing dates.  

When I first entered the business, I worked hard to develop a following, and it’s gratifying that I have a repeat customer and referral base with shifting real estate needs.  In the 80’s, I was clever about obtaining listings, was a skillful administrator to organize inventory and customer data, and an intuitive negotiator.  Today, even though I have everything I need at my computer fingertips, I’m working harder than ever to demonstrate my value to buyers and sellers.  Consumers are smarter, more informed and more demanding.  To be successful today, more intellect and greater marketing savvy are required of brokers.  We’ve evolved from gatekeepers of information to trusted advisors who analyze and interpret information to set prices for sellers and evaluate choices for buyers.  We’ve become skilled at branding and are taking strides to learn about social networking and blogging.  Better schooled in ethical decision making, we’re signing up in increasing numbers to earn the new NYRS® credential from the Real Estate Board of New York (REBNY) which recognizes the business and educational achievements of top brokers. 

Most assuredly, it’s a different world. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For June/July 2010 Mann Report Residential Manhattan Market Watch ON NEGOTIATING By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership “Birds do it, bees do it, even educated fleas…... Read more >

For June/July 2010
Mann Report Residential
Manhattan Market Watch

ON NEGOTIATING
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

“Birds do it, bees do it, even educated fleas do it…”  I’m talking about negotiating, not falling in love.  Everyone does it, and we do it all the time—with our partners, our children, our friends, our bosses, our clients, and even with ourselves.  Some do it more skillfully than others. 

Volumes have been written on the subject, and master classes continue to be offered on negotiating skills and principles.  Recently I was reminded of an excellent REBNY NYRS course taught by Dr. Alon Ben-Meir who insisted that brokers consider themselves “not merely as a messenger conveying information from one party to the other, but as an architect with a clear vision of the structure he or she wants to create.”

“Please don’t shoot the messenger,” a seller’s broker recently said to me by way of apology when he countered with less than one half a percent off the asking price.  I had presented what I considered to be a strong all cash bid for my buyer that was 5% off the ask.  When I complained that the seller’s response failed to signal a willingness to engage in any bargaining, the seller’s broker excused himself as being simply an emissary.  I described how we needed to be architects of the deal, and we went back and forth broker to broker, ultimately arriving at a meeting of the minds for our principals. 

Each negotiation is different, so it’s impossible to come up with a one size fits all strategy or a definitive list of do’s and don’ts.  I’ve done a bit of reading on the subject, and I have thirty years of sales experience, so with humility, I offer the following tips and insights for residential real estate trading. 

Negotiating is a process to reach a mutually satisfactory agreement between two or more parties with lots of back and forth/give and take communication.  It’s based on skill, intuition and common sense, and it depends on trust, respect and credibility. 

The first step in any exchange is to gather as much information as possible.    Research the property’s history, time on the market, price reductions, comparable sales and competitive offerings.  Ask lots of questions, listen carefully to responses, and take notes.  Try to uncover any rejected offers or botched deals.  What is the motivation for selling or buying?  What is the desired close date?  Are buyer and seller expectations realistic?

More than a messenger

Never convey an offer without first establishing rapport with your co-broker.  If you can, find a shared interest and talk about that first.  Building a good relationship is crucial.  Throughout the process, you should also cultivate good will for both buyer and seller, and never speak badly of either.  When there is mutual understanding, empathy and flexibility are more likely to follow. 

At all times, demonstrate good faith and treat all parties fairly.  The truth, personal integrity and ethical behavior are non-negotiable.  Bluffing may work in poker, but I don’t advise it for real estate negotiations.  Referring to a wide circle of interest is far preferable to inventing a phantom buyer.  Overstating and misrepresenting will get you in trouble, and you may be liable for damages. 

Before conveying a first offer, call your counterpart to engage in conversation.  You can say that you are anticipating an offer, or want to encourage your buyer to make an offer.  At this stage, it’s more important to listen than to talk.  Combine what you have heard with your market knowledge to suggest to your buyer a realistic range for an opening bid.  Discuss how the other side might react.    

When you’re ready to put the offer in writing, be as specific and as thorough as you can.  Provide information about terms such as close date and financing, as well as an employment profile and net worth summary.  If this is a competitive bid situation, ask your buyer to add a personal note so the human element is not lost.  Why this particular property?  Is there a common ground anywhere?  Did they attend the same school?  Putting a human face on negotiations makes the other side care.

Prepare your principal for every next move, and again lead by suggesting a range.  Communicate clearly where you believe there may be flexibility.  Don’t raise false expectations or promise something you can’t deliver.  Appeal to reason always.  Generally the first move up or down is the greatest and most significant.  Subsequent 2nd and 3rd moves are usually smaller than the first.  Splitting the difference works best at the end of the process, after you’ve worked hard to narrow the gap.

Devote time to the process, and don’t shortchange it.  Each party needs to develop a vested interest in the exchange in order to feel good about the outcome.  If you think negotiations are moving too quickly, slow things down so each side has time to evaluate the another.  But be careful not to lose momentum.  Use a combination of phone calls and email—and be sure to respond promptly, if only to acknowledge that you have nothing new to communicate but are working diligently to move the process forward.  With emails, before you hit SEND, always reread at least once to consider how your communication will be perceived when it’s forwarded to the principal or an attorney.  And don’t hesitate to immediately pick up the phone to clear up a misunderstanding, ask about delays or seal the deal. 

Experience is the best teacher.  Hiring an experienced broker is the best advice. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

 

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For May 2010 Mann Report Residential Manhattan Market Watch ETERNAL HOPE THIS SPRING By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership I’ve taken liberties with a line from…... Read more >

For May 2010
Mann Report Residential
Manhattan Market Watch

ETERNAL HOPE THIS SPRING

By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

I’ve taken liberties with a line from Alexander Pope’s philosophical poem “The Essay on Man” for my title.  This spring, we’ve witnessed a new bounce in our residential marketplace along with a renewed buzz, increased activity and stabilizing prices.  As of this writing, roughly 18 month’s after banking institutions failed on Wall Street, Manhattan real estate is recovering.  An improved momentum is expected to be sustained this quarter resulting in strong April to May stats for contracts signed. 

Nationwide, we’re in the early stages of a very slow economic recovery, and in New York there are reports of continuing job losses.  Nevertheless, stronger than expected corporate earnings and significant bonus payments have contributed to Wall Street’s rebound.  With our local industry on the mend, consumer confidence has returned, high end retail is improving, and residential transactions for the ultimate luxury purchase of a New York apartment are on the rise. 

There is general agreement among professionals and economists that mortgage rates will creep up as the recovery proceeds.  That, plus the recognition that we have passed the market’s bottom, plus a low threshold for delayed gratification have awakened our area’s purchasers.  Additionally, foreign buyers are back because the Euro is declining as the dollar rises.  Buyer confidence is further buoyed by the government’s incentive for first time purchasers.  Though the award doesn’t add actual dollars to the pockets of Manhattanites who exceed income limits, the incentive has led to a growing enthusiasm. 

Since mid February, transaction volume has been accelerating steadily, and prices in nearly all segments have been leveling.  In some categories, particularly the overactive $2-5 million market, prices have even been inching up.  With extremely thin inventory in this real estate sector, well priced, well located 6-10 room resale offerings in good condition have been flying off the shelves. 

Cash has never counted for more 

Competitive bidding and overbidding have returned as increasing multiple demand meets limited flat supply, and time on the market for these specialty products has decreased.  Not everyone is choosing to go with the highest bidder.  Because the financing climate is so radically altered, sellers are recognizing that it’s often worth more to take less from an all cash buyer.

Aside from the delays involved with financing—it’s taking an average 45 days to get a commitment—those seeking financing today have to sidestep a veritable minefield of uncharted obstacles.  Not only do buyers have to show 45% debt to income ratio, stellar credit scores and unblemished credit histories, but buildings also have to pass muster with Freddie Mae’s tighter lending guidelines.  Some banks simply won’t lend in some buildings, and that’s rarely been the case before. 

Among other things, to be considered credit worthy, a building must show that  10% of its total budget is available for future mechanical system breakdowns; in the past, it was enough to show a line of credit or healthy reserve fund.  Additionally, no single entity can own more than 10% of the co-op or condo according to Freddie Mae.  Adequate insurance, including fidelity bond insurance which protects against employee theft and hazard must also be documented. 

A credit worthy borrower in an equally credit worthy property, however, can still be tripped up by a low appraisal.  The new Home Valuation Code of Conduct (HVCC) has turned the appraisal process upside down, and lowball appraisals are occurring with greater frequency.  With no recent closings in many buildings as empirical evidence, there’s no way to anticipate how a property will be evaluated. 

While buyers are demonstrating an increasing willingness to spend money on housing, they are not overspending.  On the contrary, they are taking on less debt, unlike their predecessors who overextended and overleveraged.  Irrational exuberance along with froth and excess are gone.  Today’s buyers are more conservative, more cautious, and armed with knowledge of past and current sales prices readily gleaned from the Internet, they are seeking value.  

Not all sellers are rushing to contract.  Fueled by the current wave of optimism, and believing that the market is on rise, some are still holding on to inappropriate expectations.  Homeowners are cautioned to use discipline to set realistic prices.  Testing the market with an inflated asking price wastes precious time and risks missing a market wave.  Buyers are responding best to properties in mint condition, and they are ignoring overpriced properties especially those requiring renovation. 

As we move from a declining market to a stabilizing market, the future looks promising.  Our market is faring much better than expected.  “Hope springs eternal in the human breast…”

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Manhattan Market Watch CONSIDERING GROUND LEASE CO-OPS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Recently I was hired by the executors of an estate to sell an apartment…... Read more >

Manhattan Market Watch

CONSIDERING GROUND LEASE CO-OPS

By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Recently I was hired by the executors of an estate to sell an apartment in a ground lease building on the Upper East Side.  We’ve cleaned and staged the property, but as of this writing, we’ve chosen to wait before putting the unit on the market because there is too much uncertainty surrounding the renewal of the lease which expires June 30, 2010.  I’ve been in this business since 1980, have sold in several landlease buildings in the past, but I’ve never heard of an instance where the co-op board and landlord waited until the 11th hour before coming to terms on a leasehold extension. 

“That’s a reckless tactic,” says attorney Dennis Greenstein who specializes in co-op and condo law.  “I’d have to read the actual landlease document to see what options are available to the co-op, but in theory, upon the expiration of the lease, it’s very likely that the shareholders’ tenancy will end, and their equity could cease to exist.”  Greenstein characterizes ownership in a leasehold as “a diminishing asset.”  As you move up in the years of the lease term and if no provisions have been made to extend the lease, then the property’s value actually depreciates.  If the lease is allowed to expire, the landlord can take the property back, and the condo or co-op would no longer exist.  The shareholders would revert to being renters and would lose their equity.  Could a landlord force tenants out of their homes?  That’s a very thorny question according to the attorneys I’ve surveyed. 

A ground lease co-op or condop is one where the underlying land is owned by a landlord and is leased to the cooperative or condop which pays rent to the landowner.  Each leasehold situation is different, and each is governed by the lease agreement which spells out how much rent is to be paid and for how long—usually 50-99 years.  The document also contains conditions for extending the lease and for increasing the rent at specified intervals and may also include a provision to purchase the land.  Usually, the rent is calculated as a percentage of the property’s appraised value.  If land values go up, increases will follow when the rent is readjusted along with corresponding increases in each unit’s maintenance fees. 

There’s more uncertainty for apartment owners in ground lease buildings and also fewer tax advantages than for unit owners in fee simple co-ops.  When the corporation owns the land, shareholders can deduct that portion of their maintenance that represents the taxes paid on the building as well as the interest paid on the building’s underlying mortgage.  In a landlease building, the portion of the maintenance used to pay the ground rent is not tax deductible. 

It’s also more complicated to obtain financing in ground lease buildings because of the associated risk that a landowner might decide to sell the land or not renew the lease.  My bank sources say lenders generally want to see about 40 years left on the lease term.  Similarly, it’s more difficult for a ground lease building to borrow money itself for any capital improvements, because lenders usually want the mortgage secured by both the structure and the land. 

In the case of the co-op apartment owned by the estate that has hired me, there’s a dispute between the landlord and the shareholders about the value of the land and the term for the lease renewal—which is not a big surprise.  The landlord says the land is worth more than the shareholders’ estimate, and the landlord will offer a 30 year extension, while the shareholders want a 99 year renewal.  In all probability, this particular case will go to arbitration, and whatever the outcome, the shareholders will have to pay additional fees to attorneys, consultants and perhaps even bankers. 

Ground lease apartments are not for everyone.  However because of the uncertainties and limited tax benefits, apartments in landlease buildings cost considerably less than similar units in fee simple properties.  Taxes are also less because the landowner pays these. 

My colleague Susan Abrams, a shareholder herself at the ground lease co-op Tower East on 72nd Street who has sold 13 apartments in the building over the years, says, “You get substantially more for considerably less in a landlease building.  You get to live in a grander apartment than you could otherwise afford, but you have to be comfortable paying higher monthly maintenance.”  In Abrams’ estimation, prices for comparable apartments in fee simple buildings are at least 30% higher.  For the apartment that she is currently listing at Tower East, she’s looking for a buyer with a high income who will be comfortable paying more in maintenance while giving up less liquid assets because of a significantly discounted price.  

In the end, it’s really all about making informed decisions.  It’s critical to understand the terms and conditions of a ground lease document.  What are the provisions for extensions?  How are rent increases to be calculated over the term of the lease?  Are increases tied to market appraisals or to regular escalation?  How stable are the building’s financials?  How healthy is the reserve fund? 

Hopefully the co-op board and landlord mentioned above will work past their current stalemate without going into costly and lengthy arbitration, and we’ll come to market and identify a ready, willing and able buyer who will pay a fair but discounted price.   

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Bright idea a hand sanitizer in the lobby Wednesday, March 3, 2010 If you've ever eyed your elevator buttons with distrust in the height of flu season, this one's for you. One Upper West Side building…... Read more >

Bright idea a hand sanitizer in the lobby
Wednesday, March 3, 2010

If you've ever eyed your elevator buttons with distrust in the height of flu season, this one's for you. One Upper West Side building recently installed a freestanding hand sanitizer in its lobby.

"I first saw it when we did a walk through before closing on January 12th, and the buyer who was with me-- who was pregnant and a doctor -- commented that this was an excellent idea," says Warburg Realty broker Shirley Hackel who tipped us off to the innovation.< Read less

For March 2010 Mann Report Residential Manhattan Market Watch VALUE PLUS By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership In today’s Internet Age, real estate buyers and sellers…... Read more >

For March 2010
Mann Report Residential
Manhattan Market Watch

VALUE PLUS

By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

In today’s Internet Age, real estate buyers and sellers need only to turn on their computers to surf the proliferating public websites for immediate access to all kinds of information.  With the click of a mouse, they can check out available inventory, view floor plans and photos, gain data about recorded sale prices and even join discussion boards and blogs.  When the Internet provides such easy access to information, why hire a broker?  And how does one choose from among the growing number of real estate professionals?  What makes a good broker? 

Indeed the Internet is a powerful tool for principals and brokers alike.  Though sometimes flawed with outdated or inaccurate information, as the first point of entry for any search, the Internet saves valuable time by allowing us to preview the broad landscape of competing properties from our desks.  Information alone, however, is not enough; for it to have value, the information requires analysis and judgment. 

Experienced brokers serve to evaluate and interpret information.  As consultants, we share more than our knowledge of a particular building, neighborhood or co-op board.  Adding perspective, we highlight nuances and explain market trends in a broader context.  We not only educate buyers and sellers about recent sales, but offer insights about choices and resale possibilities helping buyers and sellers to make informed decisions. 

Effective communicators, we are experts in negotiating and closing.  We know how to prioritize and identify areas for flexibility and compromise.  We know how to listen and are skilled at positioning and packaging.  We are able to champion a cause logically and persuasively to put together the best possible bid, counter offer or board package.  We are adept at guiding buyers through the increasingly arduous borrowing process, helping to identify lending professionals who will explain ever changing requirements and unpredictable scrutiny.   We are accomplished at delivering the best possible presentation to co-op boards. 

Part Diplomat, Part Shrink
Good brokers are well-versed in the psychology of buying and are armed with discretion and diplomacy.  We lend emotional support to every transaction, and are adept at hand-holding and easing stress.  More often than not, we become confidantes to our clients and customers who invariably share personal and often sensitive details. 
Good brokers have a wealth of resources at our fingertips and have strong working relationships with mortgage brokers, lenders, attorneys, designers, stagers, architects, contractors, and movers.  Our judgments are respected, and we cooperate effectively with all players involved in a transaction. 

Good brokers are creative thinkers and problem solvers.  We know how to manage expectations and have the courage and integrity to speak the truth always.  Vigilant during every step of the process leading up to a successful closing, we know how to anticipate and overcome obstacles.  We recognize that appraisals today are coming in low, so we work diligently to price realistically.  Always mindful of the transaction’s timing, we pay close attention to the calendar to acknowledge when a mortgage commitment may expire, or if a board review is taking too long since if a board interview has not occurred 30 days after the contractual closing date then either side may cancel the contract.

Much like the attorney who represents himself and has a fool for a client, the buyer or seller who goes it alone without a broker is shortchanged more often than not.  Without the benefit of professional counseling, time is wasted, money is lost, and deals go astray.  Even negotiating effectively for one’s own account is tough, because ego always gets in the way of self-intentions.  Whenever, I’ve negotiated to buy or sell a property for myself, I’ve asked a colleague to act as spokesperson for me in order to save face if I ever offended with a low offer, inadequate counter, or disparaging comment.

Buying and selling a home is not only a major financial commitment representing a significant portion of net worth; for most, it’s a pivotal life event.  Though not nearly as high on life’s stress meter as marriage or divorce, the process is fraught with emotion and anxiety.  To ensure a smooth transaction from beginning to end, buyers and sellers are advised to select the right broker.  The recommendation is to get referrals from friends or other professionals and interview your prospects.  For the best outcome possible, hire an experienced broker with sensitivity and integrity who demonstrates a willingness to provide personal attention and service and a successful track record to achieve your specific goals. 

Shirley Hackel
Executive  Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For February 2010 Mann Report Residential Manhattan Market Watch STABILITY BECKONS IN 2010 By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Last February, our market was reeling…... Read more >

For February 2010
Mann Report Residential
Manhattan Market Watch

STABILITY BECKONS IN 2010
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Last February, our market was reeling from the aftershocks caused by a stunning chain of events that began with the collapse of Bear Stearns and bankruptcy of Lehman Brothers. The subsequent downturn in Manhattan's residential market was sudden and precipitous.  Sales activity nearly halted and then grew tentative as buyers waited for successive shoes to drop.  Whatever limited transactions occurred came with steep discounts averaging 25-30 percent off the highs.  Fast forward more than a year, and there are real signs that our marketplace is on the comeback.

Despite the financial strains that remain, a new energy has emerged among housing’s players that reads like a Hallmark Valentine's card to the city.  With what’s being called a “return to normalcy” by many, optimism is being restored.  With boosted confidence, buyers are out actively shopping, making purchasing decisions and, in fact, closing.  Unlike those before them who took on too much debt in a rising market, today’s consumers have bank imposed limits on borrowing, so they are making more practical choices.  The good news is that value has returned, and transactions are up though driven by reduced prices. 

With historically low interest rates and decreased prices, more people can afford to enter the market.  Bonuses this year will be much improved over 2009, although it’s unclear at this writing how much will include stock over cash payments.  In addition, sales activity is bolstered especially for first time buyers who can participate in the government’s $8,000 tax credit which has been extended to those who contract to buy a principal residence of up to $800,000 by May 1st and close by July 1st 2010—with income limits of $125,000 for individuals and $225,000 for joint filers.  Other new buyers may benefit from a $6,500 tax credit for property owners who have been in their homes for at least five years.

On the rebound

As optimism replaces uncertainty, a new foundation for sales is being built.  There’s less tension between buyers and sellers as we move from a declining market to one of stability.  With more transactions occurring, there’s greater comparable empirical data for property appraisers to draw on. 

In sharp turnaround from last February when credit was nearly frozen, today’s lenders are back in business ready to make loans despite a new regulatory environment defined by rigid scrutiny and delays.  For the most part, lenders are requiring 35% down, and borrowers must present unblemished credit and consistent income histories.  Underwriters will red flag income and bonus inconsistencies and unusually large bank deposits.  Increasingly, loan approvals can take 45 days or longer with equally comprehensive examinations of the borrower and of the property being financed.  Buildings must meet Freddie Mae and Freddie Mac guidelines for adequate insurance coverage and sufficient reserve funds plus an additional 10% of budget for mechanical system breakdowns.  Moreover, clearing to close can take weeks as the property gets reviewed a second or even third time with more questionnaires and requests for insurance evidence.  Not surprisingly, cash buyers are making broad jump moves over buyers who are unable to waive a financing contingency. 

Last year’s 4th quarter saw an unexpectedly quick absorption rate for properties perceived as being priced right.  Purchasers stepped up in competitive bidding to secure homes offering that rare combination of space, condition, views and price.  As I write this on a cold December day less than a week before Christmas, I reflect on my own transactions from October through December which sold within 45 days of the listing date to all cash buyers at, near or over the asking price. 

More and more sellers are listening to the new market realities.  They are cautioned to use discipline to set appropriate prices to generate action and stimulate bidding, and not misinterpret the new confidence as a reason to set unachievable levels.  There won’t be a rally up in prices any time soon.  Testing the market with an inflated asking wastes precious time and risks missing the moment of a market wave. 

Buyers should understand that low ball offers might have worked in the fall of 2008 and winter of 2009, but rarely today.  Prices are leveling off, not caving down.  Even before purchasers bid on a property, they should identify mortgage options and also investigate their personal credit scores with companies like North Shore Advisory who can help to restore credit profiles if needed.  Buyers should rely on guidance from their brokers to address the difficulties with co-op boards, especially in the light of recent turndowns. 

Last February’s fear and inertia have abated.  Though uncertainty still clouds the big economic picture, Manhattan’s housing market has been showing resilience.   This February as friends and lovers exchange mutual love notes, here’s hoping that leveling prices bring together buyers and sellers in increasing numbers.  Xoxoxo.  Happy Valentine’s Day! 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For October 2009 Mann Report Residential Manhattan Market Watch 4TH QUARTER TEMPERED OPTIMISM By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership It’s tough to be writing on a…... Read more >

For October 2009
Mann Report Residential
Manhattan Market Watch

4TH QUARTER TEMPERED OPTIMISM
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

It’s tough to be writing on a hazy, hot and humid day in the last week in August for an October publication date.  By Fall, an unusually damp summer will have morphed into cooler, drier crisp autumnal air.  If we’re lucky, we’ll experience an Indian summer, and soggy greens will explode into vibrant foliage of reds and oranges.  Though I’m not in the business of forecasting weather or market trends, I do declare I’m optimistic about residential real estate for the last quarter of 2009.  But I also have some worries.

It’s been a challenging year to say the least.  But the summer months have been especially busy, and that bodes well for the future.  We’ve not experienced a typical seasonal lull.  On the contrary, marketing activity and deal flow have been steady since the end of the 1st quarter.  July was unusually strong, and even the ever-pessimistic Case Schiller Home Price Index was up for the first time in 34 months.  In brokerages across Manhattan, the number of signed contracts rose steadily in the 2nd and 3rd quarters in all price ranges.  Purchase volume increased, prices stabilized, and interest rates remained historically low.

Headlines have proclaimed that the recession is over in much of Europe, particularly Germany and France, and recovery is well underway in Asia, especially in China and India.  In the U.S., hopefully the worst is behind us too.  In Manhattan, if we’re not at the bottom of the curve now, we’re very close.
This summer, the supply of re-sale apartments decreased (as opposed to a surplus of overbuilt new developments) as some owners temporarily removed their properties from the market.  After Labor Day, inventory is expected to pick up and increase into the 4th quarter.  Curiously, the anticipated flood of apartments never materialized from Bear Stearns and Lehman professionals or Madoff victims.

The fact that new housing starts are low and new construction is stalled is actually helping to rebalance the gap between supply and demand.  Because homeowners tend to hold onto what they have in down markets, there are fewer listings this year than in 2008 (of re-sale apartments again, not new development units).  As a result, brokers have been selling largely from a backlog of inventory. 

Then again…

Optimism, however, is tempered by what’s occurring in the commercial real estate arena and the credit markets.  Even as residential real estate recovers, the commercial field is hurting.  According to reports from Cushman Wakefield, commercial sales are down 55% from a year ago.  Moreover, commercial real estate loans reportedly totaling $2.6 trillion are expected to come due for refinancing by 2010.  With values down, even credit worthy owners will have difficulties refinancing at their existing mortgage levels.  If and when this next shoe drops, one wonders how that will impact apartment sales. 
Mortgage financing continues to be the thorny wild card.  Although buyers and sellers are more in sync, the pendulum has swung widely from reckless lending with lax borrower reviews to overly-cautious lending with arduous assessment standards not only for the borrower but for the building too which must meet Freddies Mae and Mac guidelines for adequate reserve funds and insurance coverage.  Though credit has eased, and lenders are no longer hoarding their cash, a new regulatory environment is making decision makers skittish and creating additional delays for a loan approval process already slowed by increased scrutiny. 

A new code of conduct for appraisers initiated by NY Attorney General Andrew Cuomo became effective May 1, 2009.  Home Valuation Code of Conduct, or HVCC, is a joint agreement between Freddie Mac, New York State and the Federal Housing Finance Agency.  Although intended to protect the homebuyer—“to enhance appraiser independence and accuracy”—it’s actually creating some new concerns.  As of this writing, a bill is before Congress calling for an 18 month moratorium so that code guidelines can be readdressed.  A July 8th report on NAR’s website says a flawed HVCC is slowing home sales and holding back the recovery.  Refinancing is also being affected. 

HVCC prohibits mortgage brokers and real estate brokers from recommending or selecting appraisers.  As a consequence, more out of town and inexperienced appraisers are being hired who may be unfamiliar with an area and may miss nuances that affect value.  In addition, appraisal costs have risen in order to compensate “authorized third parties” or appraisal management companies who choose appraisers.  The time it takes to obtain an appraisal has increased as well, but even more troublesome, are the lowball appraisals that are occurring with greater frequency.  In difficult markets such as the one in which we find ourselves where current closed sales data is limited, it’s essential for brokers to provide as much evidence as possible to support sales prices, including comparable sales with notes on condition, pricing changes and days on the market, plus any evidence of competitive bidding—though appraisers may choose to disregard the latter. 

This summer, buyers and sellers have been coming together in increasing numbers as brokers bring about a meeting of the minds.  This 4th quarter, we’re looking forward to more of the same as we sidestep the obstacles to move ahead, however sideways for the moment. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For September 2009 Mann Report Residential Manhattan Market Watch CONFESSIONS OF A FACEBOOK NEWBIE By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership I’ve been a skeptic, and…... Read more >

For September 2009
Mann Report Residential
Manhattan Market Watch

CONFESSIONS OF A FACEBOOK NEWBIE
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

I’ve been a skeptic, and I’ve had my reservations, as I rationalized:  Who has the time to learn about social networking and how to use it?  Besides, my private life is—well, private.  Being discreet is a requisite of my business, and I likened social websites to reality TV, arguing neither was my cup of tea.  Though not a full convert yet, I’ve made an extra special effort to begin.  Hardly a passing fad, social networking is spreading to include users on both sides of 50.  As baby boomers join their children in ever-growing interactive online communities, the way people work and play together is being transformed.  As the various social websites proliferate—each with its own distinct personality—marketing on these sites is evolving, underscoring an increasing interconnectivity between social and business worlds.  What’s a broker to do?

Embrace a new venue—is the answer—and learn how to become part of an evolving interactive social fabric on the web.  Encouraged or, more accurately, prodded by my management to get started, I posted a profile and was immediately cheered on by my daughter with a “Hi Mama!!!!!  Welcome to Facebook!”  With her permission, I unabashedly set about to poaching friends from her own roster, though not indiscriminately.  Scrolling down her list, I selected those that I remembered from play dates, sleepovers, parties and prom nights.  It was enormously pleasing to see how they had grown into their adulthood.  In retrospect, I probably should have added a personal note with my request to friend them.  I wondered, “Would they accept my invitation?”  And once accepted, then what? 

Social networking is all about give and take.  Bob Baker, author of MySpace Music Marketing talks about “the ping-pong effect.”  “It’s you sharing yourself with and getting to know dozens, and then perhaps hundreds of people,” he explains.  “In turn, those people mention you to their friends.”  According to Bobette Kyle, whose WebSite MarketingPlan I discovered online:  “You meet people and get to know them by sharing information about each other.  Those you like and/or share interests with become part of your ‘network.’  The marketing magic kicks in when those in your network start talking about you.  Your reputation spreads by word-of-mouth.”  It’s a little like trading business cards with those you connect at a giant cocktail party—only this gathering is 24/7 and spans the globe. 

Steve Goldschmidt, my associate at Warburg, who is a master at social networking says he spends about an hour a day on Facebook, and adds, “It’s easy to join, and free.  It’s all about building connections, developing relationships, making new friends and reconnecting with old ones.”  Steve credits Facebook with at least one transaction and three new referrals. 

As brokers, we are keenly aware of the importance of referrals, and what it means to farm a territory.  By extension, social websites provide an arena for us to mine our connections and expand our spheres of influence.

A Facebook Novice

I’m definitely a neophyte on Facebook, and I’m feeling my way around.  The site lets you see who is friends with whom, and how many friends each person has.  When you friend a person who has very few friends, an amusing, automatic message appears to enlist support to get someone started on Facebook:  “Robert has 11 friends.  Help Him Find People He Knows.” 

As a newcomer, my first order of business is to make more connections.  As I grow my circle of friends realizing six degrees of separation into an expanding online rolodex, my wired network multiples and soon others ask to friend me.  Once a friend agrees to become part of your network, each time there’s any online activity, you’re updated and have an opportunity to comment.  Initially, I’ll play the observer as I figure out how to share myself best with others and participate meaningfully in my online neighborhood.  
I’m just at the tip of a huge learning curve.  Which social networks will suit me best?  Facebook, LinkedIn, Twitter, MySpace, or something else that will morph from these?  I’m not at all sure.  But I’ll try to find my own voice and audience to share my knowledge generously and honestly with those who choose to join my network.  And I’ll try not to embarrass my adult children. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For August 2009 Mann Report Residential Manhattan Market Watch THE BUYER’S ADVANTAGE By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership There’s been a burst of new activity…... Read more >

For August 2009
Mann Report Residential
Manhattan Market Watch

THE BUYER’S ADVANTAGE
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

There’s been a burst of new activity over the last several months, with the volume of signed contracts increasing through the spring and continuing (hopefully) well into the summer.  As I write this on a mid June morning, buyers have been stepping out regularly in growing numbers to evaluate the inventory pool, and stepping up steadily, however cautiously, making offers to buy and going to contract with sellers who finally have come to terms with market realities.  

Lots of deals in every price and size category are being made—even in the over $10 million range which was largely stalled until very recently.  There’s movement and buzz and even competitive bidding.  Cash remains today’s king, as sellers settle for less money for a transaction that will close quickly with certainty.  More and more, requests for appointments by brokers are met with the news of accepted offers. 

The fear and inertia of last winter have abated, but we’re down from the highs of 2007 about 25-35%, more on prices for the larger apartments, and less for the smaller units.  Since March, an improving stock market has served to restore and rebuild consumer confidence.  In April, according to the National Association of Realtors, the number of signed contracts rose 6.7% nationally—the largest monthly jump since October 2001.

A smorgasbord of alphabet soup recovery models has been suggested.  Regardless of whether you believe the economic recovery will take the shape of a curved U, a protracted L, a straight V or a W, or whether you agree real estate prices will hit bottom by the end of this year, and the cycle will begin to improve in 2010, we continue to operate in an exceptionally strong buyers’ market. 

Buyers Maintain The Lead

First time purchasers especially who were priced out of the market before are attracted by steep discounts, low interest rates and the $8,000 Obama tax credit.   The federal inducement is for anyone who hasn’t owned a home in the past three years whose income is below a specified level who will live in the residence for a minimum of three years.  Slated to expire on December 1st of this year, the tax incentive will continue to stimulate small apartment sales through the summer and early fall.  Efforts are underway in the Senate to extend this perk to all home buyers and to raise the credit to $15,000. 

Today’s buyers are also coming off the sidelines not only because they need to move on with their lives, but because they don’t want to miss the moment of opportunity.  Rising interest rates in the face of inflation have pulled in many fence sitters for fear they will miss the window to secure a low rate.  More often than not, those who try to time the market fail; if they wait too long, the chance to gain the advantage passes.  Bottom fishers are unlikely to conclude a deal, because they remain cemented in place with their low ball offers.  For those with a time horizon of at least five years, the most opportune time to join ranks is when the stock market is improving, but before the overall economy has caught up. 

Those sellers who are also buyers in this market—regardless of whether they are trading up or down—will make up any perceived loss on a sale with savings from a reduced future purchase.  In a down market, buying up costs less than in a rising market because fewer dollars are required for the percentage difference.  Today’s sellers are advised to price realistically, pay attention to value and respond to all bidders.  Even low ball offers warrant a counter to signal a desire to close the gap.  Those who bought after 2005 should expect to lose money or break even at best.  If prices were to go up now, buyers would retreat again.   

Uncertainty still clouds the big economic picture.  A new wave of defaults and foreclosures is spreading beyond risky subprime borrowers to previously stable borrowers who find themselves jobless.  Probably the biggest impediment to a full recovery is unemployment which hit 8.9% in April and 9.4% in May, and is expected to reach 10% by next year. 

Despite the contracting economy which continues to struggle with mounting layoffs and ever-dysfunctional credit markets, economists are predicting that the recession will end in either the 4th quarter of this year or the 1st quarter of 2010.  As the recession nears an end and sales activity increases, price stability will follow.  The big picture needs to improve significantly before our market regains a bounce. 

In the meantime, savvy buyers are out shopping with their brokers in increasing numbers, taking advantage of substantial discounts, not worrying about near-term paper losses or gains, and reaping the benefits of living in their brick and mortar investments.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For June 2009 Mann Report Residential Manhattan Market Watch MARKET PROBABILITIES AND REALITIES By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Are sales prices on the verge…... Read more >

For June 2009
Mann Report Residential
Manhattan Market Watch

MARKET PROBABILITIES AND REALITIES
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Are sales prices on the verge of stabilizing?  Probably yes.  Is the worst behind us?  Almost certainly yes.  We’re about 33% down from the highs of 2007—less perhaps for mint condition apartments—with not much further to go to hit ground level, if we accept the prediction made some months ago by JPMorgan Chase of a 40% decline from peak to trough. 

Speak to brokers, and they will tell you they are working harder than ever for their buyers and sellers, and it’s more challenging than ever to keep deals on track.  Activity definitely is picking up which means there will be more closings in the offing, so the stats for this year’s 3rd and 4th quarters will be measurably better than those for the first half of 2009.  More buyers are not only looking at apartments, but they are attending open houses in increasing numbers, making offers, sometimes even competing with multiple bidders and signing contracts.

Faced with continued economic uncertainty, rising unemployment, shrinking incomes, and increasing credit card and car loan debt, foreclosures are expected to escalate however.  The downturn in our market is unlikely to reverse itself quickly in the short term.  Once the market stabilizes, it’s likely that a flat market will remain, and then gradually increase with modest annual appreciation.  It will doubtless take several years for prices to return to 2007 levels.  A similar 40% decline in real estate values occurred in the down market of 1989-1991 when early ‘89 prices were not recouped until ’95.

As the market labors to recover, some new realities are emerging. 

1. In the boom years, when there was exuberance and speed in the market, the contractual financing clause all but disappeared.  Today, not only is financing reappearing as a condition of the deal, but lawyers are also specifying that the deal be contingent on the funding of the loan.  With changing regulations from Freddie’s Mac and Mae, the bank’s loan commitment to a borrower is no longer sacrosanct, and we’ve seen banks come up short of their commitment at closing or require a second appraisal closer to the time of closing.
2. We’re seeing more conditional approvals by co-op boards, as application reviews become more stringent.  As a consequence, more and more sellers are looking for additional protection and are requiring that buyers acknowledge in a side letter addendum to the contract that they will agree to conditions imposed by the board for their approval.  Since the boiler plate language of the contract states the “sale is subject to the unconditional consent of the Corporation,” buyers have a contractual right to either agree to the conditions, renegotiate with the seller because of the conditions, or walk away from the deal taking back their 10% deposit.  Conditions have included the following:  that a buyer proceed with all cash, or finance less than the amount specified in the contract, or provide a 3rd party guarantee for the maintenance, or require that 1-2 years of maintenance be deposited with the co-op in escrow.  One attorney tells us of a seller who stepped in to assume the responsibility of an escrow deposit when the board asked, since the buyer claimed not to have family who could lend that amount.  One wonders how another most recent situation will play out.  Just today (5/4/09), a board asked for an appraisal in an all cash deal where the selling price was perceived as being too low. 
3. The embattled economy is inflicting greater pain on condos than on co-ops.  When a highly leveraged condo owner defaults, and the lender forecloses, the other condo owners must share the burden of paying those unit’s common charges.  Not so in a co-op.  If a shareholder is delinquent in co-op maintenance charges, the repossessing bank is required by law to pay the arrears. 
4. Complaints are increasing to the Attorney General from condo purchasers who went to contract as many as two years ago who are looking either for discounts or to get out of contracts.  Websites like nocondo.com are emerging to take advantage of this mostly disenfranchised group.  In some instances, condo buyers have joined together in class action suits to sue sponsors for faulty construction.  Attorneys see more law suits ahead, especially against projects where construction has been delayed.  
5. To stimulate sales at new developments, struggling condo sponsors have been offering financing, upgrades, price cuts, and paying closing costs.   Some are taking a page from car maker Hyundai’s book and providing guarantees to buyers who lose their jobs.  National builders like Clayton Homes and Toll Brothers have proposed payment protection plans to lure buyers.  Rockrose Development is advertising they will buy back an apartment after 5 years at 110%.  In the co-op market, we’re seeing sellers who are providing short term loans as a way to bridge the gap for a buyer who needs money above the committed bank loan amount.  Similarly, we are seeing sellers approaching their boards to request whether flexibility can be granted to ease established financing limits.

For purchasers who have been sitting on the sidelines, now is the time to re-enter the market.  With ballooning inventory and interest rates at historic lows, there has never been a better time to buy.  That’s the new reality. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For May 2009 Mann Report Residential Manhattan Market Watch ON THE REBOUND By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership On the first days of April as I write this column…... Read more >

For May 2009
Mann Report Residential
Manhattan Market Watch

ON THE REBOUND
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

On the first days of April as I write this column for May publication, it’s important to acknowledge that we’re in a much improved position than last fall when overwhelming uncertainty gripped the Manhattan marketplace.  With the tipping point of the Lehman Brothers bankruptcy in mid September 2008, real estate activity came to a near halt until the end of last year.  Open houses were quiet, some buyers who were already in contract renegotiated prices, while others walked away from deposits, leaving everyone else on the sidelines waiting to exhale.

Not surprisingly, the number of actual closings for the First Quarter of 2009—which  reflects last fall’s inactivity and scarcity of signed contracts—is down nearly 50% from a year ago.  The press has sensationalized this dramatic statistic, which tells only part of the story of what is occurring in these first months of 2009.  A more important marker, though a more difficult stat to track, is the number of contracts signed during this period.  Tempted by falling prices and new entry levels, buyers negotiated with realistic sellers, and there was a significant uptick in the number of signed contracts beginning in mid January and continuing at this writing:  so Second Quarter of 2009 data for closed sales will be much improved.    

Real estate transactions this year may have started slowly, but the number of signed contracts for Manhattan apartments increased steadily in the first quarter, though February fared better than March.  At the same time, there were better than expected gains for both new and existing home sales throughout the US.  While in the early weeks of March, stock market declines were in the dizzying triple digits, by mid month, the Dow had rallied significantly.  Similarly, the number of contracts signed zigzagged during March. 

We’re turning a corner

Despite the downturn, there are scores of examples throughout the city of properties that are finding their sales threshold.  Many apartments that have been on the market for 6 months or longer, with repeated price reductions, have reached new value levels and are attracting the attention of buyers with pent-up demand.  In a number of instances, where the price was perceived to be below market, there have been multiple bids.  Similarly, handfuls of newly listed properties at perceived bargain prices are also securing full or near asking prices.

In this climate, competitive offers need to be handled skillfully since much is at risk in this challenging environment.  A certain degree of humility needs to take the place of the bravado of past years.  Operating in a buyer’s market, today’s purchasers have time on their side and numerous alternative choices to consider.  Broker expertise and judgment are valued highly, and good relationships between brokers are all-important so trust can be engendered to further negotiation and facilitate the deal.

In this market as in any other, the ethics of a verbal handshake speaks volumes.  Once an offer is accepted, it’s best for a seller to stay with the deal and continue to show for back-up only.  Sellers are cautioned also not to lose momentum:  to issue a contract within 24 hours; to set an agreed upon time for a buyer to return a signed contract; and to have all required documents for review at hand, including the last two years’ financial statements, house rules, proprietary lease, transfer requirements, alteration agreements, and if appropriate, offering plan and amendments.  With angst on both sides of the table, lengthy delays with contract signing can jeopardize the deal.

Adapting to the new landscape is especially painful for those who bought at the height of the market, when prices were inflated and double digit appreciation was expected annually.  These sellers are counseled to wait if they can or to bite the bullet and price below what they paid.  Even after the market stabilizes, price appreciation will likely be modest for the next several years.

Sponsors of new developments with unsold inventory are also hurting.  Financing continues to be problematic in these buildings.  Additionally, unlike individual sellers, developers are bound to their offering plans and have limited flexibility with end pricing.  Price adjustments would not only impact any earlier sales, but in many instances, they are prohibited by the project’s lender.  Instead of rebates, developers are providing upgrades, and offering to pay closing costs to attract and retain buyers.  

Last fall’s somber mood has lifted this spring.  We’re not out of the woods, but we have turned a corner.  Credit is easing and mortgage rates are still dropping, but because of the surge in refinancing, applications are stalled and banking standards remain very tight.  While it’s tough to predict and pinpoint the moment of recovery for our economy, it’s safe to say that some time this year Manhattan real estate prices will find a bottom.  Many believe we’ll bump along an uneven terrain until 2010.  It will take time for the national and local economies to stabilize, but solid residential real estate deals are being made in Manhattan.

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For April 2009 Mann Report Residential Manhattan Market Watch THE RESALE GLASS IS HALF FULL By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership “The reports of my death are greatly…... Read more >

For April 2009
Mann Report Residential
Manhattan Market Watch

THE RESALE GLASS IS HALF FULL
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

“The reports of my death are greatly exaggerated,” wrote Mark Twain in 1897 when his obituary was mistakenly published nearly 13 years before he died.  Fast forward more than a century later, Ted Kennedy told well wishers to please “hold the eulogies” as he celebrated his 77th birthday in late February.  In a similar vein, we respectfully request that the press refrain from sensationalizing the current new realities of the Manhattan residential marketplace.  Our market is not dead, nor it is “cratering” or “rotting” as Barron’s February 23rd cover story would have us believe.  Real estate values continue to decline, coming off highly inflated levels, and transaction volume is down considerably, but following last year’s most unusual 4th quarter of near inactivity amid grim global financial news, hints of optimism have been surfacing steadily in the first months of 2009. 

A Tale of Two Markets

Essentially, any reporting about the Manhattan real estate market must distinguish between two diverging product streams:  new developments and resales.  A boom environment of too easy financing and too much leveraging led to explosive, unchecked growth of too much new condominium product too fast.  It is this part of the market that is hurting the most. 

A changing economic environment is causing hardships for many.  Unable to meet a lender’s financing schedule, many development projects are in limbo, either stalled in mid construction, cancelled or reconfigured as temporary rentals.  For those projects nearing completion, it remains to be seen how this market will fare when these condos begin issuing their 30 day advance notices to close.  Faced with falling values, will their buyers—who went to contract well before Wall Street’s meltdown—close at the contracted price, negotiate a settlement or walk away from substantial down payments?  With as much as 10-25% deposits at risk, some purchasers may have lost jobs, others may be facing future layoffs, and still others may no longer have their previously promised financing in place. 

Cracks in the new condo market were apparent even before January 2008.  In a deteriorating economic climate, an oversaturated inventory of similar over priced commodities simply could not be absorbed.  Purchasers were stymied by demanding banks with restrictive approval requirements for borrowers as well as the properties they were financing.  Pressured by lenders to jump start sales, some distressed condo developers are considering using auctions to generate activity.  According to reports, five mid range to high end projects, as of this writing unidentified, will be auctioned in April at minimum reserve prices 40-45% below January ‘08 published prices.  Successful in other parts of the country, particularly in South Florida, auctions—both live and sealed bid—are expected to stimulate sales activity at struggling condo projects and also set some much needed pricing benchmarks.

And on the Other Hand

Unlike the near inertia with new development products, there’s discernable activity and contracts are being signed in the resale market for both co-ops and condos throughout the city.  Despite mounting financial uncertainties and increasing layoffs with new stock market lows in an ever bearish market, the first eight weeks of 2009 saw an uptick in deal making.  Tempted by falling prices and new entry levels, buyers have been circling favored properties, making bids, negotiating with realistic sellers and signing contracts.  The market is challenging to be sure, and probably still seeking a bottom, but buyers and sellers are moving to contract. 

Using the Realplus search engine to count the number of contracts signed during the first eight weeks of 2009, I focused on the upper East and West sides—a key market indicator—and came up with the following snapshot.  


By degrees, deals are being made—albeit unhurriedly.  Five days ago as of this writing, Fed Chairman Ben Bernanke told Congress that it was “reasonable” to predict the recession will end this year and that 2010 “will be a year of recovery.”  We look forward to more glimmers of decent news. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For March 2009 Mann Report Residential Manhattan Market Watch IF THE SHOE FITS… By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership Buyers are back!  Sidelined during 2008’s…... Read more >

For March 2009
Mann Report Residential
Manhattan Market Watch

IF THE SHOE FITS…
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

Buyers are back!  Sidelined during 2008’s fourth quarter, they have returned to the residential marketplace in these first few months of 2009, visiting open houses again as they scout neighborhoods and evaluate inventory.  Releasing pent up demand and testing the waters with low offers, they seek value and discover that prices are down as much as 20% from six months ago in all categories.  Many who were priced out of the market previously can now afford to buy more for less, and deals are being made once again. 

Some of the doom and gloom is lifting in Manhattan even as our national and local economies continue to struggle with mounting layoffs and still dysfunctional credit markets.  Even as the downturn persists, buying opportunities are surfacing, and well priced properties are getting attention from multiple purchasers. 

On January 18, a banner headline on the front page of the Sunday NY Times Real Estate section announced:  “For the Brave, the Moment is Now!”  The story reported that first time buyers especially were positioned to take advantage of “reduced apartment prices and interest rates that have fallen to the lowest levels in a generation.”  Similarly, there is increased purchasing activity in the $2-3.5 million market as families demonstrate they can no longer delay gratification, and there is renewed and heightened interest in this sector. 

Last September 15, Jim Cramer, New York Magazine’s “The Bottom Line” columnist predicted that on June 30, 2009, the nation’s housing market would turn around, New York would find its bottom and home prices would become “irresistible.”  By mid year 2009, Cramer expects we will face “the best opportunity to buy since the 1989-1991 real-estate crash.” 

For much of last year’s fourth quarter, seller expectations were misaligned with buyer perceptions, so transactions were stalled.  We’re now in an adjustment period of sorts, having shaken off our market dependence on Wall Street.  While some sellers remain in denial, others are demonstrating flexibility and are negotiating to make deals happen.  Contracts are being signed, but we are returning to 2005 price levels.  Those who bought after 2005 will undoubtedly lose money with a sale now.  Those sellers who will also buy in this market—regardless of whether they are trading up or down—will make up any perceived loss with savings from a reduced future purchase.

Just hold your nose and jump

Current low interest rates are extremely appealing, but there are new reality checks with obtaining financing.  Not only must borrowers have sterling credit scores of 720 or higher and be able to verify income with reams of documentation, but the building must also meet all fine print qualifications previously ignored by underwriters:  like having enough cash reserves to cover 3 months of maintenance, having sufficient fidelity bond insurance, and in the case of new construction developments, having 70% of the building sold or in contract.  Additionally, some lenders are beginning to discount appraisals by 5% because of Manhattan’s sudden new classification as a “declining neighborhood.”

Confounding the financing process, national lenders like Chase, Wells Fargo, Citibank and Bank of America are no longer working with mortgage brokers.  In this climate, delays and the unpredictable can occur.  As a result, financing contingencies have returned to contracts, and many attorneys are also adding a contingency clause that the full amount of the loan is funded at closing. 

In this environment, bottom fishers are unlikely to conclude a deal.  Cemented in place with their low ball offers, these bargain hunters may regret a missed opportunity later, since only with the benefit of hindsight or a rear-view mirror, can the bottom be timed. 

Sellers need to acknowledge that the playbook for 2009 underscores a buyer’s market with changing rules and tightening standards.  They are advised to price realistically, paying attention to value and leaving room to negotiate.  Most bids warrant a counter, because two months down the road, offers may be even lower.  While well priced specialty products might fetch multiple interest quickly, there is a pile-up of inventory in many other categories where scores of similar products compete.  When the product is interchangeable with the rest, only price can make the property compelling.   

The buyers have returned to the marketplace this quarter, and hopefully I’ll be joining their ranks.  “Just hold your nose and jump,” coached my boss and friend Frederick Peters in a supportive email.  No different than other buyers who fear further price declines in a weakening market, I admitted I was hesitant.  Suffering a mini identity crisis as both broker and buyer, I rationalized that even if prices came down more, I wouldn’t get hurt over time if I bought quality merchandise and I had a 5-7 year horizon.  As of this writing in the early days of February, I’m positioned to take the plunge and offer this advice to others:  We’ve neared the bottom, so if you see the property that you’ve been waiting for, don’t hesitate to begin a dialogue.  Make a sensible purchase and acknowledge your opportunity costs.  Come on in—the water’s fine. 

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For February 2009 Mann Report Residential Manhattan Market Watch REVISITING THE CO-OP BOARD REVIEW CHALLENGE By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership In September 2005,…... Read more >

For February 2009
Mann Report Residential
Manhattan Market Watch

REVISITING THE CO-OP BOARD REVIEW CHALLENGE
By Shirley Hackel, Executive Managing Director, Warburg Realty Partnership

In September 2005, I penned a column for this publication entitled “The Co-op Board Review Challenge.”  At the time, transaction prices were rising rapidly, and so were the numbers of co-op board rejections.  As property values escalated, co-op boards seemed to tighten their already stringent scrutiny of purchase applications.  With rising sales prices came the need for proportionately higher incomes and greater liquid assets for buyers.

How will today’s extreme meltdown in the financial markets impact the co-op board’s review of current purchasers?  With declining real estate prices, increasing layoffs, and shrinking portfolios, will boards be more or less rigid?  Under what circumstances might they demonstrate some flexibility?  What is the broker’s role?

The Board’s job is to protect shareholders, and not to facilitate a sale.  Their task is to assess an applicant’s financial wherewithal and determine suitability for tenancy in the co-op’s community.  To this end, they have absolute authority to approve or reject a candidate.  Although they may not discriminate against 14 protected categories (race, sex, age, disability, etc.), they may deny approval for any reason or for no cause, and they are not required to disclose a rationale.  This unqualified right has been upheld numerous times by the courts:  as early as 1959 in Weisner v. 791 Park Ave. Corp., the New York Court of Appeals decided:  “There is no reason why the owners of the cooperative apartment house could not decide for themselves with whom they wish to share their elevators, their common halls and facilities, their stockholder’s meetings, their management problems and responsibilities, and their homes.”

Since boards are not required to give reasons when they reject an applicant, broker and buyer—in collaboration with the co-broker—must make every effort to stack the cards favorably to provide the best possible board presentation.  The more complicated the situation, the more important it is to anticipate reservations and to explain details upfront in a cover letter.  When a board requests additional information, negativism begins to breed, and when this occurs, the spiral can pivot downward dangerously to an unhappy conclusion.  Moreover, when a board seeks to obtain clarity, delays follow, and the process can be stalled for weeks and even months. 

In a declining market, it’s critical to pay attention to the calendar, especially as it relates to the “on or about” contractual closing date.  If a board has not made a decision to approve or reject an applicant by the date specified in the contract, then the closing is automatically postponed for 30 days.  However, if approval is still not received by the adjourned date, then either party has the right to cancel the contract—a potentially devastating situation for any seller in this market.   

While board requirements vary from building to building, and few co-ops have formulas for minimum income and assets, all boards look for good credit, consistent employment and stable income.  My own qualifying rule of thumb is for an applicant to have a debt to income ratio of about 25% or less.  If the proportion is greater or if there is concern about either income or job security, options may be offered to the co-op board:  a guarantee from a family member or friend to ensure that maintenance will be paid—in which case the guarantor also must submit full financials with supporting documentation; a deposit by the applicant or a gift from a family member or friend equal to 1-2 years of maintenance to be held in escrow as security against non-payment of maintenance; or both. 

Stacking the Cards for Approval

In every circumstance, financial information must be stated clearly in simplest terms, so it can be understood by the least sophisticated board member.  All assets as well as all liabilities need to be documented with complete statements, appraisals or opinion letters, and these numbers must match up exactly.  If a business represents a portion of the purchaser’s assets, an audited statement or corporate tax return is required.  An accountant’s letter can explain how a privately held enterprise is valued.  If tax returns fail to show consistent or rising income, an appending note can account for declines.  If there’s a trust fund, the administrator or trustee should quantify whether there’s easy access to funds, and a copy of any trust instrument should be provided.  A cover letter from the buyer can clarify any past or pending lawsuits including divorce or separation settlements.  A copy of pertinent pages of a divorce agreement should also be included, if applicable. 

In addition to a full financial profile, with generally two years of complete tax returns, reference letters serve to tell the rest of the buyer’s story.  Social letters should talk about the purchaser’s background, education, charitable, club and leisure interests.  Business references should highlight specific accomplishments and demonstrate the buyer’s character.  When reference letters are generic and lack substance, they fail to contribute to an emerging profile, and can actually detract from the presentation. 

It’s never enough for a broker to bring about a meeting of the minds between buyer and seller of a Manhattan cooperative.  Co-op boards are notoriously tougher than banks in their review of applicants.  Today’s challenging marketplace requires dedicated diligence and increased cooperation between co-brokers to provide the best application possible so that board members can make sound decisions and give the corporation’s “unconditional consent” in order to move to successful closings.   

Shirley Hackel
Executive Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For January 2009 Mann Report Residential Manhattan Market Watch CHALLENGES CONTINUE IN 2009 FIRST QUARTER By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership Throughout 2007, Manhattan’s…... Read more >

For January 2009
Mann Report Residential
Manhattan Market Watch

CHALLENGES CONTINUE IN 2009 FIRST QUARTER
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

Throughout 2007, Manhattan’s residential marketplace managed to sidestep a severe nationwide housing decline.  As long as our local market was driven by Wall Street’s escalating engines and fueled by swelling bonuses, we were immune—albeit temporarily—to a countrywide slump.  Not so for 2008.  Last year was a changing market for us, and by September, the winds had turned. 

As early as March 2008, New Yorkers especially were stunned by the fall of Bear Stearns and then shaken by an unrelenting succession of dire financial news, including the failures of Lehman, Wachovia, Washington Mutual, AIG, among others—and by the resultant nearly daily stock price bounces.  These extreme institutional calamities caused thousands of very serious individual causalities.  By the 4th quarter of 2008, Manhattan real estate was feeling a shared pain with Wall Street, and trading of properties paused while the credit crisis deepened amid increasing bankruptcies, widespread layoffs, declining city revenues and deteriorating consumer confidence.  Although deals were being made, fewer buyers went to contract, and prices dropped in all market segments—as much as 20% in some cases at the high end, and an estimated 10-15% in the low to mid ranges.  At the same time, some buyers who were already in contract renegotiated prices as much as 10% down, while others cancelled agreements and walked away from deposits.

It was hardly a typical seasonal deceleration which generally starts Thanksgiving and ends after New Year’s Day.  Last year’s slowdown began weeks before the presidential election, and it will probably continue until well after the Obama inauguration.  For much of 2008, the pace of trading slowed.  Anxiety and uncertainty led to indecision and inaction.  While some purchasers stepped up cautiously to seize an apparent advantage, many more waited on the sidelines with their searches on hold concerned not only about declining home values but about diminishing bonuses and decreasing job security. 

Some Emerging New Realities

A disparity between new development condos and resale units is widening, particularly with respect to securing financing for these differing products.  With a seeming “Catch 22” twist, banks are requiring new projects to be 50% sold to ensure construction completion before committing to loans.  The current caveat creates additional difficulties for borrowers already faced with tightening lending standards and increased down payment conditions.  For the most part, these buyers signed contracts as many as two years earlier in a very different economic environment.  Today, even if these purchasers are still employed and have stellar credit, they may not be able to secure financing if less than 50% of the project’s units are sold.  Obtaining a mortgage for a resale product is far less arduous.   

Another current development is the return of the mortgage contingency in a contract.  For all the years when the market favored the seller, the seller’s attorney would almost routinely strike out the financing contingency in the standard pre-printed Blumberg form.  With the decided shift to a buyer’s market today, however, not only are attorneys insisting on retaining the financing clause, but a handful are inserting an additional stipulation that the loan is actually funded at closing—recalling a number of occasions last August when some lenders failed to arrive at the closing table with the full loan amount. 

Difficulties securing financing is not the only reason today’s pool of buyers is shrinking.  Significant numbers of financial professionals are sidelined because of layoffs, reduced bonuses and job insecurity.  In addition, as the dollar strengthens, fewer foreigners are purchasing Manhattan condominiums.  Moreover, there’s very little discretionary trading up or down in the current climate.  Even those who have the ability to buy are choosing to wait and see for the moment or opting to rent.  For the most part, those making buying decisions are dealing with real life issues such as marriage, birth, death, divorce and relocation. 

Despite an increasing number of one and two bedroom apartments, product supply is expected to remain at consistent levels for a number of reasons.  While it’s logical to anticipate that a fair amount of distressed sales will come to market especially from financial professionals who have lost their jobs, as of this writing—on the Sunday following Thanksgiving—that’s not occurring.  In addition, there will be fewer new construction projects in 2009, because developers are less able to secure affordable financing and are more cautious about beginning new developments during a downturn.  With less new condo inventory, more absorption of old stock will be possible.  Additionally, we’re seeing more and more sellers offer rental options, applying rents to a future purchase.  At the same time, a new group of sellers is considering coming to market:  empty nesters approaching retirement who are riding the elevator down on their stock portfolios are looking increasingly to their Manhattan real estate as their most significant asset, and are contemplating trading down sooner than they had expected as a stop loss to further declining home values. 

Our local real estate market is impacted heavily by the condition of the financial services sector.  In our boom times, it’s what kept us afloat and set us apart from the nation’s housing decline.  Since Wall Street’s financial professionals live here, we are perhaps even more vulnerable now than the rest of the country as financial institutions struggle to re-invent themselves.  Unlike the rest of the nation, however, Manhattan remains primarily a user market, and as a global city, this is where internationals come to work and play.  With time, balance will return to our marketplace.  We’ve demonstrated resilience before, and we will again going forward.  Nonetheless, a challenging first quarter for 2009 lies ahead.

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For December 2008 Publication Mann Report Residential Manhattan Market Watch Year End Musings By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership The world is not coming…... Read more >

For December 2008 Publication
Mann Report Residential
Manhattan Market Watch

Year End Musings
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

The world is not coming to an end, and we are not headed to the final Armageddon, but the mood going into 2009 is sober. The challenges of the current economy will make compelling page-turning history.  With the benefit of time, we’ll gain more perspective and new insights, and hopefully we’ll have learned some hard lessons.  If excess, greed and folly brought us to this place, then moderation, reason and old fashioned common sense will guide us into the New Year.  

For much of 2008, our economy behaved like a Las Vegas magic act.  With seeming smoke and mirrors and a fair amount of illusion, Wall Street icons like Lehman and Bear Stearns vanished; global credit dissolved; Merrill Lynch was consumed by Bank of America; corporate profits and retirement portfolio wealth evaporated; and tens of thousands of jobs disappeared.

Whoever said April is the cruelest month never lived through September and October of this past year.  One confounding event followed another:  the Treasury takeover of Fannie and Freddie Mae; the federal bailout of AIG; the reclassification of Morgan Stanley and Goldman Sachs as regulated bank holding companies; among others.   As one devastating shoe dropped after another, the stock market reacted with striking plunges down and remarkable recoveries up in almost daily whiplash swings.

Over time, the surviving financial institutions will reinvent themselves, and the credit markets will recover and stabilize.  For the moment however, consumers will tighten their belts, halt leveraging to the max, stop using mortgage and equity lines of credit like ATM machines, and live within their means.  It’s been a tough year of painful declines in stocks, jobs, retirement portfolios and home values. 

And on the Manhattan housing front…

Nonetheless, Manhattan real estate continues to fare better than the rest of the nation.  Thankfully, foreclosures are few in Manhattan, though they are on the rise in the other boroughs.  The predominance of co-ops in our marketplace with their restrictive financing limits turns out to be a built-in protective blessing. 

Two new laws, one on the federal level, the other on the state level, will impact our market in the near term.  On December 20, 2007, President Bush signed into law The Mortgage Forgiveness Debt Relief Act which overturned the 80/20 co-op rule that had been in effect since the early 1940’s.  Previously, if a co-op derived more than 20% of its income from non-shareholder sources like commercial rents, then it lost its co-op status, and shareholders forfeited the tax benefits of writing off their proportionate share of the building’s underlying mortgage interest and real estate taxes.  As a result, co-ops were forced to cap store rents keeping them artificially low so as not to jeopardize shareholders’ tax advantages.  With the new law, co-ops no longer need to restrict commercial income, so they can charge fair market rents for commercial spaces and won’t have to raise maintenance charges or imposes assessments.

On the state level, the 421A law that rewards developers with property tax abatements has changed.  Effective July 2008, to qualify for tax abatement status, developers must set aside 20% of their units as affordable housing, and these may no longer be built apart from the property’s luxury portion.  At a time of market uncertainty with diminishing sources for financing, this revised law creates a plethora of new problems for developers seeking to obtain tax abatements.  But the good news for our market is that there will be less new construction, permitting existing supplies to be absorbed.

Additionally, there’s real worry concerning Manhattan’s new condo projects that have yet to finish construction, where buyers went to contract as many as two years ago.  Lenders today are taking another, more stringent look at these new developments, and they are scrutinizing the merits of both the projects and the borrowers before making loan commitments. 

During the record breaking years of 2006 and 2007, rapidly escalating prices were fueled largely by spectacular though false Wall Street profits, by remarkable though obscene bonus awards, and by easy though risky credit.  As it turns out, the overheated, runaway market of our recent past sat on a precarious foundation.  Today’s market is correcting itself, not crashing. 

The stats of 2008’s fourth quarter will not dazzle.  Volume is down, but sales are not eroding.  However, we are seeing some new buyer and seller behaviors.  Sidelined purchasers are keeping watchful eyes on prices, but so far bargain basement deals are few and far between.  Those who had been priced out of the market before are wondering whether new entry points will appear.  We’ve seen a fair amount of buyers walk away from 10% deposits, and others who have successfully renegotiated with sellers 5-10% off deals already in contract.  More and more sellers and developers are offering to pay closing costs and/or a portion of tax and maintenance charges.  Some sellers are offering to provide financing; others are considering rental options, offering to apply rental expenses to a future purchase.  A handful of Internet companies have sprung up trumpeting to “sell and rent back your house.”  Attorneys for buyers are beginning to insist on contractual financing contingencies—which for years have been crossed out of standard contracts--and a couple have added a clause to insure that the lender brings the committed funds to the closing table.

For real estate, it’s important to take a long term view.  Unlike stocks, bricks and mortar don’t lend themselves to panic selling, and most sellers are not motivated by fear to take action.  In the short term, buyer and seller expectations need to be managed with sensitivity and sensibility.  Forecasters are predicting that our environment will look better by early spring 2009. 

In the meantime, my very best wishes for a healthy and peaceful holiday season and New Year! 
 
Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For November 2008 Mann Report Residential Manhattan Market Watch NAVIGATING THROUGH THE UNCERTAINTIES By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership A four week advance publication…... Read more >

For November 2008
Mann Report Residential
Manhattan Market Watch

NAVIGATING THROUGH THE UNCERTAINTIES
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

A four week advance publication deadline is tough in any market, but in perilous times like these, when everything hangs in the balance, it seems even more challenging.  Given the recent shakedown of financial institutions, where banks like falling dominos are failing at worst, or merging at best, real estate activity has slowed predictably.  While I’m not in the business of forecasting, it’s safe to expect that trading will be down markedly for the fourth quarter.  This year, a seasonal pause will probably stretch from before the presidential election on November 4th through Thanksgiving and the holiday season. 

As Wall Street reacts to daily news events, wild stock price swings have become regular occurrences.  A series of severe economic setbacks continues seemingly uninterrupted.  Beginning in the summer of 2007 with the subprime mortgage fiasco, and spreading quickly into a global credit crisis, the institutional and individual casualties have been piling up:  Bear Stearns, Lehman, AIG, Freddies Mac and Mae, Merrill Lynch, not to mention the mounting layoffs and rising foreclosures.  On September 15th, a precipitous 500 point stock market decline was trumped fourteen days later by a 777 point drop on September 29th.  As of this writing, the full impact of the Fed’s emergency $700 billion bank rescue plan is yet to be seen.

It will take time for Wall Street to reshape itself when it emerges from the current tempests.  Darwinian principles will hopefully lead to a strengthening of the surviving financial institutions that will include fewer depositories and investment banks, and fewer hedge funds, venture capital and private equity companies.  One wonders how Wall Street’s role as the driver of the city’s economic engine will change.  Up until recently, Wall Street’s position as the world’s financial capital served to insulate Manhattan real estate from housing’s overwhelming decline nationwide. 

Wall Street’s protective buffers are diminishing however.  According to an October 3rd press release from the Division of Budget, New York’s Governor Patterson anticipates a 43% decline in bonuses for financial professionals in 2008, more than doubling projections made earlier in July, suggesting that bonus awards this year will fall to 2004 levels.  Additionally, DOB forecasts that more than 40,000 jobs will be cut in New York’s financial services sector—representing a sizable percentage of Manhattan’s real estate buying audience.

Weathering the Storm
How are we to navigate through the growing uncertainties and instabilities?  How long will we stay at bottom? 
In any market, the broker’s role is to plot a course of action that steers buyers and sellers to successful transactions.  Today a good dose of patience and insight are requisite.  Sellers are advised to find a delicate balance between restraint and negotiability—using reason to set realistic prices and demonstrating flexibility to evaluate offers.  If you’re a seller who needs to sell now, your apartment will fetch a price from a buyer who needs to buy now.  The challenge is to recognize and accept the realities of the marketplace.  Clearly, we’re witnessing a prolonged shift in the pace and tenor of the market. 
It’s increasingly important for sellers to recognize and appreciate real buyers.  And it’s up to experienced brokers to present offers in the best light possible.  Persuasively outlining the strengths of a purchaser—particularly the financing wherewithal to close—lends validity to a bid and encourages negotiation.  Effective brokers must be vigilant during every step of the process leading up to a successful closing, identifying areas for compromise and anticipating obstacles.  Since time is the enemy of any deal, presenting new information in a timely manner is imperative.  Damage control requires a level headedness as well as an understanding of comparable values.
 
For buyers, a long term horizon is essential.  Purchasers with stellar credit and excellent employment histories are in strong positions to capitalize on depressed prices in anticipation of a future upturn.  Buyers who adopt a proven Warren Buffet principle and buy for the long term, are concerned more with buying quality than bottom fishing.  “It’s far better to buy a wonderful company [property] at a fair price than a fair company [property] at a wonderful price.”  If the price advantage you’ve been waiting for comes this month, it is recommended that you seize the buying opportunity.

A degree of pain in the current real estate marketplace should be acknowledged.  According to a 3rd quarter market report by Streeteasy.com, 291 contracts were cancelled from July through September as buyers walked away from significant deposits.  New construction buyers are probably most at risk, as these purchasers signed contracts as many as two years ago, and when they find themselves out of work, they are unable to meet loan conditions.  In some instances, developers are offering these buyers the opportunity to cancel a contract if they purchase a unit of lesser value.  
A number of investors have been calling to inquire about distressed sellers.  With stock portfolios in the doldrums and funds for new ventures dried up, these investors are searching to uncover opportunities with real property.  As of this writing, however, we have yet to see a rush to market of distressed sales.
 
At this point in time, more government regulation is welcomed to repair what’s been broken as surviving financial institutions try to create a new foundation that doesn’t allow this distress to occur again.  Our current financial turmoil was caused by extreme leveraging, lax lending and astonishing greed.  Hopefully, sound economic policies will be defined after the election, and a renewed flow of capital will follow.  The upcoming winter months are not expected to be particularly momentous for real estate, and leftover overpriced apartments will continue to be reduced in price until they are absorbed or removed from inventory.  The heady days of wild appreciation fueled by obscene bonus money and excessive spending are gone.  That gig is up.  Budget matters and quality still rules the day. 

A humble note of thanks:  As we approach Thanksgiving, I’d like to thank my readers.  I look forward to your comments always, and I invite you to send me your suggestions for topics I might explore in future issues.  May you and your loved ones be blessed with good health, prosperity, peace and well-being.   

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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For October 2008 Mann Report Residential Manhattan Market Watch THE FOURTH QUARTER CHALLENGE By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership October is a strong month on Manhattan’s…... Read more >

For October 2008
Mann Report Residential
Manhattan Market Watch

THE FOURTH QUARTER CHALLENGE
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

October is a strong month on Manhattan’s real estate calendar.  Following the Jewish High Holy Days—which this year come “late” on the heels of seasonal summer doldrums—the fall is generally anticipated to be a sharp selling period.  Usually after Labor Day, there’s a welcome rush of new offerings.

As I write this column for October publication, on a glorious last Sunday in August, the economic news continues to be uncertain.  There are new worries about the stability of recent commercial real estate loans.  In late August, came reports that Harlem’s Riverton Houses might not be able to make a September mortgage payment.  The seven building complex of more than 1,200 rental units stretching from 135th to 138th Streets between Madison and Fifth was sold to investors in 2005 for a reported $130 million.  But values have not escalated at the rate expected, and rents apparently are not covering operating costs and debt service. 

Additionally, there are prolonged concerns from banks and financial institutions about plunging earnings, rising layoffs and shrinking bonuses.   As summer winds down, there is news that Lehman Brothers will downsize and lay off 1,500 employees or approximately 6% of its workforce—following nearly 6,000 pink slips previously handed out since June 2007. 

While many in the financial industry are fretting about job security, still other financial professionals are questioning their earning potential.  With the exception of star traders and dealmakers, these professionals are expected to bring home 25-40% less in bonus earnings than last year—according to Alan Johnson, president of Johnson Associates, a company that tracks Wall Street compensation.

What impact will this have on our local market? 

Those employed in financial services related businesses have comprised upwards of 25% of Manhattan buyers.  As a result of job losses and declining income, there will be fewer buyers and less money to spend this quarter.  The silver lining in this cloud, however, is that for the remaining 75% of the buyer audience, there will be less competition for choice properties. 

In the not too distant runaway market of the recent past, when bonus money was explosive and when lending standards were lax, it was the financial professionals who stepped up in competitive bid situations and won most of the overbidding scrambles.  For the most part, today many are sitting on the sidelines, fearful and anxious about their own personal futures, and paralyzed to make a real estate trade.

The uncertainties of the current financial environment are also impacting other aspects of our local market.  Not only must buyers demonstrate with reams of documented verification that they qualify for a loan, they must also demonstrate to a co-op board that they can withstand the vicissitudes of fluctuating bonuses and shrinking equity portfolios.  Some boards dismiss bonus income entirely, while others discount it by about a third. 

Joining financial professionals as the weak link in today’s market are first time buyers.  Despite a surplus of one bedroom apartments, these buyers are often unable to take advantage of discounted prices because it’s harder for them to get financing.  Lenders are requiring not only stellar credit scores, but larger down payments.

Tightening credit has also curtailed new development projects.  With fewer institutional lenders, it’s extremely difficult to get financing especially for ground-up residential condo projects.  As a result, construction has slowed—but that’s good news for our market, not bad, since the building slowdown allows for the absorption of available inventory.

Recently, I counseled sellers who said they were reluctant to list in a buyer’s market.  It’s all about the spread, I explained.  As long as they were able to buy and sell in the same market, what mattered was the difference between the two transactions.  How much over what was realized from the current sale could be added to the next purchase?  The sellers weren’t convinced, and we are continuing that conversation.

This season is as good as any other for buyers and sellers to get on with life and the business of buying and selling Manhattan real estate.  Time waits for no one, while families expand and relocate, children grow and closets become overcrowded.  For the immediate user, the current market offers significant opportunities.  Investors, on the other hand, are forewarned that this is not the climate to flip a commodity for a quick profit.  Those, however, who have a long term perspective of at least five years, will realize significant appreciation. 

Although interest rates remain historically low, credit is expected to stay tight through the next four quarters, so the challenges will continue.  To attract the attention of today’s buyers who are more disciplined with their decision making, sellers need to demonstrate restraint when pricing and reason when negotiating.  Then we can look forward to increased activity with balanced trading at stable prices in this last quarter of 2008.  

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For September 2008 Mann Report Residential Manhattan Market Watch STABILITY FOR SEPTEMBER By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership   Since the subprime crisis first…... Read more >

For September 2008
Mann Report Residential
Manhattan Market Watch

STABILITY FOR SEPTEMBER
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

 

Since the subprime crisis first erupted in the summer of 2007, we’ve endured a steady progression of one proverbial shoe dropping after another.  What began last July as a U.S. housing debacle spread quickly into a complex tangle of interconnected crises at financial institutions worldwide.  With both debt and credit markets in turmoil, the meltdown deepened and some hedge funds closed, a number of mortgage providers declared bankruptcy, and banks labored.  When Bears Stearns, once the 5th largest U.S. investment bank, failed last March, and JP Morgan Chase rushed in with an emergency takeover backed by a $30 billion Federal Reserve loan, even thick skinned New Yorkers were jolted.  Then in July, shares plunged at struggling financial institutions like Lehman Brothers, Citigroup and Merrill Lynch.  After that came the near collapse of the two mortgage twin giants—Freddies Mac and Mae. 

It’s been a complicated year to say the least.  Too many factors are coalescing to bring down the economy:  a fragile dollar, tightening credit, soaring commodity prices, skyrocketing energy costs, staggering job losses, increasing foreclosures, mounting credit card and car loan delinquencies, continuing bank write downs, eroding consumer confidence. 

Remarkably, Manhattan real estate is displaying great fortitude as it weathers the economic storms and housing downturn.  Of course, different segments of the market are behaving differently.  The top end remains unchanged, if not slightly higher.  The record breaking purchase price in July at the 1928 Rosario Candela building at 2 East 67 Street, also known as 855 Fifth Avenue, was a surprise since the apartment had been taken off the market in February when there were no takers at the then $40 million asking price. The full floor, 6000 square foot co-op with 11 foot ceilings, 5 fireplaces and Central Park views closed reportedly at $48 million.  Another five bedroom beauty, this one at 1030 Fifth Avenue, a prewar designed by renowned architect J.E.R. Carpenter, went to contract in less than a week last May for just shy of 3% below the $34 million price tag—the 15 room trophy apartment overlooking the park has not yet closed as of this writing.

In other parts of the market, transactions are more price driven.  It’s taking longer to sell, and volume and prices are down.  A flood of new condominium developments are not only competing with each other for buyer attention but also with established postwar and prewar resales in proven neighborhoods.  While some developers are cutting prices, many more are making concessions in the form of upgrades, paying a portion of closing costs or prepaying several months of common charges.  On a daily basis, we read listing updates announcing that prices have been slashed, dropped, adjusted and improved.  Many of these prices, however, are not so much coming down, as they are moving from unreasonable levels to more realistic targets.

Certainly the economic meltdown weighs heavily on our market psychology.  With the country wondering what’s going to happen next, there are challenges for buyers and sellers going forward.  Wary about job security and the direction of the economy, sellers are anxious, and buyers are skittish. 

Patience and expertise are required to get deals done today.  It’s taking longer to get contracts signed and longer to secure bank financing.  There are fewer choices for lenders and mortgage products.  Requests for more documentation and second appraisals are common.  Underwriters and lenders are under enormous pressure to make judicious decisions to reverse images of past recklessness.  All the while, however, interest rates remain favorable. 

Buying and selling at the same time in this market requires skillful stress management.  When the pace of trading was quick, there were more sellers who looked to identify their next move before offering their own property for sale or they risked finding themselves homeless.  Today, when that happens, we are beginning to see a handful of buyers walk away from considerable deposits because of the anxiety level of owning two properties.  For sellers unable to manage the angst, it’s better to sell first, and buy later. 

In challenging times, co-op boards tend to get tougher so qualifying buyers is as important as ever.  When bonus income can’t be relied upon, an offer of a strong guarantor or maintenance money in escrow can often provide the comfort level needed for approval.  I see the latter as an insurance policy well worth the effort.

The next three months leading up to Thanksgiving 2008 and the new year of 2009 should present multiple opportunities.  This September, we’re expecting a new crop of properties to come to market, since sellers have been waiting for seasonal summer deceleration to pass to list after Labor Day.  Homeowners are cautioned to use discipline to set realistic prices.  Testing the market with an inflated asking price wastes precious time—and the time for active looking and decision making is from now until the distractions of the holiday season.  Buyers are advised to buy quality.  Those who continue to nurse sideline mentalities will miss opportunities for we may have already hit bottom. 

Three more quarters of difficult economic times are expected.  We’ve dodged the worst and have outperformed the nation.  Barring the unforeseen, Manhattan prices will probably remain flat for the balance of 2008 and into 2009.  The advice is always to work with an experienced professional to navigate any choppy waters and steer you to the firm ground of your next port. 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For July 2008 Mann Report Residential Manhattan Market Watch TIMING MATTERS By Shirley Hackel, Managing Director, Warburg Realty Partnership Dear Prudence Beier:  Congratulations!  Your co-op…... Read more >

For July 2008
Mann Report Residential
Manhattan Market Watch

TIMING MATTERS
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Dear Prudence Beier:  Congratulations!  Your co-op contract is fully executed.   Patience and contingency planning will be critical at this point and going forward to get you through the next steps of the board review process before you can set a definitive close date and confirm a move. 

Dear Prudence Cellar:  Ditto.  And ditto.

While the co-op Contract of Sale stipulates how many days a buyer may take to submit required documents, there are no uniform standards for how and when a managing agent and co-op board must respond.  In theory, upon receipt of the package, the managing agent will do a credit and background check and look to see that the required documents are complete and submitted in good order before turning them over to board members.  In turn, a responsible board will examine the papers and accept or reject a candidate using good business judgment in a timely manner.  In practice, however, a review can be as short as two weeks, or as long as half a year.  While an unusually long review doesn’t necessarily mean that the buyer will be turned down, delays almost always have consequences. 

When both buyer and seller are in approval-limbo, much is at stake.  Mortgage commitments can expire. When nothing is really certain, it’s tough for a buyer to lock in a rate.  When a seller must vacate one place and is clueless about the next purchase, there are real issues about where to house the children and pets.

Not all managing agents nor all co-op boards operate the same way.  Not only do requirements vary from building to building, but procedures differ widely.  Only a handful of managing agents will agree to do a credit check in advance of receiving the full package.  Some will review a package thoroughly and even make recommendations to the board.  Others will check only that the documents are sequenced in the requested order.  Still others insist that the buyer’s broker be present while an agent reviews every enclosure. 

It is the brokers’ responsibility to present a board package in the best light possible.  To that end, there needs to be sufficient time for the paperwork to be reviewed first by the buyer’s broker and then by the seller’s broker so that any improvements can be made.  If the information offered is incomplete or unclear, getting additional clarity could hold up the process unnecessarily for weeks. When a board asks for additional information, negativism begins to breed. 

Some boards meet on pre-set dates for meetings and interviews, others meet as needed, still others do not say.  Some buildings are known as being notoriously slow, and buyers in those co-ops should be forewarned by their brokers.  It is important to recognize that at this stage of the transaction, the applicant is on unequal footing with the board, and is well advised not to take anything personally, including any delays. 

It is equally important to acknowledge that the board is made up of individual shareholders who serve as unpaid volunteers.  They have jobs, families and lives apart from their responsibilities as board members.  When there are setbacks, the accepted protocol for communication is between brokers and managing agent, buyer’s attorney and seller’s attorney, and only the seller directly with the board. 
 
“Everyone is always concerned with ruffling the feathers of board members,” observes Reis Cooper LLP attorney Alan Reis who represents co-op boards and lenders.  “We have to believe that board members try to act quickly.  But if someone misses a July meeting, and the board doesn’t meet in August, then we’re staring at September as an interview date.” 

It’s important to acknowledge also that unless “time is of the essence,” the close date in a contract in New York, is “on or about” a certain day.  In other words, it’s a target or an approximation of a closing date and rarely coincides with the actual close.

Dear Prudence

It’s not unusual for buyers to become impatient with the review process and complain that the board is being inconsiderate or worse.  Karen, a recent buyer in contract to sell her Westchester home and in contract to purchase a West side co-op, is not alone in her sentiment when she emailed on successive days that she needed to confirm with her movers, and why would she even want to live in a building whose board demonstrated so little respect for others.  “I have to get on with my life, and I'm losing patience with this deal,” she objected in frustration.  “When this is over,” I wrote back to her, “and you are a shareholder, I hope you will become a board member and try to institute some reforms.  The system is certainly not perfect.”

Indeed, the practice is imperfect.  And delays have considerable consequences.  The Contract of Sale gives both buyer and seller the right to cancel the contract if a board interview does not occur 30 days after the “on or about” contractual closing date.  While I’ve never heard of this occurring, and the attorneys I’ve polled haven’t either, buyers and sellers and their brokers and attorneys are cautioned to keep this from occurring—especially in a changing market.   
 
A number of years ago, REBNY published a “Co-op Admissions Guide” with recommendations on how a board should conduct the process, concluding that “timely review is in everyone’s best interests”.  When a board reviews an application, buyers and sellers alike must put their moving plans on hold.  From the co-op board, we expect courtesy, fair treatment and good judgment.  And from you dear Prudence, if you would only work from the inside to institute some practical standards … we might greet a brand new day. 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

 

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Mann Report Residential Manhattan Market Watch CONSIDERING PROFESSIONAL ETHICS By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership Week Three of the NYRS course for top residential…... Read more >

Mann Report Residential
Manhattan Market Watch

CONSIDERING PROFESSIONAL ETHICS
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

Week Three of the NYRS course for top residential brokers covers Professional Ethics, a critical issue and compelling area of study, especially in the light of increasing lapses in moral behavior by individuals in every arena, from corporations to politics to religion.  As brokers, we make decisions and take actions daily that affect the interests of others.  How we go about our business greatly impacts the results we achieve. 

As licensees of the state, we are required to comply with the law.  However, compliance is not the same as ethics.  Obeying the law is one thing, but doing what is right and morally responsible is more than doing what is legal. 

When we are grounded in ethical values, we conduct ourselves with decency, fairness and respect for others.  We shun and avoid those who are unscrupulous or corrupt, for we have little tolerance for dishonesty.  In our business dealings, ethical questions arise in the grey areas between right and wrong when there is a conflict of interest or a dilemma between values.  

Alan Goodman, Master Trainer from The Institute for Global Ethics, recognizes three specific dilemmas:  conflicts between Truth versus Loyalty, Self versus Community, and Justice versus Mercy.  Referring to an individual’s “ethical fitness,” he advocates “doing the right thing” and valuing good over personal gain or self-interest.  

As brokers, we are hired to promote and protect the interests of our buyers and sellers.  One of the examples used in class referred to the property owner who tragically jumped to his death from the apartment’s window.  The law says that we must protect the seller’s confidentiality, and since this detail is not material to the apartment’s sale, then we should not volunteer this fact.  However, are we obliged ethically to disclose this information to a buyer?  No, is the answer.  If asked directly, we can not lie, but we are not morally obligated to reveal this fact.  In this instance then, which is the higher right?  Truth?  Or Loyalty?

Similarly, when we represent an estate, divorce or celebrity sale, we are not obliged to disclose personal information.  Our fiduciary responsibility is to protect the privacy of our clients.  

We know implicitly that it is wrong to misrepresent and make false or misleading statements.  But what about full disclosure of a property’s past problems, if known, which can fall into the grey zone between right and wrong?  Often the sin of omission becomes the sin of commission when a broker is silent with respect to a property’s past problems such as a history of mold or leaks now resolved and painted over, or vermin infestation now cured.  Chances are this damaging information will turn up during an attorney’s due diligence and reading of board minutes.  Withholding such information can derail a potential sale and cause harm to the client.  When disclosed upfront, these obstacles become non-issues.  Similarly, it’s important to obtain all the facts pertinent to a sale.  What is known about an adjoining empty lot where a new development might obscure a view?  Knowledge is power, and timely disclosure is essential for a smooth and successful transaction. 

Doing The Right Thing

One of the checks and balances Goodman discusses in determining right vs. wrong behavior is to ask whether the action can pass the smell test.  Issues that are obviously wrong stink.  Goodman recommends that the individual ask:  “How would I feel if this decision were published?  What would my parents or children think?”  

Ethical fitness requires consistency.  When values are unshakeable, integrity builds.  When you treat others as you would want to be treated, there is understanding and appreciation for the other side—even compassion.  Good faith facilitates cooperation, and respect encourages flexibility.  As negotiators, our job is to bridge distances, and when there is trust, we are most successful.

Increasingly, our co-brokers are becoming as important as our clients.  When I first started in this business, well before the time that exclusives became the norm, I had a buyer on one side of the transaction and a seller on the other.  Now, nearly always, I interact directly with one principal and a broker who represents the other principal.  The way competing brokers communicate and deal with each other is incredibly significant.  Honesty, cooperation and fair play are paramount.

REBNY’s Code of Ethics and Professional Practices defines standards of acceptable behavior within our industry with a comprehensive list of “shall” and “shall not’s.”  A peer group enforces ethical conduct and hears complaints, grievances and disputes, seeking to protect the interests of the community of  buyers and sellers as it provides for fair treatment to all transaction participants. 
 
Despite the competitive nature of our industry, and perhaps even because of it, ethical behavior is both the means and the end to doing good business.  When you care about honor, you can be relied upon to do the right thing—and as one happy client refers another, one successful deal leads to another.

There is a host of situations in our business where moral reasoning is required.  Next month, I’ll take a look at specific ethical issues, and I welcome your thoughts. 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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For May 2008 Mann Report Residential Manhattan Market Watch IS THE GLASS HALF FULL? By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership All’s not quite right with the world. …... Read more >

For May 2008
Mann Report Residential
Manhattan Market Watch

IS THE GLASS HALF FULL?
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

All’s not quite right with the world.  As the credit squeeze deepens, financial insiders tell us that there is more bad news to come with more write downs at banks before things get better.  The work out period, they acknowledge, will be longer than previously expected or hoped for.  What began as a subprime U.S. real estate debacle turned quickly into a complex tangle of interconnected crises at financial institutions around the world. 

The collapse of Bears Stearns, once the 5th largest U.S. investment bank, jolted New Yorkers especially, and sent shockwaves through the nation.  The emergency takeover by JP Morgan Chase, backed by the Federal Reserve with a $30 billion loan, averted a near bankruptcy for the failed bank.  A year ago, Bear Stearns stock was trading for $170 a share.  On March 14, just before the bombshell news of the pending purchase for $2—which days later was upped to $10—the book value was $80 and shares were selling for $30.

For Manhattan real estate, the Bear Stearns bust triggered a decided week long pause.  For several days, activity came to a near halt before resuming.  On the Monday following the shocking takeover news, three of my active buyers called to say that now was not the right time to be looking to make a purchase.  Ten days later, two called back to ask what they had missed.  Meanwhile, my Bear Stearns buyer and I worried whether he would be approved by the co-op board.  After a week-long cliffhanger, he was.

For Wall Street, the economic slowdown caused the worst first quarter in 5½ years, as the Dow slid 7% and NASDAQ plunged 14%.  Yet, on April 1st at the start of the 2nd quarter, the Dow jumped 391 points.  As Wall Street reacts to daily news events, wild stock price swings have become a regular occurrence.  

For Manhattan real estate, first quarter figures show that while the volume of  transactions was down, prices climbed.  The averages, however, continue to be skewed by closings at The Plaza and 15 CPW.  Between January and March 2008, 71 apartments sold for more than $10 million—close to half of them condominiums whose purchasers went to contract as many as 12-18 months earlier.

First quarter statistics coming from the Bureau of Labor nationally and from New York City’s Independent Budget Office locally are sobering.  Nationwide, job losses totaled 207,000:  26,000 in January; followed by 101,000 in February and 80,000 in March.  According to economists, such a severe three month contraction in the absence of a recession has not occurred since the 1950’s.  The biggest job losers were in construction, with more than 50,000 jobs disappearing in residential building. 

In New York, the City’s Independent Budget office forecast that layoffs in the financial sector alone would approach 12,600 in 2008 and 7,600 in 2009, revising an earlier estimate of 2,000.  According to Bloomberg.com, more than 34,000 jobs have been cut already on Wall Street since July 2007.  Among them are 6,200 layoffs at Citigroup; 4,990 at Lehman; 3,650 at Bank of America; 2,940 at Morgan Stanley; 2,600 at Washington Mutual and 1,500 at UBS.  Approximately half of Bear Stearns 14,000 employees are expected to receive pink slips. 

What does this mean for Manhattan real estate? 
As the pressures mount for Wall Street professionals, the economic meltdown weighs heavily on market psychology.  Uncertainty has stalled action, and many apartments are taking longer to sell.  Sellers are anxious, and buyers are skittish.  This is a market that requires patience and broker expertise.  It’s also a market whose success depends on brokers and co-brokers working together to make deals happen. 

Are property values diminishing?  Maybe, for some, and no for others.  The properties that are selling are priced just right or have sellers who are willing to negotiate.  The buyer pool has shrunk, as more purchasers sidetracked by bad news have moved to the sidelines.  Fears of recession are making many wary.  Despite the challenges, however, the current market offers substantial opportunities—especially for the strong buyer who can shave dollars off the asking price for an all cash, unencumbered deal. 

Inventory of quality resales remains low—which will help the city to withstand the problem of a housing stock surplus that’s plaguing the rest of the country.  The credit squeeze has made it nearly impossible for developers to secure conventional financing unless a project is in part presold.  With permits down by 38% this past quarter, there will be less new construction, so there will be time for the older projects and those just coming to market to be absorbed.  To compete with the huge inventory of new developments, some sponsors are cutting prices, and many more are more willing today to make concessions in the form of upgrades or to pay a portion of closing costs.

Whether or not the U.S. enters a recession, as many economists think, 2008 continues to be a complicated year with challenging 2nd and 3rd quarters ahead. Despite the difficult times we find ourselves in, real estate continues to be the most outperforming asset.  If your perspective is long-term, the glass will soon be full again. 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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April 2008 Mann Report Residential Manhattan Market Watch CHARTING TROUBLED WATERS By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership The financial seas that we currently navigate…... Read more >

April 2008
Mann Report Residential
Manhattan Market Watch

CHARTING TROUBLED WATERS
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

The financial seas that we currently navigate are murky.  According to economists, some more bad news is expected in this second quarter of 2008, before the nation recovers in the second half of this year.  What began last July as a crisis with subprime borrowers, spread quickly through turbulent credit markets, causing cascading waves of ever-deepening and tangled problems on Wall Street and at global banks and corporations. 

With the exception of Manhattan, nationwide a declining housing sector struggles, seeing month after month of diminishing values.  Last January, RealtyTrac reported more than 150,000 foreclosures around the country, with a preponderance in California and Nevada.  Meanwhile, in our own local Manhattan real estate marketplace, we are holding our own.  Despite unsettling economic news highlighted by job losses and stock swings on Wall Street and confounded by an ever-weakening dollar and soaring commodity prices, the Manhattan housing market continues to be resilient.  Although the volume of transactions may be lower this first quarter than in 2007, prices are not. 

Operating in a class by itself, Manhattan’s upper end is flourishing.  As an example, at the preeminent Rosario Candela building at 1040 Fifth Avenue at East 85th Street, two trophy re-sales tell a compelling story.  Apartment 14A, an 11 room overlooking Central Park sold in mid January for $21 million, nearly 70% above the last trade of $12,375,000 recorded in September 2005.  One wonders how another recent purchaser will fare:  on January 18, 2008, Edgar Bronfman Jr. paid $19.5 million for Apartment 10A in the same building, and less than 10 days later, with an apparent change of heart before ever moving in, he re-listed the property for $24 million, asking a cool 23% more.

At the market’s upper end, a high proportion of the inventory is being absorbed quickly by a pool of demanding "uber" buyers.  Consider the carriage house on East 75th Street between Lexington and 3rd Avenue, designed by Mica Ertigan that went to contract in mid February in a matter of days for more than 10% over the $10.9 asking price.  Or the fabulous duplex at 775 Park with the equally fabulous asking price of $24 million whose contract was signed in less than nine days.  At 800 Park, a full high floor achieved the asking price of $11 million in less than twenty days.  At 888 Park, an 11 room with a $17.8 price tag sold in less than three months.

Not every multi-million dollar property is flying off the shelves, however.  A quick search of east side co-ops over $10 million shows 29 offerings, and more than half have been on the market for six months or longer.  On the west side, only 4 co-ops are available in this product category; the oldest dates from the fall of ’06, two from fall and winter ’07, and a 4th has been listed since February 2008.

Today’s most challenging segment of the market is the $5-10 million range.  In this category, indecision reigns.  With media headlines trumpeting the demise of real estate, more are not buying than buying in this sector, and uncertainty has taken a strong foothold as apartments in this category linger on the market.  Of 36 co-ops currently available on the upper east side in this price range, nearly a third have been on the market for over a year, another third since the fall of 2007, and only 10 since January 2008.  On the west side, a significantly smaller stock of 15 properties is available:  in this category, three have been listed since this past February, two since January, five since September ’07 and another five since the summer of ’07.  

Considering Wallflowers and Bottom Fishers
The recommendation to sellers of wallflower properties is to listen to your broker.  After three months of marketing, if a home fails to yield a bidder, a price adjustment is in order.  The recommendation to buyers in this category is to resist the temptation to bottom fish.  Since only in hindsight can we pinpoint a cycle’s highs and lows, the bottom can only be located in retrospect.  Those who are prepared to search for value are finding it. 

Today the ideal purchaser is one who is unencumbered with another property to sell before buying and can proceed with an all cash transaction, or with a contract not contingent on obtaining financing.  This group comprises first time buyers for whom renting no longer makes financial sense, and also mature buyers looking to trade up or down who don’t need the funds from a sale in order to buy.  
Changes in lending practices, a direct result of the credit squeeze, have impacted current market conditions adversely.  Today, it’s more difficult to secure financing, as underwriting guidelines are being modified.  Banks are requesting more documentation and even second appraisals, so it’s taking longer to review applications, causing considerable delays.  Underwriters, lenders and mortgage brokers are under enormous pressure not to make bad decisions and to reverse images of past recklessness.  All the while, however, interest rates remain extremely favorable. 

In this troubling financial environment, the advice to buyers and sellers is to choose a broker who will help to plot a realistic course and manage to steer full speed ahead to successful closings.  

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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March 2008 Mann Report Residential Manhattan Market Watch THE TIMES, THEY ARE A-CHALLENGIN’ By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership Last year, as we moved into March…... Read more >

March 2008
Mann Report Residential
Manhattan Market Watch

THE TIMES, THEY ARE A-CHALLENGIN’
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

Last year, as we moved into March 2007, there was a decided spring and great momentum in our steps.  Not so in the first quarter of 2008.   Our stride has become more tentative, and with good reason. 

The financial world is still reeling from the aftershocks of last summer’s subprime crisis.  Banks have reported staggering losses exceeding $133 billion from mortgage related structured investments, and more write downs are expected to occur.  Layoffs have resulted at many financial institutions, and the CEO’s have stepped down at Bear Stearns, Merrill Lynch, and Citigroup.

Insiders report that we can expect another six months of complicated news and wild price swings on Wall Street.  Yes, they concur, there are problems; but these institutions, along with the federal government, are moving to correct them.  On January 30, the Fed acted boldly, cutting federal fund and discount rates by a half-percentage point, following an unprecedented three-quarter point reduction just eight days earlier.  In addition, as of this writing, Congress is reviewing a comprehensive $150 billion economic stimulus plan intended to revive a struggling economy with tax rebates for individuals and tax breaks for corporations.

With the exception of our own local Manhattan real estate market, home sale prices nationwide have been declining steadily.  Amid a glut of unsold homes, foreclosures are rising.  Hardest hit are some cities in Central Florida, Nevada and California where half finished buildings stand alongside idle cranes.  In an alarming cover story, Business Week declared on February 11th that prices nationally would meltdown 25% more before hitting bottom.  Meanwhile, others forecast that the housing sector will stabilize in the third quarter of this year.

In Manhattan, we occupy a unique slice of the real estate marketplace, protected by a variety of insulating factors.  We’re been immune to the nationwide housing slump for a very long while.  Compared to the rest of the country, our inventory is limited, not saturated, and our prices are holding, not falling.  However within our local Manhattan market, three separate submarkets exist–with the upper and lower sectors better oiled, at this time, than the middle. 

Opportunity Is Knocking
The high end submarket is performing extremely well.  In fact, there is precious little to show to buyers with budgets north of $10 million.  So when a plum corner estate apartment at 1060 Fifth was listed in November, within weeks, there were multiple bids and an offer accepted over the $19.5 million ask.  In late January, the Penthouse in the same building closed at $46 million. 

Clearly there is serious money in Manhattan.  Witness the newest Extell project to break ground on West End Avenue and 86th Street, where super sized apartments measuring 6000-8000 square feet will be offered to a niche “uber” market to the tune of $2,600 per square foot or an average $18 million per apartment.  For those who are willing to pay up, the new condo is a compelling product in a field of limited competition. 

Similarly, the submarket below $2 million shows strong activity and sales, with a good deal of competitive bidding occurring.  For the most part, these purchasers are choosing to buy rather than rent in order to build equity and gain some tax advantages. 

In the middle submarket, buyers seem to be most vulnerable, and they are hesitating.  Having lost confidence in the economy, they are moving with uncertainty, largely because they fear the unknown.  Unlike in years past, when those in this market stretched their budgets to buy as prices rose steadily, today’s buyers are stalled and proceeding cautiously.  

Despite the resilience of the Manhattan market, the pain felt by the rest of the country is sobering.  With the country wondering what’s going to happen next, there are challenges for buyers and sellers going forward. 

The advice to sellers is to price correctly and recognize that time on the market is stretching.  In a slower paced market, there’s less pressure for prudent buyers to act quickly, so it’s taking longer to sell a property.  Today’s buyers are not bidding unless the asking price is in range of their intended offer.  Pricing on target brings urgency to activity, stimulates interest quickly and yields the greatest return.
The advice to buyers is to act responsibly, buy within means and avoid the temptation to outsmart the market.  At this writing, interest rates are at their lowest since 2005.  As long as a buyer’s time horizon is about five years, there’s no good reason to postpone buying.  Trying to find the market bottom rarely works.

May you live in interesting times, says the Chinese proverb.  Indeed, we do. 

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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February 2008 Mann Report Residential Manhattan Market Watch RAISING THE BAR By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership Higher education for residential real estate brokers? …... Read more >

February 2008
Mann Report Residential
Manhattan Market Watch

RAISING THE BAR
By Shirley Hackel, Senior Managing Director, Warburg Realty Partnership

Higher education for residential real estate brokers?  Indeed, yes.  Rodney Dangerfield would tell us that as a group we don’t get no respect.  But now there’s a new designation and course from REBNY to encourage the best among us to step up and go forward to be recognized for our commitment to excellence and professionalism. 

Developed over a two and a half year period by REBNY’s Residential Sales Council, of which I’m a member, approved by REBNY’s Board of Directors and supported by its affiliate firms, the New York Residential Specialist, or its acronym NYRS, is a newly created credential for top residential brokers.  It can be earned by qualifying brokers upon the successful completion of 30 hours of a prescribed course of study.  

I’ve paid my $375 tuition, and I’m looking forward to classes which begin on January 21st and end on April 7th.  First offered last semester, the program awarded NYRS status to 30 graduates who will benefit from the experience, and who can also use the emblem on their marketing materials.

According to REBNY’s President Steven Spinola, “The course is not for everyone—it is for the ultimate professional who wants to lead by example and is willing to put in the necessary time and effort.”  In fact, not all brokers are eligible for the distinction.  To qualify, agents must be at the associate level and must have worked in New York City for a minimum of three years and completed at least 30 deals totaling a minimum of $30 million in sales or $12 million in rentals.

Alan Pfeifer, the current co-Chair of The Residential Sales Council and a Halstead Senior Vice President, led the Council’s NYRS Credentials Subcommittee.  “Its primary purpose,” he explained, “is to recognize the business and educational achievements of committed professionals and at the same time allow buyers and sellers to easily identify those who have reached these credential levels.” 

Standing Out From the Crowd

The 30 hour course is taught by recognized industry experts including Barbara Corcoran, Frederick Peters, Clark Halstead and Jonathan Miller.  Subjects cover psychology, negotiation, ethics, information management, communication, new development, and leadership.  Conforming to Albany’s educational model of 3 hour instructional blocks, 18 of the 30 hours have been approved by the state to satisfy continuing ed requirements for broker license renewal. 

Steve Goldschmidt, Warburg Marketing Group’s Senior Vice President, is looking forward to teaching a section on current technology again.  “I offer training to agents at the top of our profession.  Often,” he observes, “new technology can be a revelation to even the most experienced among us, and the intimate setting of our class makes brokers feel comfortable admitting how much they don’t know about what’s available on the web.”

The NYRS inaugural class was comprised primarily of veteran brokers.  According to REBNY Senior Vice President Eileen Spinola, “Most of those attending [the first semester] are senior brokers and no longer need the credit but are doing the designation course to stimulate their creative juices, expand their knowledge base and to stay competitive.” 

In addition to class participation which fosters lively discussions, the course has a required reading list and a final project.  Essential titles for the current semester are Emotional Intelligence by David Goleman, Getting to Yes: Negotiating Agreement Without Giving In by Roger Fischer and William Ury, and The Handbook of Emotionally Intelligent Leadership by Daniel Feldman.  According to the course application, there’s room for creativity in the program’s final project which can range from oral presentation to essay to website creation.

The course is attracting those who are highly motivated who are looking for fresh areas of growth.  While still in its infancy, the new credential goes well beyond the state’s standard educational requirements.  Looking to the future, Frederick Peters, President of Warburg Realty Partnership, predicts, “I think the NYRS designation will grow in importance as the course continues, and I strongly urge those who are eligible to sign up.”

For the industry, the new credential seeks to raise the level of professionalism, ethics and leadership.  For brokers who gain the new title, a certain competitive edge can be earned.  NYRS professionals will comprise the industry’s leaders—experienced and successful professionals who stand above the crowd.

Shirley Hackel
Senior Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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January 2008 Mann Report Residential Manhattan Market Watch AT THE STARTING GATE OF A NEW YEAR By Shirley Hackel, Managing Director, Warburg Realty Partnership This past year of 2007 will be remembered…... Read more >

January 2008
Mann Report Residential
Manhattan Market Watch

AT THE STARTING GATE OF A NEW YEAR
By Shirley Hackel, Managing Director, Warburg Realty Partnership

This past year of 2007 will be remembered as the year of pervasive and far-reaching credit and debt woes—the year when Manhattan real estate sidestepped a severe nationwide housing slowdown with few, if any, scars.  Originating in the subprime financing markets, the crisis underscored the complexity of interconnected financial markets worldwide and the resilience of our city’s residential marketplace. 

In the last half of the year particularly, as the credit meltdown deepened, widespread reverberations contributed to layoffs and bankruptcies and caused huge swings in stock prices.  A decided shift in buyer mood and activity emerged.  Uncertainty led to indecision and often to inaction, and the pace of trading slowed.  As exuberance and urgency exited, some waited on the sidelines in no hurry to purchase, not wanting the distinction of being the last to purchase at the top of the market.  Other buyers, always conscious of value, stepped up cautiously to seize opportunities.  There are scores of recent examples of properties being absorbed quickly and going to contract at top prices in competitive bidding:  consider the 12 room prewar at Park and 78th Street that sold in 24 hours over the $12 million ask; or the 3 bedroom on East 79th Street with a $5 million price tag that attracted more than 10 bidders; or the 2 bedroom West 70’s 1920’s co-op that realized greater than 10% over the $995,000 ask.

Unlike the rest of the country, on the island of Manhattan, the pivotal issue at hand is less about mortgage rates and obtaining a loan, and more a concern with what the big bonus picture will look like for financial professionals this winter.  Last year, those in the financial services industry collected spectacular sums, exceeding the bonus bonanza of 2005 by nearly threefold. 
This year, according to a recently released compensation report by The Options Group, a global strategic consulting firm, bonus payouts will be lower for fixed income professionals as well as for mortgage-backed securities and structured credit professionals; but they will be about 10% higher for investment bankers and equity derivatives traders, and as much as 20% higher for commodities traders.  While some have suggested that bonuses this year will include more restricted stock in lieu of cash awards, The Options Group predicts that many companies will raise their stock compensation component to motivate top performers and keep them from leaving for competing firms or hedge funds. 

Jumpstarting January

This January when financial professionals gather specific information about their bonus amounts, their focus will clear.  Those who have been sidelined since August will prepare to act.  If inventory remains low, it won’t take many buyers to absorb the existing scarcity of product, and the laws of supply and demand will continue to govern the economics of real estate transactions in our city. 

A close look at the marketing history of recently sold properties demonstrates a number of compelling realities:  if a property sold within its first 6 weeks on the market, then the price realized was either close to asking, at asking or over asking; however, if a property failed to sell within its first 6 weeks on the market, then there were 2-4 price reductions before it closed two or as many as eighteen months later.  From this, one can infer that today’s buyers are not bidding if the asking price is a stretch, and they are not reaching beyond their budgets, even though money remains cheap, with rates holding at about 6.5%. 

Now that reckless lending and excessive spending are things of the past, perceived value is more important than ever.  Sellers are counseled to set realistic prices and to adjust their expectations for how long it takes to sell a property.  In many cases, an average 120 days on the market, while stressful, is not unusual.  Confounding conventional wisdom that says a property that lingers on the market tends to devalue itself, are those examples of properties that have stayed on for months, and then when two buyers become interested, the property achieves the asking price or very close to it.   

Because prices are no longer accelerating, the number of U.S. investors in our market has declined, as more patient money is required.  In their stead, foreign buyers are displaying huge appetites for Manhattan condos, and increasingly, Manhattan real estate is an attractive vehicle for investors from Asia, Russia, Europe and the Middle East.  With gold at an all time high, oil approaching $100 a barrel, and an already battered dollar decelerating even more, New York proves to be relatively inexpensive compared to other international cities like London and Paris. 

Despite an inventory pile up and a rise in foreclosures across the U.S., the Manhattan market remains steady, and analysts forecast that prices will gain a modest 5% a year for the next three years.  This month as we return from holiday recess, which for some began with an early Thanksgiving, we look forward to new offerings and to those properties returning to market after a temporary respite.  Barring the unforeseen, we expect a balanced trading season ahead.

Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Mann Report Residential Manhattan Market Watch Year End Pop Quiz By Shirley Hackel, Managing Director, Warburg Realty Partnership The end of the year is always a time for reflections and comparisons. …... Read more >

Mann Report Residential
Manhattan Market Watch

Year End Pop Quiz
By Shirley Hackel, Managing Director, Warburg Realty Partnership

The end of the year is always a time for reflections and comparisons.  Last year’s fourth quarter finished stronger than expected, and this year, our market will most likely follow suit as the credit markets recover and stabilize.  But while bonus earnings in 2007 were a windfall, it’s entirely reasonable to expect that bonuses  for 2008 will be more modest.  With a playful spirit, I offer readers a cursory review of the past year in the form of a final exam.

1.  What factors have contributed to the increasing trend in condominium ownership?

a. Disenchantment with the exhaustive and intrusive review process by cooperative boards.
b. An ever-increasing supply of luxury condo products with competing amenity packages.
    c.  Liberal and creative financing opportunities.
    d.  All of the above.

2.  What factors led to the subprime meltdown this summer?

a. Excessive borrowing.
b. Reckless and easy credit to high risk borrowers.
c. Low introductory teaser rates on adjustable mortgages.
d. Widespread trading of mortgage backed securities.
e.  All of the above.

3.  Which of the following characterized this summer’s credit crunch?

a. Subprime borrowers defaulted on home loans.
b. Wealthy investors liquidated assets to meet margin calls.
c. Corporations looked to restructure risky debt.
d. Some hedge funds closed shop.
e. Mortgage providers, like American Home Mortgage and New Century Financial, declared bankruptcy. 
f. Capital One Financial Corporation laid off nearly 2000 employees closing its entire wholesale mortgage division. 
g. All of the above.


4.  What changes are evident in current lending practices?

a. Banks have tightened standards for all borrowers.
b. More documentation is required.
c. Loan to value ratios are being scrutinized closely.
d. It’s more difficult to qualify for interest only loans, no income verification loans, and 90-100% financing.
e. All of the above.

5.  What factors have helped to insulate Manhattan from the national housing downturn?

a. The dominance of co-op ownership which requires user tenancy and also limits the amount that can be financed.
b. The shrinking rental market which drives tenants to consider ownership.  
c. The city’s position as a financial center and the expanding wealth of its citizens.
d. The city’s position as a global super city and its attraction to foreign buyers.
e. All of the above.

6.  What is true about ResidentialNYC.com?
    
a. It’s a free consumer oriented search engine launched by REBNY in September 2007.
b. It offers a comprehensive collection of exclusive sale and residential real estate listings.
c. REBNY plans to spend a reported $1 million to publicize and promote the new web portal.
d. Corcoran and Douglas Elliman have chosen not to be members at this time.
e. The site will accept advertising from ancillary real estate services, but specifically not from brokers, and there will be no pop-up ads.
f. REBNY does not plan to earn any profit from this website.
g. All of the above.

7.  What recent legislation is pertinent to our market?

a. Co-op sales prices are a matter of public record.  In July 2006, then Governor Pataki signed the bill into law, and the Department of Finance now posts sales prices as well as the names of buyers and sellers on ACRIS—Automated City Register Information System.   
b. Fairness in Cooperative Housing Ownership Act was not passed.  It would have established a time frame within which co-op boards would have to accept or reject applicants and also would have required that a written explanation be given for any rejection.
c. This past August, Governor Spitzer amended the 421A tax abatement program intended to encourage developers to build affordable housing by offering extended tax breaks. The law includes tighter restrictions for developers to qualify for the abatement.
d. All of the above.

If you answered “All of the above” to all of the above, then go to the head of the class.  See you in the new year!  My very best wishes to all for a healthy and joyous holiday season ahead. 

 
Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Mann Report Residential Manhattan Market Watch A Crystal Ball? By Shirley Hackel, Managing Director, Warburg Realty Partnership At this writing, nearly 6 weeks in advance of an October 1 publication date,…... Read more >

Mann Report Residential
Manhattan Market Watch

A Crystal Ball?
By Shirley Hackel, Managing Director, Warburg Realty Partnership

At this writing, nearly 6 weeks in advance of an October 1 publication date, with the debt markets in turmoil and the stock market zigging and zagging, it’s too soon to tell what effect the fallout will have on our real estate marketplace.  It feels a little like 2005 when economists and pundits were speculating whether a real estate bubble would burst.  Greenspan saw “froth” in the housing market and predicted that the “irrational exuberance” could not be sustained.  Despite the dramatic headlines, however, 2005 turned out to be the year of the bubble that wasn’t.  Manhattan real estate did not tank, and although we experienced a mild slump during part of 2006, we ended last year with unexpected vigor and strength. 

Throughout the first half of 2007, the preceding year’s vitality continued.  On July 23rd, uncertainty surfaced as the stock market plunged lower than it had in five years.  With huge market swings occurring almost daily, the subprime fiasco unraveled.  The liquidity squeeze spread quickly from subprime borrowers defaulting on home loans, to high net worth investors liquidating assets to meet margin calls, and to corporations looking to restructure risky debt.  As the meltdown deepened from the securities backed mortgage markets, hedge funds closed shop and mortgage providers, like American Home Mortgage and New Century Financial, declared bankruptcy.  Capital One Financial Corporation shut its entire wholesale mortgage division, laying off nearly 2000 employees. 

Thus far, the Manhattan real estate market has been relatively immune to the housing slowdown that has stricken the nation.  Our sales have been strong, and we hear of few, if any, homeowners defaulting on Manhattan properties.  In sharp contrast, in the rest of the country, particularly in California and Florida, foreclosures are increasing, and they are expected to reach two million by the end of this year—according to RealtyTrac, a website that records this data.  As of this writing in late August, the market is seasonally slow, and there is little evidence that sales prices have declined.

Two powerful postures shape our market:  Manhattan’s position as a global “supercity” and Wall Street’s role as the city’s economic engine.  In the last several years, record-breaking profits at financial institutions and hedge funds have translated into huge bonus earnings, driving the city’s real estate prices higher and higher.  However, today we hear from a few real estate developers, investment bankers and lenders that a handful of their deals are being put on hold, restructured, or cancelled.  At the same time, other professionals trading in equities, commodities and distressed debt, are reporting a banner year.  While industry discussions about bonus amounts generally begin in October, bonuses are not paid until spring, and it remains to be seen how earning levels will be impacted.   

Can We See Clearly Now?

Looking beyond the current storms, Bruce Wasserstein, CEO at Lazard and former M&A head at First Boston, observes in a recent Business Week, “The stock market has drifted down, but it’s still reasonably at a strong level because the world economy is reasonably strong….Globally, there is still a lot of liquidity.”

Nonetheless, it’s important to acknowledge some new lending realities.  Banks have tightened standards for all borrowers, not just risky subprimers.  Many have discontinued no income products, and all are requiring more exhaustive documentation and also scrutinizing loan to value ratios more closely.  For too many years, it was too easy to obtain credit.  Some irresponsible lenders were too quick to advance money.  With flexible terms, low rates, and little or no money down, buyers leveraged to the max as they financed and refinanced with non traditional and exotic mortgages, using their homes as virtual ATM machines.  A return to more responsible borrowing and lending is welcome and perhaps even overdue. 

Industry veteran Sari Sardell Rosenberg, Managing Director at The Manhattan Mortgage Company, observes, “The dust will settle, and we will come out stronger.”  Cautioning those who are self employed, she advises, “If you offset all your income with deductions, and your bottom line does not resemble your gross, then you could have a problem qualifying for a loan.  However, if you can show a solid income and have good credit and savings, then there are plenty of lenders available out there.” 

In the months ahead, as the mood shifts from excess to moderation, it’s logical to expect that the pace of trading may slow and that budgets may be adjusted downward.  Sellers are advised to set realistic prices and to qualify bidders.  Purchasers are cautioned to clean up any bad credit issues in order to demonstrate credit worthiness.  Those with high credit scores will be able to shop for the most competitive interest rates, and also will be in the best position to seize the buying opportunities that surface. 

Because supply continues to be limited, small market fluctuations should have little affect on long term values.  Accordingly, buyers are advised to have a 5-7 year time horizon which excludes investors looking to flip for a quick profit.  Today’s market sees interest rates still historically low, housing supply still tight, and demand high, though maybe hesitant. 

A crystal ball?  Don’t we wish we had one? 

Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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Mann Report Residential Manhattan Market Watch SUPER CITY SUPERSTAR By Shirley Hackel, Managing Director, Warburg Realty Partnership We know well that there’s a huge disparity and even a disconnect…... Read more >

Mann Report Residential
Manhattan Market Watch

SUPER CITY SUPERSTAR
By Shirley Hackel, Managing Director, Warburg Realty Partnership

We know well that there’s a huge disparity and even a disconnect between Manhattan real estate and the rest of the country.  As an example that is repeated in cities across the nation, a housing boom in Phoenix has gone bust as the number of unsold homes rises and builders pull back.  On the news of collapsed earnings, home building stocks have declined sharply, and related job losses in the industry have affected national employment figures negatively.  Nonetheless, even as neighboring suburban markets like Westchester prove to be sluggish, New York City real estate is alive and thriving.  Prospects bode well for September, the last quarter of 2007, and into 2008.

It’s worth noting a recent “Superstar Cities” theory offered by a trio of economic academics from Wharton and Columbia in a joint working paper issued last July for the National Bureau of Economic Research.  Written primarily for an audience of economists, government and business professionals, the 52 page scholarly study, loaded with statistical analyses, concludes, “Living in a superstar city is like owning a scarce luxury product.”  Increasingly, rich buyers are concentrating in superstar cities where declining land supplies are causing property price increases.  The paper’s premise is that the explosive growth of home sale prices in high cost cities is caused by the scarcity of supply and the rapidly and ever-rising incomes of buyers who are willing to pay a huge premium to live in a superstar city. 

In the period between 1960 and 1980, only 2 cities were identified as superstars:  San Francisco and Los Angeles.  By 2000, twenty more superstar cities had come of age, including New York.  The authors argue that with more wealthy people bidding on a fixed inventory, even the price of entry-level homes accelerates.  Furthermore, they reason, if incomes continue to rise and the housing supply stays the same, ”over time, the gap in house prices between cities can keep increasing.”

The superstar borough of Manhattan hasn’t experienced a cooling off period like the rest of the nation.  In point of fact, according to The Real Deal, New York leads the country in the development of multi-unit housing.  At the same time, with the rise of construction projects, in the first 4 months alone of 2007, nearly 4,000 related jobs were added to the city’s employment pool. 

Some New Realities

Indeed, our market is strong.  But at least three new realities must be acknowledged.  First, there is fallout from a combination of higher interest rates, stricter appraisal standards and tightening credit—the latter two consequences of the subprime loan fiasco.  While the upper end of the market is impacted less by rising interest rates, first time and mid market purchasers who are able to borrow less today than last year are finding they must adjust their buying goals and  budgets.     

Second, changes to the 421A tax abatement program, already passed by the New York State Legislature, though not signed into law yet by Governor Spitzer as of this writing, will alter the landscape for new developments.  If passed, the law will require that buildings given 421A status set aside 20% of the premises for low income dwellers, significantly affecting both costs and profits for developers and creating new concerns for buyers. 

Thirdly, the increasing volume of high end sales is skewing market stats.  The distortion in medians and averages comes from record breaking closings on Fifth Avenue and Central Park West, and at new condominiums like 15 CPW and The Plaza where one of the first closings was recorded at $56 million.  In the year ahead, as more of the new construction closes, anecdotal evidence will be a better reflector of market activity than pure statistics. 

Trading in New York is expected to continue briskly.  This month, we’re expecting a new crop of properties to come to market, as the time for active looking and decision making is from now until the distractions of the holiday season.  Sellers are cautioned to price with discipline to set realistic prices.  Buyers are advised to buy quality. 

According to The National Association of Realtors, home prices across the nation are expected to pick up steam in the last quarter of this year and to recover fully in 2008.  Fueled by Wall Street and its movers and shakers, New York will continue to outperform the nation. 

Shirley Hackel
Managing Director
Warburg Realty Partnership
212-439-5197
shackel@warburgrealty.com

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The Mann Report Manhattan Market Watch WAITING FOR AUGUST MARKDOWNS? By Shirley Hackel, Managing Director, Warburg Realty Partnership If you’re a Manhattan buyer who’s been sitting on the sidelines…... Read more >

The Mann Report
Manhattan Market Watch

WAITING FOR AUGUST MARKDOWNS?
By Shirley Hackel, Managing Director, Warburg Realty Partnership

If you’re a Manhattan buyer who’s been sitting on the sidelines hoping for a summer markdown, you may be hanging on pointlessly.  Much like the two characters of Samuel Beckett’s existential play Waiting for Godot, who wait for someone named Godot, you may be hoping for something that doesn’t come.  The waiting in Beckett’s play turns out to be aimless, because Godot never shows up. 

Diametrically opposed to the experiences of the rest of the nation, the Manhattan market is strong and robust.  Everywhere else but Manhattan, it seems there’s a huge inventory pile up with sluggish sales and downward prices.  Everywhere else but New York, the housing market has been slowing down.  In a weak and lackluster environment, national home builders like D R Horton, Beazer Homes USA and K Hovnanian are reporting sharp losses amid high inventories.  Across the country, as the ripples from the subprime debacle spread, some buyers are finding it harder to qualify for loans, new homes sales are dropping, and foreclosures are rising.  A volatile stock market is riding the see-saw, losing ground one day, and climbing the next. 

But in Manhattan, real estate is alive and well, thanks in large part to the outstanding growth and resiliency of the city’s financial sector.  Nearly every housing market category is thriving:  from parents buying one bedroom apartments for children to captains of industry acquiring trophy properties.  With a bonanza of hedge fund profits and reported earnings up from 50% to 80% at financial institutions like Morgan Stanley, Lehman, and Goldman Sachs, a surplus of discretionary funds is fueling a competitive real estate environment.
   
Throughout much of the second and into third quarter of 2007, competitive bidding has been occurring.  Where there is perceived value, buyers are competing to purchase, and they are acting aggressively and quickly.  Scores of examples around town demonstrate how the buyer must have a particular property, and many homes are getting asking price or significantly above the listing offer.  Consider the 2-bedroom Lincoln Towers unit that sold in 3 days at 3% over asking; or the West 64th Street one bedroom loft that is in contract at 4% more than the offering price; or the Park Avenue 3 bedroom that went 16% over asking; or the upper Fifth Avenue 11 room apartment that achieved nearly 26% above ask. 

ECONOMICS 101

The basic economics of supply and demand rules the day.  Despite the inching up of interest rates, and the tightening of lending standards, deals are being made at consistently strong prices.  Inventory from new developments and conversions is having a stabilizing effect on an already short housing supply.  It remains to be seen, however, how long it will take for the new housing stock to be absorbed.    

Generally, a seasonal deceleration in our marketplace is expected to begin in June.  This year, however, summer’s early trading pace was as brisk as the tempo set this spring—in sharp contrast to last year when sales were decidedly slower and apartments stayed on the market longer, giving purchasers more time to evaluate choices. 

If the price advantage you’ve been waiting for comes this month, it is recommended that you seize the buying opportunity, because industry experts forecast more of the same high prices and low inventory next season.  And if   you’re a seller whose property is languishing this summer, it’s a good idea to invite another professional into your home for a second opinion.  Nothing is ever gained by overpricing.  If your home is overvalued, you’ll be ignored.  If your property is flawed by a lack of sunlight, poor condition, or a particularly fussy co-op board, your listing may sit on the market wallflower style unless you make a price accommodation.  When a property fails to attract a bid, the asking price needs to be adjusted.   

This August, when New Yorkers are vacationing elsewhere, it may be time to reel in foreigners looking for a stake in Manhattan real estate.  New condo offerings are particularly appealing to Russian and Korean investors.

After the flurry of activity this spring and early summer, a seasonal August slowdown will be a welcome respite.   Brokers will take advantage of an end-of-summer lull, if it comes.  Maybe we’ll be able to catch our breaths this month and use it as the pause that refreshes.  In the meantime, happy fishing!  See you in September.

 

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Ardsley 320 CENTRAL PARK WEST Four-bedroom co-op in Emery Roth building, approximately 2,150 square feet. Hardwood floors, washer/dryer. Renovated kitchen with two windows. Ensuite black granite master…... Read more >

Ardsley
320 CENTRAL PARK WEST

Four-bedroom co-op in Emery Roth building, approximately 2,150 square feet. Hardwood floors, washer/dryer. Renovated kitchen with two windows. Ensuite black granite master bath: double sinks, separate stall shower and tub. Gym, playroom, storage. $2.3 million.
Immediate Occupancy. 
Shirley Hackel, Warburg Realty Partnership

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Manhattan Market Watch The Challenges Continue By Shirley Hackel, Managing Director, Warburg Realty Partnership In January, after an unexpectedly strong close to 2006, we were forecasting busy first and…... Read more >

Manhattan Market Watch

The Challenges Continue
By Shirley Hackel, Managing Director, Warburg Realty Partnership

In January, after an unexpectedly strong close to 2006, we were forecasting busy first and second quarters for real estate.  Discretionary bonus money jingled, pent up buyer demand was high, interest rates stayed low, and quality inventory remained tight.  As of this writing (4/30/07), the mild slump of 2006 is decidedly over, and our market is surprisingly hot again. The pace of trading has quickened, open houses are crowded once more with as many as 30 people showing up in an hour, and competitive bidding is becoming commonplace in all price ranges and categories.

It’s unlikely that we’ll repeat the sizzling runaway market of 2004 when properties were speeding into contract at record breaking numbers with more than 25% price appreciation jumps.  But the market is hardly unhurried, and well priced properties are attracting multiple bids and selling quickly, often over asking prices.  Following are some tips for buyers and sellers in a competitive bid environment. 

Let’s assume for the moment you’re an educated buyer.  You’ve collaborated with an experienced professional to sift through Internet offerings and have visited all that’s appropriate from a limited inventory.  You’re prepared to act decisively because you have been pre-approved—which is different from being pre-qualified—by a prime lender.  Your broker has told you that the perfect apartment doesn’t exist within a given price range, and that the search for your next home is really the process of determining what you will give up and trade for something else.  You enter a property and think excitedly:  “I can live here.  This could be home.”  Do you bid the full price immediately?  Do you make an offer just below the ask as an opener?  Do you bid over ask to seal the deal?  

Or let’s assume you are the seller of a plum, well priced listing.  You embraced your broker’s wise counsel and have set a realistic price.  Shortly after your first open house, there are four bonafide offers—one at the ask—and the promise of another bid to come.  Your broker advises on possible strategies.  You can decide on an amount above your ask with which you’re happy to go to the bank, and say that you’ll sell to the first qualified buyer who will bid that target.  Or, you can agree to go to “Best and Final” by a certain day and hour.

When I’m representing a seller, my own preference is for the latter approach since it brings out the boldest of bidders, doesn’t leave money on the table, and frequently exceeds expectations.  Additionally, it gives all prospects an equal opportunity to make an offer and promote their co-op board worthiness.  

When I’m representing the buyer, I engage the seller’s broker in conversation before I submit any bid.  In a hot market, the seller may want to wait the week before responding even to a full price bid.  Showing my hand on Day One or Two may not work to win the apartment. 

In a best and final scenario, it makes sense for buyers to bid the highest they can afford without over-extending.  The difference between a winning and losing offer may be insignificant, or the difference can be staggering sometimes.  I try to guide purchasers by asking at what number they will kick themselves for having lost the apartment.  What is the last dollar at which they will feel good about entering into a contract of sale?  When you go to this last dollar, and you’re overbid, disappointment follows, but not regret. 

There are factors besides money to make your offer more attractive than a rival's.   The highest bid is not always the best.  In competitive situations, what matters also are the terms of the deal and the buyer’s qualifications, especially in co-ops where the board approval process can be worrisome.  It’s best to make the offer as clean as possible and eliminate any contingencies.  If you remove the financing contingency but need a bank loan to complete the transaction, work closely with your mortgage broker and order an appraisal immediately after your bid is accepted to ensure you don’t get caught with a report that unexpectedly falls short of the contract price. 

Take time to prepare a clear employment profile and net worth statement
to give substance to your bid.  Determine the seller’s time frame and express your own flexibility with respect to closing and occupancy.  Personal notes from prospective buyers help to humanize negotiations.  If you discover that you have something in common with the seller—schools, charitable interests, club memberships—put it in a cover letter.  When all else is equal, the seller may be influenced by the human element. 

If your bid is accepted, instruct your attorney to complete his due diligence promptly.  With back-up bidders breathing down your seller’s neck, a delay could cost you money and the apartment.  Once an offer is accepted, it’s best for a seller to stay with the deal and continue to show for back-up only.  The ethics of a verbal handshake speaks volumes.  Sellers are cautioned also not to lose momentum.  Be prepared to issue a contract to the buyer’s attorney within 24 hours.  Have all documents ready for review, including the last two years’ financial statements, house rules, proprietary lease, offering plan and amendments, if appropriate.  Set a time limit for a buyer to return a signed contract.   

Competitive bids require skillful broker management.  To maximize the ability to move forward, it is important for brokers on both sides of the transaction to control the emotional climate to minimize stress and frayed nerves.   I cringe whenever I hear a broker or principal refer to “bidding wars,” because war connotes hostility and lawlessness.  On the other hand, in “competitive bidding,” while there may be casualties, there is reason and deliberation.  Good luck with your campaigns!

 

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The Mann Report Manhattan Market Watch Kicking The Tires In New Construction By Shirley Hackel, Managing Director, Warburg Realty Partnership Walk throughs in existing properties and walk throughs in…... Read more >

The Mann Report
Manhattan Market Watch

Kicking The Tires In New Construction
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Walk throughs in existing properties and walk throughs in new developments are vastly different from one another.  In the former, the inspection of “used” properties is scheduled just before closing, but very often, it occurs on the way to a closing.  Generally, buyers and their brokers, along with sellers’ brokers, allow twenty minutes to walk through a space to see that the home is delivered “broom clean” as specified in the contract, and that nothing has changed measurably from the time of contract signing.  The walk through serves as the buyer’s opportunity to visually inspect that no wear and tear was caused by the seller’s move out and that no damage resulted from fire or leaks.  It’s also the time to see whether light fixtures and draperies that were included in the sale are in place, and that original door knobs or other expected details have not been removed.  If there are problems, the closing can be postponed, or money can be put in escrow until corrections are made. 

For buyers of newly constructed units, there are a host of differences in the walk through before closing.  For one thing, many co-brokerage agreements for new developments expressly prohibit brokers from accompanying their buyers on inspections.  Additionally, the contract of sale defines when walk throughs are permitted, and the offering plan specifies the details of the product to be delivered.  For new construction buyers who have purchased their units from model showrooms and representative floor plans, the walk through is often the first look at a finished or nearly finished product.  Few purchasers have opportunities to don hard hats at construction sites to see how work is progressing.  

Because of the time lapse between contract signing and closing, in many cases 18-24 months apart, buyers’ reactions run the gamut from being thrilled to deflated when they enter their intended home for the first time.  While the inspection is meant to create a factual punch list of what needs to be finished or repaired, the walk through also can be charged with emotion.  Brokers can help to manage expectations if they know in advance that the space to be inspected will be dusty, dirty or unfinished.  When a long awaited property falls short of buyer expectations, a relapse of “buyer’s remorse” can set in.  Unfortunately, because of today’s rush to completion by sponsors, more walk throughs are occurring before they are cleaned thoroughly.  When a space doesn’t shine, disappointment can follow. 

The sponsor’s obligations to the buyer are governed by the offering plan.  On New York State’s website, Attorney General Andrew Cuomo advises, “Buyers must therefore carefully read the "Description of Property" section in the offering plan to determine the sponsor’s obligations and should not rely on advertising brochures, verbal statements from salespeople or beautiful pictures of architect’s renderings.”

If your first walk through produces ill feelings and a laundry list of imperfections, get your attorney to request a follow up inspection.  In my most recent new condo walk through, probably the biggest concern was the shut off position of the apartment’s faucets, which were all at 45 degree angles instead of the customary 90 degree horizontal or vertical positions.  The sponsor’s rep’s response was that this was a deliberate design decision and would not be changed.  I got involved with a couple of well placed phone calls, their attorney wrote a letter, and by the time of our next walk through, the faucets were all pointing downward.  Did the offering plan specify which way the faucets should face?  No.  But the adjustment could be made with a simple allen wrench, and good will was promoted. 

On the day of your walk through, leave your children home, but brings lots of patience.  Since nearly every inch of space needs to be inspected, it’s important to minimize distractions.  While most sponsors allow one hour for walk throughs, it’s reasonable to request more time, depending on the size of the apartment.  With blue masking tape and note pad in hand, proceed room by room and inspect everywhere your eye can see to record all that is missing or imperfect.  If the property is particularly dirty and dusty, request a follow up appointment since dirt can hide imperfections on surfaces and windows.  Following are some tips.

• Bring a hair dryer to test electrical outlets.  These should be aligned squarely without visible wall gaps.
• Flush toilets and turn on the taps to check for leaks, proper water flow and drainage.
• Test appliances including stove burners and exhaust fans. 
• Make sure doors, including cabinet doors, are aligned properly, open easily and shut tightly. 
• Check that drawers glide smoothly. 
• Open and close windows and examine window handles. 
• Inspect ceilings, walls and floors for stains that can be evidence of a leak.
• Test heating and air conditioning. 
• Listen for floors that squeak and plumbing that rattles.
• Examine trim on baseboards and ceilings.  Seams should appear gapless, and nail holes should be filled in. 
• Inspect grout everywhere, especially at the base of walls or where tile turns a corner or meets an enclosure.
• If there is a fireplace, ask to test that it draws properly by burning a piece of newspaper.
• Check that the shower door gasket seals the enclosure properly. 
• Examine the texture of paint finishes, and ask to remove unsightly drips and bubbles.  Paint surfaces should be smooth, and colors uniform.
• Make sure counters and floors are sealed properly by testing these with some drops of water.
• Check that AC filters are clean.
The punch list that is created during the walk through survives the closing.  Usually the sponsor has two years to address items, according to the offering plan, but, more often than not, corrections are made before or soon after a move-in date.  During your pre-closing walk through, be reasonable—but be sure to kick the tires to see that you’re getting what you bargained for. 

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Mann Report Residential April 2007 Exceeding Expectations with Shirley Hackel With more than 25 years of experience, veteran broker Shirley Hackel continues to find increasing inspiration and satisfaction…... Read more >

Mann Report Residential
April 2007
Exceeding Expectations with
Shirley Hackel

With more than 25 years of experience, veteran broker Shirley Hackel continues to find increasing inspiration and satisfaction in her real estate career.  She represents buyers and sellers with sensitivity and integrity. 

Her style is direct and results oriented.  When she meets a seller for the first time, she’s quick to emphasize that her goal is not only to sell real estate, but to win the individual as a lifelong client.  “I’m in the business of building and maintaining relationships that last,” she says purposefully, “and I value every person that I meet for each will contribute in some way to my success.” 

Attentive to the unique needs of both buyers and sellers, she works diligently to facilitate and achieve their particular goals.  Combining encyclopedic product knowledge with effective marketing know-how, she is a specialist at defining market strategy for sellers.  She offers them case studies and market analyses to help set realistic prices and expectations.  She is also a critical listener and an expert at uncovering and evaluating opportunities for buyers.  To help them make informed decisions, she’s adept at demonstrating the market economics of the day.  Providing intuitive insights into choices, she offers sound counsel regarding potential resale and also advises buyers to put calculated limits on their financial exposure.

“My father taught me early on about integrity, dealing ethically and building a good name,” she explains.  “The thrill of making the deal is sweet,” she admits, “and setting the stage and negotiating effectively are critical.”  But once the transaction terms are agreed to, she warns that the difficult part of holding the deal together follows.  “That’s when discipline and vigilance are required to pay keen attention to details and to handle buyer’s remorse and the complexities of the board review process.”  Skilled at anticipating and overcoming potential problems, Hackel maintains a level-headedness in even the most complex situations.  Not surprisingly, more than three quarters of her deals comes from repeat business and referrals.  She’s earned her reputation as a trustworthy broker who can be counted on to get the job done. 

Over the years, she observes, not only has the city’s real estate landscape been reshaped by emerging new developments, but the manner of doing business has changed also.  “When I first began in 1980 at The Corcoran Group, and Barbara taught me the business, I had a buyer on one side and a seller on the other, and it was up to me to bring about a meeting of the minds.  Today, more often than not, I have direct access to only one of the principals.”  With nearly all properties listed exclusively, good relationships between co-brokers is requisite to success.  “I want to be able to rely on an equally skilled professional to manage emotions and expectations on the other side of the transaction," says Hackel.  “Good manners count, and a team spirit is essential.  I never want a big ego to get in the way at any point—not at the initial negotiating stage nor during board package review.”

With a career that spans multiple real estate cycles, Shirley Hackel brings historical perspective to current trends and issues.  Well known and respected in the industry, she has been writing a monthly column for the last three years entitled “Manhattan Market Watch” which was published first in Manhattan Home and now appears regularly in The Mann Report.  “I look forward to the challenge of a monthly deadline, and am gratified by the response from my community of peers who have gone out of their way to send me notes and emails about the timeliness and informative content of my columns.  A handful of company managers have even written to say they have used my column as the basis for their sales meeting discussions.” 

“I’m privileged,” says Hackel, a Managing Director with Warburg Realty.  “I’m working in the world’s greatest city to buy and sell housing for incredible people.  I’m looking ahead at my best year ever with sales exceeding $40,000,000—and we’re still in the first quarter of 2007.”

 

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The Mann Report Manhattan Market Watch SPRING INTO STRONG SALES By Shirley Hackel, Managing Director, Warburg Realty Partnership All indicators point to a busy buying season ahead this spring.  The…... Read more >

The Mann Report
Manhattan Market Watch

SPRING INTO STRONG SALES
By Shirley Hackel, Managing Director, Warburg Realty Partnership

All indicators point to a busy buying season ahead this spring.  The year's beginning has been surprisingly hot, following a stronger than expected 4th quarter for 2006.  Outperforming historically low end-of-year expectations, we moved with great momentum into 2007.  Despite negative media attention throughout much of last year, prices rose a steady 6% over 2005.  There was no slump. 

As we entered the new year, a thriving Wall Street was expected to feed Manhattan real estate.  With discretionary income at an all time high and with seven figure bonuses for hedge fund managers, investment bankers, brokers, traders and analysts, even those who did not participate in any bonus windfall were feeling pressure to relinquish their sideline mentalities about a cooling market.  Displaying a limited tolerance for delayed gratification, impatient buyers who could wait no longer stepped up to evaluate the available offerings, crowding open houses again with as many as 30 lookers per hour. 

But the drama of wildly high price increment -- remembered from successive years 2003 to 2005 -- is over.  Balance and stability are the new buzz words to define this season.  Buying demand is pent up and high, but the inventory of co-op and condo re-sales is falling.  Paradoxically, inventory is limited, despite the growth of new condo products.  With interest rates expected to hold steady and well below 7% for the duration of 2007, opportunities abound.

The advice to sellers remains simple:  hire the right broker, set a realistic price, set the stage and listen to offers. 

Hire the right broker.   Get referrals from friends or other professionals, and interview your prospects.  Look for experience, service, common sense and a user friendly web site.  For the best outcome possible, choose a seasoned broker with sensitivity and integrity who demonstrates a willingness to provide personal, undiluted attention to achieve your specific goals.  Since the broker holds together not only the terms of the deal but its players from the attorneys to the mortgage brokers to the architects to the reference letter writers, good communication skills are essential.  When I'm involved in a co-broke situation, I want to count on a skilled professional to manage emotions and expectations on the other side of the deal.  Big broker egos are more of a hindrance than a help. 

Set a realistic price.  At the outset of an offering, there is always a range in price to consider.  It's far more effective to price near the mark rather than much over the target so that the property shows as the best within a given price and category.  Listing a property at the high end of a price range is counterproductive because it wastes valuable time.  Today's buyers are not bidding unless the asking price is in range of their intended offer.  In the rapidly accelerating markets of past years, it was reasonable to pay a shade more than budgeted because the market was moving so fast.  In a slower paced market, there's less pressure for more prudent buyers to act quickly, so it's taking longer to sell a property.  A tight asking price invigorates the marketplace, causes everyone to take notice, and yields the greatest return.  It brings urgency to activity and stimulates interest quickly. 

Set the stage.  Happy properties -- ones that are clean and show well -- make buyers feel good and bring in the most dollars.  With a little polish and a lot of common sense, you can set the stage for your home sale.  Since first impressions are critical, consider your residence as a commodity to identify flaws with objectivity.  Think of yourself as a set designer to prepare a scene that will welcome and encourage buyers to imagine themselves in your space.  Redoing a kitchen or a bathroom is far less important than scrubbing the place thoroughly, since most buyers will renovate to suit themselves.  Remove clutter, repair whatever is broken, take down heavy draperies, open the blinds, and let the sun shine in.  Consulting with a stylist is money well spent.  

Listen to offers.  Good brokers know how to prioritize needs and identify areas for flexibility and compromise.  They know how to anticipate and overcome objections. 
It's up to experienced brokers to present buyers and their offers in the best light possible.  Persuasively outlining the strengths of a purchaser lends validity to an offer, and encourages negotiation. 

New York is flourishing, and Manhattan real estate is not tanking.  All segments of the market are expected to remain strong.  Buyers are advised not to fear jumping into the market at any point this year.  Sellers are cautioned to price realistically and with great discipline to acknowledge that prices have leveled.  If you're the seller of a plum listing, or the hopeful buyer, the message is the same -- choose a broker who will guide you wisely. 

 

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The Mann Report Manhattan Market Watch Measure for Measure? By Shirley Hackel, Managing Director, Warburg Realty Partnership Did you know that there are national standards for calculating the square footage…... Read more >

The Mann Report
Manhattan Market Watch

Measure for Measure?
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Did you know that there are national standards for calculating the square footage of single family houses?  Initiated in 1996 by the American National Standards Institute, and supported by the National Association of Home Builders, the published criteria differentiate between finished, heated floor areas and unfinished, unheated floor areas for above and below ground spaces.  They provide specific guidelines for how to measure single family homes, and are recommended for voluntary use.  A Google search shows that the state of North Carolina also publishes recommendations based on the ANSI model for computing the square footage of single family houses.  The guidelines, however, are not applicable to apartment or multiple family dwellings. 

Did you know that there are uniform methods for calculating commercial spaces in New York City to determine the usable and rentable area for office buildings and stores?  Developed by The Real Estate Board of New York and effective since January 1987, the recommendations are provided "to facilitate a comparison of the cost of space among buildings."  Dissimilarities between buildings and "loss factors" are acknowledged, and precise guidelines are spelled out.  

Did you know that there are no uniform standards for measuring square footage in either cooperatives or condominiums for New York's residential housing? 

Home buyers have always been interested in square footage, but because of the huge increase in the city's condo offerings which are sold largely by price per square foot, the interest is paramount.  The time has come for us to develop approved and accepted methods to calculate square footage in co-ops and condos.  If we are to help our buyers and sellers evaluate a property's value and also compare it to other like properties, then we need to be able to measure qualitatively and quantitatively and match up apples to apples. 

The practice among residential brokers today is to avoid citing square footage for cooperative apartments -- either from computer sources which can vary, or from seller's estimations which may be exaggerated -- because there have been lawsuits and complaints filed against agents for inconsistencies and inaccuracies.  Instead, brokers invite buyers to come with their architects and measuring tapes.  On the other hand, we are comfortable quoting square footage for condominium apartments, because these figures are published in condo offering plans.  A co-op prospectus lists the count for rooms, bedrooms and baths, but it does not record an apartment's square footage. 

There are variations, however, in the way condo developers calculate total square footage.  As a result, confusion arises when comparing apartments in different developments.  Within the book-length offering plan, a sponsor must disclose how square footage has been computed.  But not all sponsors add and subtract the same way.  

Nearly all builders measure square footage from exterior wall to exterior wall, but since the thickness of walls vary -- some exceeding a foot -- not all brick to brick measurements are equal.  In corner apartments, there are two exterior walls to consider.  Moreover, there are differences among gross calculations when developers include a prorated share for common elements such as elevators, corridors and stairwells.  Some offering plans refer to the inclusion of mechanical columns and pipes in gross area totals.  As a result, actual apartment square footage is distorted because common building elements are included in the gross area total.

Square footage in co-ops comprises the floor space within an apartment's perimeter walls, including closets and hallways.  One would think that multiplying length times width to determine the floor area would be straightforward arithmetic.  In point of fact, however, if you were to ask a developer, interior designer, appraiser, seller and broker to measure the same co-op apartment, more often than not, you would get five different responses.   Similarly, if you were to ask a carpet installer to compare one 2000 square foot condo with another in a different development, you're likely to come away with two very different carpetable areas. 

Square footage is an important consideration in determining and comparing property values.  It's time for industry standards.

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The Mann Report Manhattan Market Watch Considering Trusts and Co-op Ownership By Shirley Hackel, Managing Director, Warburg Realty Partnership I begin this column with a disclaimer.  Although I have…... Read more >

The Mann Report
Manhattan Market Watch

Considering Trusts and Co-op Ownership
By Shirley Hackel, Managing Director, Warburg Realty Partnership

I begin this column with a disclaimer.  Although I have called upon my attorney contacts to share their insights and experiences, I do not offer legal advice, but rather bring attention from a broker’s point of view to a current complicated issue.  Buyers and sellers always should consult with their lawyers for legal guidance in all aspects of their real estate transactions.

I am in contract on a Fifth Avenue co-op with a buyer who wishes to hold title in a trust for estate planning purposes.  I represent the seller in this transaction, and it was a competitive bid situation, so I advised the buyer’s broker to remove any contingency and to proceed to contract in the principal’s name and then, after closing, apply to the board for a transfer to a trust.  While it’s not the first time in my 25 years as a Manhattan broker that I’ve been involved with a trust question, it is the first time that I have gotten advance positive feedback from a managing agent that the co-op board would entertain the prospect of trust ownership.  Unlike the knee-jerk negative responses I’ve heard in the past, this managing agent advised that the corporation did not object “in principle” to a transfer by a shareholder to a trust, specifically a “QPRT” or Qualified Personal Residence Trust. 

“While there are a myriad of types of trusts,” explains Frank Julie, an estate planning expert and partner at Joseph and Koppel LLP, “only two are seen as desirable for residential ownership:  the QPRT which is irrevocable and done for very specific estate planning purposes, and the living trust which is revocable and used for non-tax reasons, like providing greater control over assets in the event of a disability.”  

As I see it, there are two primary concerns for the co-op.  First, trust ownership challenges the policy of owner occupancy.  Secondly, since the trust is a legal entity and not a person, there is no one to be held accountable when maintenance is unpaid or when house rules are disregarded.  In order to eliminate these worries, the trust and the co-op usually enter into additional agreements.  Specifically, an Occupancy Agreement would establish who is permitted to reside in the apartment, and provisions would be made that on the death of the approved occupants, the trust would not permit the apartment to be occupied by anyone who is not approved by the Board.  Additionally, the occupants would provide a personal guarantee for all the co-op’s financial obligations.  In some cases, the co-op board may also request a year or more of maintenance payments to be held in escrow.  Sometimes, an ancillary jurisdictional document names a specific agent who can be served in the case of a legal proceeding.

The foregoing is logical and reasonable, especially in a cash transaction when a bank is not involved.  However, when there is financing, other stumbling blocks surface, since the stock and lease must be in the same name as the contract, and lenders are loathe to give co-op loans to non-individuals.  Sometimes when title is changed to a trust, the bank may permit the trust to assume the loan, but more often than not, the borrower must refinance since the bank physically holds the stock and lease, and an exchange must be made to accomplish the transfer by cancelling out the share and issuing a new set of documents.  When a flip tax is levied on a sale, each co-op handles the transfer issue differently:  some do not charge when a transfer is made to a child, spouse or trust and no money is exchanged; other co-ops look to add revenues to their coffers by collecting a flat fee or charging a percentage on the appraised value.   

Yielding to Pressure

While the number of sophisticated boards is growing, many more remain unwilling to consider the complexities involved.  As a consequence, brokers may be reluctant to encourage principals to enter a contract in a trust name, primarily because trust ownership may have a negative effect on board consent.  Additionally, trust instruments are lengthy and complex, so their review adds yet another layer of time and cost to the approval process.  “It is important to remember that even with enlightened boards and lenders, their review processes may take longer, and this should be factored in by the parties,” says Reis Cooper LLP attorney Alan Reis who represents cooperative boards and lenders. 
 
Existing shareholders currently involved in estate planning are exerting considerable pressure on their co-op boards to transfer shares from individual names to a QPRT.    Scott Konner and Robert Teitelbaum of Konner Teitelbaum & Gallagher, a firm which represents about 40 co-ops, point to a changing environment where more and more co-op boards are allowing ownership of apartments by trusts.  "It is becoming increasingly more common for co-op boards to permit either the transfer of an existing apartment or the purchase of a new apartment to occur in a trust.  This is the direct result of tax and estate planning in our more sophisticated society today."

There are benefits as well as risks involved in acquiring or transferring co-op shares in a trust, and these should be evaluated carefully with tax and legal counsel.  The broker’s role is to facilitate the dialogue that leads to achieving desired goals and a successful transaction.   

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The Mann Report Manhattan Residential Market Watch Top Ten Truisms By Shirley Hackel, Managing Director, Warburg Realty Partnership The best time for a Top Ten List is at the close of one year looking…... Read more >

The Mann Report
Manhattan Residential Market Watch

Top Ten Truisms
By Shirley Hackel, Managing Director, Warburg Realty Partnership

The best time for a Top Ten List is at the close of one year looking ahead to the next.  Here then, as we approach 2007, are my top ten observations for the year past. 

1.   Real estate is big news.  We’ve gotten beyond the boom and bust bubble stories that dominated the headlines for three years, but now we’re being bombarded with speculation about whether a shifting market is in for a soft or hard landing.  There’s not a day without some housing talk by the media.  For more than six consecutive years, until this year, the housing sector enjoyed a steady, robust uptick of rapidly rising prices, fast paced transactions, and high numbers of sales.  This year, growth has been minimal.  With ever expanding inventories of new development projects, trading has slowed, sales volume is down and prices have leveled.  In addition, across the country, new housing starts have declined.  Nonetheless, value abounds in the marketplace.   

2.  New York is the most insulated real estate market in the nation.  Unlike other housing markets, Manhattan real estate benefits from the city’s inherent strengths.  A magnet for the world’s super wealthy, Manhattan is also home to the financial industry.  Much of the profits and bonus money from Wall Street’s hedge fund managers, investment bankers and law partners winds up in the purses of the city’s real estate sellers.  Primarily a user rather than investor market, Manhattan is also dominated by cooperative ownership which requires user tenancy and which limits the amount that a buyer can finance, thus preventing over leveraging.  New York buyers are less able to stretch their wallets to purchase housing.  Additionally, many co-op boards are steering buyers away from exotic loans, some specifically prohibiting interest only products.  With co-op ownership, shareholders leverage less and gain larger equity positions.  

3.  If you build it, will they come?  Perhaps the greatest shift in the marketplace is occurring among new developments which have grown exponentially in the last two years.  New projects are altering the face of our housing supply.  The current product ratio of 15% condo to 85% co-op is expected to approach 35:65 in the next couple of years.  Creating new choices for buyers, these new condominiums compete vigorously with co-op and condo resales.  But there is increased pressure on developers from rising construction costs, in some cases 30% above last year.  Unlike the overheated markets of two years ago, when sponsors were submitting multiple price increase amendments to offering plans, today’s developers are providing incentive upgrades and covering closing costs, and a handful are filing price reductions with the Attorney General’s office. 

4.  The market for affordable rentals is shrinking.  A renewed wave of condominium conversions is sweeping the city.  Vastly different from the 1980’s when developers gave rental tenants deep discounts to purchase, today’s insider offerings are only marginally lower than published prices.  As some of these tenants consider becoming first time buyers, they are fueling the bottom end of the sales market.  For the most part, however, these residents can not afford to buy. 

5.  Co-op sales prices are now public.  This summer Governor Pataki signed into law a bill that requires the disclosure of cooperative sales prices.  While some have lauded this passage, others question whether it jeopardizes privacy issues.  Also on the slate of bills reviewed this July, but not passed was the Fairness in Cooperative Housing Ownership Act which would have established a time frame within which co-op boards would have to accept or reject applicants and also would have required that a written explanation be given for any rejection. 

6.  REBNY provides a Co-op Board Admissions Guide.  This spring, REBNY introduced a guide for managing agents and Board members that includes recommendations for Board review and identifies 14 protected anti-discrimination classes, and also suggests a six week time frame from package receipt to response.  Untimely reviews are not only inconsiderate, they put lives on hold indefinitely. 

7.  Interest rates are still at historic lows.  While rates have seesawed up and down fractionally this year, the public perception is that they are increasing.  Yet they are still at historic lows, and it’s unlikely they will approach double digits any time soon. 

8.  Staging gains increased importance.  There’s no good reason for a property not to show to its best advantage.  Armed with practical advice from brokers and tips from apartment stylists or professional “stagers,” today’s sellers understand the advantages of presenting a property for maximum visual and emotional appeal.  Staged apartments sell faster and for more money than unstaged ones. 

9.  Air rights are the new commodity.  Four years ago, empty lots—particularly those in Harlem—were the market’s hot new product as brokers talked about the price per buildable square foot.  Today, the latest index of market development is the sale of air rights, as the product moves from the commercial arena to the residential marketplace.  The ability to use vertical air space above smaller buildings which are not built to the maximum allowed by zoning depends on location and zoning height limitations.  Contributing to increased values, air rights can be used to protect light and views, or to build above a structure, or lots can be merged to create more desirable development. 

10.  The more things change, the more they remain the same.  The cycles of real estate are fluid.  As always, the advice to principals is to work with an experienced professional who understands the market economy who will help buyers to evaluate purchase opportunities and who will guide sellers to set realistic prices.  Buyers are advised not to fear jumping into the market at any point this year.  But don’t gamble with your residence—buy quality, put deliberate limits on your financial exposure and don’t leverage to the max.  Barring the unforeseen, in the months and year ahead, a return to more even activity with modest price appreciation is welcomed.

Shirley Hackel 
Managing Director
Warburg Realty Partnership
212 439 5197
shackel@warburgrealty.com

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Ready, Set, MOVE! By Shirley Hackel, Managing Director Warburg Realty Partnership, Ltd. Congratulations.  Your contract has been signed!  But before you break out the champagne, now is the time…... Read more >

Ready, Set, MOVE!

By Shirley Hackel, Managing Director
Warburg Realty Partnership, Ltd.

Congratulations.  Your contract has been signed!  But before you break out the champagne, now is the time to begin planning your move.  Next to divorce and marriage, moving ranks high on life’s stress meter.  Because it centers on displacement and disruption, it requires preparation, organization and perspective.  Here are some tips I’ve gleaned over the years. 

If you’re buying and selling at the same time, you’ll need to orchestrate carefully the mechanics of each closing.  It’s important to understand the options available.  Since most homeowners require their sale proceeds to fund their next transaction, a simultaneous close with the sale occurring in the morning and the purchase following in the afternoon is the optimum scenario.  When this is not possible, however, a short-term bridge loan is an effective, though costly, way to cover the time between closings.  Other times, a holdover arrangement or interim rental provision, often spelled out in the contract, can protect against unforeseen delays.  Additionally, some moving companies offer “storage in transit” and will hold your belongings on trucks for 3-4 days.  Knowing your new building’s procedural requirements regarding move-ins and their policy regarding elevator use is critical. 

It’s best to call the movers as far in advance as possible, but, at the very least, call 3-4 weeks before the move.  Get estimates from 3 companies.  Since move dates can change more than once for a variety of reasons, choose a company that will be the most flexible, especially if your timing is uncertain.  “Everybody’s dates change,” says Gerry McGwyne, President of T&G Relocation Systems, “and no two moves are the same.  Go with a recommendation,” he advises, “and get a fixed price with a written guarantee.  A low quote from a disreputable firm may turn into a big headache at the end of the day.” 

Moving presents multiple opportunities.  It’s the best time to have your rugs cleaned and then delivered to the new place.  There’s never a better time to sort through and eliminate stuff you no longer use or need.  Donations to shelters, hospitals and schools are immensely gratifying and also tax deductible. 

If the movers are packing for you, it’s best to leave items in place, since it’s safer to pack glassware and china from a cabinet than a cluttered counter.  You can leave your clothes in dresser drawers, but don’t overstuff them.  If you’re packing yourself, the rule of thumb is to pack heavier items in the bottom of the box and lighter things on top, keeping the box’s weight under 50 pounds.  For heavy items, use smaller boxes.  You can use newspapers for filler, but not for wrapping since newsprint rubs off and stains.  Mark boxes with fragile items accordingly.  Hire experts to move your grandfather clock and piano.  Since plants don’t move well, consider finding them new homes or moving them yourself.  Since you won’t have time for children or pets on moving day, arrange for favorite babysitters.  Consider moving some cherished toys yourself.

Color Coded Chaos

Number each box, and use different colored labels to identify boxes by room.  Paste the same colored labels on the door of the room being packed and on the door of the room in the new home where the boxes will be unpacked.  Give the movers your floor plan indicating color coded rooms and furniture placement.  Create a master list of boxes by room and number, and try to categorize contents as best you can.  When you’re ready to make a final check of every room, don’t overlook your basement storage area.  Remember also to shut lights, and close windows.

Notify the mover about high value items such as antiques and collectibles that may need special care.  Moving companies are limited by law as to how much they can protect against lost or damaged goods.  Check your homeowners’ policy to see whether you’ll need to purchase additional transit coverage.  Movers are not liable for what they did not pack unless the exterior of the box is damaged.  They cannot be responsible for jewelry or important documents. 

Expect moving day to be organized chaos. Even with one person at the old place to supervise, and another at the new place, mistakes happen.  Dee, a veteran mover, cautions, “If you’ve promised to leave the window treatments and light fixtures, make sure you tell the movers, or they’ll dismantle everything even if it’s nailed to the wall, as they did to my horror in my last move.”

Create an “unpack first” box and move this yourself.  Include items you’ll need immediately like bed linens, towels, toilet paper, soap, large trash bags, scissors, hammer, screwdriver, cleaning supplies, bottled water, notepad and pen.

In many ways, moving is a lot like having babies or redoing a kitchen.  You forget the pain and remember only the joys, and so you do it again.  With good planning and a sense of perspective, you’ll manage the challenges of moving admirably, and the stresses will be behind you soon enough.  Cheers!

Shirley Hackel has been selling Manhattan residences since 1980.  She can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

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The Mann Report Manhattan Residential Market Watch BACK TO SCHOOL By Shirley Hackel, Managing Director, Warburg Realty Partnership We’ve sharpened our pencils, bought new notebooks and are ready to…... Read more >

The Mann Report
Manhattan Residential Market Watch

BACK TO SCHOOL
By Shirley Hackel, Managing Director, Warburg Realty Partnership

We’ve sharpened our pencils, bought new notebooks and are ready to get back to business as usual in September 2006.  For the better part of this year, we’ve been a market in transition.  What lies ahead for Manhattan real estate?  To answer, a review of the recent past will help.

The years just behind us of 2004 and 2005 were among the hottest markets ever.  They were heady times with historic highs for price appreciations and equally historic lows for mortgage interest rates.   Easy credit and ever rising plateaus contributed to a sizzling and overheated market.  There were steady price increases from sponsors on new developments, and brokers and sellers were pricing ahead of the market.  Open houses attracted crowds of buyers, and competitive bidding became commonplace with many deals trading at 10% above the asking price.  The spikes in the marketplace were spectacular, and the pace of trading was frenetic.  All the while, there were dramatic headlines of boom and bust, but 2005 turned out to be the year of the bubble that wasn’t.  The Manhattan market did not tank, and this year has been all about returning to balance and stability with unhurried deal making and a slower absorption rate.  

While the volume of deals declined this year, prices have remained level.  As new construction competes with resales, there’s more inventory to consider, so it’s taking longer for properties to sell.  Instead of last year’s 4-6 week average for days on the market, it’s taking 4-6 months and longer to sell.  Instead of multiple price increases at new developments, sponsors are offering concessions to attract buyer attention, and a handful of developers are even filing price reductions with the Attorney General’s office.  At the beginning of the year, there was a buyer lethargy that continued through February.  In March and April, sales rebounded and by May, a significant up-tick in trading at high prices was confounding the pundits who had been predicting a bursting bubble.  In mid-June, a seasonal deceleration began, and like last summer, activity dropped as some properties languished on the market. 
 
At the same time, economists tell us that inflation is being managed, there’s growth in most industry sectors, and consumer confidence is rising.  Yet oil prices are higher than ever, the stock market volatile like always, and as of this writing, the international news especially in the Middle East is particularly disquieting.  In addition, interest rates have been inching up steadily.  According to Freddie Mac, by mid-July, the rate on a 30-year fixed mortgage had risen to 6.7%, the highest since the spring of 2002.  For the balance of the year, these rates are expected to average 6.9%.   

Former Federal Reserve Chairman Alan Greenspan called the boom times “froth” and predicted that the “irrational exuberance” caused by overvalued properties could not be sustained.  This July, his successor Ben Bernanke described the housing “downturn” as “orderly.”  Nonetheless, David Lereah, National Association of Realtors’ chief economist expects this year to be “the third strongest on record” and that “we should see sales rising and falling month to month” without “any big shifts one way or the other.” 

What lies ahead for Manhattan real estate? 

The next three months leading up to Thanksgiving 2006 and the new year of 2007 should present multiple prospects for buyers and sellers.  Market activity has slowed to a sustainable pace.  A new crop of properties is coming to market since sellers have been waiting until after Labor Day to list.  The time for active looking and decision making is from now until the distractions of the holiday season.  In a stabilizing environment, buyers who have been on the fence will be more comfortable to commit to purchasing.  They are advised not to fear jumping into the market at any point this fall and winter.  Those who continue to nurse sideline mentalities will miss opportunities. 

Prices are expected to rise modestly or remain flat.  Properties in mint condition will continue to rule the roost, and will be the ones to sell most easily, assuming they are priced realistically.  All segments of the market are expected to remain strong, and the one and two bedroom category will gain particular strength from an ever-tightening rental market.  Overpriced properties leftover from last season will continue to be reduced until they are absorbed or removed from inventory.  Barring the unforeseen, New York will continue to thrive, and quality real estate will retain its value and endure. 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to answer your questions and can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

 

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HEADS UP! By Shirley Hackel Managing Director Warburg Realty Partnership Those who know me know that I’m a realist and a straight shooter.  Always, I speak the “emes”—pronounced…... Read more >

HEADS UP!

By Shirley Hackel
Managing Director
Warburg Realty Partnership

Those who know me know that I’m a realist and a straight shooter.  Always, I speak the “emes”—pronounced em-es, or em-et, which is the Hebrew word for truth.  So what are the realities of the current marketplace?  Simply put, we’re a market in transition, and working with a pro and managing the deal are more important than ever.  

Without a doubt, the pace of the marketplace has slowed, but realistically priced apartments continue to sell at high prices.  Brokers have been able to hang up their roller skates, because we no longer need to race the streets to get our buyers to properties lickety-split.  Apartments are staying on the market longer, so purchasers have the luxury of time to evaluate choices and deliberate over options.  The truth of the matter is the market is changing.  We’re moving away from the heady boom times of the last four years.  Despite a cooling period, chief economist of the National Association of Realtors David Lereah forecasts that “2006 is still expected to be the third strongest [year] on record.... and slower appreciation will help to preserve long-term affordability.”  

Across the country, new housing starts are down, in some areas nearly 8% from last year.  As a consequence, related job losses in the industry have affected national employment figures negatively.  Exacerbating the situation are continued stock market volatility, rising interest rates, escalating oil prices, and concerns about a sluggish economy and global unrest.  At the same time, however, much of the financial industry is reporting significant earnings growth:  profits at Morgan Stanley and Goldman Sachs have doubled, Lehman reported income up 47%, and at Bear Stearns earnings surged over 80%. 

The Manhattan real estate market is blessed with a number of inherent strengths that protect it from external factors.  To name a few…  it is home to the financial industry, and much of Wall Street’s bonus money finds its way ultimately to the purses of the city’s real estate sellers.  It is primarily a user market, unlike Florida and California which are flooded with investors and thus overvalued.  Its housing inventory is predominantly cooperative ownership which requires user tenancy and which puts financing restrictions on buyers, preventing over leveraging.  Its rental market is shrinking because of a renewed wave of condominium conversions, driving tenants to consider becoming first time buyers and refueling the bottom end of the market as a result.

Listen Up!

Even though Manhattan historically behaves very differently than other parts of the nation, Manhattanites would have to be made of stone not to be affected by the conflicting dynamics of the marketplace and the accompanying media coverage.  If interest rates continue to inch up, we will face tougher 3rd and 4th quarters.

Except for the frenzied days of 2005, when bidding wars were the norm, buyers generally proceed with caution as they negotiate their deals.  Those with sideline mentalities, however, are missing opportunities altogether.  Others who forge ahead to accepted offers, sometimes become skittish and question their own judgments.  Their thinking is… if the seller accepts my offer, then I’m paying too much.  If an attempt at renegotiation follows, then it’s very possible that all may be lost for both sides, since one of the risks of trying to renegotiate is the seller will refuse to deal with an edgy buyer at any price.

Appreciation may be down, but prices are not eroding.  The market has slowed to a sustainable pace allowing buyers to make informed decisions.  With the urgency gone, it’s becoming increasingly important for sellers to recognize and appreciate real buyers.  It’s up to experienced brokers to present buyers and their offers in the best light possible.  Persuasively outlining the strengths of a purchaser lends validity to an offer, and encourages negotiation.  Good brokers know how to prioritize needs and identify areas for flexibility and compromise.  Vigilant during every step of the process leading up to a successful closing, they know how to anticipate and overcome obstacles.

The task of holding together the deal is always the responsibility of the broker.  Good communication skills are essential, since the broker acts as liaison for all the transaction’s players—including attorneys, mortgage brokers, architects, reference letter writers and even mothers-in-law.  In every market, deal making requires discipline and vigilance, and a good working relationship between co-brokers is critical.  When I’m involved in a co-broke situation, I want an experienced professional representing the other side of the transaction.  I want to be able to count on an equally skilled co-broker to manage emotions and expectations.  Good manners always count, and I want calls to be returned promptly.  A team spirit is essential, and I never want a big ego to get in the way at any point—not at the initial negotiating stage nor during board package review.  Since time is the enemy of a deal, in every market, presenting information in a timely manner is key.  Damage control requires a level headedness as well as an understanding of comparable values. 

For the rest of the year, prices are expected to rise modestly.  The summer months are not expected to be particularly momentous, and leftover overpriced apartments will continue to be reduced in price until they are absorbed or removed from inventory.  The advice to principals is to work with an experienced professional who understands the market economy who will help buyers to evaluate purchase opportunities and who will guide sellers to set realistic prices.  Ain’t that the truth? 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to answer your questions and can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

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CAN YOU HEAR ME NOW? By Shirley Hackel, Managing Director My children say I send the same message in each monthly column:  price realistically and collaborate with a professional broker to help buy…... Read more >

CAN YOU HEAR ME NOW?

By Shirley Hackel, Managing Director

My children say I send the same message in each monthly column:  price realistically and collaborate with a professional broker to help buy or sell your home.  Undoubtedly, the transaction represents a significant portion of your net worth, so why even consider shortchanging yourself?

Though interest rates are rising moderately, the increase won’t derail the real estate market.  In fact, there’s an inverse relationship between interest rates and apartment size:  the larger the budget, the smaller the impact of rising rates.  First time buyers and sellers of apartments under $1 million will feel a rise in interest rates most.  Interest only products will continue to be interesting options for buyers with a time horizon of six years or less.  While analysts continue to worry about where interest rates are headed, the truth is that our economy is in pretty good shape.  Inflation is being managed, and there’s growth in most industry sectors.  Something needs to be done, however, about the escalating price of oil, because it’s psychologically disconcerting to pay over $50 to fill an average gas tank.  Unchecked escalating oil prices certainly will influence discretionary spending, especially travel purchases. 

We’ve witnessed a series of boom years in this city’s real estate market.  It’s been a heady experience for principals and brokers alike.  Last year, I wrote that a slowdown in price increments was to be expected, along with a leveling of market activity.  Well, stability and balance are here, along with some new realities and shifting expectations. 

Instead of dramatic and successive price jumps in sales, we’re seeing modest appreciation in price levels in the single digits.  Bidding wars—last year’s accepted manner of doing business—are still occurring when there is perceived value.  In each property category in nearly every area of the city, when there is an offering that has a particularly compelling element—like a high floor view or a ballroom sized living room—buyers are competing to purchase, and they are acting aggressively and quickly. 

But while some properties are moving briskly, others are languishing.  Overpriced homes are being ignored.  Those with obvious flaws, like a lack of sunlight or a fussy board, must be reduced in price to compensate for shortcomings.  But sometimes, despite the best pricing advice, a property will sit on the market wallflower style.  When a property is ignored, a price accommodation is in order, or the home will devalue itself.  Winter and spring leftover inventories are being reduced or removed from the market. 
 
When Less Brings More
  
At the outset of an offering, there is always a range in price to consider.  It’s far more effective to price under or on the mark so that the property shows as the best on the market at a given price.  Listing a property at the high end of a price range is counterproductive because it wastes valuable time.  Today’s buyers are not bidding unless the asking price is in range of their intended offer.  In the rapidly accelerating markets of past years, it was reasonable to pay a shade more than budgeted because the market was moving so fast.  In a slower paced market, there’s less pressure for more prudent buyers to act quickly, so it’s taking longer to sell a property. 

With the urgency gone, it’s becoming increasingly important for sellers to recognize and appreciate real buyers.  It’s up to experienced brokers to present buyers and their offers in the best light possible.  Persuasively outlining the strengths of a purchaser lends validity to an offer, and encourages negotiation. 

Perhaps the greatest shift in the marketplace is occurring among new developments which have grown exponentially in the last two years.  The condo explosion has added vitality to the marketplace by creating new choices for buyers.  But the increasing inventories also have led to unhurried deal making and a slower absorption rate.  More products are coming on the market than ever before, crowding the real estate terrain.  Increasing construction costs, in some cases as much as 30% over last year, are putting pressure on developers.  Proper pricing of new projects is critical if they are to be absorbed.  Throughout the city, there are examples of developers who are working creatively to get the attention of the buying community.  To avoid price cutting, some are offering concessions to purchasers in the form of upgrades or by covering closing costs.

With nearly 20,000 new condo units approved for sale in the next year, new developments are changing the face of New York’s housing supply.  Estimates indicate that the proportion of condo and co-op products will change from their current ratio of 15%:85% to 35% condo and 65% co-op.  Additionally, these new developments are expanding housing’s geographic limits as the gentrified city grows larger and pushes deeper into Brooklyn, the Bronx and Long Island City. 

Yes, Virginia, the echoes resound:  collaborate with an experienced broker to buy or sell your home, set realistic expectations, price precisely, and listen to the healthy hum of the marketplace.   

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to talk to you about buying or selling your next home.  She welcomes your comments and questions and can be reached at shackel@warburgrealty.com or 212-439-5197.

< Read less

CAN YOU HEAR ME NOW? By Shirley Hackel, Managing Director My children say I send the same message in each monthly column:  price realistically and collaborate with a professional broker to help buy…... Read more >

CAN YOU HEAR ME NOW?

By Shirley Hackel, Managing Director

My children say I send the same message in each monthly column:  price realistically and collaborate with a professional broker to help buy or sell your home.  Undoubtedly, the transaction represents a significant portion of your net worth, so why even consider shortchanging yourself?

Though interest rates are rising moderately, the increase won’t derail the real estate market.  In fact, there’s an inverse relationship between interest rates and apartment size:  the larger the budget, the smaller the impact of rising rates.  First time buyers and sellers of apartments under $1 million will feel a rise in interest rates most.  Interest only products will continue to be interesting options for buyers with a time horizon of six years or less.  While analysts continue to worry about where interest rates are headed, the truth is that our economy is in pretty good shape.  Inflation is being managed, and there’s growth in most industry sectors.  Something needs to be done, however, about the escalating price of oil, because it’s psychologically disconcerting to pay over $50 to fill an average gas tank.  Unchecked escalating oil prices certainly will influence discretionary spending, especially travel purchases. 

We’ve witnessed a series of boom years in this city’s real estate market.  It’s been a heady experience for principals and brokers alike.  Last year, I wrote that a slowdown in price increments was to be expected, along with a leveling of market activity.  Well, stability and balance are here, along with some new realities and shifting expectations. 

Instead of dramatic and successive price jumps in sales, we’re seeing modest appreciation in price levels in the single digits.  Bidding wars—last year’s accepted manner of doing business—are still occurring when there is perceived value.  In each property category in nearly every area of the city, when there is an offering that has a particularly compelling element—like a high floor view or a ballroom sized living room—buyers are competing to purchase, and they are acting aggressively and quickly. 

But while some properties are moving briskly, others are languishing.  Overpriced homes are being ignored.  Those with obvious flaws, like a lack of sunlight or a fussy board, must be reduced in price to compensate for shortcomings.  But sometimes, despite the best pricing advice, a property will sit on the market wallflower style.  When a property is ignored, a price accommodation is in order, or the home will devalue itself.  Winter and spring leftover inventories are being reduced or removed from the market. 
 
When Less Brings More
  
At the outset of an offering, there is always a range in price to consider.  It’s far more effective to price under or on the mark so that the property shows as the best on the market at a given price.  Listing a property at the high end of a price range is counterproductive because it wastes valuable time.  Today’s buyers are not bidding unless the asking price is in range of their intended offer.  In the rapidly accelerating markets of past years, it was reasonable to pay a shade more than budgeted because the market was moving so fast.  In a slower paced market, there’s less pressure for more prudent buyers to act quickly, so it’s taking longer to sell a property. 

With the urgency gone, it’s becoming increasingly important for sellers to recognize and appreciate real buyers.  It’s up to experienced brokers to present buyers and their offers in the best light possible.  Persuasively outlining the strengths of a purchaser lends validity to an offer, and encourages negotiation. 

Perhaps the greatest shift in the marketplace is occurring among new developments which have grown exponentially in the last two years.  The condo explosion has added vitality to the marketplace by creating new choices for buyers.  But the increasing inventories also have led to unhurried deal making and a slower absorption rate.  More products are coming on the market than ever before, crowding the real estate terrain.  Increasing construction costs, in some cases as much as 30% over last year, are putting pressure on developers.  Proper pricing of new projects is critical if they are to be absorbed.  Throughout the city, there are examples of developers who are working creatively to get the attention of the buying community.  To avoid price cutting, some are offering concessions to purchasers in the form of upgrades or by covering closing costs.

With nearly 20,000 new condo units approved for sale in the next year, new developments are changing the face of New York’s housing supply.  Estimates indicate that the proportion of condo and co-op products will change from their current ratio of 15%:85% to 35% condo and 65% co-op.  Additionally, these new developments are expanding housing’s geographic limits as the gentrified city grows larger and pushes deeper into Brooklyn, the Bronx and Long Island City. 

Yes, Virginia, the echoes resound:  collaborate with an experienced broker to buy or sell your home, set realistic expectations, price precisely, and listen to the healthy hum of the marketplace.   

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to talk to you about buying or selling your next home.  She welcomes your comments and questions and can be reached at shackel@warburgrealty.com or 212-439-5197.

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Manhattan Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership VALUE ADDED Today, there are more than 28,000 residential real estate agents and brokers doing business in Manhattan. …... Read more >

Manhattan Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

VALUE ADDED

Today, there are more than 28,000 residential real estate agents and brokers doing business in Manhattan.  Because of the record breaking run-up in sales prices over the last several years, the field has attracted an increasing number of newcomers.  Many will not stay the distance.

If you’re a buyer, a seller, or a developer, how do you choose from among the vast numbers of professionals?  What makes a good broker?  And why hire a broker at all when the Internet provides access to a global marketplace for available inventory? 

Certainly, the Internet is a powerful information tool that saves time for principals and brokers alike.  Providing detailed photographs, floor plans and virtual tours, the web allows us to scan the competitive landscape and preview properties from our desks. 

Good brokers serve to interpret and disseminate information.  Acting as advisors, they share more than their knowledge of a particular building, neighborhood or co-op board.  Adding perspective, they are able to explain current market trends in a broader context.  They not only educate buyers and sellers about recent sales, but they offer intuitive insights into choices and always consider resale possibilities.  By helping to evaluate opportunities, they enable all to make informed decisions.

Effective communicators and negotiators, good brokers know how to listen.  They are skilled at positioning and packaging.  They know how to champion your cause logically and persuasively to put together the best possible bid, counter offer or board package.  There are precious few among us who are able to negotiate effectively on our own behalf.  Nearly always, ego gets in the way of our intentions.  Whenever, I’ve negotiated to buy or sell a property for myself, I’ve asked an associate to act as negotiating spokesperson for me.  In that way, I could save face if I ever offended with a low offer, inadequate counter, or disparaging comment.    
Part Diplomat, Part Shrink

Good brokers are well-versed in the psychology of buying.  They lend emotional support to every transaction, and are adept at hand-holding and easing stress.  More often than not, they are confidantes for their clients and customers.  Because they are privy to personal information and sensitive details, good brokers are armed with discretion and diplomacy.   

Additionally, they have a wealth of resources at their fingertips, and can put you in touch with the right mortgage broker, attorney, designer, architect, contractor, supplier and mover.  They have strong working relationships with other professionals in the community, especially co-brokers and mortgage brokers.  Their judgments are respected, and they cooperate effectively with all players involved in a transaction. 

Good brokers are creative thinkers and problem solvers.  They know how to prioritize needs and identify areas for flexibility and compromise.  They can predict future requirements and advise on resale probabilities.  Vigilant during every step of the process leading up to a successful closing, they know how to anticipate and overcome obstacles. 

Buying and selling a home is a major financial commitment.  For many, the transaction represents a significant portion of net worth.  For most, it’s also a pivotal life event.  Though it’s not nearly as high on the stress meter as marriage or divorce, the process is fraught with emotion and anxiety.  To ensure a smooth transaction from beginning to end, both buyers and sellers are faced with the challenge of selecting the right broker.  The recommendation is to get referrals from friends or other professionals, and to interview your prospects.  For the best outcome possible, hire an experienced broker with sensitivity and integrity who demonstrates a willingness to provide personal attention and service to achieve your specific goals.  Today, in fact, there are less than 28,000 of us around. 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to talk to you about buying or selling your next home.  She welcomes your comments and questions and can be reached at shackel@warburgrealty.com or 212-439-5197.

 

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Manhattan Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership Ultimate Makeovers What’s most important to the success of a renovation project?  I posed the question to…... Read more >

Manhattan Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Ultimate Makeovers

What’s most important to the success of a renovation project?  I posed the question to a handful of property owners who have renovated multiple times, an architect, a space designer, and a contractor.  All agreed:  do your homework, plan thoroughly, and respect timing. 

Do your homework

Before you begin, talk to as many as you can who have been through the process.  Get lots of recommendations, ask dozens of questions and take notes.  You’ll have scores of decisions to make, but selecting your primary professionals—architect or space designer and contractor—will impact all your subsequent choices.  So interview carefully, examine past performance, and check references.  When evaluating bids, consider reputation and experience as much as you consider price.  When checking references, ask how each responded when problems surfaced during and after the job. 
 
Study the building’s house rules, by-laws, proprietary lease and alteration agreement; also check board minutes, if available, for clues to potential biases.  What hours is work permitted?  Are there summer only rules?  If there are restrictions on the use of the freight elevator, it may mean that only one renovation may occur at a time in any one elevator bank.  Is there a charge for freight elevator use?  Does the freight elevator need to be reserved in advance for moving materials into and out of the building?  Is the removal of demolition debris limited to a specific day of the week?  Is there a specified period of time to finish a job, and what is the per diem charge for late completion?  When are special filings or permits required?  Discuss your preliminary ideas with the building superintendent for a cursory understanding of what jobs must be filed with the city’s Buildings Department or Landmarks Preservation Commission.  If the building’s engineer is available to be consulted, enlisting that kind of aid upfront is invaluable. 

Plan thoroughly

Try to make as many decisions as possible before actual construction begins, and include even the smallest details along with specifications for all equipment and materials in your contract documents and drawings.  Detailed plans are essential for prompt review and approval by your co-op or condo board; these also serve to protect you.  If the installation of electrical switch plates and bathroom accessories is not specified in your contract, you may be charged additionally by your contractor. 

Understand the hierarchy and chain of command from the architect/designer to the contractor to the subcontractor to the suppliers.  Acknowledge that each trade is dependent on the work of another.  If there are problems or questions with one skill set, discuss these with the primary professional who has ultimate responsibility and who, much like the conductor of a symphonic orchestra, must manage expectations as well as each movement of the total job.

Respect timing

Probably the biggest unknown for a renovation project is the time that it takes to get board approval.  Varying from building to building, the span can range as short as two weeks to as long as six months.  It’s impossible to predict what other board concerns will take precedent over reviewing your application or what board members may be on vacation.  Since the board president must sign work permit applications, delays are tough to anticipate.  Additionally, since there are no real standards to follow, the board will need time to consult with its Managing Agent, the building’s engineer, and other advisors as needed. 

Make sure that your submitted plans are as complete as possible, and that you include all contracts, permits, timetables, insurance policies, and lists of contractors and subcontractors.  Requests for omitted information only cause delay.  At the Columbia Condominium, a recent project was held up for four and a half months with request after request for more information, such as what size anchors would be used to install kitchen cabinets, and what finish was being used on cabinet doors?  If you’re seeking to set a building precedent like the owner on Riverside Drive who requested a mixed design of casement and tilt and turn windows, then don’t expect a speedy response—in that case, it took four months for the board to finally approve the window replacement.  

Though the approval process may be arduous, the review of alteration plans is more than “strangers dictating what you can or can’t do in your own home”—as one homeowner described it.  On the contrary, the board is concerned with issues of safety and must look to protect the building’s structure and systems for heating, plumbing and electric.  Additionally, the board seeks to protect security and quality of life for residents as it tries to contain noise and air-borne contaminants. 

Setbacks occur for a myriad of unpredictable causes:  elevators break down, building employees strike, ordered materials are not available.  Whenever possible, prepare for contingencies, or be ready to assume the costs of unavoidable delays and cost overruns.  Changes that you make to approved plans affect not only end pricing but scheduling.  Since time is money, delays are always costly.  

Once your job is in full swing, keep extensive lists and check on progress with weekly visits and conferences.  Stay on top of supply deliveries, or you may wind up losing a week or two waiting for an ordered item when another might have been substituted.  Wait until your punch list is completed, before you write your last installment check.

There is great value to successful property renovations.  Aside from the obvious increase in worth, there’s immeasurable pleasure and satisfaction in your own design and execution of a renovation well done.  

Shirley Hackel has been selling Manhattan residences since 1980.  She is looking forward to her 5th renovation project.  She welcomes your comments and questions.  She can be reached at shackel@warburgrealty.com or 212-439-5197.

 

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Manhattan Residential Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership To Stage or Not To Stage?  If “all the world’s a stage” as Shakespeare reflected in As You…... Read more >

Manhattan Residential Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

To Stage or Not To Stage? 

If “all the world’s a stage” as Shakespeare reflected in As You Like It at the turn of the 17th century, then it may seem that professional real estate stagers are a little late in coming to Manhattan.  According to the website for the International Association for Home Staging Professionals, an organization founded in the mid 1970’s by Barb Swartz in Washington State, the New York City chapter was formed only recently in November 2004.  Staging as a recognized trade is pretty new.  However, with the rising popularity of cable TV shows like “Sell This House” and the demonstrated success of recent “staged” apartment sales, the business is definitely growing.
 
Much like a stylist, the stager is a design professional who is hired for a fee to present a property for maximum visual and emotional appeal.  Often, a stager can be consulted by the hour for a proposal and an estimate.  A full scale production might include refinishing floors, painting walls and trim, replacing countertops, improving lighting, regrouting tiles, cleaning carpets, replacing worn furniture with rented props, and adding accessories. 
 
Happy properties—ones that are clean and “show well”—make buyers feel good and bring in the most dollars.  With a little polish, a lot of common sense, and the aid of your broker, you too can set the stage for your home sale.  Since first impressions are critical, you’ll need to consider your residence as a commodity.   You’ll need objectivity to identify flaws you may have grown accustomed to.  Think of yourself as a set designer, putting aside ego and emotion, to prepare a scene that will welcome and encourage buyers to imagine themselves in your space. 
 
There’s no need to redo a kitchen or a bathroom.  A face-lift is less important than a good scrubbing, since most buyers will renovate to suit themselves.  Some of my suggestions below are obvious.  Most rely on common sense.  It’s best to start at your front door with pad and pen, and work your way room by room.  With each noted change, go back to your front door to reassess and continue.  Apply the suburban concept of “curb appeal” to every inch of every room.  Look with the eyes and senses of your prospective buyer. 
 
1.  Clean and dust thoroughly everywhere.  Don’t overlook unappealing grime on appliances and their cords, or fingerprints on telephones and switch plates.  Get rid of bathroom mildew.  Windows should be crystal clear to let in all natural light.
 
2.  Remove clutter from rooms, closets and surfaces including tables, countertops and bookshelves.  Rearrange not only the furniture to its best advantage but also the shelves, so books are not falling over one another, and so your treasured knick knacks are displayed artfully on your newly liberated shelves.  Give or throw away stuff you haven’t used in years that’s crowding your closets or collecting dust on your shelves.  Neat closets look bigger, and space sells.  Hang a couple of empty wooden hangers in your front hall closet to look like they’re waiting for your guests’ coats.  Discard your collection of wire hangers. 
 
3.  Organize cabinets, and clean all visible interior shelves of any dirt that may have accumulated.  Expect buyers to open all doors and drawers, so check that they open and close easily, and that nothing gets stuck or tumbles out.  Test doors to see that they don’t bump against what may be hidden behind. 
 
4.  Repair whatever is broken.  A buyer will “kick the tires,” so fix the loose doorknob and leaky faucet.  Pay attention to imperfections you’ve long ignored—like painting the patched ceiling where the toilet above may have leaked. 
 
5.  Illuminate your home properly.  Take down heavy draperies and open the blinds.  Clean glass fixtures so they shine, and replace broken ones.  Turn on all lights when showing your home, even though buyers will ask to shut them to assess natural light.

6.  Reduce odors from cooking, pets or cigarette smoke, but don’t use room deodorizers.  Instead, before appointments, boil some cinnamon sticks, or bake some sliced up frozen cookie dough.  Clean the litter box daily, and replace the wee-wee pad promptly.  Put cedar chips in the coat closets. 
 
7.  Camouflage all that is less than perfect.  There’s great power in the smallest details.  Invest in plump new towels and fresh luxurious bedding—items you can take to your next home.  It’s not necessary to set the dinner table with your best china and silver, but do set out a bowl of oranges on the kitchen table and a vase of fresh tulips on the front entry console.  Liven a drab corner with a tall green plant, but keep up with appearances, and trim away any dying, yellowed leaves.  Throw away the ailing ficus or the leggy fern.  Buy a pretty shower curtain to soften the impact of poorly grouted bathroom tile.  Dress up a worn sofa with a decorative shawl or throw pillows.  Accessorize wisely but minimally.  Add a mirror to enlarge a small space or to take advantage of an oblique view.  Buy attractive boxes to bring order to children’s toys.  
 
There are clear advantages to staging your home.  Happy apartments have happy endings.  They sell faster and for more money than unstaged ones.  More importantly, they show buyers that your home is worth every dollar you’re asking. 

Shirley Hackel is a 25-year veteran broker.  She is happy to evaluate your space and offer complimentary staging suggestions.  She can be reached at 212-439-5197 or shackel@warburgrealty.com.

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Manhattan Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership The Mighty Engine That Should If 2005 was the year of the bubble that wasn’t, how will this sixth year of the…... Read more >

Manhattan Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

The Mighty Engine That Should

If 2005 was the year of the bubble that wasn’t, how will this sixth year of the second millennium play out for buyers, sellers and brokers? 

Last year, boom and bust stories about the real estate market dominated the press with dramatic headlines.  For the most part, however, the reports were conflicting, and the media spin on medians and averages proved to be confusing ultimately for readers.  There were contradictory interpretations of statistics as data was misread and facts were distorted—particularly in the year’s last quarter which saw a decided drop in the volume of sales, though not in the price of transactions. 

Indeed, the spikes of early 2005 were spectacular.  In nearly all segments of the real estate market, bidding wars drove prices up by leaps, setting record breaking milestones.  In the first few months of last year, prices jumped as much as 35%, and the pace of trading became frenetic.  Fueled by low interest rates and easy credit, ever-rising plateaus contributed to a sizzling and overheated market.  When a modest slowdown began in mid-July followed by a seasonal summer deceleration in August, journalists were trumpeting that a real estate bubble was about to burst.  As urgency was replaced with caution, the pace of activity slowed, and the numbers of deals were fewer, but prices remained level.  By November, activity had picked up despite the beginning of the holiday season, and December sales were surprisingly robust. 

How then are we to view 2006? 

Taking small liberties with the title of an endearing children’s classic, all indicators point to Manhattan’s real estate market in 2006 as the mighty engine that should!  Leaving the heady atmosphere of 2005 behind us, with its historic highs for price appreciation, and equally historic lows for mortgage interest rates, there is a decided shift to balance and moderation in the marketplace this year.  Transactions in 2006 will be all about readjusting, realigning and repositioning. 

Usually, the first few weeks of a new year are a good predictor of things to come.  Following a strong new year’s equity rally, the Dow tipped the 11,000 mark, with gold topping $550 an ounce and copper nearing an all time peak.  Our economy is relatively healthy despite the fallout from two major hurricanes, and concerns about gas prices, inflation and the Iraq war.  Wall Street bonus money will have a definite impact on New York’s economic picture, though it’s still unclear at this writing whether this extra discretionary money will be going into securities or real estate. 

Chief economist for the National Association of Realtors David Lereah has predicted a “return to normalcy” for 2006.  Anticipating a better balance between supply and demand, he forecasts more balanced trading with modest price appreciation this year.

There are benefits to slower growth.  While it’s tough to keep up with double digit jumps, price increases in the single digits can be sustained in both the long and short terms.  The difference between dramatic rises and modest increments is largely as much about time as it is about numbers.  Today, it’s taking longer than last year to sell a property because it’s taking longer for purchasers to make their buying decisions—there’s considerably more inventory to consider, and new construction is competing vigorously with resales. 

The rebalancing of supply and demand should keep trading humming at a steady clip and prices even with the highs of last year.  New York is flourishing, and Manhattan real estate is not tanking.  Buyers are advised not to fear jumping into the market at any point this year.  Sellers are cautioned to price realistically.  Overpriced apartments leftover on the market from last year will need to be reduced so they can be absorbed or removed from inventory.  Expect a slowdown in price increments and a leveling of market activity.  Barring the unforeseen, New York will continue to thrive; quality real estate will retain its value and endure.

Chug, chug, chug….  The mighty train steadied itself on the tracks.  In 2006, we know we will, we know we will…

Shirley Hackel has been selling Manhattan residences since 1980.  Nearly three-quarters of her business comes from referrals.  She welcomes your comments and questions.  She can be reached at shackel@warburgrealty.com or 212-439-5197.

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Manhattan Residential Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership Rodney Dangerfield, Where Are You?  If you’re a seller today, proper pricing is more important…... Read more >

Manhattan Residential Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

Rodney Dangerfield, Where Are You? 

If you’re a seller today, proper pricing is more important than ever.  While it’s tempting to sign on with the broker who says your apartment can fetch a higher price than other broker estimates, expectations need to be real and achievable.  When agents overprice properties—or when sellers fail to heed conservative pricing advice—valuable time is lost as the real estate sits on the market only to be ignored and ultimately discounted.  Some sellers get no respect. 

It’s tough to reverse the consequences of overpricing.  An apartment that lingers devalues itself.  Improperly priced properties not only yield lower sales results, they take longer to sell, minimize potential, and waste time.  The disadvantages pile up:  brokers don’t pay attention; open houses are poorly attended; buyers suspect something is inherently amiss.  Invariably, the buyer asks:  “How long has this been on the market?” 

The most important time in the life of a new listing is its first 3-4 weeks when the savviest of buyers and brokers come through.  In real estate, there’s nothing quite like the rush of energy and anticipation that a hot, new, well priced home brings.  With mispriced properties, the excitement is never realized, and when the bloom is off the rose, marketing enthusiasm diminishes.   

When Less is More

Proper pricing is not an exact science.  Rather, it is an artful blend of knowledge and discipline.  While it combines the best of astute marketing analyses, it also requires experience and intuition.  It depends on a clear understanding of market economy and up to date information about comparative past sales and current offerings.  A tight asking price invigorates the marketplace, causes everyone to take notice, and yields the greatest return.   Pricing on or near the target creates the greatest excitement, brings urgency to activity and stimulates interest and bidding quickly.  

Because a property’s value is equal to what a buyer is willing to pay, there’s less risk in pricing at or slightly under the market rather than pricing above the market.  When brokers say that the market will speak for itself, they refer to buyer activity or non-activity and its effect on pricing.  If an asking price is under the market, then activity will work to move the price up with competitive bidding.  However, if an asking price is over the market, the reverse never happens, and, in most cases, the property is simply ignored.  Sellers are advised to price as close to value as possible in order to avoid finding themselves in the position a month after listing of having to reduce the price to gain attention.   

The press has been having a field day with its bubble theories and reports of softening averages.  For practical purposes, the debate is academic.  If you’re a seller who needs to sell now, your apartment will fetch a price from a buyer who needs to buy now.  The challenge is to recognize and accept the realities of the marketplace.  Clearly, we’ve seen a shift in the pace and tenor of the market.  Price increments have slowed, and activity was less exuberant this fall than it was last spring.  Apartments of all sizes in mint condition will continue to rule the roost, and will be the ones that sell most easily. 
The one and two bedroom market also will remain strong as first time buyers continue to capitalize on the attraction of a real estate investment. 

It’s important to acknowledge two additional factors.  (1)  Today’s buyers have more and more inventory choices.  With the virtual explosion of residential construction throughout the city, thousands of newly constructed condo units are competing vigorously with co-op and condo resales.  (2)  Bonus money is expected to be plentiful this season, in some instances, as much as 25-30% higher than last year.  Buyers, however, will be looking for value.

Sellers are counseled to safeguard their real estate assets and to maximize returns without alienating potential purchasers.  Hire an experienced broker who will price your property correctly and also control the emotional climate of the bidding that ensues.  Choose a strong communicator who understands the market economy.  Don’t be seduced by brokers wearing rose colored lenses who bring false promises and overly ambitious prices.  With all due respect, overpricing is irresponsible and causes the seller to miss the market beat. 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to help price your residential property or answer your real estate questions.  She can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

 

 

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Year End Final Exam 1.  Which of the following is contributing to increasing interest in the condo market?         a.  Disenchantment with the co-op review…... Read more >

Year End Final Exam

1.  Which of the following is contributing to increasing interest in the condo market?   
     a.  Disenchantment with the co-op review process.
     b.  Increased supply of luxury condominium product.
     c.  Unlimited and flexible financing opportunities.
     d.  All of the above.

2.  When choosing a broker, look for…
     a.  Experience, commitment and knowledge.
     b.  A strong communicator.
     c.  Credibility, discretion and integrity.
     d.  All of the above.

3.  Which of the following is essential for a smooth transaction?
     a.  A good working relationship between seller's and buyer's brokers.
     b.  An attorney who regularly handles co-op closings.
     c.  An appraisal at the contract price.  
     d.  All of the above.

4.  Which of the following can derail a deal if not known up front?
     a.  The imposition of a building flip tax on the transfer of property.
     b.  A "no pets" rule.
     c.  A renovation policy limiting work to a specified period of time. 
     d.  All of the above.

5.  How is the amount of a flip tax computed?  
     a.  By a percentage of the gross sales price, usually between 1% and 4%.
     b.  By a percentage of the profit realized by the seller.
     c.  By a dollar amount per share.
     d.  All of the above.

6.  Last month, the President's Advisory Panel on Federal Tax Reform recommended:
     a.  Eliminating federal deductions for state and local taxes.
     b.  Cutting the current $1 million cap for mortgage interest deductions to $400,000.
     c.  Replacing mortgage interest deductions with a 15% tax credit.
     d.  All of the above. 

If you answered "all of the above" to each of the above, go to the head of the class.  For extra credit, try the following. 

7.  When is the best time to talk to a mortgage broker?
     a.  Before you begin your search for a property.
     b.  After you identify the property you want to buy.
     c.  When your offer is accepted.
     d.  Once your contract is signed.

8.  Who coined the phrase "irrational exuberance"?  
     a.  Alan Greenspan
     b.  Jessica Simpson
     c.  Nathan Lane
     d.  Barbara Corcoran

9.  What is "Condoflip.com"?
     a.  A new website aimed at speculators who buy and sell before construction is complete.
     b.  A new blog that's attempting to revive the 70's Flip Wilson Show.
     c.  Who cares?

Wishing all a healthy and joyous holiday season ahead.

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to answer your real estate questions.  She can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

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Rodney Dangerfield, where are you? By Shirley Hackel  If you’re a seller today, proper pricing is more important than ever.  While it’s tempting to sign on with the broker who…... Read more >

Rodney Dangerfield, where are you?
By Shirley Hackel 

If you’re a seller today, proper pricing is more important than ever.  While it’s tempting to sign on with the broker who says your apartment can fetch a higher price than other broker estimates, expectations need to be real and achievable.  When agents overprice properties—or when sellers fail to heed conservative pricing advice—valuable time is lost as the real estate sits on the market only to be ignored and ultimately discounted.  Some sellers get no respect. 

It’s tough to reverse the consequences of overpricing.  An apartment that lingers devalues itself.  Improperly priced properties not only yield lower sales results, they take longer to sell, minimize potential, waste time and lose money.  The disadvantages pile up:  brokers don’t pay attention; open houses are poorly attended; buyers suspect something is inherently amiss.  Invariably, the buyer asks:  “How long has this been on the market?” 

The most important time in the life of a new listing is its first 3-4 weeks when the savviest of buyers and brokers come through.  In real estate, there’s nothing quite like the rush of energy and anticipation that a hot, new, well priced apartment brings.  With mispriced properties, the excitement is never realized, and when the bloom is off the rose, marketing enthusiasm diminishes.   

Proper pricing is not an exact science.  Rather, it is an artful blend of knowledge and discipline.  While it combines the best of astute marketing analyses, it also requires experience and intuition.  It depends on a clear understanding of market economy and up to date information about comparative sales and offerings.  A tight asking price invigorates the marketplace, causes everyone to take notice, and yields the greatest return.   Creating excitement, target pricing brings urgency to activity, and stimulates interest quickly.  

Because a property’s value is equal to what a buyer is willing to pay, there’s less risk in pricing at or slightly under the market rather than pricing above the market.  When brokers say that the market will speak for itself, they refer to buyer activity or non-activity and its effect on pricing.  If an asking price is under the market, then activity will work to move the price up with competitive bidding.  If an asking price is over the market, however, the reverse does not happen, because, in most cases, the property is simply ignored.  Sellers are advised to price as close to value as possible in order to avoid finding themselves in the position a month after listing of having to reduce the price to gain attention.   

The press has been having a field day with its bubble theories and reports of softening averages.  For practical purposes, the debate is academic.  If you’re a seller who needs to sell now, your apartment will fetch a price from a buyer who needs to buy now.  The challenge is to recognize and accept the realities of the marketplace:  price increments have slowed and activity is less exuberant this fall than it was in the spring.  Apartments in mint condition will continue to rule the roost, and will be the ones that sell most easily.  The one and two bedroom market will remain strong as first time buyers continue to capitalize on the attraction of a real estate investment. 

Sellers are counseled to safeguard their real estate assets and to maximize returns without alienating potential buyers.  Hire an experienced broker who will properly price your property and also control the emotional climate of the bidding that ensues.  Choose a strong communicator who understands the market economy.  Don’t be seduced by brokers wearing rose colored lenses who bring false promises and aggressive prices.  With all due respect, overpricing is irresponsible and causes the seller to miss the market beat. 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to help price your apartment or answer your real estate questions.  She can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

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Manhattan Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership The Promise of New Developments Construction cranes are everywhere in this city, and new development business is…... Read more >

Manhattan Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership

The Promise of New Developments

Construction cranes are everywhere in this city, and new development business is booming.  According to The Real Deal, by the end of 2005, more than 9,000 new condominium units will have come on the market this year.  To put that number into perspective, only 1,300 new condo apartments were offered in 2000; 2,200 units were added in 2001; 2,900 in 2002; 3,000 in 2003; and 4,800 last year.  With the high number of new projects complete with amenities packages not found in older products, buying opportunities and choices abound.  However, caveat emptor—buyer beware—was never more important than when buying new construction.       

While some condos sell from lavish showrooms with elaborate multimedia presentations and virtual miniature replicas, others attract initial interest from street buzz—like 15 Central Park West at the former Mayflower Hotel site.  As of this writing, we’re told that there are letters of intent for nearly 40% of the available 202 units at this exclusive 2-tower condo slated for mid 2007 occupancy.  With no real spaces to inspect, and at best only model kitchens and baths to visit, the phenomenon of selling from plans before construction is completed is much like buying a promise.

Repeatedly, recent history has demonstrated that a newly constructed condo has more value than the same size condo or co-op resale.  A celebrity architect increases worth.  However because of higher closing costs and the inherent risks and delays in purchasing new construction, buyers must do their homework to prepare and protect themselves.  They are cautioned to be smart consumers:  enlist the aid of an experienced broker, consult with an attorney, and speak to others who have been through the process.  While buyers need worry less about recognized developers such as The Related and Zeckendorf, they should check a developer’s past projects and reputation.  Dealing with novice builders can be uncertain since there’s no past performance to predict quality execution. 

New construction closing costs are higher than resale transactions.  In addition to customary fees, new condo buyers must also pay the closing expenses usually paid by sellers—specifically the New York City Real Property Transfer Tax and the New York State Real Estate Transfer Tax—and buyers must pay these taxes again when they sell.  The developer’s legal fees, title and recording charges are also passed along to the buyer.  Additionally, purchasers must put into escrow six month’s worth of estimated taxes to be paid by the sponsor when due, and they must also contribute one to two months of additional common charges to build a reserve fund.  In addition, buyers must pay mortgage recording taxes (if they are financing), a 1% mansion tax for properties over $1 million, any closing adjustments, plus bank and legal fees. 

Upon contract signing, 10% of the purchase price is due usually, and much of the balance must be paid before closing at specified intervals to cover construction costs.  Payment schedules, structured differently at each project, usually coincide with specific performance.  A handful of lenders are offering products that lock in a competitive rate for 12-18 months, charging one point for the privilege, a portion of which is credited at closing. 

Buyers of new construction should take nothing for granted.  Since typical contracts are “pursuant to the Offering Plan,” both buyer and attorney must read the book-length document that is filed with the New York State Department of Law which spells out the property’s characteristics and features.  A “Special Risks” section enumerates several boilerplate disclaimers.  For example, the sponsor reserves the right to rent rather than sell units, to change unit purchase prices, to adjourn the closing “from time to time,” and to change specified fixtures and materials with “similar substitutes.”  Since square footage is measured from exterior walls, usable floor surfaces may be less than the total listed in the plan.

In addition, the Offering Plan catalogues finishes, fixtures, landscaping, security and services.  All appliance manufacturers and model numbers are specified.  If medicine cabinets or towel bars are not itemized, you probably have to buy your own.  Warranties for materials are extended to the first purchaser only.  However, since appliances may have been bought far in advance of actual closing, these guaranties can be tricky.

Since the condo’s operating budget will determine common charges, it’s important to review the first year’s projected income and expenses.  Is the sponsor being realistic with estimates?  When does the budget actually begin?  If the condo is delayed by six months or more, the sponsor must amend the plan to include a revised budget; and if the new budget exceeds the original by 25% or more, the buyer can rescind the contract and reclaim all down payments. 

Since delays are to be expected, flexible timing is a prerequisite for new condo buyers.  A promised August closing can become December or even later.  Since move-ins occur before the building is completely operational, with hallways unfinished and services lacking, adjourning is recommended until staff is on hand and kinks have been ironed out.

Walk throughs are critical, so take your broker with you.  Most reputable developers will follow through on your punch list.  However, the offering plan may say that the sponsor is not responsible for normal settling of new construction, in which case, how will sticking doors, warpage, nail pops and scratches be handled?  What about unforeseen problems like ceiling imperfections and noise from air conditioners? 

How does a buyer secure the promise of new construction?  With common sense, good legal advice and expert broker guidance. 

Shirley Hackel has been selling Manhattan residences since 1980.  She is happy to answer your questions and can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

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Manhattan Market Watch By Shirley Hackel, Managing Director Warburg Realty Partnership Coasting Sideways This Fall The deluge of press ink on the housing bubble debate continues even as the media offers…... Read more >

Manhattan Market Watch
By Shirley Hackel, Managing Director
Warburg Realty Partnership

Coasting Sideways This Fall

The deluge of press ink on the housing bubble debate continues even as the media offers broad coverage of record breaking highs for transactions during the first and second quarters of 2005.  In every category and in every area of the city, milestones have been set.  Last year, the headlines broadcast that the average price for a Manhattan apartment was a cool $1 million.  By the end of the second quarter of this year, the average sales price had topped $1.3 million.  Despite the negative environment created by all the talk about boom and bust, prices rose steadily.

To be sure, the various reporting agencies used different methodologies; however, each concluded that the second quarter numbers were exponentially high.  Despite worries about a real estate bust, buyers were paying up for their homes, encouraged by continued low interest rates and short inventory. 

The current real estate boom is at least four years old; some would argue it’s even older.  Because of the duration of the flourishing market and its ever-rising plateaus, a psychology has set in, complete with emotional supports and comfort levels, which has sustained the escalating prices.  Because of these support levels, the downside risk is minimal.  Buyers, sellers and their brokers are comfortable with the sense of value achieved. 

A modest slowdown that began in mid-July was followed in August by a very seasonal deceleration.  This pause in the marketplace, decidedly not a bust, was not unusual considering this summer’s heat and humidity.  The summer ebb, hardly a collapse, was predictable.  Phones weren’t ringing, and showings were down as New Yorkers took time out to vacation and chill out.  The slowdown caused apartments to remain on the market longer.  If anything, Manhattan prices are moving sideways, not down, in the third quarter.

With the urgency gone from bidding and attendance down at open houses, buyers have been taking advantage of the change in the environment to pause and deliberate more over their decisions.  Unlike the tempo of the first half of the year when apartments were snapped up in a matter of weeks in fierce bidding wars, apartments are staying on the market longer before they sell.  After frenzied first and second quarters of peak activity, a slower and more balanced second half of the year makes sense.  Twenty percent gains for each quarter can’t be sustained.  For the rest of the year, prices are expected to rise modestly.  In the near term, leftover overpriced apartments will continue to be reduced in price until they are absorbed or removed from the market.  Inventory from new developments and conversions should have a stabilizing effect on an already short supply.  Mortgage rates are projected to increase minimally, moving to 6.2% for the fixed 30-year product during the fourth quarter, and to 6.6% by the end of 2006. 

Safeguards for the industry may come from federal banking regulators who announced last May that new underwriting standards for mortgage lenders were in the works and would be in place in 2006.  According to the mortgage data firm Loan Performance, nearly one-third of all new mortgages in 2005 were interest only.  Although risky with high loan-to-value ratios, interest only loans are commonplace today, especially among condominium buyers and investors—the latter group accounting for 23% of all home purchases in 2004, according to NAR.  Should prices cool, investors and other highly leveraged buyers holding big mortgages but little equity may be in jeopardy of having loans higher than their property’s worth.  This worst case scenario is unlikely to occur, however, with owners of cooperatives since co-op boards have specific financing requirements, ranging from zero financing permitted (in all cash buildings) to a maximum of 80% allowed.  Additionally, many co-op boards are steering buyers away from exotic loans, specifically prohibiting interest only products. 

For most of this year and much of last, skeptics have been predicting that our market will tank.  But housing prices move much slower than stock prices.  In real estate, there are no black Mondays.  Apartments can not fall 23% in a day or plunge to zero.  At the end of the day, real estate is a usable asset.

NAR economist David Lereah predicts that the real estate market nationwide will remain healthy throughout 2006, at the very least.  The advice to real estate principals is to work with an experienced professional who will help buyers to evaluate purchase opportunities and who will guide sellers to set realistic prices. 

Shirley Hackel has been helping buyers and sellers of Manhattan residences since 1980.  She is happy to answer any of your questions and can be reached at 212-439-5197 or by email at shackel@warburgrealty.com

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The B-Word is Balance Manhattan Residential Market Watch By Shirley Hackel It’s tough to ignore the cacophony of economists, journalists and real estate pundits as they continue to debate…... Read more >

The B-Word is Balance

Manhattan Residential Market Watch
By Shirley Hackel

It’s tough to ignore the cacophony of economists, journalists and real estate pundits as they continue to debate the possibility of a real estate bubble.  Experienced brokers agree that last spring’s frenetic pace of trading has evaporated.  But are we headed for a freefall?  Are we in a bubble that’s about to burst?  No, and no. 

In the last year, the housing sector posted its best figures ever, and in Manhattan, residential prices jumped as high as 35% in a market characterized by tight inventory, heightened demand and quick activity.  Across the nation, home prices rose faster in 2004 than in any other year since the 1970’s, especially in markets like New York, Florida, California, Washington D.C. and Las Vegas.  Sales continued on an upward surge despite disappointing employment and corporate numbers, declining consumer confidence, high oil prices, sagging U.S. and global stocks, and worldwide uncertainties.

In New York, real estate prices rose because of increases in personal income, mainly bonus money, and steady declines in interest rates.  An inventory shortage led to competitive bidding, and as mortgage rates fell lower and lower, trading picked up speed and urgency, and property prices climbed higher and higher with bidding wars driving prices up by leaps.  With supply low, and demand and expectations high, buyers stepped up to pay record prices for their homes as they factored future price increases into their transactions. 

Doomsayers declare that today’s housing is as overvalued as yesterday’s tech stocks.  But comparing the real estate market to the stock bubble is incorrect for a variety of reasons.  Unlike stock buyers, real estate purchasers, for the most part, buy shelter that provides tax advantages.  Changes in home ownership occur slowly since most property buyers, even buyers of second homes, stay for the long haul.  Additionally, when a property is sold, it is usually replaced by another, and there are considerable costs associated with property transfers.  Unlike stocks which can be disposed of in a single phone call, it takes time, emotion and money to sell and move from a home.  Flipping investments is far easier to accomplish in the equity markets. 

Economists view housing as a long term consumer product that is underwritten by mortgages.  While low interest rates have kept the real estate market humming, they have also contributed to a potentially risky financial scenario.  Taking advantage of low rates, homeowners have refinanced, often with larger loans on homes whose values were rising, using the extra cash for additional spending.  Fortune Magazine reports that Americans have been using their homes like ATM machines, borrowing $662 billion in refinancing and home equity loans since 2001.  With interest only and adjustable rate mortgages, some first time buyers may have been over-reaching to finance their purchases.  As a result, mortgage debt as a percentage of income is up significantly.  Easy credit is especially risky for entry level borrowers who may be taking on higher mortgage payments than they can afford and who are banking on expectations that property values will continue to soar in the short term. 

In recent years, the combination of rapidly escalating prices and low interest rates has contributed to more speculative buying, especially of second homes and new condos.  Among a new breed of real estate investors are those who have managed to buy and resell even before the new developments were completed.  This windfall, however, will be tough to sustain with the coming of a slowdown in price increments and a projected rise in interest rates. 

For sure, there are real estate cycles.  Experienced brokers readily acknowledge peaks and valleys.  But while the tech bubble underscores an inherent industry volatility, the real estate market demonstrates a basic vitality.  With 1990 as probably the last bottom seen in New York, and last spring the most recent high, veteran real estate professionals are looking forward to a reality check.  Since runaway values stretch the limits of what is reasonable and sustainable, the leveling of prices is welcomed as a healthy correction.  A crash in real estate will not occur, although growth this next year probably will be modest. 

According to the National Association of Realtors, a better balance between supply and demand is expected by year end.  Throughout Manhattan, new conversions and new construction are in the works with more than 25,000 apartments scheduled to come into the marketplace in the next 18 months.  Will the “if-you-build-it, they-will-come” mentality continue?  Undoubtedly, some developments will be more secure in their locations than others, like The Plaza, The Stanhope and The Mayflower Hotels.  As this latest supply of product becomes available, price gains are expected to slow but still remain above historic norms. 

Some economists are forecasting that interest rates will approach 7% by 2006.  However, it’s unlikely that Manhattan real estate prices will plunge.  Morgan Stanley’s chief U.S. economist predicts, “Home prices will rust, not bust, for the next few years.”  Alan Greenspan has called it “froth” and acknowledges that the rate of increase—“clearly without recent precedent”—can not continue.  However, even if mortgage rates increase, the effect will be less significant on Manhattan real estate resident owners than on speculators.  The advice to both buyers and sellers is to work with an experienced broker who is intelligent and clear thinking and not to gamble with your residence.  Buy quality, put deliberate limits on your financial exposure and don’t leverage to the max.  Expect a slowdown in price increments and a leveling of market activity.  Barring the unforeseen, in the months and year ahead, a return to more even activity with modest price appreciation is welcomed.  Stability and balance lie ahead.

Shirley Hackel has been selling Manhattan residences since 1980.  Nearly three-quarters of her business comes from referrals.  She looks forward to hearing from you at shackel@warburgrealty.com or 212-439-5197.

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July/August 2005 Manhattan Market Watch By Shirley Hackel, Managing Director The Co-op Board Review Challenge What do Richard Nixon, Madonna, Antonio Banderas and Melanie Griffith, a hedge fund superstar,…... Read more >

July/August 2005

Manhattan Market Watch
By Shirley Hackel, Managing Director

The Co-op Board Review Challenge

What do Richard Nixon, Madonna, Antonio Banderas and Melanie Griffith, a hedge fund superstar, a foreign national family man, and a successful litigator have in common?  Answer:  they are co-op board rejects. 

Co-op boards have absolute power to approve or refuse a prospective buyer’s application to purchase an apartment.  Richard Nixon was denied admission into a Fifth Avenue cooperative after he resigned as President.  The San Remo said no to Madonna, and this past February, the Dakota declined to invite Antonia Banderas and Melanie Griffith to an interview.  A Park Avenue co-op turned down an Ivy League educated hedge fund trader with a $15 million personal portfolio.  Another top Park Avenue board declined the application of a seemingly qualified foreign buyer.  A Central Park West co-op refused a well known and highly regarded litigator.  And so the stories go.

When the glitterati are passed over for admission to Manhattan’s fanciest cooperative buildings, it’s newsworthy and often expected.  But when otherwise perfectly qualified non celebs are denied approval for cooperative ownership, questions can be raised about their board presentations. 

Co-op prices are up, and so are the numbers of co-op board rejections.  With escalating prices, co-op board members, who serve as unpaid volunteers, are tightening up their stringent scrutiny of applications.  With rising prices comes the need for proportionately higher incomes and liquid assets. 

In 2002 and 2003, the press reported that the New York State legislature and Westchester County were each considering legislation to make co-op boards accountable to those whose applications were rejected.  In New York, the State Assembly approved the bill, but it never came up for vote in the State Senate.  Westchester too never passed the law that would have required co-op boards to provide written reasons for rejecting potential candidates.  While federal housing laws prohibit discrimination based on sexual preference, religion, race, age or handicap, the co-op board wields absolute power in its authority to approve or reject a prospective buyer.

This unqualified right was upheld in a decision by the New York Court of Appeals dating back to 1959:  “There is no reason why the owners of the cooperative apartment house could not decide for themselves with whom they wish to share their elevators, their common halls and facilities, their stockholder’s meetings, their management problems and responsibilities, and their homes.”  According to Paragraph 6 of the Contract of Sale, a prospective buyer must receive “unconditional consent of the Corporation.”  By contractual agreement, purchasers are required to submit their application plus all supporting documentation within 10 business days after the delivery of a fully executed contract.  In the light of the growing number of board rejections, how do buyers ensure that their co-op purchases will be approved? 

The advice to the buyer is simple:  choose a smart broker who is experienced, diligent and detail oriented.  Then listen to her or him.  Your broker will guide you through the intrusive process and will work to present you to your best advantage.  If your board package lacks substance, is difficult to understand, or raises unanswered questions, then the board can ask for additional information, which can derail the review process for weeks or even months.  Or worse, the board may decide not to invite you to an interview at all.  When a board intends to reject a candidate, generally the interview never happens. 

While the co-op Contract of Sale stipulates how many days a buyer may take to submit his materials for review, there are no standards or guidelines for how a board must respond.  In theory, a responsible board will examine the package and make its recommendations in a timely manner.  In practice, however, a review can be as short as two weeks, or as long as half a year.  An unusually long review doesn’t necessarily mean that the buyer will be turned down.  However, long reviews almost always have consequences.  When both buyer and seller are in approval-limbo, much is at stake including any mortgage commitment which may have expired and costs extra money to extend.  If a board interview does not occur 30 days after the specified contractual closing date, then either party has a right to cancel the contract. 

Broker and buyer need to collaborate, making every effort to stack the cards favorably to provide the best board presentation possible.  The more complicated the situation, the more important it is to explain details in easily digestible and understandable morsels to avoid questions which breed negativism and create delays.  Board turn downs cause anguish for broker, buyer and seller—as well as embarrassment and financial hardship.  The broker’s role in assembling the package and preparing the buyer for the interview is more important today than ever.  While boards are not required to give reasons when they reject an applicant, the approval process is hardly a roll of the dice.  Preparation requires experience and diligence.  A reckless or cavalier attitude or an inexperienced broker can prove unfortunate and regrettable. 

Shirley Hackel has been helping buyers and sellers of Manhattan residences since 1980.  She is happy to answer any of your questions and can be reached at 212-439-5197 or by email at shackel@warburgrealty.com.

 

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Manhattan Market Watch By Shirley Hackel Managing Director The B Word is Balance Talk continues about a possible bubble in real estate.  In the last year, prices have jumped as much as 30-40%, and…... Read more >

Manhattan Market Watch
By Shirley Hackel
Managing Director

The B Word is Balance

Talk continues about a possible bubble in real estate.  In the last year, prices have jumped as much as 30-40%, and the pace of trading has been frenetic.  In the months and year ahead, however, a return to more balanced activity with modest price appreciation is welcomed. 

Inventory has been shrinking steadily.  But with new construction and new conversions in the works, more than 25,000 apartments are scheduled to come into the marketplace in the next 18 months.  For certain, the market will be impacted.  Will the “if-you-build-it, they-will-come” mentality continue?  Undoubtedly, some developments will be more secure in their locations than others, like The Plaza, The Stanhope and The Mayflower Hotels.

Contrary to popular opinion, brokers do not love a sizzling market.  Ours is a business of building relationships, and it takes time to develop and build trust.  In a fast paced rising market, pushing new buyers to bid immediately is bold.  In a market where buyers need to bid without deliberate time to reflect and digest, everyone becomes frustrated and angry.  It’s sometimes tough too when representing sellers, because pricing ahead of the market can be wrong.

In the May 23rd New York Magazine cover story journalist Henry Bloget declares, “For practical purposes, the bubble debate is academic:  You can afford what you can afford, and no one knows what the market is going to do. “  In all real estate cycles—high, low and everything in-between—it’s important to buy smart.  New York Magazine’s risk analysis of neighborhood values borrows from real estate’s three basic principles:  location, location, location.  Neighborhoods that lack services, schools and proximity to transportation are not good risks.  Additionally, values are more solid when there is a blend of residential life and services, and a mix of neighbors who are single professionals and families, both old and young.   

While cautioning against speculative buying, New York Magazine’s cover story contains a serious error in its reporting.  A statistic attributed to the appraisal firm Miller Samuel “says that the median Manhattan co-op cost the same in 1999 as it did in 1981, eighteen years earlier.”  Jonathan Miller, the company’s President, confirms that this is erroneous.  In 1981, when I was a rookie broker with just one year of experience, I well remember selling a family sized Park Avenue 8-room co-op for $500,000, just as these units were beginning to approach the half million dollar mark.  In 1999, the same apartment sold for $1.930 million.  In today’s market, a similar unit traded at $3.4.  New York in 1981 was nearly bankrupt, crime was high, and mortgages were at 16%. 

In recent years, the combination of rapidly escalating prices and low interest rates has contributed to more speculative buying, especially of 2nd homes and new condos.  Some investors have managed to buy and resell even before the new developments were completed.  With interest only and adjustable rate mortgages, first time buyers are also reaching and perhaps over reaching to finance their purchases.  Easy credit is especially risky for entry level borrowers who may be taking on higher mortgage payments than they can afford and who are banking on expectations that property values will continue to soar in the short term. 

Alan Greenspan is calling it “froth” and acknowledges that the rate of increase can not be sustained.  Mortgage rates continue to be low, and even if they rise slightly, the effect will be less significant on Manhattan real estate resident owners than on speculators.  The advice to both buyers and sellers is to work with an experienced broker who is intelligent and clear thinking and not to gamble with your residence.  Buy quality, put deliberate limits on your financial exposure and don’t leverage to the max.  Expect a slowdown in price increments and a leveling of market activity.  Barring the unforeseen, stability and balance are ahead.

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When the Numbers Don't Match As real estate prices have soared in recent months, some buyers have found that the apartments they've agreed to purchase were appraised for less than the sale price - with…... Read more >

When the Numbers Don't Match

As real estate prices have soared in recent months, some buyers have found that the apartments they've agreed to purchase were appraised for less than the sale price - with often knotty consequences.

Sometimes, the collision of inflated prices and deflated expectations so unnerves buyers that they look for ways to get out of a deal. Other times, they still want to go ahead but are forced to find more cash or more creative financing, because a low appraisal means they can't borrow as much in the form of a traditional mortgage.

A bank that is financing a home purchase uses an appraisal to make sure the price being paid reflects the market value of the property, so that it could recoup its capital if the borrower defaults. In setting a value for a property, appraisers rely primarily on data from comparable closed sales, known as "comps."

But in areas where prices have been rising rapidly, closed sales may represent an outdated snapshot of a market, taken several months earlier when prices may have been significantly lower. According to a market report prepared by Halstead Property, the average price for all Manhattan apartment sales that closed in April was 17 percent higher than the average for December. In many parts of the city, prices have climbed even more rapidly, and, especially in those areas, the prices on contracts being signed today can be expected to be significantly higher than recent closings.

Chris Peters, an executive vice president at Prudential Douglas Elliman, who manages the firm's Chelsea office, said that when he decided to sell an investment property he owns in Astoria, Queens, he thought he'd have no difficulty conducting the sale himself. He signed a contract in April with a buyer who agreed to pay $850,000 for the three-family house at 31-32 42nd Street. But when the appraisal came in at $720,000 and his buyer walked away, he realized he needed help. He dropped the price to $799,000 and asked Virgil Cannatella, an Elliman broker in the neighborhood, to handle the sale. He reasoned that a local broker would know where to look for comparable sales to satisfy an appraiser, something he hadn't been able to do.

Mr. Peters, who found a new buyer this month, said that when he bought the Astoria house three years ago for $460,000, the appraisal had come in low, but it had not bothered him.

"I didn't really care if it underappraised," he said. "But when people are paying the prices they're paying today, they want them to comp out."

Banks will typically provide a mortgage for up to 80 percent of a property's appraised value. There have been complaints in some parts of the country that banks are sometimes ill-served by appraisers who are too quick to place an inflated value on a property without adequate proof. That leaves the banks vulnerable if buyers default.

Low appraisals present a different sort of problem, however, and in this case, it is often buyers and sellers who suffer.

Sari Sardell Rosenberg, a senior mortgage consultant with the Manhattan Mortgage Company, said the impact of a low appraisal is often greatest on first-time buyers trying to buy smaller apartments with limited funds.

One of her clients agreed this month to buy a large alcove studio in Chelsea for $510,000, but the appraisal came in at $490,000. Ms. Rosenberg had another appraisal company review the valuation to see if the first appraiser had missed some comps, but even then she was unable to get the number raised. If the apartment had been appraised at the sale price, her client could have borrowed $408,000, with $102,000 down. But with the lower appraisal, the amount he could borrow, based on 80 percent of the valuation, was cut to $392,000. That meant her client had to come up with another $16,000 in cash. Ultimately, he turned to family members, who helped him cover the shortfall.

"On these smaller apartments it's significant," Ms. Rosenberg said. "You have people who are really trying to squeeze themselves to buy an apartment and $10,000, $20,000, it really bites."

In today's highly competitive market, many buyers, under pressure to seal a deal before competing bidders beat them out, are willing to sign a contract without a financing contingency, which would allow them to walk away if an appraisal came in low and they were unable to get a suitable mortgage. Because of that, they may find themselves forced to stay in a deal despite a low appraisal.

Buyers who want to proceed with a deal despite a low appraisal have three basic options. They can come up with the extra cash to bridge the gap, in effect putting more equity into the purchase. They can get what mortgage brokers call a piggyback loan, either a home equity loan or a second mortgage, to cover the shortfall. Or they can get a first mortgage for up to 90 percent of the appraised value if they agree to pay private mortgage insurance, or P.M.I., which has the effect of adding about half a percentage point to the rate they pay on their loan.

Melissa Cohn, president of the Manhattan Mortgage Company, said that buyers most frequently prefer a mortgage with a piggyback loan, because the interest payments on both loans are tax deductible, while mortgage insurance is not. Ms. Cohn said that after a year of paying P.M.I., homeowners can ask their lenders to have their property reappraised. If their loan equals 80 percent or less of the new valuation, they will be allowed to stop P.M.I. payments, Ms. Cohn said.

Catherine Massey and Matthew Freeby were prepared for a low appraisal when they agreed in March to pay $210,000 for a one-bedroom apartment in a co-op building at 312 Nagle Avenue, at 193rd Street, in Washington Heights. Their broker, Denise Rosner, a senior vice president at Bellmarc Realty, explained to them that prices in the neighborhood had been rising precipitously, and that another one-bedroom in the same three-building complex had sold last December for $48,000 less. But they had looked around enough to have a sense of the market and they felt they were getting a fair deal.

So it came as no surprise when an appraiser valued their apartment at $200,000. "We had talked out the scenario with Denise and our mortgage broker and we knew it was a possibility," said Ms. Massey, a graduate student who will be attending New York University in the fall. They are moving from San Diego and her husband, a doctor, will be working at Columbia-Presbyterian Hospital. The couple had signed a contract without a financing contingency, and planned to buy the apartment regardless of what the appraiser said it was worth.

But Ms. Massey and Dr. Freeby did not want to put down more cash, because they were concerned that a strain on their financial reserves might dissuade the co-op board from approving their sale. So they arranged for a single mortgage of $168,000, or nearly 85 percent of the appraised value, plus private mortgage insurance. Their initial monthly mortgage payments are $967.11. They will pay an additional $45 a month in P.M.I. They closed on their apartment last Wednesday.

In many cases, a low appraisal is a function of point of view. "The buyers are looking forward and the appraisers are looking backward," said Bill Sheppard, a vice president at Brown Harris Stevens in Brooklyn. "The appraisers are saying, 'What have things sold for in the last year?' The buyers are saying, 'Prices are going up like this; in order for me to get this house I have to bid above the asking price.' "

Mr. Sheppard represented the seller of a house in Prospect Lefferts Gardens in Brooklyn who accepted an offer in December for $885,000, more than $15,000 above the asking price. The appraisal, however, judged the value of the house at about $780,000. The buyer, who had a financing contingency in his contract, then asked the seller to come down in price, saying he'd be willing to split the difference between the price they had agreed on and the appraisal. The seller refused and put the house back on the market.

In another deal in the same neighborhood, Mr. Sheppard said, a three-story, one-family brownstone went to contract for $890,000 after a bidding war drove the price up last summer. The appraisal came in at $800,000 and the buyer, who had a financing contingency, said he wouldn't pay above the appraised value. "The sellers had already committed to buying another house somewhere and they had to go through with the deal," Mr. Sheppard said.

There are several things that a broker can do to avoid appraisal problems. First, a broker should supply an appraiser with information on closed sales that support the price on the property. But closed comps are only the beginning. Jonathan J. Miller, the president of Miller Samuel, an appraisal firm, said he also looks at information about similar apartments that are in contract but not yet closed. Frequently, brokers can learn of sales in contract from their colleagues, and they can pass the information on to an appraiser. And if multiple bids have been made, Mr. Miller said, he will look at bid letters from other potential buyers as evidence to support a higher valuation. Some appraisers will also use the prices on similar listings in a building or neighborhood to assess the value of a property.

When an appraisal does come in low, many mortgage brokers will simply go out and get a second or a third appraisal until they get one that matches their sale price. A broker can also request a review of an appraisal in hopes of getting it bumped upward.

Many real estate brokers said that they shudder when they see that a lender has dispatched an appraiser from out of town. "A broker has to be alert to a 516 area code that indicates an appraiser might not understand the workings of the Manhattan market," said Shirley Hackel, a managing director at Warburg Realty Partnership.

Brokers also must be alert to flaws in an appraisal. Richard Ferrari, a senior vice president at Prudential Douglas Elliman, said that last year he represented the buyer in a deal in which an out-of-town appraiser turned in an appraisal $100,000 below the selling price for an apartment on Central Park West, saying the unit had no park views. "The appraiser never came to the apartment," Mr. Ferrari said. "Every window faces the park." Mr. Ferrari challenged the valuation and the bank brought in a second appraiser, who determined that the apartment was worth the sale price.

"A really good broker is always present during the appraisal," said Leonard Steinberg, a senior vice president with Prudential Douglas Elliman. On a recent deal, Mr. Steinberg said, he discovered that an appraiser working with an electronic measuring device had come away with a mistaken measurement for one room in a loft he was selling in the Flatiron district. "It was mind-boggling to me," Mr. Steinberg said. "We were actually leaving and I said, 'How much did it measure out to?' He said, 'It's 4,100 square feet,' and it was actually like 4,900 square feet." Together, they remeasured the room "with an old-fashioned tape measure," and the appraiser corrected his mistake.

Kathleen M. Sloane, a vice president with Brown Harris Stevens, decided to take pre-emptive measures after watching a deal come apart last fall. An appraiser valued an apartment at the Christodora House on Tompkins Square Park in the East Village at $800,000, far below the $885,000 contract price, she said. The buyer was so upset by the low appraisal that he walked away. She later found another buyer for the apartment, but at a lower price.

Now, Ms. Sloane advises sellers to have their own appraisal done before putting an apartment on the market.

"It is better to act in advance and get your own appraisal as a seller," she said, "so that when someone comes in you say, 'We have an appraisal of this property.' You should make available to your appraiser the same comps that we used for ours."

A low appraisal can have a serious financial impact, but the psychological repercussions can sometimes be just as devastating.

Annie Cion Gruenberger, a managing director at Warburg Realty Partnership, was working as the broker for a young woman who went into contract for $780,000 on a one-bedroom apartment at the Mondrian, a condominium at 250 East 54th Street.

"Then some appraiser from upstate New York comes," Ms. Gruenberger said. "This man has no clue. I don't think he's done a New York City appraisal in months." Ms. Gruenberger gave the appraiser information on comparable sales, and even took him to a new condo building across the street where apartments had been selling for considerably more. "This guy comes in with an appraisal, I thought I'd shoot myself, something like $650,000," she said. "A ridiculous number."

The buyer was "hysterical," she said, and Ms. Gruenberger called in another appraiser, who came up with a valuation of about $745,000. The buyer, whose parents were helping pay for the apartment, was already ordering window treatments and kitchen fixtures. In addition, she had signed a contract without a financing contingency.

But once they learned of the low appraisal, she said, the woman's parents became determined to get out of the deal, although they could still afford to buy the apartment.

"It was definitely not financial," Ms. Gruenberger said. "It was totally about power and being right."

In the end, the seller let them walk away from the deal without penalty, wishing to avoid a nasty fight over the deposit. Ms. Gruenberger said it was the first time in 13 years in real estate that she had lost a deal because of a low appraisal.

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Manhattan Market Watch By Shirley Hackel Managing Director THE B-WORD REVISITED As momentum continues in Manhattan’s real estate market, with record setting prices the focus of media and cocktail party…... Read more >

Manhattan Market Watch
By Shirley Hackel
Managing Director

THE B-WORD REVISITED

As momentum continues in Manhattan’s real estate market, with record setting prices the focus of media and cocktail party attention, shouts about a possible bubble are turning to whispers.  In 2004, prices across the nation rose faster than in any other year since the 1970’s.  Despite disappointing employment and corporate numbers, declining consumer confidence, high oil prices, sagging U.S. and global stock, and worldwide uncertainties, prices in New York surged in a tight market amid heightened demand and frenzied activity.  High incomes and low interest rates fueled ever-rising values.  In nearly all segments of the real estate market, bidding wars drove prices up by leaps.

Doomsayers declare that today’s housing is as overvalued as yesterday’s tech stocks.  But comparing the real estate market to the stock bubble is inaccurate for a variety of reasons.  Unlike stock buyers, real estate purchasers buy shelter that provides tax advantages.  Changes in home ownership occur slowly.  There are costs associated with property transfers, and when a property is sold, usually it must be replaced by another.  Unlike stocks which can be disposed of in a single phone call, it takes time, emotion and considerable expense to sell and move from a home.  Flipping investments is far easier to accomplish in the equity markets than in the real estate markets.  Most property buyers, even buyers of second homes, stay for the long haul.  

In the past few years, as homeowners took advantage of low rates by refinancing, they used the extra cash in their pockets for additional spending.  However, the windfall created by refinancing is coming to an end, and a slowdown in price increments is coming.  By 2006, economists forecast that interest rates will approach 7%.  It’s unlikely, however, that real estate prices in Manhattan will plunge.  A more likely scenario is that they won’t rise much or will remain flat.  Morgan Stanley’s chief U.S. economist predicts, “Home prices will rust, not bust, for the next few years.” 

According to the National Association of Realtors, a better balance between supply and demand is expected by year end.  Throughout Manhattan, new conversions and new construction are in the works.  As this latest supply of product becomes available, price gains are expected to slow but still remain above historic norms. 

Certainly, there are cycles in the real estate market.  Price fluctuations, however, matter less to home owners who are purchasing shelter than to those who seek pure investment.  A more balanced level of trading lies ahead. 

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Manhattan Market Watch Shirley Hackel, Managing Director Ready, Set, MOVE! Congratulations on your contract signing!  Before you break out the champagne, however, now is the time to begin…... Read more >

Manhattan Market Watch
Shirley Hackel, Managing Director

Ready, Set, MOVE!

Congratulations on your contract signing!  Before you break out the champagne, however, now is the time to begin planning your move.  Experts are available, along with useful websites full of comprehensive checklists and helpful tips. Friends who have been through the process and your broker can provide guidance as well.  Next to divorce and marriage, moving ranks high among life’s challenges.  Because it centers on displacement and disruption, it requires preparation, organization and perspective.

It’s best to call the movers as far in advance as possible, but, at the very least, call 3-4 weeks before the move.  Get estimates from 3 companies.  Since move dates can change more than once for a variety of reasons, choose a company that will be the most flexible, especially if your timing is uncertain.  June is the industry’s busiest month.  “Everybody’s dates change,” says Gerry McGwyne, President of T&G Relocation Systems, “and no two moves are the same.  Go with a recommendation,” he advises, “and get a fixed price with a written guarantee.  A low quote from a disreputable firm may turn into a big headache at the end of the day.” 

If you’re buying and selling at the same time, you’ll need to orchestrate the mechanics of each closing.  It’s important to understand the options available.  Sometimes, a short-term bridge loan is cost effective to cover the time between closings, if they can’t be scheduled simultaneously.  Other times, it may be helpful to have a holdover arrangement or interim rental provision in the contract to protect against unforeseen delays.  Some moving companies offer “storage in transit” and they will hold your belongings on trucks for 3-4 days.  Knowing your new building’s requirements with respect to elevator use is critical.  Equally important is understanding the procedural requirements of your new board with respect to readying an apartment for move-in.  “We lucked out,” muses Shari, an expert by dint of having moved 3 times in 4 years.  “Our buyers were coming from a rental, and they let us stay in the apartment 3 weeks beyond closing, so we could get the floors done and the apartment painted.  It took 4 day for my painters to get their insurance certificate approved by our new board.  In turn, we gave our buyers our furniture which had been bought to scale and fit the space perfectly.” 

Moving presents multiple opportunities.  It’s the best time to have your rugs cleaned and then delivered to the new place.  There’s never a better time to sort through and eliminate stuff you no longer use or need.  Donations to shelters, hospitals and schools are immensely rewarding and tax deductible. 

If the movers are packing for you, it’s best to leave items in place, since it’s safer to pack glassware and china from a cabinet than to take it from a cluttered counter.  Clothes may be left in dresser drawers, but don’t overstuff them. 

If you’re packing yourself, the rule of thumb is to pack heavier items toward the bottom of the box and lighter toward the top, keeping the box under 50 pounds.  The heavier the item, the smaller the box.  Newspapers are not good for packing as the ink rubs off and stains.  All boxes with “fragile” items should be marked accordingly.  Grandfather clocks and pianos should be moved by experts. 

Number each box and use different colored labels to identify boxes by room.  Put the same colored label on the door of the room being packed and on the door of the room in the new home where the boxes will be moved.  Give the movers your new floor plan indicating furniture placement and color coded rooms.  Create a master list of boxes by room and number, and try to categorize contents as best you can. Plants don’t move well, so consider finding new homes for them or moving them yourself.  Since you won’t have time for children or pets on moving day, arrange for favorite babysitters.  Consider separating and moving some cherished toys yourself.

Notify the mover about high value items such as antiques and collectibles that may need special care.  Moving companies are limited by law as to how much they can protect against lost or damaged goods.  Check your homeowners’ policy to see whether you’ll need to purchase additional transit coverage.  Movers are not liable for what they did not pack unless the exterior of the box is damaged.  They cannot be responsible for jewelry or important documents. 

Expect moving day to be organized chaos. Even with one person at the old place to supervise, and another at the new place, mistakes can happen.  Dee, another veteran mover, cautions, “if you’ve promised to leave the window treatments and light fixtures, make sure you tell the movers, or they’ll dismantle everything even if it’s nailed to the wall, as they did to my horror in my move.”

Make arrangements for utility connections and transfers.  Prepare a change of address list, including banks, credit card companies, and magazine and newspaper subscriptions.  Notice to forward mail can now be done online. 

Create an “unpack first” box and move this yourself.  Pack items you’ll need immediately like linens for beds, towels, toilet paper, soap, trash bags, scissors, hammer, screwdriver, pencils, notepad, water and cleaning supplies.

When you’re ready to make a final check of every room, don’t overlook your storage area.  Make sure windows are closed, doors are locked, and lights are off.

Moving is a lot like having babies or redoing a kitchen.  You forget the pain and remember only the joy, and so you do it again and again.  With good planning, and a sense of perspective, the burden of the move will be behind you soon enough.  Cheers!

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To Stage or Not To Stage? Manhattan Market Watch By Shirley Hackel If "all the world's a stage" as Shakespeare reflected in As You Like It at the turn of  the 17th century, then it may seem that…... Read more >

To Stage or Not To Stage?

Manhattan Market Watch
By Shirley Hackel

If "all the world's a stage" as Shakespeare reflected in As You Like It at the turn of  the 17th century, then it may seem that professional real estate stagers are a little late in coming to Manhattan. According to the website for the International Association for Home Staging Professionals, an organization founded in the mid 1970's by Barb Swartz in Washington State, the New York City chapter was formed only recently in November 2004. Staging as a recognized trade is pretty new. However, with the rising popularity of cable TV shows like "Sell This House" and the demonstrated success of recent "staged" apartment sales, the business is definitely growing, and brokers and sellers are becoming more and more receptive to the concept.

Experienced brokers are adept at advising clients how to present their properties to their best advantage, and we have been providing this service free to our sellers for years. Enter the stager - a design professional, much like a stylist, who is hired for a fee to present a property for maximum visual and emotional appeal. A full scale staging job might include refinishing floors, painting walls and trim, replacing countertops, improving lighting, regrouting tiles, cleaning carpets, replacing worn furniture with rented props, and adding  accessories. The cost, of course, varies with the scope of the project. Often, a stager can be consulted by the hour for a proposal and an estimate.

If a seller has the time, the money and the stomach to paint and do floors, it is certainly money spent well. However not every seller needs or has the budget for a full-blown production. Nonetheless, first impressions are critical to a sale, and there are no second chances for sellers. Happy apartments make a buyer feel good and bring in the most dollars. Even wrecks can be improved upon. Here then are my insider's tips on how to ready your apartment for sale.

First, consider your residence as a commodity, and try to distance yourself and remain detached. You'll need objectivity to identify flaws you may have grown accustomed to. Put aside ego and emotion. Getting an apartment ready for showing is harder than preparing for a formal dinner party. Think of yourself as a set designer and prepare a scene that will welcome and encourage buyers to imagine themselves in your space. 

There's no need to renovate a kitchen or a bathroom. A face-lift is less important than a good scrubbing, since most buyers will renovate to suit themselves anyway. Some of the suggestions below are obvious; most rely on common sense. It's best to start at your front door, and work your way room by room; with each change, go back to your front door to reassess and continue. Apply the suburban concept of "curb appeal" to every inch of every room. Look with the eyes and senses of your prospective buyer. 

1. Clean and dust everywhere thoroughly. Don't overlook unappealing grime on appliances and their cords, or fingerprints on telephones and switch plates. Get rid of mildew in the bathroom. Windows should be crystal clear to let in all natural light.

2. Remove clutter from rooms, closets and surfaces including tables, countertops and bookshelves. Rearrange not only the furniture to its best advantage but also the shelves, so books are not falling over one another, and so your treasured knick knacks are  displayed artfully on your newly liberated shelves. Give or throw away stuff you haven't used in years that's crowding your closets or collecting dust on your shelves. Neat closets look bigger, and space sells. Hang a couple of empty wooden hangers in your front hall closet to look like they're waiting for your guests' coats. Discard your collection of wire hangers. Organize cabinets, and clean all visible interior shelves of any dirt that may have accumulated. Expect buyers to open all doors and drawers, so check that they open and close easily, and that nothing gets stuck or tumbles out. Test doors to see that they don't bump against what may be hidden behind. 

4. Repair whatever is broken. A buyer will "kick the tires," so fix the loose doorknob and leaky faucet. Pay attention to imperfections you've long ignored-like painting the long ago patched ceiling where the toilet above may have leaked. 

5. Illuminate your home properly. Take down heavy draperies and open the blinds. Clean glass fixtures so they shine, and replace broken ones. Keep all lights on when showing your home; even though buyers will ask to turn them off if they are interested in assessing the amount of natural light.

6. Reduce odors from cooking, pets or cigarette smoke, but don't use room deodorizers. Instead, before appointments, boil some cinnamon sticks, or bake some sliced up frozen cookie dough. Clean the litter box daily, and replace the wee-wee pad promptly.  Put cedar chips in the coat closets. 

7. Camouflage all that is less than perfect. There's great power in the smallest details. Invest in plump new towels and fresh luxurious bedding. These are items you can take to your next home. It's not necessary to set the dinner table with your best china and silver, but do set out a bowl of oranges on the kitchen table and a vase of fresh tulips on the front entry console. Liven a drab corner with a tall green plant, but keep up with appearances, and trim away any dying, yellowed leaves. Throw away the ailing fichus or the leggy fern. Buy a pretty shower curtain to soften the impact of poorly grouted bathroom tile. Dress up a worn sofa with a decorative shawl or throw pillows. Accessorize wisely but minimally. Add a mirror to enlarge a small space or to take advantage of an oblique view. Buy attractive boxes to bring order to children's toys.

Even in the current climate of low inventory and fast paced deal-making, where apartments are selling quickly for near and   sometimes above asking, there's a clear advantage to staging your home. Happy apartments have happy endings. They sell faster and for more money than unstaged ones. More importantly, they show buyers that your home is worth every dollar you're asking.

Shirley Hackel is a 24-year veteran broker.  She is happy to evaluate your space and offer complimentary staging suggestions.  She can be reached at 212-439-5197 or shackel@warburgrealty.com

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Manhattan Market Watch By Shirley Hackel Managing Director Warburg Realty Partnership, Ltd. CONSIDERING THE B-WORD It’s tough to ignore the economists and real estate pundits who see in the current…... Read more >

Manhattan Market Watch
By Shirley Hackel
Managing Director
Warburg Realty Partnership, Ltd.

CONSIDERING THE B-WORD

It’s tough to ignore the economists and real estate pundits who see in the current marketplace signs of ebbing exuberance and cooling ardor.  Professional brokers will agree that the frenzy of last spring is gone, and that is a good thing, they add.  But are we headed for a freefall?  Are we in the midst of a real estate bubble that’s about to burst?  No, and no.

In 2003, the housing sector posted its best year ever.  Prices, which had been rising at record levels for the last 8 years, shot up as much as 25% last year in markets like New York, Florida, California, Washington D.C. and Las Vegas.  This rise came even as our choppy economy struggled to recover.  In New York, real estate prices rose because of increases in personal income, mainly the return of bonus money, and steady declines in interest rates.  An inventory shortage led to competitive bidding with many homes selling over the asking price.  As mortgage rates fell lower and lower, trading picked up speed and urgency, and property prices climbed higher and higher.

Economists see housing as a long term consumer product that is underwritten heavily by mortgages.  While low interest rates kept the real estate market humming, they also contributed to a potentially risky financial scenario.  As refinancing became the darling of the mortgage industry, property owners took out new, often larger loans on homes whose values were rising.  According to a recent Fortune article, Americans have been using their homes like ATM machines, taking out 662 billion dollars in refinancing and home equity loans since 2001.  In the last 3 years, it has not been unusual for homeowners to refinance as many as 2 or even 3 times, paying off their first mortgage plus any credit card debt, and then spending or banking what’s left.  The wave of refinancing has stimulated consumer spending, but mortgage debt as a percentage of income is up significantly.  Easy credit is especially risky for those borrowers who take on higher mortgage payments than they can afford who bank on their expectations that property values will soar in the short term.  Gambling with your residence is never recommended. 

Nonetheless, for the last decade, more and more homeowners have been considering their properties as more than shelter.  Increasingly, real estate has been considered part of an overall investment strategy—a fact which has invited some comparison to the dot.com bubble of the late 90’s.  Proponents of the real estate bubble theory see similarities with the technology boom and bust.  Doomsayers declare that today’s housing is as overvalued as yesterday’s tech stocks. 

A connection between the technology boom and real estate can be made.  As investors and venture capitalists used their dot.com profits to purchase bigger and more expensive homes, prices and expectations were pushed higher.  With supply low, and demand and anticipation high, buyers stepped up to pay record prices for their homes as they factored future price increases into their transactions. 

However, there are some very important differences between stocks and real estate as assets.  In the first place, changes in home ownership occur slowly.  Unlike stocks which can be disposed of in a single phone call, it takes time, emotion and considerable expense to sell and move from a home.  Secondly, while the stock market is based on national and global economies, real estate is influenced largely by local factors of supply and demand.  Thirdly, there is nothing in real estate equivalent to the Wall Street short seller or hedge fund trader.  Finally, it is impossible in real estate for a debacle to occur like Black Monday, when on October 19, 1987, the stock market plunged 22% in a single day.

For sure, there are real estate cycles.  Experienced brokers readily acknowledge peaks and valleys.  But while the tech bubble underscores an inherent industry volatility, the real estate market demonstrates a basic vitality.  With 1990 as probably the last bottom seen in New York, and last spring the most recent high, veteran real estate professionals are looking forward to a mild reality check this season.  Since runaway values stretch the limits of what is reasonable and sustainable, the leveling of prices is welcomed as a healthy correction.  While prices may have peaked, they are not tanking.  A crash in real estate will not occur, although growth this next year may be comparatively small.  Some economists are predicting that home prices will rise an average of 5% annually for the next 10 years.  Christopher Thornberg, a senior economist at UCLA expects that there will be “a drop in market activity and flat prices until the market fundamentals can catch up.”  Conventional wisdom continues to look at residential real estate as bricks and mortar providing shelter and tax advantages.  As a long term investment, it is also an important addition to any diversified investment portfolio.

Shirley Hackel is a 24-year veteran broker.  She can be reached at 212-439-5197 or by email at shackel@warburgrealty.com

 

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Manhattan Market Watch By Shirley Hackel Managing Director Warburg Realty Partnership, Ltd. BACK TO SCHOOL We’ve sharpened our pencils, bought new notebooks and are ready to get back to business as…... Read more >

Manhattan Market Watch
By Shirley Hackel
Managing Director
Warburg Realty Partnership, Ltd.

BACK TO SCHOOL

We’ve sharpened our pencils, bought new notebooks and are ready to get back to business as usual in September 2004.  Happily, we’re moving from the near inertia of August, historically the slowest month for sales.  This year, August was not only a good month to take a vacation, but because of anticipated convention madness, August was a reason to leave the city. 

Arguably, the slowdown in real estate last month was expected and cyclical.   Perhaps, the decline was even appropriate, since it’s hard to continue to ignore disquieting international news, disappointing employment numbers, falling consumer spending, and a sagging Dow Jones.  Yet, with interest rates back to all-time lows, there’s never been a better time to borrow.  The 5/1 ARM—probably the most popular mortgage product—is down from 5.25% to 4.625%, as of this writing.  It remains to be seen whether rates will remain low, see-saw a bit more, or rise because of expected increases in oil prices and inflation.  The November election will probably not have much affect on Manhattan property values.

The real estate surge that began in late winter ‘03 and accelerated through most of last spring, abated sharply in May ‘04.  As a large pool of buyers chased a comparatively small inventory of housing, prices rose in percentage increments monthly.  As a result, brokers and sellers began to price ahead of the market.  Competitive bidding became commonplace, with many deals trading at 10% above the asking price.

This summer, however, there was a considerable drop in activity and trading, properties stayed on the market longer, and prices leveled.  Moreover, there was greater segmentation in the market.  First time buyers continued to capitalize on the attraction of a real estate investment, and trading of smaller units remained brisk.  At the high end, however, there was greater reluctance to commit.

Autumn 2002 was extremely sluggish.  A year later, however, fall ‘03 became the prelude to one of the hottest markets ever.  What lies ahead for Manhattan real estate?  The next three months leading up to Thanksgiving 2004 and the new year of 2005 should bring multiple opportunities to buyers and sellers.  The time for active decision making is from now until the distractions of the next holiday season.  Buyers who have been on the fence are waiting patiently for a new crop of properties to materialize.  The advice to sellers is to take wise counsel from your broker and to price with great discipline and acknowledge that prices have leveled since the peaks of late April/early May.  The advice to buyers is to choose an experienced broker to represent you, not only in your search for your next home, but in the competitive bidding process that will inevitably continue if prices are set realistically.

Stay tuned.

Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com

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Manhattan Market Watch By Shirley Hackel Managing Director Warburg Realty Partnership, Ltd. Great Expectations for Harlem Real Estate Harlem is humming with revitalization.  Dumpsters in the streets…... Read more >

Manhattan Market Watch
By Shirley Hackel
Managing Director
Warburg Realty Partnership, Ltd.

Great Expectations for Harlem Real Estate

Harlem is humming with revitalization.  Dumpsters in the streets and work permits in the windows proclaim that renovations are in progress.  Boarded up buildings are being rehabilitated, and dilapidated shells are getting full makeovers and facelifts.  Private investors are rushing in on the heels of earlier developers who were given economic incentives by the city to renovate abandoned properties.  Existing structures are being converted to luxury housing, and brand new construction is being built for mixed use.  

This September, Warburg Realty Partnership will open a 2,400 square foot storefront on Frederick Douglass Boulevard between 120th and 121st Streets.  On the ground floor of a new middle income co-op development, the office will be managed by Chris Halliburton.  "In five years," Chris forecasts, "Harlem will be a thriving bedroom community with a blend of people of all income groups and ethnicities, including New Yorkers, Europeans, Asians and African Americans from around the world."  He points to the volume of current projects in the area, and says that development is greater in Harlem than anywhere else in the city currently-not in total units, he clarifies, but in the number of individual ventures. 

An abbreviated history

Named by the Dutch after a town in Holland, colonial Harlem was rural.  Early farmhouses had low ceilings, small casement windows, and doors which were divided into upper and lower halves for ventilation and for keeping the children in and the chickens out.  By the mid 18th century, Harlem became the place where the prosperous built grand scale houses with higher ceilings and distinctive mantelpieces on broad gardens on a hill.   The Morris Jumel Mansion at West 160-162 Streets is the only surviving colonial residence.   Built in 1765 on 130 acres by English colonists, this Georgian mansion with attic slave quarters is now a museum on a 10 acre city park.   In 1776, it was used as headquarters by George Washington. 

With the opening of the Harlem Railroad in 1837, the area became the place where fashionable and well-to-do white New Yorkers retreated to spend the summer.  Two of the best known country villas that still exist are Alexander Hamilton's The Grange (1802), a Federal style house on West 143rd Street between Amsterdam and Convent Avenues, and the Bailey House (1888), an ornate mansion with stained glass windows, extravagant turrets, porches and balconies, at 10 St. Nicholas Place, built for circus showman James Anthony Bailey.

After the mansions, rowhouses were built.  Looking much like a Hollywood movie set, The Sylvan Terrace rowhouses, adjacent to the Morris Jumel Mansion, line both sides of the cobblestone street on West 161st Street at St. Nicholas Avenue.  Built to accommodate 1st and 2nd generation immigrant laborers without servants, they are modest two-story, wood framed, single family cottages; they have 7 rooms, approximately 1700 square feet, shuttered windows, double doors, high hooded stoops, and service entrances below the stoops.  In 1882, each of the 20 Sylvan Terrace rowhouses was offered for sale for $30,000.  A gutted shell is now on the market for $550,000. 

In 1919, Striver's Row-considered Harlem's most prestigious townhouse address-on West 138th and 139th Streets between 7th and 8th Avenues-was opened to "blacks only" after the project was foreclosed following the crash of 1893.  Although developed by three different architects, the houses share a similar scale and all lack the stoop of earlier construction.  The Striver's Row townhouses attracted doctors, lawyers, musicians and architects-those striving to purchase an elite address. 

Denser housing came in the early 1900's as apartment buildings were constructed to house the increasing immigrant population, including German Jews and Irish Catholics.  After the depression, most of Harlem's real estate stock was subdivided, neglected, and ultimately abandoned by landlords.  Property values plummeted in the 1930's, and those who could left Harlem.  Lowery Stokes Sims writes in the foreword to Michael Henry Adams' Harlem: Lost and Found: An Architectural and Social History:  "...Harlem was a place you were from and where you visited friends and relatives who were not so lucky as to have moved away." 

Next Month:  Part 2:  Current Harlem Developments
Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com  

 

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Manhattan Homes Manhattan Market Watch A ROADMAP FOR BUYERS By Shirley Hackel, Managing Director Warburg Realty Partnership, Ltd. It’s not easy being a buyer in the current real estate climate where…... Read more >

Manhattan Homes
Manhattan Market Watch

A ROADMAP FOR BUYERS

By Shirley Hackel, Managing Director
Warburg Realty Partnership, Ltd.

It’s not easy being a buyer in the current real estate climate where sellers have the clear advantage.  Today’s market pace is fast, and competitive bidding is furious:  there simply isn’t enough product to meet buyer demand.  Within days, a listed property has an accepted offer over the asking price with multiple back-ups.  What’s a buyer to do in this tight market?

Be smart.  Be armed.  Be flexible.  Stay focused.  A smart buyer recognizes the value of a real estate professional.  Be loyal to your broker, so your broker will contact you with immediate information on offerings, price reductions, and units coming back to market.  Ask your broker to organize and make sense of the numerous and over-crowded Sunday open houses by weeding out those properties that aren’t right for you.  Surfing the Internet for properties works best when it’s a collaborative effort with your broker.

An educated buyer is one who is prepared to act quickly and decisively.  Financing pre-approval is a must in this market.  If you can gain the confidence level to remove the financing contingency from your offer, you will gain a considerable advantage.  Take the time to prepare a professional and financial profile that will give substance to your bid.   Determine the seller’s time frame and express your own flexibility with respect to closing and occupancy.   A skillful broker knows how to communicate effectively on your behalf to present your profile to its best advantage. 

In a competitive bid situation, put your best foot forward immediately to knock out other contenders.  Since you may not get a chance to negotiate, you’re not really bidding against yourself.  It’s OK to lose an apartment because you’ve chosen not to go beyond a specific dollar distance.  But it’s not OK to lose a property because you’ve delayed.  In a competitive environment, go to the last dollar beyond which you would not kick yourself for having lost the apartment:  go to the last dollar at which you’ll feel good about entering into a contract of sale.  If you’re overbid, there will be disappointment, but no regrets.  Be prepared to pay as much as 10% over the ask to secure the property.  If your bid is accepted, instruct your attorney to complete his due diligence promptly.  With back-up bidders breathing down your seller’s neck, a delay could cost you money and the apartment. 

If your bid is accepted, expect that malady known as “buyer’s remorse” to overcome you within 12-24 hours.  Occurring in buyers’ and sellers’ markets alike, this affliction disappears with appropriate hand-holding from your broker.  2004 is stacking up to be a banner year for real estate, and if you’re counseled wisely, you will be among the victors. 

Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com  

Copyright 2004 Gibson Publications Ltd.

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Manhattan Homes Manhattan Market Watch WHERE HAVE ALL THE SELLERS GONE? By Shirley Hackel, Managing Director Warburg Realty Partnership, Ltd. Our economy is improving:  inflation is low, consumer…... Read more >

Manhattan Homes
Manhattan Market Watch

WHERE HAVE ALL THE SELLERS GONE?

By Shirley Hackel, Managing Director
Warburg Realty Partnership, Ltd.

Our economy is improving:  inflation is low, consumer confidence and spending are up, and corporate earnings are exceeding expectations.  However, unemployment remains high, and we’re still at war.  Nonetheless, the mood on Wall Street and the streets of Manhattan is buoyant.  In these first few weeks of 2004, buyers are competing for a short supply of apartments, and they are stepping up to pay asking price or better—in sharp contrast to last January when Wall Streeters were worried about losing their jobs, and real estate buyers were watching from the sidelines, waiting for the other proverbial shoe to drop.  It never did.  At the start of this first quarter, things are looking positive, and the impact on demand from hardy and impatient New Yorkers is palpable.  Additionally, interest rates are staying at low levels longer than expected.  The 30-year mortgage is projected to average 6.4% this year, up modestly from 5.8% in 2003.  However the supply of apartments, which has been short for the last 9 months, is shrinking even further.  The declining inventory is giving sellers the advantage. 

Record breaking numbers of buyers are arriving at Sunday open houses with scores of internet listing print-outs in hand, and loan pre-approvals in their pockets.  One bedrooms are being snapped up by first-time purchasers in days.  Similarly, buyers of two bedrooms starting at $800,000 are racing to contract.  For those seeking larger family apartments on Manhattan’s east and west sides, however, there are fewer choices.  As of this writing, there are only a handful of new prewar listings on either side of the park for the family 7 or 8 priced between $2.5 and $4 million.   Demand for ultra luxury properties is robust, but pickings are slim—barely a dozen apartments at premium prices between $7 to $14 million.

The short inventory coupled with the market’s fast pace may in effect be contributing to the declining number of apartments for sale.   Without a doubt, it’s easier to sell a well-priced property than to buy.  Apartment owners who may be crowded in their classic 6’s and who must sell before than can trade up are hesitant for good reason.  They are waiting until they can identify their next move before they put their own apartments on the market, or they’ll find themselves homeless and forced to rent, subjecting their families to the trauma of two moves. 

What’s a seller to do?  Choose a broker with experience who’s been through this cycle before and can guide you wisely through the process.  Listen to your broker—especially if you are a seller who’s not getting any offers in this current HOT market.  Heed the advice of your broker:  if your apartment hasn’t sold after three month’s of active marketing, there’s good reason for a price adjustment. 

Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com  

Copyright 2004 Gibson Publications Ltd.

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Manhattan Homes Manhattan Market Watch THE CO-OP REVIEW PROCESS PART 2:  The Board Interview By Shirley Hackel, Managing Director Warburg Realty Partnership, Ltd. When you’re invited to meet the…... Read more >

Manhattan Homes
Manhattan Market Watch

THE CO-OP REVIEW PROCESS
PART 2:  The Board Interview

By Shirley Hackel, Managing Director
Warburg Realty Partnership, Ltd.

When you’re invited to meet the co-op’s Board of Directors, you’re halfway home.  The interview is the “look-see” part of the process.  Some boards may ask you to bring your dog to make certain your pet is well mannered.  Children, however, almost never participate, unless a parent is purchasing for an adult child. 

Essentially, the co-op board wants to make certain that you will be caring and responsible neighbors.  To that end, they have great latitude in the kind of questions they can ask.  Be prepared for this, and do not avoid answers to personal questions, or be angered by this intrusion.  The board already knows the details of your life and financial situation, but there may be someone in the group who is curious about something or perhaps even jealous.  Don’t take anything personally.  Don’t be presumptuous.  Should the board ask something you’re not prepared to answer, say you’d like to think about it, and then regroup with your broker later.  On one occasion, my buyers were asked to proceed without financing; they did, but we renegotiated the price down another 5% from the agreed upon contract price.  In most cases, your broker should be able to anticipate particular questions. 

Since you don’t get a second chance to make a first impression, some interview tips are worth reviewing.  1—Be on time and be your conservative best.   2—Act and dress as if you are going to a job or school interview.  3—Don’t ask questions.  All questions concerning the building should already have been answered.  4—Don’t look to make conversation.  The interview is not a social visit, so don’t worry about trying to fill uncomfortable pauses.  No one was ever turned down for being boring.  5—It’s best to decline a drink if it’s offered.  The interview will be shorter.  6—Be cordial and friendly, but never sarcastic or playful.  Answer questions honestly, but don’t volunteer any new information.  Be humble, not aggressive.  Unlike in a job interview, do not try to sell yourself.  7—Know your application.  Be prepared to answer any specific questions concisely.  8—Couples should decide in advance who will answer which types of questions.  It’s perfectly fine for one of you to carry most of the interview.  9—This is not the platform to discuss any planned structural changes or renovations.  If asked, it’s ok to say you might redo a kitchen or bath, but also acknowledge that you are aware of building work rules, and that you know changes require board approval.  10—When the interview is over, do not ask when you are likely to hear a decision.  The board may welcome you to the building, or they may communicate more formally by making a recommendation to the full board who then will call the managing agent who, in turn, will notify the broker.  Thank the board members for their time.   Usually, the interview lasts between 15 and 30 minutes.  There may be another interview just before or just after you. 

Board turn downs cause anguish for broker and buyer alike, as well as embarrassment and often hardship.  While boards can’t discriminate on the basis of race, sexual preference, age or handicap, they have absolute power to approve or deny a prospective buyer.  They are not required to give reasons when they reject an applicant.  Increasingly, co-op boards are becoming stricter in their review of purchase applications, and the broker’s role in assembling the package and preparing the buyer for the interview is more important than ever. 
Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com  

Copyright 2004 Gibson Publications Ltd.

 

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Manhattan Home November 2003 By Shirley Hackel, Managing Director Warburg Realty Partnership, Ltd. The Co-op Review Process PART 1:  The Board Package According to Paragraph 6 of the Contract of…... Read more >

Manhattan Home
November 2003
By Shirley Hackel, Managing Director
Warburg Realty Partnership, Ltd.

The Co-op Review Process
PART 1:  The Board Package

According to Paragraph 6 of the Contract of Sale, co-op apartment transactions are “subject to the unconditional consent of the Corporation.”  By contractual agreement, purchasers are required to submit their application and all supporting documentation within 10 business days after the delivery of a fully executed contract of sale.  But how, in the light of the growing number of board rejections, do buyers ensure that their co-op purchases will be approved and will conclude ultimately in a successful closing? 

The advice to the buyer is simple:  choose a broker who is experienced, smart, diligent and detail oriented.  Then listen to him or her.  Your broker will guide you through the intrusive process and present you to your best advantage.  If your board package lacks substance, is difficult to understand, or raises unanswered questions, then you may not be invited for an interview.  Generally, when a board intends to reject a candidate, it does not grant a personal interview.  Since boards are not required to give reasons for turning down an applicant, it behooves the broker and the buyer to do everything they can to stack the cards in their favor—which means providing the best package possible and putting the most conservative foot forward in the interview that follows.
 
The board package should tell a story that is uniquely the buyer’s own.  Letters should be specific.  Social letters should talk about the purchaser’s background and education, charitable, club and leisure interests.  These letters should highlight accomplishments and show the buyer’s character.

While board requirements vary from building to building, and only a handful have formulas for minimum income and assets, all co-ops look for good credit and consistent employment history.  Financial statements should be presented clearly and concisely.   The lowest common denominator should be considered, so the financial statement can be understood by the least sophisticated reader.  Anything complicated should be simplified; anything out of the ordinary should be addressed up front.  If there is financing, loan application numbers should match those on a net worth statement.  If your broker has questions, these should be cleared up or addressed in a cover letter.   Requests for more information from the board breed negativism, and when this happens, the spiral almost always moves downward, not upward.

All financial entries must be documented with bank or brokerage statements, real estate appraisals or opinion letters.  When a business represents a large part of the purchaser’s assets, then an audited statement or corporate tax return is required.  Additionally, an accountant’s letter can explain a family owned enterprise or how a business is valued.  Similarly, if a loss is carried over on tax returns, reasonable explanations should be provided to allay misgivings of low numbers from buyers claiming high incomes.  Boards can be suspicious of high assets with low income, and, conversely, of high income with low assets.  If there’s a trust fund, the administrator should quantify whether there’s easy access to the funds.  Any outstanding credit card balances can be explained in a cover letter from the buyer.  If an applicant’s income is suspected to be insufficient, and if the board permits, a parent might act as guarantor for the maintenance, but then two sets of financials must be presented to the board.  Alternatively, a parent can write a gift letter and offer to put a year of maintenance in escrow as security against a default in the maintenance.  If there’s a past or current lawsuit pending, a reasonable explanation might prevent the board from thinking you’re litigious and turning you down. 
NEXT MONTH:  PART 2:  The Board Interview

Copyright 2003 Gibson Publications Ltd.

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From Manhattan Homes, October, 2003 Manhattan Market Watch By Shirley Hackel, Managing Director, Warburg Realty Partnership, Ltd. Condominium marketing directors are reporting sales at very healthy prices.…... Read more >

From Manhattan Homes,
October, 2003

Manhattan Market Watch
By Shirley Hackel, Managing Director, Warburg Realty Partnership, Ltd.

Condominium marketing directors are reporting sales at very healthy prices. At the same time, luxury rental towers with full amenity packages are rising on Manhattan's upper west side, reshaping the area as they offer multiple leasing opportunities and life style choices to those searching for housing.

At 43 West 64th, Bret Bobo of Athena Properties scored a September sale on one of the condo's four Penthouse duplexes for $6.6M. The successful developer of the outstanding 838 Fifth Avenue Condominium, Athena converted an eight-story warehouse on the corner of Columbus Avenue and added four floors. Seventeen of the 32 apartments have sold. Billed as "clubby and private," the building offers loft style apartments with oversized windows on the front, varying ceiling heights and prices ranging from $1.3 to $10.2M for units from 1,586 to 6,151 square feet. While the Statue of Liberty, which once graced the top of the original Liberty Warehouse, has been removed, O'Neal's Restaurant will be returning to this site.

At One Central Park, Director of Sales Richard Walgren is extremely optimistic about activity at the AOL Time Warner Center. He cites a recent sale just under $10 million to an Upper East Side couple who could have chosen to live anywhere in this city, but who were attracted to the building's "commanding views, new plumbing and valet parking." Also noteworthy is a record-breaking $42.25M sale to a foreign buyer for an unfinished penthouse which has actually closed. The extraordinary complex, nearing completion at Columbus Circle, comprises two 80-story towers, a concert hall for Jazz at Lincoln Center, the Mandarin Oriental Hotel, a fitness center with a 75' Olympic lap pool, five restaurants, and upscale retail choices, including the widely acclaimed Whole Foods. A total of 135 residences with glass walls and 10' ceilings, a couple with private elevators, are housed in the South Tower, beginning on the 52nd floor. Sixty-six hotel apartments are in the North Tower, offering room, maid and spa services. More than half of the complex is in contract.

New construction is transforming the area between 64th and 65th Streets on Broadway, overlooking Lincoln Center. Beginning March 2004, Glenwood Management will be offering 232 rental apartments from one to three bedrooms in a 30-story structure designed by Costas Kondylis-- the architect who is also responsible for the condo around the corner at 43 West 64th Street. According to Gary Jacob, Executive VP, these high-end rental units will have 9' ceilings, luxury finishes, washer/dryers plus a skylight fitness center and lap pool, children's playroom and garage. Spaces will range from 750 to 2000 square feet and will average approximately $60 per square foot. Bed Bath and Beyond is the rumored anchor tenant, in addition to an unidentified bank and a garage.

Further uptown at 96th Street, sandwiched between the gas station west of West End and the non-doorman 1916 Cliff Dwelling co-op, is Hudson Park Rentals. Expected to be completed by mid October, this new construction has 172 apartments. Already, 75 units have been leased, and 70 tenants are in residence. The building has 14 penthouse triplexes with outdoor space, 10 townhouse-style triplexes with patios and gardens and a mix of simplexes and duplexes. Spaces with luxury finishes range from 975-1,900 square feet at $65 a square foot. There's a fitness center, children's playroom, landscaped roof deck, Pilate's studio plus a 15-seat theater than can be rented for parties or presentations. The project's developer Boymelgreen is also developing condos in Soho (Spring) and Tribeca (River Lofts).

Without a doubt, these newest kids on our west side blocks are changing our city's landscape, contributing new vitality and reinforcing the west side's exciting dynamics.

Shirley Hackel can be reached at 212-439-5197 or by email at shackel@warburgrealty.com

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Copyright 2003 Gibson Publications Ltd.

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