Warburg Blog

Earlier this week, I was invited to a client meeting with the smart and sophisticated director of a major not-for-profit organization. The organization owns a large midtown building in Manhattan which they have had on the market for several years at a price slightly above the market. He invited me to pitch for the business, which I declined to do because in the end I felt that the price, not the agent, was the problem. But the agent’s website is minimal and not user friendly, and neither the director nor his Board had thought to look at it before retaining her. So it got me thinking about what owners of real estate need to ask about marketing when they are looking to hire an exclusive agent:

1) Go immediately to the company’s website. This is everyone’s primary marketing vehicle in the Internet age, and according to the National Association of Realtors, well over 80% of buyers begin their real estate searches on-line. The number reaches nearly 95% for international buyers. You should play around on the site a little: is it easy to navigate? Does each exclusive have a unique property page with multiple photos, floor plan, and complete description?

2) You should ask how many unique visits they have per month and what they do to drive traffic to their site. What tools are available that will give you easy access to information about your property, such as numbers of hits, number of e-mails generated, appearances in other media, etc?

3) Is the agent active on Facebook, or in the blogosphere, or on Twitter or another Web 2.0 medium? Social media increasingly offers opportunities to put your property in front of an exponentially expanding audience.

4) Does the agent or the firm have a public relations presence which ideally could get both them and your property covered? If the agency you hire appears often in the media demonstrating expertise (in other words, the kind of coverage you can’t buy) that will drive more traffic to their website and, ultimately, to your listing. And your agent’s good relationships with the major media also increase the likelihood that your property might appear in a news feature like “On The Market” in the Sunday New York Times.

5) Classified advertising in print is irrelevant today. In general print is valuable for branding more than selling purposes, but both branding and selling require a big presence to stand out in the tidal wave of advertising which surrounds us. Make sure that whatever print your agent’s firm does, it is big enough to be noticed and appears in publications which have the right reader demographic for your property.

Unless your agent can offer you a strong marketing program, your property is at a disadvantage. And in today’s ultra competitive market you want every advantage you can get!

Bring your Sigg to keep hydrated, your hat to keep the sun off and your rejected electronics to keep the landfills uncluttered and and visit the Lower Eastside Ecology Center’s latest recycling events this weekend:

Saturday July 24, 2010 | 10:00am - 4:00pm
Essex Street, on the east side of Essex St btwn Hester St and Grand St, New York, NY 10002

Sunday July 25, 2010 | 10:00am - 4:00pm
Essex Street, on the east side of Essex St btwn Hester St and Grand St, New York, NY 10002

Today’s real estate market is moving faster than ever, it seems, with a new narrative at our fingertips every couple of months, versus every other quarter in previous years.   I am seeing many sellers out there whose properties are languishing on the market.  These sellers fall into two categories, those who listed at right time but with too high a price and those who listed too late.  This post is for them both.

Here is the current narrative to consider.  Q1 of this year was quite strong as we all know; sellers who wanted to sell priced their properties well and were able to close relatively quickly, at prices higher than had been seen in the previous, beleaguered year.  By the time the news of this market shift hit the market, we were in Q2.  It took an extra month or two for those on-the-fence sellers to first believe the market shift and then finally list, which for many occurred in May/June.  By that time, of course, the market had already begun slowing down.  Unless a property was priced very well and had a little something extra to it (be it outdoor space, stellar renovations, etc.), chances are it may still be on the market today. 

If you listed your property over the last 6 months and it’s still on the market, it could be easy to just write off the month of August and wait for the tide to turn.  My advice: don’t.  Don’t count on September or later to revitalize your strategy, as you don’t know what the Fall will bring. 

Here is a set of actions you and/or your broker can take now to make every day, week and month count:

·         Rerun comps:  understand where a property like yours closed over the last 6 months, and look at current asking prices to understand your property’s competitive positioning in relation to what’s for sale in your neighborhood

·         Adjust pricing:   armed with this data, adjust your price accordingly (i.e. downwards).  If it still lingers on the market come September, adjust once again, as you will then have access to the higher traffic that the Fall typically brings to generate some good amount of interest.  At that time, worry less about pricing “too low” and more about creating a sense of urgency and even a bidding war based on your lower pricing. 

·          Refresh your marketing efforts:  do another mailer, create an additional marketing push.  If your photos aren’t great, re-take them.  If you only have a minor description of your home, substitute it for a robust one.  Change up your ads and property description to reposition the apartment anew.

Why is any of this worth it now?  You’d better believe that anyone in the market right now (July and August) is serious; everyone else is taking the summer off.  Sure you have a less voluminous set of buyers, but the volume that’s there is serious and has likely been looking for months.  Only by being proactive can you take advantage of market opportunities.   The bottom line is to truly listen to the market today, and what it’s telling you in the present.  Otherwise, you will either be employing a lagging strategy based on past data or counting on a future that may never materialize.

Here’s the update from me and my agents:

* Mint condition is hot. “Needs everything” is not, unless the price REALLY reflects that reality.

* 1 and 2 Bedroom new condos are hot if they are priced at around $1000 per foot or less.  if they are much higher, and not at 15 CPW, they are not.

* Prewar apartments and lofts are hot. There are just not very many on the market, and they are still the gold standard for many people. On the Upper East and West Sides, and in Soho and Tribeca, buyers are waiting for them.

* Second Avenue is not. That subway will be great some day, but it is making a big mess!

* Classic 6′s for under $2 million are hot. Anything for $25 million is not.

* Priced right is hot. Overpriced is not.

* Rentals are hot (much hotter than they were a year ago.)  So no fee apartments are not (they’re gone!)

* New York is literally and figuratively hot. The suburbs are not.

* Smart, educated, analytical brokers are hot. Brokers who don’t really know the maintenance or the Board requirements or the pet policy or how to read the financial statement are NOT.

Here’s our advice: try to stay cool. And use this list to pursue what’s hot!

Last month 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. 

The second quarter of 2010 behaved like March in the old adage: it came in like a lion and went out like a lamb. April was the acme of a sales avalanche which began gaining force in the fall of 2009. Throughout Manhattan and western Brooklyn residential properties of every category were snapped up, often with competitive bidding, at prices averaging only 10-15% below the 2006/2007 peak. Numerous all time price records were set, especially in mid-sized and larger apartments, during March and April. Confidence and the stock market surged higher.     

Buyers began emerging and becoming active during the fall of 2009, as gradually rising prices made them apprehensive lest they miss the opportunity to purchase while the market was still depressed. The wave of purchasing gained traction during the winter, and by March inventory had dropped from a 19 month supply to an 11 month supply, essentially normalizing the marketplace. Larger properties saw particularly robust gains during this period. While the absolute top of the market (properties asking $20 million and above) remained sluggish, demand for properties of six to twelve rooms was intense.  It was precisely these properties for which demand had declined so precipitously during the period between September of 2008 and September of 2009. There was little available in this category, especially on the Upper East and Upper West sides, and only those buyers who acted quickly and aggressively succeeded in making a purchase. The early months of 2010 were replete with cognitive dissonance: buyers simply could not believe that they had missed “the bottom” and that failure to act decisively once again left them empty handed just as it had three years earlier!

The smaller apartment market, which had suffered less during the recession, rebounded less dramatically. The one- and two-bedroom markets did see significant absorption, but with lesser price increases and little competitive bidding, as supply for the most part continued to outweigh demand. The inconvenience surrounding construction of the Second Avenue subway depressed prices along that corridor and helped moderate demand for the postwar inventory which makes up the bulk of the housing stock north of 59th Street and east of Third Avenue. In the Village, in which the housing stock remains primarily rental, scarcity drove the market as it had before the recession, with many buyers competing for the few available offerings, especially in the larger two- and three-bedroom categories. In both Tribeca and the Financial District an overhang of unsold inventory from the condo construction boom helped keep prices moderate, while at the same time demand remained strong for the “old” Tribeca lofts, with their high ceilings and enormous windows, in the prewar industrial buildings for which the neighborhood was originally known. In Williamsburg, developers responded early and dramatically to the recession, slashing prices at their buildings and guaranteeing a level of activity which was the envy of most other emerging and more recently gentrified neighborhoods.

As April moved into May and May into June, first economic and then seasonal factors came to bear on the marketplace. Debt crises in Greece and Spain and a falling euro sidelined many Eurozone investors whose interest in New York real estate had buoyed the condo market for years. In our new global economy those European debt concerns began to weigh heavily on OUR equity markets as well. Consumer confidence here at home was further shaken by the program trading driven rout in stocks on Thursday May 6, which temporarily reduced many issues to near zero values. Although the market rebounded, the confidence did not. The jobless nature of our recovery, our mounting national debt burden, and government gridlock, both in Washington and Albany, further depressed the Dow, which lost value during much of June. And then, of course, summer arrived.

Real estate purchasers react in different ways to times like these. While recent developments have certainly taken the sizzle out of our market, deal flow remains healthy as buyers see a home purchase as an alternative to stocks and bonds, with significant collateral benefits. The latter half of June, July, and August are always slower in the residential sales, as both buyers and sellers spend more time out of the city. But with the market a little slower, real opportunities exist for buyers. Some sellers will still be holding out for pie in the sky, but for now that mad moment seems to be over. We predict a market driven through the summer and fall by value, as real sellers make realistic deals with serious buyers. We don’t see an upcoming loss in value, but the froth will be gone. Buyers, if you think this is a moment to flee to the sidelines, reconsider! This is 2010’s moment of opportunity.