Warburg Blog

Here on Guernsey in the Channel Islands between England and France, where my wife and I have just spent the week-end with our daughter and son-in-law, the residential property market is bifurcated. There is a Local Only designation on about 75% of the houses and apartments, which can only be occupied by natives of Guernsey, their spouses, those whose ancestors have lived here in the past, or those whose presence is deemed “essential” to the community (As the intricacies of this system were explained to me by our taxi driver I almost certainly do not have all the details correct!) I found this idea fascinating. The goal, increasingly significant since Guernsey has become an international tax haven, is to make sure an adequate supply of property remains within the financial reach of local residents. However, even the Local Only housing is expensive and locals like my cab driver are hard pressed to afford it (he is working two jobs, 90 hours a week, to help carry his £1500 per month mortgage.) Even in an artificially controlled environment, market forces are still at work.

In New York we have no Local Only housing. And one of the great things about our city is that every year the number of locals expands as people arrive from all over the world to become New Yorkers. Still, the market we, as brokers at Warburg and similar firms, serve represents a small triangle at the top of the wealth pyramid. Many who grew up in Manhattan cannot afford to return there as adults, especially if they have chosen careers in teaching or the social services. And increasingly the vast majority of those working in the city cannot afford to live in it, or even near it. Most of the members of my administrative staff commute at least an hour and a half each way to ensure that they have adequate home space for their families.

Does this bode well for the future of our city? The loss of tax incentives in recent years has discouraged many developers from building subsidized housing, which our city sorely needs. A change in the fate of Stuyvesant Town could further deplete the stock of middle income housing available in Manhattan. I am a strong believer in paying attention to market forces but also to the importance of diversity, ethnic and financial, in keeping New York vital and dynamic. Some form of intervention must guarantee that residential opportunities exist in New York for middle class housing, intervention which is fair to tenants, landlords, and owners alike. Because we need to figure out how to protect our own hard pressed locals. They represent both our history and our ever changing face. We need them here. 

As the fall season beings, everyone is asking “How’s the Market?” The stock market is steadily up this month and the Times on Sunday opined that real estate in New York has stabilized, even as real estate markets across the country continue to be threatened by lack of demand, ongoing foreclosures, and short sales. The National Bureau of Economic Research told us Monday that the recession ended in June, 2009, giving the Dow a 146 point lift. So I asked our agents how they are experiencing the market, and here is a summary of what they told me:

* Overall, price is still the key factor in determining the viability of a listing. Buyers are all doing their homework, either through their agents or on their own using sites like StreetEasy and PropertyShark. They know what has sold, they know for how much, and they don’t want to overpay.

* In most markets, buyers are more skittish than they were in the late winter and early spring. Even though most economists agree that there is little likelihood of a double dip recession, some buyers are still worried.

* At the same time, sellers are often pricing properties well ahead of the last sale in the building. While this year has seen some record breaking sales, and while a modest increase is usually OK, many sellers are adamant that these new higher prices are achievable, even after months on the market.

* Condition still sells. The better it looks, the easier it is to find a buyer for it. Many of my agents (and I am with them!) are advocating staging more strongly than ever before. First impressions really DO count with real estate.

* As the rental market has weakened slightly, smaller co-ops and condos are once again competing with rentals for potential first time buyers. The buy vs. rent equation does not seem so obvious to this constituency as rental prices soften a bit.

* Spacious prewar co-ops and condos of 6 to 10 rooms on the Upper East and Upper West Sides, if reasonably priced, are VERY much in demand. We are seeing some of these listings receiving very strong and even full price offers during their first few days on the market. But again, price matters. If the price is really out of whack people don’t even want to try.

* Finally, little by little the shadow inventory of new development units is making its way back to the market. These units are located all over town, from Harlem to the West 40s to the East 20s. They too are all about price. There is demand for these units if they are priced to sell. Otherwise, buyers seem to feel that there are plenty of other properties to look at.

Overall I predict that it is going to be quite a busy fall. I do not see big price gains any time soon, but as confidence improves in the coming weeks (barring any big setbacks) and sellers confront the possibility of higher capital gains taxes in 2011, both sides of the transaction will be motivated to come to terms. And brokers will be there doing what we do best, using our expertise to facilitate the conversation and bring the parties safely home.

Do you know whether the agent you called is actually representing you? Maybe they are representing the other side but you don’t know it? As of January 1, 2011, real estate agents selling co-op and condominium apartments will be subject to the same written disclosure requirements as are currently mandated in the sale of all other kinds of property (and in all other parts of the country). So let’s talk a little about representation.

When I was first in the business there was only seller representation. By law, every residential agent represented the seller in every situation. Buyers went unrepresented, even though the broker often had a FAR stronger relationship with the buyer, to whom they might have been showing property  for months; than they did to the seller, whom they might never have met. This was in the days before co-broking, so there was only one agent involved in every transaction. Law and reality did not sync. Agents LEGALLY represented sellers, but mostly they ACTUALLY represented buyers.

As more properties became exclusive listings, and co-broking became more common, there were two agents involved in most transactions. But the legal notion of representation did not change. Now not only did the seller’s agent represent the seller, but the buyer’s agent, who would not only never meet the sellers but probably never talk to them either, legally represented the seller as well (it was called sub-agency). So you had two agents representing the seller, one of whom CLEARLY represented the buyer. It made no sense.

In the mid-1990s the Residential Division of The Real Estate Board of New York petitioned then-Secretary of State Gail Schaeffer to put an end to the sub-agency notion and recognize that in co-broke situations, the agent who brought the buyer was actually a buyer’s agent. They agreed, and that ushered in a period of greater clarity.

But some murky areas remain. For one thing, are you aware, as a consumer, that your agent is legally obliged to inform you whom she represents? She is. And what happens if you are buying your agent’s exclusive listing? Unless you clarify otherwise, your agent actually represents the seller, with whom they have signed an exclusive contract, and not you. In this case there is also the alternative of Dual Agency.

In a Dual Agency situation, both parties agree that the agent will represent them both. While this clearly makes complete loyalty to either side impossible, sometimes it is the best alternative. Dual Agency acknowledges a reality: it is often best for BOTH parties, if there is only one agent, for that agent to represent the DEAL by pushing and prodding both sides towards a place of compromise. To me that seems like the fundamental definition of an agent’s job.

Finally, there is a new variant in the Dual Agency scenario which the State of New York just introduced in the last couple of years. It is called Dual Agency with Designated Sales Agents. This arises when two agents within the same firm represent the two sides in a transaction. Any time an agent has an exclusive listing it means that EVERYONE in their company now represents the seller, since legally the company, not any individual agent within it, holds the exclusive. Now, thanks to the Dual Agency with Designated Sales Agents option, it is possible for two colleagues within the same firm to represent two different sides of a transaction, one owing loyalty to the seller, one to the buyer.

All these options – buyer’s agent, seller’s agent, dual agent, dual agent with designated sales agents -appear on the new form which all buyers and sellers will be signing come 2011. As agents, we always love the one we’re with. But do we represent them? That is the question the form is trying to lay to rest…

I am a New Yorker 

I am a New Yorker 

I live in the five boroughs or on the Island or Upstate 

I went to Queens College

I may live hundreds or thousands of miles away 

Or I may live just over the GW Bridge 

But I am a New Yorker 

I am a New Yorker 

Whatever took me out of New York : 

Business, family or hating the cold 

did not take New York out of me. 

My accent may have faded and my pace may have slowed 

But I am a New Yorker  

I am a New Yorker 

I was raised on Macy’s Thanksgiving Day Parade and Rockefeller Plaza , 

The Yankees or the Met’s (Giants or Dodgers) 

Jones Beach, Rye Beach, Orchard Beach, Sunken Meadow or one of the beaches on the sound 

I know that ‘THE END’ means Montauk. 

Because I am a New Yorker 

I am a New Yorker 

When I go on vacation, I never look up 

Sky scrapers are something I take for granted 

The Empire State Building and the Statue of Liberty are part of me 

Taxis and noise and subways and ‘get outa heah’ don’t rattle me 

Because I am a New Yorker 

I am a New Yorker 

I was raised on cultural diversity before it was politically correct 

I eat Armenian food,Greek food and Italian food, 

Jewish and Middle Eastern food and Chinese food 

Because they are all American food to me. 

I even eat those Bellie whoppers-White Castle’s

I don’t get mad when people speak other languages in my presence 

Because my relatives got to this country via Ellis Island and chose to stay   

They were New Yorkers  

People who have never been to New York have misunderstood me   

My friends and family work in the industries, professions and businesses that benefit all Americans 

My firefighters died trying to save New Yorkers and non-New Yorkers   

They died trying to save Americans and non-Americans   

Because they were New Yorkers.  

I am a New Yorker 

I mourn the loss of my beautiful city 

I feel and dread that New York will never be the same But then I remember: 

I am a New Yorker  

 

And New Yorkers have: 

Tenacity, strength and courage way above the norm.  Compassion and caring for our fellow citizens.  Love and pride in our city, in our state, in our country.  Intelligence, experience and education par excellence.  Ability, dedication and energy above and beyond Faith–no matter what religion we practice.  Terrorists hit America in its heart but America ‘s heart still beats strong.  Demolish the steel in our buildings, but it doesn’t touch the steel in our souls.  Hit us in the pocketbook but we’ll parlay what we have left into a fortune.  End innocent lives leaving widows and orphans, but we’ll take care of them because they are New Yorkers  

 

 

Wherever we live, whatever we do, whoever we are  there are New Yorkers in every state and every city of this nation.  

We will not abandon our city.  

We will not abandon our brothers and sisters  

We will not abandon the beauty, creativity and diversity that New York represents.   

We are New Yorkers  and we are proud to be New Yorkers 

  

 REMEMBER THE WTC 

Author – Vincent Pasquale, Maspeth , NY  

Thank you Vincent for allowing us to share this with 

our fellow New Yorkers all around the world. 

Only those that grew up or lived in NYC 

can understand the meaning of this:

THERE I S NO NORTH AND SOUTH. 

IT’S ‘UPTOWN’ OR ‘DOWNTOWN.’ 

IF YOU’RE REALLY FROM NEW YORK , 

YOU HAVE ABSOLUTELY NO CONCEPT 

OF WHERE NORTH AND SOUTH ARE…

AND EAST OR WEST IS ‘CROSS-TOWN.’  

YOU KNOW HOW TO MAKE AN EGG CREAM. 

YOU RIDE IN A SUBWAY CAR WITH NO AIR CONDITIONING 

JUST BECAUSE THERE ARE SEATS AVAILABLE.

 YOU TAKE THE TRAIN HOME AND YOU KNOW EXACTLY 

WHERE ON THE PLATFORM THE DOORS WILL OPEN THAT 

WILL LEAVE YOU RIGHT IN FRONT OF THE EXIT STAIRWAY. 

YOU KNOW WHAT A ‘REGULAR’ COFFEE IS. 

 IT’S NOT MANHATTAN …IT’S THE ‘CITY.’ 

YOU CROSS THE STREET ANY WHERE BUT ON THE CORNERS

AND YOU YELL AT CARS FOR NOT RESPECTING YOUR RIGHT TO DO IT. 

YOU MOVE 3,000 MILES AWAY, 

SPEND 10 YEARS LEARNING THE LOCAL LANGUAGE 

AND PEOPLE STILL KNOW YOU’RE FROM THE BRONX

BROOKLYN , OR LONG ISLAND , 

THE MINUTE YOU OPEN YOUR MOUTH. 

YOU RETURN AFTER 10 YEARS AND THE FIRST FOODS 

YOU WANT ARE A ‘REAL’ PIZZA FROM DENINOS OR  JOE & PATS, 

AND A  ’REAL’ BAGEL.

 A 500 SQUARE FOOT APARTMENT IS LARGE.

 YOU ARE NOT UNDER THE MISTAKEN IMPRESSION THAT ANY HUMAN BEING WOULD BE ABLE TO ACTUALLY UNDERSTAND 

A P.A. ANNOUNCEMENT ON THE SUBWAY.

 YOU WOULDN’T BOTHER ORDERING PIZZA IN ANY OTHER CITY.

 YOU GET READY TO ORDER DINNER EVERY NIGHT AND MUST CHOOSE FROM THE MAJOR FOOD GROUP MENUS: CHINESE, ITALIAN, MEXICAN OR INDIAN.

 YOU’RE NOT THE LEAST BIT INTERESTED IN GOING TO TIMES SQUARE ON NEW YEAR’S EVE. 

YOUR INTERNAL CLOCK IS PERMANENTLY SET TO KNOW WHEN ALTERNATE SIDE OF THE STREET PARKING IS IN EFFECT.   

YOU KNOW WHAT (AND WHERE) A BODEGA IS. 

SOMEONE BUMPS INTO YOU AND YOU CHECK FOR YOUR WALLET. 

YOU DON’T EVEN NOTICE THE LADY WALKING DOWN THE STREET

HAVING A PERFECTLY NORMAL CONVERSATION WITH HERSELF. 

YOU PAY ‘ONLY’ $230 A MONTH TO PARK YOUR CAR.

 YOU CRINGE AT HEARING PEOPLE PRONOUNCE HOUSTON ST .. LIKE THE CITY IN TEXAS   

THE PRESIDENTIAL VISIT IS A MAJOR TRAFFIC JAM, NOT AN HONOR.

YOU CAN NAP ON THE SUBWAY AND NEVER MISS YOUR STOP.

(this always amazed me.)

 THE DELI GUY GIVES YOU A STRAW WITH ANY BEVERAGE 

YOU BUY, EVEN IF IT’S A BEER.

THAT’S NEW YORK !      

YA GOTTA LOVE IT!!!!!!!!!!!

Several articles have recently appeared in the NY Times and the Wall Street Journal touting the relative stability of the Manhattan marketplace as other parts of the country hover at the edges of a second real estate dip. While it is certainly true that New York was less affected by the end of the first time home buyer tax credit (after all, how significant can $8000 be when studio apartments in Manhattan start at $150,000) our real estate market has not been immune to the pressures of global financial anxiety and a two-steps-forward, one-step-back recovery. So as the market reconstitutes itself after Labor Day, I am thinking about what will keep our market strong. Other than economic factors over which we have minimal control, nothing makes property more saleable than the right price. Here are a few recommendations for finding that elusive number:

* DO your homework. Insist that your agent give you a list of comparables, both recently sold and currently on the market. And do your own research on real estate sites like Property Shark and StreetEasy. That creates a frame of reference. But…

* DON’T price based only on other asking prices. The fact that others are unrealistic doesn’t mean you should follow suit – in fact quite the contrary. Your property will be even more interesting to buyers if you are the only one who has realistically assessed the marketplace. Research has shown that properties have a “golden” period of high buyer interest during their first month on the market. Don’t waste it!

* DO consider your own time frame. If you have a year to sell, it is probably better not to list now. If on the other hand you want to sell before December 31 because you think it is likely that capital gains rates will rise in 2011 (and that DOES seem likely) you need to act now and price your property fairly. And remember, any increment in your property’s value during the next twelve months will likely be offset by the higher taxes, so be sure to factor that into your decision making process.

* DO lower the price if you have had no interest after a month or six weeks. The market is eloquent about prices; we just have to listen to it.

* DON’T be emotional about your pricing decision. Most of us love our homes. But our love does not make them unique or impervious to market forces. Once you have done your research, be hard headed about what the right number should be, without inflation based on feelings of personal attachment

* DO price with negotiation in mind. In a market like the one prevailing today, you will probably not receive your asking price. We recommend building in a cushion of no more than 5% between the probable sales price and the price which you decide to ask.  Generally the properties which are priced tightest to value sell fastest and most profitably for their owners. Buyers find too wide a gap between an asking price and their perception of value discouraging. Many buyers will not even offer on a property they perceive to be incorrectly priced.

Many factors go into determining a proper price. Location, condition, square footage outlook – all play a part. But in the end the value of any property is precisely what a buyer will pay and a seller will accept. Determining and reacting to an asking price are the first steps in the dance of purchase and sale.