Warburg Blog

Sitting on the plane flying home from London, I am thinking about the ways the British system of selling real estate differs from ours. I met last week with a firm of high end estate agents, who do a significant amount of business in both rentals (or “lettings” as they are known in London) and sales. More than anything else, I am fascinated by the way their system apparently disadvantages buyers AND sellers, because their low commission rates lead to a lack of co-brokerage.  (Of course the same thing, minus the low commission rates, can be said about much of Brooklyn.)

In New York City, all Real Estate Board members are required to co-broke their listings with all other Board members within 24 hours of receiving a listing. This leads to an orderly marketplace. In London, by contrast, co-brokerage is voluntary. What that means is that, more often than not, an exclusive agent who has a hot property will keep it within their firm so as not to be required to share the 2% or 2.5% commission. So, as a buyer, unless you happen to be in touch with an agent from that firm, you do not see the listing.  Dual agency is not permitted, so if you go directly to the seller’s agent you have no buyer’s representation in your negotiation. And if you want a buyer’s agent, more often than not you have to pay them yourself. Unless you are willing to pay them yourself, or contact the listing agent directly, you simply do not have access to the property.

To me this system seems like the height of inefficiency. The seller has no guarantee that he is receiving the highest and best price for his property, since it is likely that many in the pool of appropriate buyers may never learn about the listing (of course the Internet has alleviated this problem somewhat).  Similarly, the buyers cannot select a trusted agent and count on that agent to show them everything, unless those buyers are prepared to pay their agent a fee.  And even then, exclusive agents often prefer not to have to deal with another real estate professional.

Our system may not be perfect, but in it I believe everyone wins. Brokers on BOTH sides of the transaction are fairly compensated for making sure their clients, be they buyers or sellers, get the broadest possible market exposure with expert professional advice before making a decision.

 Are you expecting a refund this year? If you want to know where your money is here are  a few ways to find it. (more…)

 BY: Frederick Peters, Warburg Realty President

Throughout the country real estate is beginning to recover. Unevenly, with false starts and disappointments, as the economy strengthens, inventory is being absorbed. Prices are still depressed, time on the market still extends into the multiple months, foreclosures still abound, but the situation now improves a little bit each month.

Against this backdrop of gradual improvement, the behavior of the luxury marketplace in New York, where prices are rising, there are multiple offers on many properties, and absorption is quick - seems all the more exceptional. Why is it happening? None of us know the complete answer, but I have a few ideas: (more…)

Throughout the country real estate is beginning to recover. Unevenly, with false starts and disappointments, as the economy strengthens, inventory is being absorbed. Prices are still depressed, time on the market still extends into the multiple months, foreclosures still abound, but the situation now improves a little bit each month.

Against this backdrop of gradual improvement, the behavior of the luxury marketplace in New York, where prices are rising, there are multiple offers on many properties, and absorption is quick - seems all the more exceptional. Why is it happening? None of us know the complete answer, but I have a few ideas:

·        We are a confined market. Manhattan is an island, and an island with little construction currently under way. Between the recession and the loss of tax incentives, developers do not have much in the pipeline. The prewar co-ops are, of course, impossible to duplicate. There has been, without exaggeration, NO foreclosure inventory among the Manhattan co-ops. And we have a vicious cycle regarding inventory: owners won’t sell unless they know where they are going, and since so there is so little for sale they cannot find anyplace to go. So they renovate, or hang on. Inventory stays low. And when good new property appears, ten people are waiting to pounce on it. Someone wins, but for the other nine, there is STILL no place to move. So their properties don’t get listed. And so it goes.

·        Manhattan is an international financial and business center. In many respects, our market is driven more by global than by national forces. And since finance is our hometown industry, the behavior of the stock market impacts our real estate market more than it does other locations. That said, real estate is still viewed as a separate asset class which does not always move in tandem with the market. We are also seeing, as we did a decade ago, an interest in bricks and mortar as a hedge against volatility with bonds and securities.

·        Our condo market is driven by non-US nationals. They come from all over the world, with buyers from Russia, China, Korea, and Brazil currently leading the charge. For them, New York represents both a secure safe haven for their money and a good buy. Paris, London, Moscow, Hong Kong – the real estate in these cities costs more and (at least in London, Paris and Moscow) the economic situation looks less stable. For a variety of reasons, buyers from the Arab world still prefer London.

·        New York is awash in cash. For many in the financial world, the last two years were not at all bad. AND many of the Wall Streeters have also seen their Restricted Stock Units from the boom-years earlier in the last decade vest, creating big windfalls. Certain legal specialties, especially those regarding bankruptcy and restructuring, have had several banner years. And merger and acquisitions activity is soaring in 2011.

·        Commuting is a tough life with today’s work schedules. The suburbs were conceived based on a 9 to 5 workday, with Mom at home. With Mom and Dad both working high level jobs often stretching from 9 AM till 8 or 9 PM, boarding that train at the end of the evening, and getting home after the kids are already asleep, doesn’t seem so appealing. So even though there are great buys in Westchester, Connecticut, and New Jersey, a lot of New Yorkers want to stay in New York.

What are some other reasons? You tell me – fpeters@warburgrealty.com or post your comments here.

BY: Heather Higgins, Pricipal and founder of Higgins Design Studio in NYC

 You have tried to make changes yourself, but the drapery color doesn’t look the same on the windows as it did in the fabric swatch, the overstuffed sofa that looked great in the store, looks cramped in your space and the new dining room chandelier dwarfs the size of the table and the light level is blinding. Isn’t it time to call in a professional?

The Smart Solution
A challenging economy has reacquainted us with spending our money wisely, which is the reason to use a design professional. They will help you to develop a master plan for your space, so that with every purchase, you are building toward a successful end result. They can recommend where to best spend your money or when you can “get the look for less”. Most importantly, they have reliable resources for getting good value and can help you to avoid costly mistakes. But, which professional do you hire? (more…)

Every now and then I like to reflect on why I became, and remain, a residential real estate broker. When I started, in 1980, men didn’t pursue this job; they became commercial brokers. Residential was a “woman’s business.” Over the years I have been treated like a servant (that happens a lot), I have ACTED like a servant (many beds made, curtains unhung, bathrooms cleaned etc.), and I have endured the know-it-all attitude of people half my age who in fact know much less about my business than I do.  So why stick with it?

* First, it’s fun. Residential property is endlessly interesting, as are people’s choices about the use of space, furniture, and style to create a personalized environment.

* Second, the psychodynamics are fascinating. Who’s in charge? What is the client REALLY looking for? Who actually decides which offer is acceptable? We brokers listen and intuit throughout our professional relationships, which are short but intense, because without knowing the answers to these questions we are not effective advocates.

* Third, it’s diverse. To succeed as a residential agent, you have to do a lot of things well: you need great interpersonal skills, a strong enough personality to close, a sensitive enough personality to work with many different character types, a lot of math, analytical ability, and enough drive to keep going even when things continually go wrong, or just don’t go at all.

* Fourth, and most importantly, what we do is profoundly important. Shelter is a basic human need, and creating a home underpins the human desire for a sense of place. Where we live locates us in the world, and how we live reinforces our own identities and tells others important things about who we are and what we value. I have always been proud of my work, and that of my colleagues,  to facilitate the creation of something so fundamental and profound.

If you have ever walked around New York  with me you know that I love to  tell stories. Mostly about the the transition or revitalization of New York City’s commercial or blighted neighborhoods to their current luxury residential  status.  I like to describe everything from neighborhood architecture and landmarks to scents, and street vibe to  a building as part of the reference to location.  Many of you have not walked around the block with me but there is a great new way to see what I might have said. (more…)

Time may heal all wounds but it also kills all deals–if there is too much of it. Never has that been truer with an incredibly tight market–boasting almost absolutely no inventory–rentals or sales. Grizzled rental brokers are working with customers who don’t need to move til June or July. Buyers brokers who always set up listings alerts for themselves are madly checking for newly listed properties before the sun comes up every day. And many deals are getting done. The latest in signed contract activity certainly proves that.

But for every deal that happens, there are many that don’t–and time is often the culprit. Some of it seems simple–time wasted on collecting paperwork–time wasted on selecting an attorney–time wasted on making any straightforward decision–are all opportunities for another buyer or renter to scoop your potential dream apartment up.

So, if you are buying,  before you look at one apartment, take the time to fill out a financial statement (essential in submitting an offer), reach out to your mortgage broker and submit all necessary paperwork to him/her (tax returns, bank statements, letter of employment) and hire an attorney (remember, you don’t pay them until they start work when you are at accepted offer).

If you are renting, have your tax returns, 2 months of bank statements, a letter of employment and cash ready for deposits and application forms.

Time can be on your side–if you are just a little organized.

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.