Warburg Blog

This afternoon, while listening to the beautiful Tchaikovsky E-flat minor quartet in a converted barn in Falls Village, CT, my mind wandered to the question of why I want to run a residential real estate company. There are of course a number of reasons: the money isn’t bad (especially when we are on top of our market), the satisfaction is considerable. But considering that I work much of every day all week all year (and yes, I am writing this blog post on Sunday night, now listening to Schubert piano sonatas on CD) there has to be something more to it than that. And what I came up with, in addition to the pleasure I have written about before in this column advising people regarding such an important life decision, is my acute desire to rehabilitate our reputation. The best agents combine the many skills of a trained therapist, a top notch investment banker, and a financial planner/accountant. So why aren’t we perceived that way?

The media rarely portray us respectfully. At the nadir, there is Sylvia Miles in “Wall Street,” clothed in leopard, salivating over her commission, just another facet of the Gordon Gekko universe of greed and cynicism. The same face, although better disguised, is presented by the broker Sally Rawthroat in Tom Wolfe’s “Bonfire of the Vanities.” These agents, indifferent to the plight of their clients as long as their “high commission” got paid, exemplify what much of the public believes we are about.

Part of the problem we have in New York State is that the barrier for entry into the real estate business is too low. The state test is extremely easy. The continuing education courses tend to be unchallenging. A more difficult test, a more rigorous course of study, would certainly be appropriate for a job in which what is at stake is often a client’s largest asset. My colleagues at The Real Estate Board of New York and I have devoted years to trying to make certain that all members of the Board, at least, get solid ethics and skills training. And while the bar for entry is low, the success bar is very, very high. Very few residential agents make it to the top.

So let’s look at this another way. Of course we are interested in getting paid. Who isn’t? And unlike most professionals, we can work for months or even a year and end up with nothing, depending on the property, the seller, and the economic environment. Agents at the top of their game have a complex and nuanced skill set: they are marriage counselors, mind readers, negotiators, persuaders, crafters of letters, furniture arrangers, balancers, winnowers, and organizers of financial information. We have to walk a thin line in every transaction – on the one hand, providing emotional support during a complex and often anxious moment in the lives of those we serve, while at the same time remaining objective about value and realistic outcomes. And when things go wrong-the Board says no, a higher offer comes in and knocks us out of the box, the property doesn’t sell – we are the ones on the firing line.

So the reason I write a blog every Sunday night, the reason I speak at meetings to my own agents and in public to consumers, is that I want to make sure we are taken seriously. I know how smart and creative most agents are, how committed to doing the right thing, how tireless in fitting all the pieces of the residential puzzle together. I know they are up at 6 AM looking for listings, and they are up at midnight responding to e-mails. And I want everyone reading this to know that, too.

Twenty years ago the Manhattan real estate sales market slowed to a crawl every summer. Not so today! The red hot rental market is hotter than ever, with inventory remaining at record lows, and the sales market in most areas and  price points is steaming as well. Here’s what my agents have told me this week about activity in the current marketplace:

* First, and of greatest importance, it is ALL about the price. Price it right and you are in the game. Price it wrong, even by a little, and you are on the sidelines.

* All over town, from Harlem to the Financial District, new condos are hot for both American and foreign buyers. Inventory is way down, and buyer frustration levels are up. They either think the market is about to go down because of global economic pressures, or they can’t believe they missed the boat after reading so much about excess inventory. Meanwhile, these properties at all price ranges keep moving out the door, often with multiple bids.

* Reasonably priced larger apartments on the Upper West Side are scarce and in demand. A recent open house for a fully renovated 4 bedroom property on West 110^th Street brought in 35 buyers, several of whom made on the spot offers. The same story is being heard all over the neighborhood. There is so little in the mid-priced 6 room to 8 room market that these units sell in a week or less.

* Smaller apartments are also hot. The combination of high rents and low interest rates has opened the floodgates for small apartment buyers (many of whom are parents buying for their kids). Here too, well priced units, especially in the better locations, sell in no time with multiple offers.

* Brownstone Brooklyn is the hottest part of town. Many Warburg customers have bid the asking price only to discover two, three or four bidders going higher. At least two of our customers lost four competitive bidding situations before finally snagging a house.

* Condition counts. My agents observe that mint apartments are a much quicker sale. Owners who cannot be realistic about the condition of their properties when pricing tend to see their properties linger on the market.

* In the market above $3 million, it needs to sell fast to sell well. The backlog of pent-up demand makes new listings very popular during their first few weeks on the market. Once that backlog of buyers has seen the property, showings tend to dwindle to one or two a week at best. So it is critical to price to sell during the first crucial weeks. If you lower your price after the first month, the best buyers have already seen and rejected the property. And although they liked it, once they have rejected it they usually don’t come back, even at a lower price. Psychologically, they have already moved on.

July and August may bring some easing from the fast pace of June. But for now, with the weather still cool as July approaches, we are busy and delighted so to be. Summer is not what it used to be, and that is fine with us.

Why buy real estate? If, as Michael Lewis suggests in “Boomerang”, the Greek government is just a big piñata at which every citizen had the right to a whack, and if Iceland is a land of fishermen turned failed hedge funders who blow up their cars at night for the insurance money, if the Irish built thousands of luxury homes for people who never even existed, much less had the wherewithal to buy them, and if there are no social services left in Vallejo, California because the tax base won’t support them, then why should anyone feel good about plunking down millions of dollars for a place anywhere in the world? If the U.S. debt is crippling the nation, and no one wants to pay higher taxes (though at least most of us do PAY taxes, which seems to put us ahead of an awful lot of Europeans!) what sense does it make to invest in the infrastructure of a financial system which is surely melting down?

In some form or other, my agents at Warburg and our confreres throughout the country face these questions every day. Buyers are jittery. They have been anxious, with some pockets of unexpected exuberance, ever since the middle of 2008. They want to get on with their lives, but…

Here’s what I see, after over 30 years selling real estate and over 60 years on the planet: life goes on. It is not always easy to have faith in the future, but it is certainly the best way to live. And, as I have written before in this blog, buying a home is an act of faith. You are investing not only in your belief that the property will appreciate, at least modestly, over time, but also in your vision of your own future. Is this someplace where you, or you and those you love, will be able to create happy times? Will it be a refuge such that you breathe a sigh as you walk in at the end of a long day and feel embraced by the sense of home? In an uncertain world, and we are certainly living in one today, these are gifts that cannot be quantified.

I certainly have no idea who will win the Presidential election, or when the employment numbers will improve or the euro will stabilize. But I do know that the money I have invested in my homes (one at the top of the market in Connecticut in late 2005) has brought me enormous pleasure and a deep sense of place. In a profound way, owning my homes, filling them with things I love, feels like an affirmation.  It says, “In this complicated world, I know this is where I belong.”  And to create that feeling in others is really the definition of success for all the great agents I know. For the buyer, it just begins with a deep breath.

Sunday, June 10, 2012.  Vivian Toy’s “Who’s Got Your Back” on the cover of today’s NY Times Real Estate section advises home buyers and sellers how to choose a broker to help with a process that is high up on the stress meter because it’s full of challenges and involves what is arguably life’s largest and most important transaction. 

The article provides a timely opportunity to endorse REBNY’s NYRS program and to recommend New York Residential Specialists to consumers.  To the article’s 6-step Choosing A Broker outline, I would include the caveat to select a member of the Real Estate Board of New York and then add—among REBNY members, to hire a New York Residential Specialist (NYRS).  Of the 13 agents featured in Ms. Toy’s piece, one has earned the NYRS credential thus far. 

The NYRS program was started in 2007 as a way for brokers to distinguish themselves at the height of the market when the field was overcrowded with entry level real estate agents.  Developed for brokers by brokers, it’s an educational program with qualifying criteria for applicants and a prescribed course of study that addresses the unique challenges of New York City’s residential market.  The curriculum, updated regularly, reflects changing market conditions and emerging issues.  Experts and industry leaders teach such classes as zoning, taxation, real estate law, development, negotiation, ethics and social media. Class size is kept small to encourage thoughtful participation and an open exchange of ideas.

With less than 60 agents graduating yearly, the NYRS network comprises 200 agents today.  For the industry, the new designation is all about raising the bar and maintaining high standards of professionalism, ethics and leadership.  For consumers, the credential is the industry’s quality control and veritable seal of approval. 

According to online sources, today there are over 25,000 real estate Salespersons and Associate Brokers licensed by the New York State Department; of those, approximately 13,000 are Salespersons and 12,000 are Associate Brokers which is the next step up as it requires two years of Salesperson experience, 45 additional hours of State approved course work, and a pass grade on a State exam.  Narrowing those numbers to our local market, in New York City, there are 7,183 residential Salespersons who are members of the Real Estate Board of New York, and 1,799 who are Associate Brokers. 

Founded in 1896, The Real Estate Board of New York is the city’s real estate trade association.  REBNY works to promote municipal and industry policy, lobbies to encourage development and offers guidelines for professional practices.  Residential Brokerage is one of six separate divisions that it governs. 

When choosing a broker, consumers should insist on REBNY membership, and then look for the NYRS insignia and hire a New York Residential Specialist who may be found at the soon to be released www.nyrs.net.  These are the agents who are committed to professional excellence and advanced education.  They can be counted on to deliver results with integrity.  Together they form a powerful peer group whose influence is spreading. 

Residential real estate was the first sales job I ever had. When I began my career, 32 years ago, it took me a little while to figure out my own style. I read some books. I heard little acronyms like “Remember your ABCs” (for those of you not in the know on this topic, “ABC” stands for “Always Be Closing”) and tried extremely hard to figure out what they meant. But over time I developed my own style. And that style centers around the notion of facilitation.

I don’t believe that I and my fellow agents actually sell property to buyers. Our job as buyers agents’ is guidance: awareness of the comparable properties, knowledge of the neighborhood and the building, insight into the market; our job as sellers’ agents, similarly, revolves around pricing advice, effective marketing, and a sense of market timing. On both sides, our clients depend on us for negotiating expertise. But I have a horror of being (or having Warburg agents be) the equivalent of that high pressure clothing salesperson who barges into the dressing room, looks you up and down in the outfit which you know makes you look like a sausage, or Al Capone, or both, and says with determination, “You look fabulous in that!”

That is to say, it’s not our job to talk people into liking things. That’s a decision they need to make for themselves. We can sometimes be helpful in pointing out a property’s features, although too much of that can be a hindrance rather than a help. I am a big believer, as either a seller’s or a buyer’s agent, in keeping the talk to a minimum during the first visit. Real estate, like most things, is in large measure about karma. I like to say to my agents “People usually don’t know in the first thirty seconds if they ARE going to buy something, but they always know immediately if they are NOT going to buy it.” Almost everyone knows if the feeling works for them from the minute they walk in the door.

So our work with buyers, first and foremost, is to help them listen to that inner voice. Then, as we refine criteria, we can actually zero in on the property which is right for them (another major early lesson for me: I didn’t have to like it! I wasn’t choosing it – they were). And then the facilitation begins. Once THEY have picked the property, it becomes OUR responsibility to make sure there are no major problems with it, and then that they actually get it. Here, as a negotiation advisor, I actually think it is OK to push. Years ago, a hedge fund manager to whom I was selling a property said to me, “Look, I am a salesman too. I also give the ‘Be Bold’ speech. That said,”  he told me, “if you give me the ‘Be Bold’ speech one more time I am going to kill you.” The next day we got a counter offer, he balked – even though he and I both knew the price was fair – and I gave him the “Be Bold” speech one more time. As agents, we don’t choose the property our buyers want, but once it is chosen we have to do everything we can to bring the deal home. THAT is our job.