A Method to the Madness: How to make a quick and informed decision when you find the RIGHT apartment.
The New York real estate market is improving rapidly as a result of low inventory, high demand and the availability of attractive financing terms. These factors have given steam to the market and have resulted in increasing values. This low inventory is creating some “madness” in the market. Only 8,529 units were on the market as of Dec 2012, or 18.2% less than the same time last year according to Streeteasy.com. Michael Vargas at Vanderbilt Appraisal asserts that is only 5 months of property supply. These statistics are creating more and more bidding wars, a far different situation than the same market just one year ago.
As a buyer you must be prepared to move quickly. My last blog entry, “The Ultimate Checklist for Buyers,” was designed to help you decide what apartment will work best for you. Here we will discuss how to quickly and assuredly pursue the right apartment once it has been identified.
In this market sellers are in the driver’s seat. They will only deal with buyers who are well prepared and well qualified. To win the race you must make an offer quickly and in as strong a manner as possible:
-Don’t be afraid to make a same day offer.
-State that you do not wish to be in a bidding war.
-An excellent way to stand out is to offer slightly above ask if your broker can justify the offer.
-Be transparent when making the offer.
-Have your broker give your financial breakdown with the offer.
-Prepare a short bio on you and your family.
-Be clear about your timeline and all conditions.
-Offer a quick closing.
To make the process less daunting, it is helpful to keep the following three things in mind:
1) Do your research so you know the values in the area. A good buyer’s broker will help you with this.
2) Make sure your financing is in place, with mortgage pre-approval and REBNY financial firm completed. It is important to demonstrate to the seller that you are financially stable.
3) Retain an attorney with New York City residential contract experience. A good attorney will facilitate a smooth transaction so you don’t lose out to a backup bidder.
Note: do not expect much negotiating on properties in this market. By doing your research and knowing your needs, you and your broker will be able to justify value.
To achieve a successful purchase, as a buyer you must first have a base knowledge of the marketplace. From there, you should find a broker to help you navigate and negotiate that successful purchase. Your broker should be able to garner information, disseminate data and provide an informed platform for you to make a decision.
However, though it is extremely important to work with a strong buyer’s broker you must also be aware of the right questions to ask to determine if a property is right for you. Questions can range from how the apartment lays out to the economics of the building- all of which should be on your “checklist” of items needed for a successful purchase.
Take a look at the standard questions and items you as a buyer should know in order to determine that the “right” property is truly the “RIGHT” property for you:
Real estate brokers have the reputation of being elusive.
With their buyers, with their sellers and generally with their clients.
A rogue economist might rationalize this behavior by saying that agents have an incentive to conduct themselves and their business in this manner. I say no! It is counterintuitive. I argue that agents have the incentive to be transparent, build a reputation of accessibility and be a conduit for free flowing information. In their bestselling book Freakonomics, Levitt and Dubner compare real estate agents to the Ku Klux Klan. A little excessive, but they certainly got my attention and made a point to the millions of readers who made this book a national bestseller! (Thanks for helping our reputation, Fellas).
What I don’t understand is why some real estate agents (in this day and age) still have the incentive to be elusive to one another. This behavior breeds contempt within the industry and within a company, and is toxic. This is why we are strong proponents of a team mentality and maintain a strong culture of transparency within our company. The power of sharing that leads to personal and professional growth is inspiring.
I’ve observed two schools of thought in the industry:
Old School and New School.
- Old School believes that information is power that should be safeguarded. New School knows that information is everywhere and easily accessible to all.
- Old School believes that protocol and hierarchy create strength. New School knows that a layer-less environment creates free flowing ideas which lead to growth.
- Old School believes that business-as-usual in a historically successful company is a formula for success. New School knows that change is a constant and a requirement for success.
- Old School believes that ideas and leads are owned and controlled. New School knows that the collaboration of ideas create growth which leads to innovation.
- Old School thrives on a culture of privacy. New School thrives on a culture of transparency.
I have discovered that New School and Old School philosophies are not defined by age, past success or failure. They are defined by vision, culture and common sense. They are a part of the DNA that makes up an individual and company at its CORE!
WE ARE OUT OF THE WOODS!
An important part of my job is identifying and forecasting trends. I am expected to know market trends of pricing, unit desirability, design appeal, buyers’ needs, and manage agents’ expectations. Our clients rely on our insight and foresight. Everybody knows what the historical data is. Nobody needs a report that shows old closed data. Our value is the interpretation of current data and how that may affect the future. Developers want to know where the market is going. Buyers want to know if the market has bottomed out. Sellers want to know if they should take the offer on the table. Agents want to know if there will be deals to be made.
To achieve this effectively, I need to stay very connected to all of the touch points that determine the market. How well I do this…effectively…defines my value. There are no secrets, just riddles. Here are a few of the pieces of the puzzle I absorb to make a determination:
I measure open house traffic.
I speak to agents everywhere to see what buyers are saying.
I speak to buyers.
I speak to sellers.
I speak with developers.
I communicate with bankers.
I track offer activity – How many and at what levels.
I speak to owners of companies.
I stay abreast of new developments on the horizon.
I read – Everything from blogs to books.
In short – I act like a sponge.
In February 2008, I stated that the market would possibly decline (in some segments) by as much as 40% off the high. I was criticized by some of my peers that I was being irresponsible to the sellers who had property on the market for sale. (We sold and closed on a $6 Million property that was previously asking $11 Million a month after). I contend that the speed and willingness of the markets acceptance of this correction stimulated the recovery we are now seeing.
Right now, I would boldly say that we are out of the woods in New York City. For this cycle. Open house traffic is robust, rates are low, contract signings are on the rise, and there seems to be a shortage of inventory of quality homes. Consumer confidence is also higher than it has been for over two years. Does this mean we can expect prices to appreciate at the alarming rate they did over the previous decade?
Yesterday’s article in The New York Times was a reaffirmation of something people have been saying for years. It is truly perplexing to me that this measure of quantifying property value is still quoted and misquoted on a daily basis and has become the benchmark amongst “professionals” in the appraisal industry. Some “professionals” have actually made a profession out of doing this.
When the first report of this type came out 15 years ago, I contended that the measurement of a home is one of the most misleading ways to quantify the value of it. I say this as a broker who has walked through thousands of homes with buyers after seeing the things that make a difference to them (not as an appraiser). Clearly everyone wants a larger apartment, but there are things more important in a Buyer’s mind:
The bedroom count
The volume of the space
And yes…the “feeling” of the space!
This hasn’t stopped some appraisers (turned analysts, turned investors) from continuing to use size as the determining factor in value.
(This is why the CORE Realtime Report doesn’t include square feet as a barometer of value).
Perhaps it is our need as an industry (or the desire of the media) to assimilate Real Estate to Wall Street.
But the two are fundamentally different.
Narrow your focus
Because selling and buying is more effective when you have a specific goal in mind.
If you’re a buyer
- set specific parameters
If you’re a seller
- define realistic goals
If you’re a broker
- be an expert
It’s impossible to be effective when you’re all over the place.
…and the weather is cold.
We brokers have a saying:
“If you’re out with a buyer in the snow, then you know they are for real”
Real estate is seasonal.
So take advantage of that if you’re a buyer!
Look at property when no one else is.
Buy that penthouse with outdoor space – in the winter – and buy a summer home – in December.
You’re more likely to get a deal when there’s less activity on a property!
The more we peel the layers off an onion, the more it seems to stink (and make us cry).
And the less it looks like an onion!
What do we expect to find at the CORE?
A nugget? A pearl? Or are we looking for an excuse?
As a buyer, you start out with a clear idea of what you want. You search, search, search… and search some more. You may find some places that are just “fine” and some that are just not!
If you’re lucky enough to find what you’re dreaming of within your price range (and you will know it when you see it), just BUY it!
Don’t question yourself. No second guesses.
Have your agent negotiate the best deal for you and take the plunge!
I’ve met more people who have regretted NOT buying their dream home than people who regretted buying their nightmare apartment.
Part of being a successful agent is having the ability to get back on the horse quickly!
This business, more than most, is filled with disappointment and rejection.
I think that’s why a large number of the industry’s successful agents come from a creative background – you can work on something for hours and have nothing to show for it at the end of the day.
We’ve all worked with “that” buyer. You know, the one you work with for months, the one you show 100 properties, sending them every listing in their price range, only to have them buy something without you at an open house on a Sunday.
Get back on the horse. Don’t look back. Move on to your next buyer.
We’ve all worked for “that” seller. You know, the one you hold open houses every weekend for, the one you are perfect for, working tirelessly to accommodate every appointment, only to have them drastically reduce the price, give the listing to another agent and have them sell it a week after your agreement expires.
Get back on that horse. Don’t look back. Move on to your next listing.
There is no agent who bats 1000. The sooner you realize this, and accept it, the happier you will be – and more successful you will become.
Almost every seller I have ever met believes that their home is valued above what the market will bear. Don’t be one of “those” sellers. This will only hurt your chances of finding the right buyer who will pay top dollar for your home. When you overprice a property, it can have an adverse effect on the marketing effort by alienating buyers, and discouraging brokers from showing it.
You probably feel your home is worth more because you have lived in it and are aware of all its attributes. Remember this – a future buyer won’t get to know these things as intimately as you until they live there. You need to take an objective view.
If your concern is underselling – make sure you have an agent on your team who is doing all the right things to market your home, and the market will dictate your home’s value.
My advice to you, BEFORE you list your property, is to get educated:
1.) Have your broker give you a comparative analysis of homes recently sold, in contract and currently on the market.
2.) Take 2 hours to go and see what the competition is.
3.) Ask your broker to bring in a few more agents to get their opinion on the value of your home.