No Fee Listings (Caveat Emptor!)

No one in their right mind would pay thousands of dollars for something that they can just as easily attain for nothing.

In New York City the tenant, not the landlord, is normally responsible for paying the broker's commission. This is the Bizarro-World opposite of the rest of the country, where the landlord foots the broker fee for finding a suitable tenant. (The reason for this economic inversion in New York is simply that there are many, many potential tenants all vying for the limited resource of housing. The landlords don't pay the fee simply because they normally don't "have to")

The news is not all bad for the potential tenant. There is a whole other universe of rental apartments known as "no-fee" listings. The theory is that if a landlord advertises his own apartment directly to potential tenants without involving a real estate broker, his apartment will be rented very quickly since the new tenant won't be on the hook for thousands of dollars in commission to a third party broker.

Well that's the theory.

The problem is that this reasonable idea has been almost completely perverted by individuals of questionable moral and ethical character. These include landlords, tenants and yes, real estate brokers too.

A full treatment of the world of no-fees will have to wait, simply because there is too much to get in to in this limited space, but I will touch on a just a few of the highlights.

1. Bad landlords. Bad landlords have substandard apartments that are in abysmal shape. No one with the means not to would ever live in one of these holes. Unfortunately, there are many folks who don't have the means, and they are forced to rent these hovels. The landlord takes advantage of these people since they don't have the ability to upgrade. Result: Horrible apartments offered as "no-fee".

2. Bad tenants. Bad tenants can be a nightmare beyond belief. Since it's likely that you dear reader are not a landlord and are probably none too sympathetic to their troubles, this one may be lost on you, but consider this: Picture having a "house-guest" that wantonly destroys your home and never pays you a dime, all the while you are out thousands of dollars paying your own expenses plus fixing this Bozo's damage. Furthermore, suppose that the police and courts are sympathetic to this devil of a person, and seem to believe everything this liar says. Result: Never again! The honest landlord with a nice place will use a broker next time to pre-screen potential tenants.

3. Bad brokers. Bad brokers will advertise "no-fee" listings under the guise of "owner pays commission" apartments. When you meet with the broker there's bad news. The apartment was just rented that morning. "Don't worry" he calmly reassures you, "I've got an even better apartment available on the same block. There's a small fee with this one, but ..."

Like the proverbial dusty and forgotten Ferrari tucked away under a sheet in a barn somewhere, great no-fee apartments do exist. For price points under $2,000 there is a reasonable chance of successfully finding a nice apartment if you're willing to put in the time and effort to separate the wheat from the chaff. For more expensive apartments, your best bet is to try and negotiate fees and/or rent with the landlord and hope that rental demand is soft enough that you will receive at least some concessions.

Reach me at: michael.sussilleaux@gmail.com

Light at the End of the Tunnel

No, it’s not a train coming at us, it’s daylight!

My last post speculated that we may have hit the bottom of the market here in New York. That’s great news for buyers, but what about the sellers? Where does this leave them, and what can they do to maximize their situation?

First and foremost, proper pricing is paramount. Unrealistically priced apartments are shunned by serious buyers and the subsequent dribs and drabs of marginal price reductions leave sellers in a weak negotiating position as their “time on market” stretches into months, and the property takes on the perception of being damaged goods that no one wants.

Beyond that, and choosing a top notch broker who really knows the market, the rest should fall into place. This is a marketplace for serious buyers and sellers who are willing to act rationally and reach reasonable pricing compromises.

Unfortunately, many misguided and uninformed buyers are missing the boat. They still think it’s the market of six months ago where there was a plethora of excess inventory to choose from and the dearth of transactions meant that even egregious low-ball offers were being seriously considered. That market has clearly come to an end.

On the other hand, and just as detrimentally, some eager sellers are beginning to get ahead of themselves and are already thinking the market has rebounded to that of the fictitious “eternal escalator of unending price appreciation”. This is simply not the case. The recent increase in signed contracts has not cleared the table of excess inventory just yet.

As I laid out in my previous post, we’re likely at the flat spot at the bottom of the curve where prices have stopped declining, and are beginning to turn upwards.

Buyers with reasonable budgets and realistic expectations can now purchase a home with substantial room for upside appreciation and sellers can once again find buyers willing to purchase under reasonable terms.

History has proven over and over again that these fleeting moments of affordability are short-lived and it appears we are already seeing the beginning of the end of this window of opportunity. Act wisely!

Reach me at: michael.sussilleaux@gmail.com

When is the Perfect Time to Buy (or Sell)?

Time and timing. When it comes to real estate everyone wants to peer unerringly into the future, but our best laid plans are confounded by the fact that we are only privy to knowing with certainty what happened in the past.

Interestingly, though not surprisingly, buyers want to buy at yesteryear's low prices, and sellers want to sell at the historic high-water mark (or even higher!). These "decisions" are often made without the slightest regard for what's going on in the real world. The old adage of "a property is worth exactly what someone is willing to pay for it" is a tough customer and can't be ignored.

No build-up here. The answer to the question of when is the "best" time to pull the trigger is this: Make the best decision you can based on the facts available to you at the time and the circumstances of your own situation. In a nutshell, be realistic and be reasonable and you will be rewarded.

I'm writing this on August 3, 2009. This happens to be a great time for buyers. (If you're selling to buy, then relax, as you too will hopefully be a buyer soon)

Why is it a great time for buyers?

1. Prices are off an average of 10 to 20% or more from just a year ago. It's a genuine housing SALE.
2. Inventory is abundant. The law of supply & demand reaffirmed!
3. Prices have stabilized and deals are being done. (The volatility of the market has stabilized)
   
4. Interest rates are at record lows! This is the real "Act before midnight tonight" motivator. Interest rates shouldn't be low at all. The money supply is increasing, which leads to inflation, which leads to higher interest rates. It's only a matter of time before interest rates start their inexorable climb.
   

The wildcard in all this, and the most important factor of all, is your personal situation. Is your employment stable? Do you have money saved? ...etc. I can't help you with this part. This analysis is up to you; everyone's different.

Hey, I don't have a crystal ball, no one does, but if your situations is stable and you have the means, all the signs point towards great opportunity as a buyer.

Reach me at michael.sussilleaux@gmail.com