Buying a Pied-à-Terre

Are you considering buying a part-time residence, or “pied-à-terre”, in New York City?  New York is a fantastic place to do more than just “visit”, and owning your own place – without the hassle and expense of a hotel – may be just the right thing for you. 

There are many things to consider and it is important to understand all the factors that affect what, where and how you buy your pied-à-terre.  Some of the more important elements are:

1.  Location.  What neighborhoods best suit you?  Is transportation convenient?  How about restaurants, shopping, museums and the theater? 

2.  Ownership.  New York primarily offers condos, co-ops and private buildings as buying choices.  In most cases co-ops will not work for part-time residents.  You must understand the differences and the pros and cons of each choice.

3.  Financing.  At the time of this writing, mortgage rates are currently at record lows.  Lenders often have different requirements for part-time residents, particularly those who live overseas.

4.  Income/Expenses.  Are you planning to rent out your pied-à-terre?  Do you know what fees, taxes and expenses you will incur?

The list above is not comprehensive and each point above could easily be expanded to a separate blog post, but it is a start.  Because of all the details and the fact that you most likely aren’t intimately familiar with New York real estate, it is vital that you speak with a knowledgeable broker to walk you through the process and help you achieve all your goals.  I recommend that you call or e-mail me if you’re interested in finding out more.  I’m happy to help.  You can find my contact information here.

Reach me at: michael.sussilleaux@gmail.com

Overpricing

I'll need 18 of those $1,000,000 bills thank you very much.

A small townhouse of "quasi-historical significance" just came on the market in Brooklyn for $18,000,000. It's a small building. By suburban standards, it's minuscule. If this buildings' doppelganger were being sold in Buffalo, NY it might sell for $30,000 or so. Theoretically, you could by 600 of these in Buffalo for the same $18 million that this one in Brooklyn is listed for.

Does this mean that this $18,000,000 townhouse is overpriced?

Well, that's a tougher question than one may think. It really all depends on what someone is willing to pay for it. Comparable sales suggest that it is overpriced, but what is "quasi-historical significance" really worth? More importantly, if you are the seller of a "unique" property, how do you maximize your profit.

Consider the owner of this property. Perhaps a real estate broker came in and valued the townhouse at $4,000,000 based on comparable sales. Let's go wild and assume that ten brokers came in and valued it ranging from $3,000,000 to $5,000,000. Finally, the eleventh broker comes in and says that you can get $18,000,000 for the property. What do you do?

All things being equal, it seems the property is worth $4,000,000, but how can you possibly leave a potential windfall of $14,000,000 on the table? That's a very, very compelling reason to list the property in the stratosphere. Many of us buy lottery tickets, why shouldn't a rational human being try for the moon?

The problem is that if you go for the $18,000,000, and then reduce it to $15,000,000 and so on ... all the way down to $4,000,000 everyone will wait for it to go even lower because you'll have a white elephant that no one wants. You're facing quite a conundrum because the lure of the silly money is a tempting siren indeed. What's the answer?

The answer is this. If you are a seller and you are truly uncertain about the true value of your property because of extenuating circumstances such as "quasi-historical significance" your safest bet is to offer the Pollyanna broker the following: "I will let you list my property for $18,000,000 for 30 days. If you are correct, and this is the price point, everyone benefits. If you have misjudged the market and you are wrong, you are fired."

This protects you from brokers who are "buying the listing". Specifically, they simply want to get your listing whether or not the price is realistic. They do this to attract buyers to see the property who they then woo and guide them to other, more reasonably priced, listings. If they price your property ridiculously high, it is detrimental to them as well because frankly the buyers they're hoping to attract will be angry that they went on a wild goose chase for a clearly inferior property.

The moral:

The more unique and out of the ordinary your property is, the more important it is that you do your homework and try to get the most qualified sales team on your side.

Reach me at: michael.sussilleaux@gmail.com

Winds of Change

The market is shifting again. You'll read about it in the papers several months from now when all the current sales close, and the data is publicly available, but the shift is happening right now.

Buyers are buying.

Yes, the economy is still bad, and the job market is still suffering. Nevertheless, apartments are really moving again. Great properties under a million are actually becoming scarce. Every apartment that we've listed in the past month or so has had hundreds of web hits per day, and we're getting offers right from the start. On the flip side, we're struggling with inventory for our buyers because the best apartments are moving quickly.

The market is still a bit slower for larger apartments, but they're starting to move as well.

Fortunately for buyers, prices aren't rising dramatically (yet).

In previous posts, I've described how the media helps fuel the fire; exaggerating trends positively in "up" markets, and negatively in "down" markets. If the past is any indication, once the media gets wind of increasing sales activity, there will be tales of bidding wars and buyer frenzy again.

Now is the time to buy if you want to be in front of the herd.

Reach me at: michael.sussilleaux@gmail.com

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

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

Me, Myself & I

"I am the Platinum Club, Winner's Circle, Champion's Coven, Golden Halo, Diamond Award, Top Producer, Blazer of Excellence, Broker of the Century, Elite member of the top 1% of the top 5% in the Northeastern district of the top 7% of the entire United States of America! I'm amazing! Let me tell you even more about me! But enough about me, what do you think about me?"

Yes, there's no subject more dear to many broker's hearts than themselves.

In defense of these peacocks, many potential clients -- having no better criteria of comparison -- opt for the broker with the most impressive achievement "flair". So while we all hate listening to these conceited asses blowing their own horns ... it seems to work!

So what should you be lookng for when interviewing a broker? Is it polite to shoot them with a water pistol when they won't shut up? (Answer: No, it's not polite, but it's darned funny)

Generally speaking, the broker will have some prepared material that he or she will go through in their presentation. This is important for sure, but while you're listening I recommend that you try and pick up clues beyond the specific content of the presentation.

1. Does the broker convey the sense that he or she really knows what they're talking about? Communication -- in both directions -- is at the heart of this business. Maybe you're a "facts" person. Maybe you're a "feeling" person. Do you get the sense that the broker is comfortable speaking with you? More importantly, do you get the feeling that they would be equally comfortable speaking with someone who's not like you?
2. Is there a reasonable intelligence beyond those flapping gums? Can the broker go "off script" comfortably and cogently?
3. Ask them what differentiates them from their peers. If they are the "Universal Iridium Sales Challenge points leader for the Western Hemisphere", find out what differentiates them from all the other "Universal Iridium Sales Challenge points leaders of the Western Hemisphere"?
   

Beware the broker with 50 listings. 50 listings is not of itself a bad thing, but it raises several questions:

1. How did he or she get all those listings? Was it by promising the moon? Or was it by demonstrating success over and over again?
2. Who will physically attend to my needs? Mr. or Mrs. "Fifty Listings" is no doubt scouring the town for the 51st, and won't be able to serve cookies at your open house. Perhaps there is a team of dedicated professionals to support the load, but you won't know unless you ask.
3. Who will be doing the negotiating on your property? This is big money; your big money. You deserve to know.
   

Great brokers are successful in completing transactions, and the byproduct of this is that they have a large pool of potential references to shower them with accolades and approbations. Brokers who provide reference letters and the telephone numbers of past clients are generally worth considering since not only were they able to convince people to use their services, but they were ultimately successful with those people who in turn were happy enough with the service rendered to field questions from strangers in a positive and uplifting way.

The lesson here is that choosing a broker is not simply a popularity contest, but it is entering in to a partnership with an agent who represents you and your interests to the best of their ability. Choose wisely!

Reach me at: michael.sussilleaux@gmail.com

Wake Up!

Rise and shine buyers!

For the past seven years or so, buyers have been pretty much continually lamenting the high price of Manhattan real estate. Heck, I don't blame them. Year after year prices went in one direction; up, up, up.

The situation is quite different now, and I have exciting news: Prices are down, and it's a great time to buy!

So why aren't buyers buying?

There are two very legitimate reasons. First, some buyers aren't buying because their jobs are in very real danger of going away. Second, some buyers aren't moving forward because their cash reserves have diminished in value so much as to materially affect their ability to purchase. These are two very real problems, and they have a palpable effect on the buying decision. If you fall into one or both of these categories, I completely understand your reticence in moving forward.

What about the rest of the fully qualified buyers out there? Why are they on the fence, and should they act now or later?

I think that most people who are fully qualified to buy who aren't purchasing right now are waiting for the "bottom of the market". No one knows in advance when a "bottom" will actually occur, or how low it will be. By definition the "bottom" is only realized after it has occurred! There's no doubt whatsoever that the less you pay for a given property on a given date, the better off you are, but there are some very compelling reasons to suggest that now is the best time to move ahead with a purchase.

1. Interest rates are at record lows. There is normally an inverse relationship with real estate prices and interest rates. The lower the interest rate the higher the home prices, and vice versa; the higher the interest rate, the lower the home prices. This relationship exists because normally what people can afford to buy is based on their monthly payment. If they have to pay more for interest, they can afford less for the price of the home. We are in the midst of an anomaly where prices are low and interest rates are low. This can't last forever, and with inflation fears, it is very likely that interest rates will rise sharply in the near future.

2. There is no competition. Contrary to what many people would like to think, most people take great comfort in being part of the herd; doing what everyone else does, rather than acting decisively. When bidding wars were common, people lined up out the door to hurl their money at sellers all the while cursing the competition. You have your wish. The competition is gone. Prices are down. If you're the only buyer in town you name your own price. This dovetails in with reason number 3:

3. The bottom may not have yet been hit. That's right, prices may drop further -- I don't know that they won't -- but I don't know that they will either. As I pointed out above, by definition, there's no bottom until prices start to rise. What do you think will happen when the media reports that prices are on the rise and New York real estate is "back"? Do you think that you will be able to mosey into an empty open house and present a "take it or leave it" offer to the desperate seller? Do you think that you're the only one out there smart enough to ride this thing to the bottom, and then pluck up the cherry property at its nadir?

When the bottom has been declared and publicized by the media, the most likely scenario is a rapid return to normality for New York real estate, namely high prices that result from the "scarcity of resources" that has characterized this city for 200 years! It's an island, and people want to live here. Sellers whose property lost 30% or more of its value will be quick to embrace the upturn from the bottom, and price accordingly. Remember; sellers act in their own interest, and when all the buyers start knocking on their doors again, you'll be one of the herd again, and out of luck.

Here's the bottom line. If you buy now, you have an unprecedented selection of discounted inventory pretty much all to yourself. If you're not happy with the price, you can bid lower and still be taken seriously. (Just one year ago, if you didn't bid close to asking price or even above, you wouldn't even be considered -- see how quickly the worm can turn?) Buying 6 months from now for $50,000 less may seem like the thing to do, but if interest rates rise even a little bit, your $50,000 "savings" is negated; and there's absolutely no guarantee that it will be $50,000 lower 6 months from now to begin with!

I'm happy to answer all your questions and discuss the particulars of your situation. Beat the herd!

Reach me at: michael.sussilleaux@gmail.com

Views, Vistas and Cityscapes

Gazing down upon the city from an apartment high in the sky in New York City is a truly amazing experience. One can't help but marvel at the sheer magnitude of the city and of the multitude of people out there living separate yet connected lives working and playing in the sprawl below your urban aerie.

Or you could be facing a brick wall less than an arm's length beyond your sooty window pane.

Views matter. They directly affect how much a space is worth. Two similar apartments across the hall from each other in the same building can vary in price by hundreds of thousands of dollars if one of those apartments overlooks a river or Central Park, while the other apartment overlooks the walls of a neighboring building.

Equally important as the view itself is the notion of how much sunlight an apartment receives. People overwhelmingly favor southern exposures that are "light & bright" over plain old "dark" whatever direction that may be facing.

If you are in the hunt for an apartment, expect to pay a premium for a great view or a space "bathed in glorious sunlight". On the flip side, if you're a person who isn't concerned with a view or who would actually prefer something darker, you're in luck. Great spaces can be had on the cheap compared to comparable apartments in the light & bright category. (One word of caution: Don't lose sight of the fact that when it's your turn to sell the apartment down the road, you too will have to price it attractively compared to the sunnier competition)

Summary:
The amount of sunlight an apartment receives as well as the quality of the view have a direct and tangible effect on the price of an apartment. If you're buying, consider that a compromise in one or both of these criteria can save you a lot of money, but consider too that when you put it up for sale you will face the same "visionary" challenges that the current seller is facing.

Reach me at: michael.sussilleaux@gmail.com

Dark Side of the Moon

You can buy land on the moon for at little as $12.47 per acre. I'm serious. You can find a number of sites on the Internet willing to sell you real estate in "desirable" and "prime" locations on the moon. At these prices it's hard to resist. Apparently one also receives some sort of deed or other "official" paperwork commemorating your speculative extraterrestrial purchase.

Irrespective of the lack of an atmosphere and the specious legitimacy of selling parcels of Earth's closest celestial companion on the Internet, one may ask oneself why a 100 foot by 100 foot lot in Manhattan can sell for more than $100,000,000.00, yet the same sized lot can be snapped up to expand our embryonic lunar estate for a mere $2.86?

The answer is the oldest cliche in the book: location, location, location.

Real estate is by definition a local phenomenon. In New York City, "local" is measured in blocks, not miles. It can also be measured in stories. For example, in the same building, it's likely that the same apartment on a higher floor will be more expensive than the one on the floor below it, and less expensive than the identical apartment above it.

The current state of the economy and the recent mortgage debacle affect us all, and in that way there is a "National" component of your local real estate market, but beyond that the primary forces that affect real estate prices are in fact... local.

If you're a potential seller and you think your apartment is larger and nicer than an equivalent apartment on Park Avenue, and therefore worth more money, but your building is not on Park Avenue, think again. Conversely if you're a buyer and you've seen beautiful, large apartments in fringe locations, don't think that you'll get an apartment for the same price in a prime location. It doesn't matter if we're talking New York apartments, suburban homes, or rural farms, the same principle applies.

SUMMARY:
There are a multitude of things that appeal to people, and while location is only one of many, a great location is much more likely to appeal to the broadest demographic of potential buyers. Similarly, it can be a real challenge to sell an otherwise beautiful home in a bad location. Consider this carefully when buying, selling or renting!

Reach me at: michael.sussilleaux@gmail.com