Bureaucracy

The bane of modern day society.  Bureaucracy.

Throw common sense and logic out the window.  When you're mired in bureaucracy, there is little you can do.


So how does this pertain to real estate transactions?

First and foremost; real estate management companies are "the" poster child of bureaucracies.  Multi-dwelling condos and co-ops are almost always managed by one of these outside real estate management companies.  Among other things, they handle building expenses, collecting rents, common charges and/or maintenance fees, keep the books for the building and file paperwork with the city and other agencies.  They are also instrumental in the approval process for sales and rentals.  This sales/rental process is where the owner/seller/buyer/landlord/renter interacts with the management company directly.

Management companies generally do not share your concern for whether or not you have a roof over your head.  If you are missing page 37 of document XYZ, your purchase/rental application will most likely be put on hold and work stops.  If you're lucky, you're told of the problem.  It's just as likely that when you haven't heard back from them in two weeks and call for a status report that only then will you find out that it was shelved weeks ago.

Anecdotes like the one above are not exaggerations, nor are they uncommon.  Problems arise when clients refuse to accept that this can happen to them.  "After all, if I'm spending $2,000,000 on this condo they should understand that a $47 discrepancy on my credit report is not important!"    Well, yes you're right.  And no, you're wrong.  It's not common sense that rules the day, it's bureaucracy.  The person processing your paperwork is more than likely an overwhelmed minimum wage employee with absolutely no discretion whatsoever in interpreting the "Big Picture".  He or she has no concept or concern over "shades of gray".

So what is the answer?  The answer is to not put yourself in a situation (if possible) where your paperwork is incomplete or sloppily submitted.  Furthermore, you should allocate a sufficiently generous block of time (if possible) for the management company and/or board to review your paperwork.

This is classic example of why who you choose as your broker matters.  This is grunt work, but it's critical to the success of your transaction.  If your broker does the best job possible assembling your paperwork and couples it with polite, non-threatening communication with the management company, your chances of success will be greatly maximized.

Reach me at: michael.sussilleaux@gmail.com

"Full Ask"

Obtaining the full asking price, or "Full Ask", on a property is nice for the seller.  Psychologically it's "Winning" (Charlie Sheen pun intended)

But is it really wise to hold out for "Full Ask"?

Several years ago, when the real estate feeding frenzy was at it's peak, bidding wars were common and prices climbed every week.  Sellers puffed out their chests and bragged that they got $200,000 over asking price.  Interestingly, buyers also boasted that they "paid $200,000 over asking price, and I won!".  In some markets brokers even adopted the strategy of deliberately listing the property well below market value in anticipation of a bidding war driving it far beyond what it was theoretically worth.

This strategy often worked.  In that particular psychological climate buyer's fear of losing was so strong that they willingly overpaid just to keep their "competition" from winning.  Seemingly odd behavior, but a surprisingly "human" reaction.

Times have changed.  The market went through a dramatic swing when prices dropped drastically.  Interestingly, you would think that stressed-out buyers nervous about committing to paying such a huge premium to own property would jump at the chance to buy at a 20-30% discount, but no -- they did not.  They were scared and afraid.  Logically you may ask "Would you like to buy the exact same property that was priced at 'x dollars' six months ago for only 80% of 'x' now?" but the answer was almost always "No".

Where are we today?  It's neither a seller's nor a buyer's market.  Most properties are priced reasonably and most trades are reasonably close to asking price, but almost invariably there's some wiggle room.  You would be hard pressed to find someone today to pay full ask simply because they expect to negotiate.

As a seller you must consider this before you commit to an initial asking price.  If you think your apartment is worth $1,000,000 it would be far wiser to list it at $1,050,000 or $1,100,000 and negotiate with a buyer than to list it at one million and expect full ask.  The strategy may change over time, but that's the way it is now.

Summary: Markets change.  You must to adapt.to them accordingly.  Bucking the trend -- even if you think it makes sense -- is a recipe for failure.  You can still achieve the same goals, it's just the method that requires flexibility.

Reach me at: michael.sussilleaux@gmail.com

Investment Properties

Investment properties have always been popular in New York City, and there is even more interest in them now primarily due to global economic factors and very low interest rates.  Foreign investors in particular are taking advantage of currency fluctuations and the relative stability of New York real estate values as a hedge against uncertain conditions in their home countries.

Ok, so you're considering buying an investment property in New York, what should you be looking for?

The first thing to do is familiarize yourself with the various ownership options.  The three main choices are:

1. Owning a building outright
2. Owning a condominium apartment
3. Owning a cooperative apartment

There are also opportunities in commercial real estate, but that is a separate subject.  Of the three listed above, the least attractive and most constraining form of ownership is the cooperative, or "co-op".  In a co-op, you own shares of a corporation along with other owners, and your control over the property is limited; particularly regarding your right to rent out the property.

Condominiums and building ownership both give you much more latitude in what you do with the property and they're typically the best suited for investment purposes.

So what should you look for in a potential investment?

I recommend the following as a starting point:

• Location:  What is the neighborhood like now, and likely to be in the future?
• Appeal:  Will the property appeal to a wide variety or a unique niche of potential tenants?
• Rent:  What are the typical rents you can expect from a property?
• Income/Expenses: What are all the costs associated with ownership?
• Cap Rate:  What is the ratio of Net Operating Income to the price paid for a property?
• Appreciation:  What is the "upside" for the property over time?

Every investor is unique, and there is no substitute for market knowledge and good advice.  If you're considering investing in New York real estate, give me a call at (917) 647-1464.  Or shoot me an e-mail.  I look forward to hearing from you!

Reach me at: michael.sussilleaux@gmail.com

Why Do You Want to Rent in New York City?

I was going to write a treatise encompassing everything there is to know about renting in New York, but I quickly realized that the topic is way too large for one post.  Instead I want to start with the "why" of renting because it directly affects the best course of action for you to pursue to reach your goals.

Example 1: You live in another city, and you're transferred to NYC.  You have to start working here in 2 weeks.  Your company will put you up in a hotel for a maximum of one month -- but politically you don't want to overstay your welcome on their dime.

The "why" in this example is obvious, but what's important are the constraints that accompany the "why".  You have to find a place, and you have to find it quickly.  You're expected to be at the office, so you have to optimize your time spent looking at apartments.  You don't have a lot of lead time, so it's unlikely that you'll have the pick of the litter since the best apartments are often listed a minimum of one month prior to the earliest occupancy date.  You don't have much time, you have to get in as soon as possible.  You're most likely going to have to compromise in the interest of speed.  You also have to have all your paperwork in order and ready to go, since you will have act quickly to lock up a place once you find it.

Example 2:  You live with your parents in an upper-middle class suburb.  You just graduated college, and your first job is with a non-profit downtown.  It's time to strike out on your own and live the hipster life you've always dreamed of.

Again, the "why" is clear.  Nevertheless, there are some real problems to work through.  First, do you earn enough money to afford the apartment you want?  Landlords typically require 40 times the rent in annual base salary.  For a $2,000/month apartment, that's $80,000.  If you don't make that, you will most likely have to ask your parents to act as guarantors.  On the bright side, you don't "have" to move before midnight tonight, so you can be more particular in your search.  If you find a great place that's only available two months from now, it could still work for you since you have shelter (however inconvenient).

The point of these two examples is to illustrate that every situation is different, and everyone will have flexibility in some areas, and severe constraints in others.  It is important for you to realistically and honestly analyze your own financial situation, time frame and expectations before you hit the bricks.  The most successful renters are adaptable to the ever-changing rental market and they know exactly what they can, and cannot afford.

Conversely, the least successful would-be renters are prisoners of their own flawed idea of how things "should" work and refuse to accept evidence to the contrary.  If you're frustrated, still looking for that perfect place, and you've been through a number of "incompetent" brokers, it may be time to revisit your initial assumptions.

Reach me at: michael.sussilleaux@gmail.com

Deliberately uninformed, relentlessly so [a rant]

This is a post from "Seth's Blog", which I highly recommend to anyone in any industry.  Check it out at http://sethgodin.typepad.com.

"Many people in the United States purchase one or fewer books every year.

Many of those people have seen every single episode of American Idol. There is clearly a correlation here.

Access to knowledge, for the first time in history, is largely unimpeded for the middle class. Without effort or expense, it's possible to become informed if you choose. For less than your cable TV bill, you can buy and read an important book every week. Share the buying with six friends and it costs far less than coffee.

Or you can watch TV.

The thing is, watching TV has its benefits. It excuses you from the responsibility of having an informed opinion about things that matter. It gives you shallow opinions or false 'facts' that you can easily parrot to others that watch what you watch. It rarely unsettles our carefully self-induced calm and isolation from the world.

I got a note from someone the other day, in which she made it clear that she doesn't read non-fiction books or blogs related to her industry. And she seemed proud of this.

I was roped into an argument with someone who was sure that ear candling was a useful treatment. Had he read any medical articles on the topic? No. But he knew. Or said he did.

You see a lot of ostensibly smart people in airports, and it always surprises me how few of them use this downtime to actually become more informed. It's clearly a deliberate act--in our infoculture, it takes work not to expose yourself to interesting ideas, facts, news and points of view. Hal Varian at Google reports that the average person online spends seventy seconds a day reading online news. Ouch.

Not all books are correct or useful. Not all accepted science is correct. The conventional wisdom might just be wrong. But ignoring all of it because the truth is now fashionably situational and in the eye of the beholder is a lame alternative.

I know this rant is nothing new. In fact, people have been complaining about widespread willful ignorance since Brutus or Caesar or whoever invented the salad... the difference now is this: more people than ever are creators. More people than ever go to work to use their minds, not just their hands. And more people than ever have a platform to share their point of view. I think that raises the bar for our understanding of how the world works.

Let's assert for the moment that you get paid to create, manipulate or spread ideas. That you don't get paid to lift bricks or hammer steel. If you're in the idea business, what's going to improve your career, get you a better job, more respect or a happier day? Forgive me for suggesting (to those not curious enough to read this blog and others) that it might be reading blogs, books or even watching TED talks.

As for the deliberately uninformed, we can ignore them or we can reach out to them and hopefully start a pattern of people thinking for themselves..."

Reach me at: michael.sussilleaux@gmail.com

What's a "Walk-Through"?

What is a "walk-through", and why is it important?

A walk-through is a physical "inspection" of a property performed by the buyer just prior to the actual closing. Since it often takes months from the time that the buyer has last set foot in the property to the time of closing, a walk-though is an opportunity for the buyer to make sure that the property is in a condition consistent with when they last saw the property. It's a final opportunity just prior to closing to ensure that there is no egregious damage to the premises.

Note that the word "inspection" in the last paragraph is in quotes. Therein lies the rub.

Recently I had a walk-though where the buyer came in with a team of helpers and tested every appliance, the plumbing, all the electrical sockets, the windows, window coverings and inspected the walls, floors and ceilings for imperfections. Naturally this person wanted to make sure that she was getting everything in working order -- which is understandable. (By the way, everything was fine, and the closing went smoothly).

What isn't fine with the "fine toothed comb" approach is that in New York City, properties are generally sold "as-is". This means that if the chandelier didn't work when you signed the contract, there's no requirement for it to work now, just before you close on the property unless you specifically made contractual provisions for it to be fixed. The walk-through is not an engineering "inspection" to compile a punch list of things to be fixed by the seller. (In the special case of purchasing new construction, there really is a punch list, but not in the far more common resale of an existing apartment)

Had this woman found pinholes in the walls from picture hangers, faded paint or stains that were covered up by rugs, inoperative lighting fixtures, non-working air conditioners and almost anything else you can think of, she would most likely NOT be entitled to have the seller remedy these problems or compensate her in any way since the purchase is "as-is". This is a surefire way for there to be bad feelings and resentment at the closing table, and is most certainly not the way you want to begin life in your new home.

All this pain can be avoided. The time for this kind of detailed inspection is before the contract is signed, not after. Check the property out thoroughly before you sign on the dotted line! The walk-through is to verify that there is no unreasonable damage that wasn't there when the contract was signed and to ensure that there is a working smoke detector in the property. (The buyer must sign an affidavit that there is a working smoke detector at the closing, so I always make sure I call attention to it during my walk-throughs)

It is the responsibility of the real estate broker to educate their customers about what to expect from a walk-through. There's nothing "evil" about the sale being as-is, but it's important to know how you can meet all your expectations about what you're buying. Education makes all the difference.

Reach me at: michael.sussilleaux@gmail.com

Missing in Action

Mea Culpa.

It's been a long time since I've written a post. The reason is simply that I've been very busy with the business, and haven't allocated sufficient time to write.

So this is a placeholder. There's lots to talk about. I just have to do it.

Hang in there and as always, feel free to e-mail me if you have any questions. Thank you!

Reach me at: michael.sussilleaux@gmail.com

Price per Square Foot

Here's a quick lesson on "Price per square foot", (or ppsf). Price per square foot is a very effective means of pricing property, particularly in large multi-dwelling buildings. The other day I was explaining how to utilize ppsf data to a client of mine, and she said "Oh, it's just like pricing diamonds!", and she is correct.

One of the "4 C's" of pricing diamonds is "carat", or the physical size of the diamond. Small diamonds are obviously less expensive than larger ones, but as the diamond gets larger, the price increases ever faster.

For example, a 1/4 carat diamond of a given cut, color and clarity may sell for $200. A 1/2 carat diamond may sell for $500, a 1 carat for $1,300 and a 2 carat for $3,500! You can't simply add up the cost of four 1/2 carat diamonds to "equal" a single 2 carat diamond. The larger diamonds are simply much more valuable than the smaller ones.

The same pricing analogy is true of apartments. In a given location, for apartments of similar condition, the ppsf will vary considerably by size. A small studio apartment may sell for $700/sf, but a one bedroom in the same building may go for $800/sf and a two bedroom for $1,100/sf. Unfortunately for the buyer, the bigger apartment is not only more square feet to pay for, but each one of those square feet is more expensive! On the bright side, unlike diamonds, you can combine small apartments to make larger, more valuable ones. (But that's a topic for another post!)

Reach me at: michael.sussilleaux@gmail.com

Should I Sell Now?

The answer to the question "Should I sell now?" depends very much on where you will be moving after you sell.

Your answer will be very different depending on whether or not you're staying in the same area or relocating to a different real estate market.

There's a saying that helps answer this question for you; "All boats in the harbor rise and fall together with the tide". This simply means that in a given real estate market, when prices go up for one home, they go up for all homes and vice-versa.

Consider this: Is it better to sell in a rising or a falling market? If you will be buying in the same market after you sell, it's better to sell in a falling market. The reason is that you will be buying someone else's property at a price point that continues to drop in the declining market after you've sold your property and pulled your money safely off the table.

Conversely, if you sell in a rising market, you will be buying someone else's property at a higher price since it will continue to appreciate while your money is off the table after you've sold.

Naturally, if you are relocating you must consider the new market that you're moving to. It's an altogether different "harbor" in the boat analogy, and subject to different "tides".

This is only one factor to consider in the selling decision, but it's an important one. Please feel free to contact me if you have any questions about selling your property.

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

The Blog is Coming to Amazon's "Kindle" Platform

The blog is expanding! Amazon is trying to expand content for it's wireless reading tablet, "Kindle", so I decided to join their beta program and publish the blog on it.

I've received so much positive feedback from you on the blog, that I want to do everything I can to expand readership. I think that Terra Firma is somewhat unique in it's approach, and that there's something in it for everyone.

Real estate transactions are almost certainly the largest financial transactions that you will ever be a party to, and while there is a plethora of "how-to" fodder available, I've always felt that the vast majority of it was sorely lacking in practical advice, and more importantly, a thorough analysis of how all the relevant parties interact, what their strengths and weaknesses are, and most importantly of all; what their true motivations and agendas are. (Whew, that was one long sentence)

So whether you're a faithful reader, or a new visitor, I urge you to take a peak back at previous posts for a refresher, and stay tuned for even more juicy tidbits of insight. Keep sending me those e-mails, and I'll do my best to reach out to all of you.

Reach me at: michael.sussilleaux@gmail.com

Bottoms Up!

How do you determine when the real estate market in your area hits bottom? Or, for that matter, how do you tell when it hits the top of the market?

(The Million Dollar Question)
How do I accurately determine what the best time is for me to either buy or sell so that I get the very best deal possible?

Newspapers, magazines and television all report on the state of the real estate market, but there are two important limitations. First, they tend to deal with national data, which doesn't necessarily do you a lot of good. (Remember that real estate is a local phenomenon. If you didn't know that, or don't know why that's true, read this)

Second, sales statistics invariably report on the number of houses sold. On the face of it, it makes obvious and perfect sense, because what else can they report on? I am going to challenge this assumption, but first let's dig a little deeper in to this metric of "properties sold" and apply some common sense analysis.

The actual sale of a property is the last step of a long sales process. What are the components of this long process or "sales cycle"? (Specifically the time that transpires from the moment a sales agreement is reached to the actual closing and recording of the sale at the county clerk's office)

In my market, New York City, things probably work a bit differently than where you live simply because the overwhelming number of home sales represent condominiums and cooperative apartments and not stand alone houses. Condos and co-ops require lengthy submissions of personal and financial information followed by a review and approval process conducted by either the condo association or co-op board prior to the actual closing on the property.

Irrespective of the specific procedures applicable in your local market, most of the components of the sales cycle are the same. Typically, once an agreement is reached there is some form of down payment, an inspection, a mountain of paperwork, obtaining financing, submitting government filings, obtaining approvals, and finally scheduling a closing.

My experience is that the time from agreement on terms and conditions to closing is typically three to four months. At last! The transaction is complete.

Let's apply this three to four month time line to a hypothetical situation. You fall in love with a beautiful co-op apartment in the sweltering heat of late August and quickly reach an agreement with the seller of the property. The clock on the closing process starts ticking, and because from Thanksgiving through New Year's things slow to a crawl, the anticipated three to four months stretches to just over four, and you close the first week in January. Congratulations! You've just purchased a home in the first quarter of the next year!

Now let's get back to the media, and the sales figures they report to gauge where the market is. Where do they get the statistics? The answer is that they are either compiled by major real estate corporations or real estate data firms every quarter and published in "market reports". Your January sale will be bundled in the first quarter statistics that are released to the media in the beginning of April.

You may be thinking: "Whoa! Did he just say 'April'? I 'bought' that property in August the year before!"

And you would be correct.

Do you see the flaw in market news you get from the media? It's old. Very old.  Too old.

SUMMARY
The message is that it's important to understand that the data used to report the direction the real estate market is moving is at best several months old, and isn't necessarily reflective of what's happening now in your local market. If you were to quantitatively know where the market is today, you would have a serious advantage over everyone else.  

Many of the "best" brokers don't have the foggiest idea of how to collect and interpret the necessary data to determine where the market is now; and I mean "now" as in today.  If you want to learn more, let me know.  

Reach me at: michael.sussilleaux@gmail.com

Real Estate Myth Number 1: The Boutique Broker

Your luxury apartment or townhouse is genuinely spectacular. It's a multi-million dollar home, and when the time comes to sell it, you're not going to entrust the sale to just anyone. The broker who represents your property must be every bit as refined and pedigreed as your lovely home. This is clearly the milieu of the "Boutique Broker"

"Edwin Paddington Snodgrinckle" of "Snodgrinckle Elite Luxury Residences" is "the" most prestigious broker in the city -- or so you hear -- and fortunately for you he's been able to squeeze you in this Thursday so he can evaluate the suitability of your humble abode for inclusion in the Snodgrinckle stable of superior luxury homes.

Snodgrinckle arrives punctually, and nods casually at your tastefully decorated home. He remarks that it reminds him of the well appointed servant's quarters of the Rockefeller mansion; where he regularly attended black tie affairs when New York was "New York!".

Oh, it gets better. Old Edwin here has done $500,000,000 worth of business over his career and he conspiratorially -- "I really shouldn't tell you this, but ..." -- rattles off a gaggle of names from old New York Society whom he has represented.

Ask Mr. Snodgrinckle how he plans on marketing your property and he'll wax poetic about the thousands of buyers unique to his rolodex gathered over the course of his 45 years in the business. He'll also tell you that you'll get the best of both worlds; his premium service and the service of all the brokers in Manhattan since he distributes your listing to all the "big name" pedestrian firms.

Flushed with excitement from artfully spun tales of patrician hob-nobbing, and overwhelmed by his 45 years plus in the real estate business, you practically beg for the honor of having him represent your property.

Sounds like a dream come true to me, so what's the catch? Where is the myth?

1. Unfortunately for you the Boutique Firm has no real advertising and marketing budget. They can not hope to reach the number of qualified buyers that the largest firms do. Instead they play up their "expertise" in your type of luxury property as if this will somehow mitigate the fact that they can't and don't advertise extensively. All the alleged expertise in the world is completely worthless if buyers aren't exposed to your listing.
2. Their one page, out-of-date, homemade website; (if they even have a website); is virtually invisible to anyone searching for a property. It may appear on page 2,137 of a Google search, but who realistically looks past page 2 (at most) of the results? No buyer searching for a luxury property is ever going to find your listing on the Internet.
3. The only advertising you will likely get with a boutique firm is the occasional ad in the New York Times. Unfortunately the role of the Times as the "New York Real Estate Bible" has almost completely evaporated in recent years along with its precipitous decline in circulation. My listings typically attract over 10 times the number of visitors to my company website than I receive on the Times site! (Yes, the big firms advertise on the Times too -- we have the budget to advertise on many, many venues.)
   
4. While it (should) be true that Mr. Snodgrinckle will share the listing with other brokerage firms, the other firms will not advertise it on their multi-million dollar prominent websites, nor will they publish it in magazines, newspapers and international venues since it's not their listing. Since all the major firms share their listings, it begs the question why not invest your $500,000 commission with a firm that can actually promote your listing around the city, country and world, since all the one-man-bands like Snodgrinckle will still receive the listing information anyway?
5. Mr. Snodgrinckle almost certainly has a rolodex, but buyers at this level do not "belong" to one broker. If you're a player in New York real estate, you appear in many rolodexes. When your listing is disseminated among all the brokers in New York, you can be absolutely sure that Mr. Snodgrinckle, all the other "boutique brokers" and all the brokers from the big firms will be on the phone to their best buyers within seconds because each one of them will be competing to be the first to reach the big players and therefore share in the co-broke commission.
6. Today's buyer is younger, more educated and computer savvy. They do not read print ads. They use the Internet, and they search on their own. Having no public presence other than a newspaper ad borders on ludicrous. You would be doing yourself a egregious disservice by not doing all you can to reach these buyers.
7. Snodgrinckle's track record of success over 45 years is most likely just that: Snodgrinckle's success, not his seller's! If Snodgrinckle sells a $10,000,000 townhouse directly to someone on his rolodex, he collects $600,000. That's a tidy sum. But what if more buyers saw the property? Buyers not in Snodgrinckle's rolodex, but instead brought by a co-broker? Maybe the townhouse would have gone for $12,000,000. In this case Snodrinckle would "only" make $360,000 since he would be splitting the commission with a co-broker who brought the buyer to the deal. Can you see how it's in Snodgrinckle's best interest; and specifically not in your best interest; to keep the deal close to the vest?
   

This is just the tip of the "boutique brokerage" iceberg waiting below the surface to sink your ship. If you are considering the services of a "Mr. Snodgrinckle", please reach out to me so we can discuss it further. It simply makes no sense to pay such a significant sum of money in commission to someone who doesn't have the capablility of bringing you the best buyers so that you will receive the highest price for your property.

Reach me at: michael.sussilleaux@gmail.com

I Read the News Today Oh Boy!

Unless you live under a rock, you are undoubtedly cognizant of all the bad news of late. The first quarter 2009 Manhattan real estate sales statistics recently came out, and predictably the news was that sales are down. No surprise there.

What is surprising is that signed contracts are on the rise. Hmmm, "So what?" you may ask. "How does this affect me, and why should I care?"

If you were to "buy" or "sell" a property today, you would sign a contract of sale. This is really what the "sale" is. All the terms of the transaction are spelled out in the contract and the Buyer and the Seller both sign the document to acknowledge their agreement to the terms and conditions.

Can you move in to a property you just "bought" today by signing a contract? Heck no. You've got to "close" the deal. A closing is where the Buyer & Seller as well as a bunch of lawyers and other folks sit at the "closing table" and a myriad of documents are signed, fees paid, mortgages issued and monies exchanged. Oh, and at the end of it all, the Seller has his money and the Buyer has the keys.

The closing typically happens two to four months after the contract is signed. This creates a significant lag between when a property is "sold" and when the property "closes". The media reports on closed sales, not contracts signed, so for all intents and purposes, the media's perspective of the housing market is months behind. This lag is exacerbated by the fact that the reports come out quarterly, so if a deal "closes" in the beginning of the quarter, it won't be included in the quarterly statistics until almost three months later!

The news that contract signings are up validates my, and my colleague's "real-life" experiences that there is significantly more activity in the market than last year, and even the early part of 2009.

No one can say for certain that we have hit bottom, but the indication is that we are either there or very close since activity is on the rise. The sad thing is that Buyers who are waiting for the "official" bottom to hit, will only find out about it long after it has actually occurred. By then it may be too late.

You may want to re-read this fascinating article if you're a Buyer.

Reach me at: michael.sussilleaux@gmail.com

Get "Smart" About Mortgages

Real estate is all fun and games until you have to pay for it. That's where mortgages come in. Before you even go out and start looking at property, you should have a frank discussion with a good mortgage broker to determine what you can realistically afford for housing.

I am not an expert on mortgages, and am therefore not going to spew advice on the subject other than paraphrasing what I just said:

The first step in your quest to buy a new home is a phone call to a qualified mortgage broker to determine what your housing budget is and what your financing options are.

How do you find a great mortgage broker? Ask your friends. Ask your real estate agent. Call up banks. The only thing that you should be aware of is that when you call up a bank and speak with one of their mortgage people, that person deals solely with that bank's products. When you speak with an independent mortgage broker that person has access to a wide variety of banks, and can shop arouund for the best rate for your particular situation.

Warning: Shameless plug for a fellow blogger
I recommend that you check out a blog that, like mine, is a light-hearted, yet educational disquisition designed to inform, illuminate and entertain the buying public. It's written by Dale Siegel, CEO of Circle Mortgage Group, and is called "Diaries of a Mad Mortgage Broker". You can find it at http://www.dalesiegel.com.

Along with your real estate broker and your attorney, your mortgage broker rounds out your "team" of professionals who work together to help you find the best property at the best price and terms. 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

"e-Lies"

As professionals, real estate agents are not always perceived as being pillars of guilelessness, probity and honesty.

Unfortunately, there is good reason for this stereotype, although the majority of hard working brokers do their best to be honest and forthcoming.

Let's look at one of the most "stretched" assertions made by well meaning but ignorant, (and some neither well meaning nor ignorant) brokers...

"Our website gets 25,000,000,000 hits a week!"
"We have the second most viewed real estate website in the entire United States"
"Behind Google, Yahoo! and ebay, our website gets the most hits on the planet!"

What they're asserting is almost certainly false. Claims like this are made because buyers, sellers and renters are abandoning traditional print media in droves, and going online to transact their business. These brokers are trying to represent that they have a significant online presence.

Technology, professional web design and massive online marketing is very expensive, and none but the largest firms can realistically put forth a first class website that actually draws visitors and qualified customers to their content (i.e. your listing). It is simply too expensive for small and medium sized companies to create, maintain, and most importantly, continuously promote a first class website.

Your property will sell faster and for more money when more buyers are exposed to the property. If you don't know why this is true, you can review the reasons here. Since almost 80% of New York buyers begin their search on the Internet, it behooves you to put a professionally produced webpage of your property in front of those eyeballs.

This is really the big-time. I can't stress it enough. "Part 1" of the real estate business is now conducted on the Web in New York City. Don't be fooled by the fact that listings are shared among all the firms electronically. This is true, but it has nothing to do with your web exposure to the buyers themselves. (Exposure of your listing to the most qualified people is what I mean by "Part 1" of the real estate business. "Part 1" is everything that happens up until contact is made between a qualified buyer and the broker. "Part 2" is the actual sales process, and make no mistake; this is where the quality of the individual broker you use comes into play.)

So how do you separate the wheat from the chaff about website traffic claims?

1. Go to the website yourself and poke around. You don't need a lesson on what looks schlocky.
2. Carefully read the literature the broker gives you, if any. Web "hits" and "visitors" are two different things. One "visitor" can "hit" the website hundreds of times and it's still only one person.
   
3. Ask about international Web exposure and statistics. In New York, there are many buyers in other countries.

Summary:
Real estate today is most effectively promoted on the Web. Roughly 4 out of 5 qualified buyers begin their search on the Web, and during the buying process more than 90% of buyers use the web at some point in their search. As a seller you want to be on that Web, and you want to be in the most likely place those buyers will find you. If you want to find out more, let me know.

Reach me at: michael.sussilleaux@gmail.com