Summer is almost here!

Happy June to everyone!

As you may know, summer is typically one of the busiest sales seasons of the year for residential real estate in New York, and things are very busy this year. Since the spring of 2009, when the marketplace ground to a halt, we have seen a doubling in the number of residential sales transactions, with more than twice as many apartments being sold this spring compared to spring 2009.

The resurgence of active buyers has also signaled a reduction in the median “days on market” before a property sells, although it is still takes an average of four to five months before a listed apartment actually closes. This is by no means the “irrationally exuberant“ market of 2004-2007 and while sales volume has returned, buyers are very discerning. The demand for any given property is driven by one dominant factor: PRICE!

Well priced apartments are attracting instant activity and occasionally multiple bids, while over-priced listings fail to generate real interest. When a newly listed apartment launches, all the serious, well informed buyers are able to very quickly weigh its attractiveness and appeal in comparison to other similarly priced listings. Readily available market data on the Internet continues to bring much needed transparency to the market, and no longer can a seller reasonably hope for an “uninformed” buyer to overpay for a property.

Looking forward, while no one has a crystal ball, it is fair to say that the latest market “bottom” is behind us. Manhattan apartment prices have generally risen between 4 %and 7% since the beginning of the year, and both buyers and sellers should seriously evaluate their options.

Enjoy your summer!

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

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

2010

And so it goes. Another year begins, and we look forward, (and backwards), to get our bearings and plan for the future.

2009 showed a marked improvement in sales activity late in the year as buyers who were on the fence finally began to pull the trigger. The best apartments at the best prices are moving again, particularly in the studio and one-bedroom market.

What does 2010 hold? The future is always uncertain, but here are some of my thoughts:

1. The Federal Reserve is currently slated to pare down their direct support for mortgages this spring, and it is likely that interest rates will rise from record lows over the course of the year.
2. Inventory is down from its' record levels in 2009. It is not a sellers' market, but it's not so strong a buyers' market that buyers can unilaterally dictate terms. Many buyers have unfortunately lost out on properties they really liked because they pushed too hard and the sellers went elsewhere.
   
3. Inflation is a growing concern across our entire economy, not just real estate.

Should you make any resolutions for 2010? That's a personal decision, but here are my personal real estate success resolutions:

1. Be reasonable. You are not going to find the lone rube who is willing to pay 2007 prices for your apartment, nor will you be able to drive down a seller to accept 50% off the asking price because you are paying cash.
2. Learn the market. Find out where prices are for properties that are in your realm of interest. That way you will be able to know what amount to bid to buy it, or what price to offer it for in the case of being a seller.
3. Get an excellent real estate attorney. This past year I have seen more deals fall through because of bad lawyers than ever before. You stand to lose a boatload of money if there should be a problem and you have inadequate representation. Get a recommendation and under no circumstances should you use a friend or relative (read "cheaper fee") whose business is not primarily that of New York real estate.
   

I wish all of you a healthy, happy and prosperous New Year!

Reach me at: michael.sussilleaux@gmail.com