The Impact of Design with Benjamin Noriega Ortiz

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Enlisting an interior designer to help with your home search makes sense on multiple levels, according to well-known NYC designer Benjamin Noriega Ortiz.

Ortiz said he’s accompanied longtime repeat clients and their realtors on countless showings over the years, but homebuyers that are thinking of hiring a designer for an upcoming purchase would be wise to utilize the search itself as a way to interview prospective designers.

Literary agent and lifelong New Yorker David Vigliano is in the midst of searching for his next New York City Apartment. He’s hired Ortiz in the past, most notably to decorate his Park Avenue property, so he thinks it made complete sense to have Ortiz’ watchful eye during showings.

“He’s able to point things out that I might not consider,” Vigliano said of Ortiz. “As a buyer you have a real emotional reaction to a space. It’s easy to fall in love with some aspect of it and get carried away by that.”

Anyone can look at a designer’s work in a magazine or through pictures online, but Ortiz said that photos are not necessarily the ultimate test and shouldn’t always be the deciding factor when determining who to hire. He said it’s just as important to have chemistry, a connection, and the ability to communicate and get along with your designer.

“You have to remember that you have to deal with the designer very intimately,” he said. “They are going to ask questions like ‘what’s in your night table drawer?’ If you’re not comfortable with a designer, they’re not for you.”

Ortiz helped Debbie and Mitchell Rechler decorate four rental properties as well as a home on Long Island and most recently, their Manhattan apartment.

Debbie Rechler said when she first met Ortiz, he wanted to know about all of her family’s habits – their eating habits, when and where they watch television, where they hung their coats. But now, after collaborating so many times, she said that Ortiz can easily extract what he needs from her and her husband to create a look and a feel that makes their family feel at home.

“It’s like being with a really close friend that knows how you live,” Rechler said. “He gets in our head. He can take things out of my brain and then he can implement it.”

Consider looking at the same place three times with three different designers, Ortiz said. Without giving away all of their secrets, a lot of designers would likely do that for free, considering it an initial consultation.

A lot of brokers might frown upon investing the extra time showing properties to clients and to their interior designers, but Jeff Adler and Marie Espinal of the Espinal Adler team at Douglas Elliman said they would fully endorse an arrangement like that because ultimately, it could help everyone.

“Design is so crucial in real estate,” according to Espinal. “A designer can really lay the groundwork for a vision. Sometimes they can tell a story in a way that a person can’t do on their own.”

“If the designer has a bad feeling about an apartment, we want to know about it,” Adler said.

Ortiz knows some of his repeat clients so well and has earned their trust enough that they’ll ask him to preview apartments with a realtor so he can narrow their search before they even step foot in an apartment. Sometimes, he can immediately dismiss certain spaces. For example, he can tell the client that a unit faces south, and they’ll need blackout shades; he’ll know if a new building is set to go up across the street and will soon block their amazing views; he’ll know if their custom furniture will fit or make sense in a particular space; and he can rule out apartments that don’t have enough flat walls to hang paintings for his clients that are collectors.

“I’ll tell them, you don’t live like this. This is a mistake.” But, Ortiz said, he can provide specific feedback that could actually make the real estate broker’s job easier. “I’ll go to two or three or four apartments with the realtor, and then I’ll say, ‘okay, you can show this one.’ Then the client comes in and says, okay [the search] is done.”

 

Selling Your Property (Design vs Staging)

Ortiz’ designs tend to be very personal. A client might show him a painting and ask him to convey the feeling of that painting throughout their living space. Always prioritizing functionality, he uses paint colors, artwork, furniture, shapes, and lighting to create the concept his client is looking for. Ortiz said he almost always includes the color green somewhere and you’ll almost always see a circle of some kind incorporated into the design. No matter the outcome, and no matter what he thinks about the look he’s created, only the client can determine if he was successful.

“If the client says it’s good, it’s good, because it’s their place.”

It’s a designer’s job to appeal to an individual’s or a couple’s very specific set of tastes. They want to love the space they live in. But when someone is selling their property, appealing to a much larger audience is the obvious priority. Even though interior design and staging are two completely different things, Ortiz said that good staging is “really a work of art.” He regularly sees brilliant staging in New York City where a good stager can properly convey scale (so people know that their furniture will fit) and the stager can use a non-threatening pallet to make a space look beautiful.

The good news for property sellers, according to Ortiz, it doesn’t take much to make a very personal space much less personal. “Sometimes all you need to do is change the paint and immediately it becomes less personal.”

The Impact Design Has on the Way We Feel

New York City moves fast. Its residents are always on the run and so many of them have demanding high-stress jobs. Like most interior designers, Ortiz said a person’s living space can have an amazingly positive impact on their personal well-being.  Spending time thinking about the environment you live in is “crucial” and as soon as you walk into your living space, you should be able to catch your breath and it should feel like home.

“You have to be able to wake up and feel happy,” Ortiz said. “And that feeling can guide you through your day… [and] through your life.”

Ortiz said it’s entirely possible to create those feelings through interior design no matter where you live, whether it’s a 5,000 square foot home or a tiny studio apartment, your living space should also be diverse and accommodating. “Sometimes we want to feel active… Feel sleepy… Feel fun,” he said. “In a house or an apartment, you can do all of that.”

Marie Espinal, Benjamin Noriega Ortiz, Jeff Adler

The Psychology of your Home

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Every day, all day, we help people buy and sell real estate. So naturally it’s easy to get hypnotized into commoditizing properties and to think of them as nothing more than square footage or a bedroom count. We could all use a reminder that the space we live in is so much more than just space.

After members of our team sat with Interior Designer Benjamin Noriega Ortiz, we had a long, in-depth conversation about the impact that our living space has on our personal well-being. Jeff was only half-joking when he said an apartment could adequately function as a therapist. But, is it really a stretch to assume that science might actually support that hypothesis? We seriously doubt you could find any mental health professional who’d argue that someone’s environment has no impact on their emotional state.

After extensive research, we found dozens, if not hundreds, of articles, books, and scientific studies that draw a line between our living space and our mental well-being. We found studies that were conducted here in the United States, in Europe, China, India, Australia, and just about every corner of the globe. Some of the studies focused specifically on architecture, size of space and quality of construction, while others put an emphasis more on comfort, colors and other aesthetically pleasing elements.

With almost no exception, whether it was a blogger, an interior designer, a real estate agent, a doctor or a scientist, there is a consensus: Where we live affects the way we feel.

The conversation we had after Benjamin left our office was pretty amazing, and it made sense to think about real estate in such a personal way. Our homes are our physical and emotional fortresses. They should always be our safe place, but they also have the potential to be our happy place.

Our Homes are a lot like Yours

We love it when our conversations offer clear and obvious perspective. We can only do our job exceptionally when real conversations and real-life experiences provide that type of outlook and it becomes a part of our team’s collective mindset.

The talk we had about our living space provided the most amazing perspective. We thought about how important our own personal living space is to us; We thought about all the time and energy we’ve spent on the smallest details that transformed our own houses into our homes, and we thought about the way we feel when we’re at home.

Just a few weeks ago, Jeff was over-the-top excited about a new dining room table he ordered. On his computer screen, he showed it to the team from every possible angle. While he knew exactly how it would look in his apartment, it could have been the way it felt or the way it looked. But more likely, Jeff was envisioning the conversations and laughs he would share with friends that will gather around it for years to come.

We all have things that do nothing more than occupy our precious living space – things that serve no real purpose and offer nothing to connect with on an emotional level. But everyone in the office could tell by the look on Jeff’s face, that this table was going to make his happy place even happier.

This week Marie described chasing her new beagle puppies for several laps like a NASCAR car driver on a track that started in her kitchen and looped through her dining room and living room before zipping past the starting line somewhere near the dishwasher. When Marie suddenly reversed her course, she caught the puppies off-guard and their momentum made them slide across the kitchen floor and caused a doggy pileup at Marie’s feet that was gentler and happier than a wreck at Daytona. Marie was genuinely, laugh-out-loud happy in her home. And that’s how it should be for everyone.

Our homes play host to so many of our memories, and our friends and family members, and our alone time, and Sunday morning breakfasts, and birthdays and holidays, and children and pets, and home offices and inspiring views. Our homes are where we rest and recover and relax. It’s where we think quietly, away from the distractions of the outside world.

We have so much control over what our living space is, how it looks, and what it ultimately becomes. We control the way we arrange it, the colors we paint it, and the way we accessorize it. We even control the sounds and the smells that glide through and blend into the unseen air that we share the space with.

So much goes into turning your house into a home. But the very first step in making the perfect home is finding the perfect home. At every property showing, and during every phone conversation and every email exchange, it’s all about maintaining the proper perspective. We can never forget just how unique and personal your home will become to you. Finding your home is a huge responsibility; one that we’re honored you’ve entrusted us with.

At the Core: Espinal Adler Team Takes “Full-Service” to a Whole New Level

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After eclipsing $100 Million in sales last year, the Douglas Elliman team led by Marie Espinal and Jeff Adler announced their relaunch as the Espinal Adler Team in January 2019.

The veteran duo credits the team’s success to its holistic and hands-on approach with its clients, resulting in consecutive year-over-year growth for a decade by toppling the impressive $100 Million annual sales benchmark.

“I think it’s a testament to the things that we’re doing right, and all the while without compromising the way we service our clients or how we want to run our business,” Espinal said. “We want to advise our clients the way that patients are advised by their doctors.”

That consistent, high-level of service allowed the team to stay focused and thrive in a year that volume was down for a lot of NYC realtors, according to Adler, who prioritized cultivating long-term relationships over chasing the immediate sale.

“Even with all the volatility in this industry and this market, we have consistently grown since we’ve partnered,” he said. “Last year, everybody was down and freaking out. But we were optimistic. Because the way we do business is what the market is shifting to.”

The Espinal Adler team is being built specifically with the client experience in mind. It already had its own Marketing Director, a powerhouse of multi-lingual agents and expert market analysts. But this month, the team took an unprecedented step in adding 15-year mortgage-industry veteran Matthew Jablonski to their roster. Jablonski will serve the team’s clients in an advisory role, completely independent from any bank or mortgage lender.

Jablonski will be tasked with having his finger on the pulse of a constantly evolving mortgage industry, identifying lenders who offer the most competitive rates with the most efficient process, all in an effort to spare the team’s clients from the time-consuming information gathering process. “Our clients should rest assured that we’re in constant pursuit of information that will help them secure the best available mortgage terms,” Adler said.

Jablonski will prepare clients for the mortgage application process and be available to conference with a buyer’s loan officer or mortgage broker to ensure all the right questions are asked and answered. He’s also a trained solutions expert, or as Espinal phrased it, “a thought partner” in the event there are any roadblocks during someone’s mortgage application process. “We want our buyers to get the best possible loan for their needs, and this will help them achieve that,” Adler said.

For sellers, Jablonski will carefully vet pre-approvals when offers are made. He’ll review appraisal reports if a listing property under-appraises and offer alternatives to unnecessarily lowering a sales price.

Espinal said she and her team have worked with Jablonski for over a decade during stops he had at Chase, Mortgage Master and most recently Citizens Bank. His addition to the team will change the homebuying process for clients working through the Espinal Adler Team. A real estate broker is there for their client at every step of the negotiation, both Espinal and Adler pointed out. But, for the most part, a buyer is on their own when it comes to securing funds for the transaction.

“This was the one missing component,” Espinal said. “With the inclusion of a mortgage advocator, it really does become a full suite of services. We think it’s going to make a monumental difference in how a client experiences real estate through us.”

“It’s unparalleled,” Adler said. “How many other real estate teams have their own mortgage specialist?”

Many real estate agents have a decent understanding of mortgage finance, especially in New York City, Jablonski said, but getting to the closing table can be like navigating through a minefield of potential pitfalls. With 15 years and more than 1,500 mortgage transactions under his belt, Jablonski said his familiarity with the process, his understanding of mortgage guidelines and his ability to think like a mortgage underwriter will undoubtedly enhance the customer experience, and just as importantly, Espinal Adler clients will ultimately save money.

“I was in the mortgage business for a long time, but I never crossed paths with anyone that performed the role that I’m taking with this team,” Jablonski said. “It’s new and it’s exciting and it makes all the sense in the world.”

In addition to Espinal and Adler, and now Jablonski, the team includes Marketing Director Cortnie Schultz, and salespeople Joseph Chaplin, Ya (Amy) Wang, Jessica Escobar and Jennings Lee Culver.

 

Ask the Experts: Market Dynamics with Jonathan Miller

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Jonathan Miller’s Market Outlook

The number of units sold in Manhattan in 2018 was down by more than 14 percent compared to the previous year. The brokerage industry tends to be very linear in its perception of the market, so many believe when the market is rising, it will rise forever. And, in-turn, when the market falls, it will fall forever. That approach can lead to overreaction.

The 10-year Challenge (2009 vs. 2019)

Some analysts are even comparing the current cycle to the last downturn and the housing bubble in 2009, but Miller outlined quite a few differences between then and now.

In 2009, the average discount from listing was 10.2%. In 2018 the discount was 5.2%. In ’09, Miller said sellers were anchored to the “pre-Lehman, pre-financial crisis asking prices” and had to travel farther on price to meet a buyer. (Miller measures listing discount by the percent difference between the contract price and the price that the property was listed for sale at the time of contract – not when it was first listed). The most recent asking price is “really the moment the property entered the market,” he said.

Miller said there are more buyers today compared to 2009, but those buyers are “very jaded about what value is.” Meanwhile, sellers are anchored to another market completely, he said.

The change in tax laws in 2018 and a several-month stretch that saw mortgage rates rise before recently dropping close to previous levels had both buyers and sellers re-calibrating what value is. That process can take time.

“If a seller overprices a listing, it takes them up to 2 years to de-anchor from what their price was without thinking that they left money on the table,” Miller said. “The disconnect between buyers and sellers is measured by lower sales volume.”

Starter Segment vs. High-End Luxury

For the last two years, Miller has said that the NYC market is softer at the top and tighter as you move lower in price.

Overall inventory is up by about 17%, with a significant amount of supply coming from the studio and 1-bedroom market. Studio inventory is up 21% percent.

“The pace of the starter market is still the fastest of all segments,” Miller said. “It’s just not as detached as it was because now you have more supply.”

Interest Rates and Their Impact

Typically, rates rise when the economy is strong. The low rates we’re seeing today understate the strength of the current economy, according to Miller. “That’s the disconnect.” In the long run, interest rates do not impact price trends. Mortgage rates have trended lower for three decades, Miller said, but housing prices have fluctuated up and down during that same lengthy stretch.

Mortgage rates weren’t wildly different in ’09 compared to today. In a recent report, Miller stated that an adjustable rate mortgage rate averaged 4.38% in 2009 and was at 3.98% using the same metrics in 2018.

Miller said that real estate investors should stop trying to perfectly time the market (both with rate and supply vs. demand). Perfect timing is a concept that was born out of the housing bubble, he said, when investors viewed housing as a highly liquid stock, instead of in its proper context. “(Real estate) is more of a long-term asset.”

 In-Depth Look at the State of Appraisals

“There was nothing learned from the bad behavior of a decade ago,” Miller said, reminding himself of a Mark Twain quote. “History doesn’t repeat itself, but sometimes it rhymes,” Jonathan Miller recited. Miller, President and CEO of real estate appraisal and consulting firm Miller Samuel Inc., said federal regulators are acting irresponsibly in their effort to reduce and perhaps even eliminate the need for an appraisal as part of an overall effort to erase “friction points” that slow-down the mortgage application process.

Miller said the regulators were more concerned with collecting fees than they were with protecting the American consumer. He likened the subtle de-regulation to the housing bubble of a decade ago, pointing out that regulators were getting paid by the failing investment banks they were rating back then. Now, he said, regulators and both Fannie Mae and Freddie Mac are getting paid whenever loan volume passes through those agencies. (Fannie Mae and Freddie Mac are Government sponsored enterprises that purchase mortgages from banks and mortgage companies in an effort to create liquidity so that lenders have the capacity to lend to more homebuyers).

The Office of the Comptroller of the Currency (OCC), The Board of Governors for the Federal Reserve System, and the Federal Deposit Insurance Corporation (FDIC) proposed a rule to amend the agencies regulations requiring appraisals for certain real estate related transactions. The proposed rule would increase the threshold level at, or below which appraisals would not be required for residential real estate-related transactions from $250,000 to $400,000.

In response to our request for comment, spokespeople for the FDIC, the OCC, and The Federal Reserve said they do not comment on proposed rules during the rulemaking process.

Mortgage volume has trended lower despite rates falling steadily since the housing bubble, because lenders don’t want to take on risk, Miller said. “They’re in the fetal position. Banks are afraid of their own shadow.”

The tremendous amount of regulation implemented since Dodd Frank has led to mortgage lenders filling Fannie and Freddie’s portfolios with low-risk “pristine” mortgage bundles. But with rates so low, margins are so compressed, regulators need to stimulate volume to make money, according to Miller. “I think (Fannie and Freddie) are emboldened to take more risk.”

The push for fewer mandatory appraisals isn’t the only thing that has hurt the appraisal industry since the Dodd Frank Act was passed in 2010. The evolution of the mortgage industry’s use of the Appraisal Management Company (AMC) has led to a collapse in quality of appraisals ordered by banks, Miller said. He described the AMC as an institutional middle man that takes more than 50 cents on the dollar away from the professional appraisers who do the actual work.

“It’s like a Hollywood actor paying their agent 60% instead of 10%,” Miller said. “The mortgage industry is trying to widgetize the appraiser.”

The AMC is supposed to act as a communication barrier between the appraiser and the loan officer or mortgage broker, to thwart undue pressure to bring appraised values in at specific numbers. But according to Miller, the AMCs are under the same types of pressure that an individual appraiser might face. Some AMCs receive hundreds of thousands of dollars every month by way of appraisal orders placed by big banks. At least at the sales level, the banks apply pressure to the AMC to not “kill deals,” said Miller, who has testified in several class action lawsuits against AMCs.

In many instances, Miller and his firm were hired to do sample reviews of appraisals that came through AMCs. Often, the AMC would utilize appraisers in the market that would always “hit the number,” Miller said. A lot of those appraisers were ignoring valid comps, sometimes from directly across the street that were virtually the same as the subject property. “The AMC encouraged it because they were getting the work,” he said.

Appraisers are pushing back and there are already signs that AMCs were beginning to crumble, Miller said. Quality appraisers are turning away bank work when they know the order is coming in through an AMC because they’re not happy working for less than they deserve and because they’ve been reduced to “form-fillers,” Miller said.

 

 

Ask the Experts: Tech Pioneer – Noah Rosenblatt

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Hoping to gain ground on its massive competitor Streeteasy, Urban Digs is improving its platform with input the tech company gleaned from a few of the top realtors in New York City.

Noah Rosenblatt, founder and CEO at Urbandigs, fully recognizes the force that is Streeteasy, and he admits that it’s “still the place to go” when consumers are looking for real estate in New York City. But, he said, the behemoth property search engine doesn’t offer the best experience for the buyer, the seller or the agent.

“I’ve spoken to a lot of consumers,” Rosenblatt said. “Everyone is saying the same thing. It’s completely consensus now, StreetEasy has shortcomings.”

The selling of leads and the overabundance of expired or inaccurate data is at the root of that disillusion, according to Rosenblatt. He said UrbanDigs is offering its clientele exceptional tools and a more efficient overall search experience, and they will never allow the “re-routing” of inquiries and leads, a hot-button topic throughout the real estate community.

“I’m very philosophically against that whole thing,” he said. “I think that a listing page should belong to the exclusive listing agent who was exclusively hired to promote that listing.”

Pleasing the realtor is paramount to the future success of UrbanDigs. The company has spent two years gathering suggestions from any of the 10’s of thousands realtors at a few large firms the tech company has enterprise accounts with. But most recently, they’ve handpicked a dozen or so of the top agents and real estate teams in the city. The best agents most specific requests repeatedly overlap and converge with one another, Rosenblatt said, adding that 80-90% of the most-common suggestions would be implemented during the next 3-4 months.

Douglas Elliman’s Espinal/Adler team is one of the groups UrbanDigs works closely with in their effort to refine its platform. Espinal/Adler partner Marie Espinal said the implementation of realtor-side wants and needs would undoubtedly improve the consumer experience simultaneously, especially the time-saving efficiencies built into the platform. UrbanDigs automated menial realtor tasks like registering for an open house, designed to free-up an agent’s time.

“It’s not just about our time,” Espinal said. “It’s about our client’s time. Their time is valuable too.”

Espinal isn’t necessarily opposed to StreetEasy’s approach to monetizing its site through the sale of leads. In fact, she pointed out that most successful brokers needed to incorporate the search engine’s premier agent strategy to stay competitive. She and partner Jeff Adler said consumers can become frustrated or confused when they think they’ve phoned a specific property’s listing agent only to realize they’ve reached a realtor that isn’t connected to that property at all.

“We want our buyers to know about that,” Adler said. “And we want them to understand the differences in the user experience for each platform.”

StreetEasy is still a phenomenal tool, Espinal said, but the re-routing of leads has degraded the site’s overall transparency.

“At some point, StreetEasy flipped the other switch, and became an engine to generate leads and sell them,” Espinal said. “That was always the endgame.” Now she offers specific advice: “If you have a broker, and you don’t want to get called by 25 other brokers, do yourself a favor and have your broker go to whichever search engine they use, and let them run the appointments for you.”

UrbanDigs first major update amongst the other “finishing touches” it plans on implementing this year is the addition of a “Buildings Page” that will allow users to analyze and compare buildings against others like it in a target neighborhood or even individual units in a specific building. That update is scheduled for January 30.

COO John Walkup said the site’s data, and its charts and reports will always be what sets UrbanDigs apart from its competitors. They’ve written 600,000 lines of programming code just to enable their custom charts, and they offer 10 different types of reports and can focus on each individual neighborhood in the city. When properly interpreted, according to Rosenblatt, each report’s data would allow an agent to quickly become a market expert and share that expertise with their client.

Analyzing and interpreting the available data is up to each individual agent though. “If you’re a producing agent, using UrbanDigs is like Kerosene on a fire,” Walkup said. “But if you don’t have the experience, and you don’t know how the market works, it’s like pouring kerosene on sticks.”

At the Core: The Tech Effect

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Once upon a time, the best agent was the one who had access to the most information. Gathering data in the dog-eat-dog world of real estate was like herding cats. Information that is taken for granted today did exist in the world we used to live in, but back then it drifted aimlessly in the wind like an autumn leaf in the park.

Buyers waited for the Sunday Times to see new listings. Hero realtors walked around town with rolls of quarters, ready to jump into a phone booth the moment they had a lead on a new property. Mortgage brokers mailed good faith estimates to clients with numbers that were stale before they even arrived.

Fast-forward to 2019.

Gathering information is a problem of the past. Technology solved that riddle. Everyone has access to everything. In less than a minute, using only a cell phone, anyone, anywhere, can conjure up a list of every NYC apartment trading in any price range, and they can choose from dozens of apps and websites to see them.

But make no mistake, technology has not killed the real estate agent. In fact, their job is more important than ever. The free-flow of information only changed a realtor’s objective and changed the way we measure their effectiveness. It’s no longer about who can access information, it’s about what to do with the information once you have it – and some agents are better at interpreting data than others.

Some agents are so adept at interpreting data, they incorporate it into every aspect of their job, and it comes through in the conversations they have with their clients. But data is manipulatable. One agent can look at a chart and easily identify a trend and another might be completely overwhelmed. The data is so rich and so specific, it offers the capability to drill-down on numbers in specific neighborhoods or even specific units in a building.

An experienced analytical agent, with the vast tools at their disposal, can quickly become a market expert and share that expertise with their client. Understanding data can provide the clarity and confidence needed to appropriately bid on a property, ultimately resulting in a sound investment.

Thorough analysis can also help to properly manage expectations. For example, we can now separate (or bundle) properties of like-kind size, ownership (condo or coop) and neighborhood to determine patterns. How long is your block or area taking to sell? How far from the last asking price are properties closing at in Chelsea or Lennox Hill? What inventory is more available in Noho, condos or coops. We can now cross section the data and dive so deeply that the possibilities are endless.

It’s important to point out that some information exists that technology hasn’t quite figured out how to corral. For example, It’s widely known that automated valuation models (AVMs) used to estimate property values often supply inaccurate results because they tend to leave out important factors like the specific condition of a property, the motivation of a particular seller, potential roadblocks with a building’s finances or its board, or if a comparable unit was sold through bankruptcy or foreclosure.

Beyond the numbers

Technology is moving fast. Maybe a little too fast. But who wants to imagine a world in which you buy a property without any human interaction at all; A world in which all of your advice comes from a robot; With no conversations, just numbers and letters on a screen; Where no connections are made, and no long-term relationships are formed.

There’s still something very comforting and very human about having a conversation and getting advice from a person you know, and you trust.

Marie & Jeff

Ask the Experts – Mortgages: What You Need to Know

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In 2010, Congress transformed consumer lending. But what does that mean for potential real estate sellers, and homeowners to be?

Great question. This month, we interviewed Matt Jablonski, Loan Officer at Citizens’ Bank, to find out. Matt set the record straight on loan officer commissions, rate negotiations, and whether it’s best to buy now…or wait.

Myth: Loan officers profit from higher rates

Before 2010, loan officers often received higher commissions for more profitable transactions. Naturally, this gave loan officers the incentive to hike interest rates: at your expense.

Then came the 2008 financial crisis. To safeguard the public from future harm, the federal government signed the broad-ranging Dodd-Frank Wall Street Reform and Consumer Protection Act into law. Among other things, the law prohibits profitability-related commissions for loan officers. “The lender I work for has to pay me exactly the same amount, no matter what terms are offered,” said Matt.

What does this mean for the borrower? “You are better protected than you’ve ever been,” Matt said.

Myth: You can talk the loan officer down to a lower rate

While Dodd-Frank is a significant step forward in terms of protecting borrowers, it comes with a downside, too.

“An individual loan officer doesn’t have the power to negotiate like they used to,” Matt said. In other words, you can’t haggle your way to a cheaper rate.

But there’s still one way to secure a lower rate. “A bank is allowed to offer better terms than what they have in place under one set of circumstances only: and that is for competitive purposes,” Matt said.

If a lender can document that a competitor is offering a lower rate, they can adjust their rate accordingly. But it has to be an apples-to-apples comparison: loan amount, purchase price, property type, FICO score, loan program, and fees must be the same; and the rate estimates need to be given at or around the same time.

That said, if all the criteria fit, a borrower need only show a loan or preliminary cost estimate from a competitor to, potentially, secure a matching mortgage rate from any lender.

Myth: Now is a bad time to get a loan

Because mortgage rates are currently on the rise, many people assume we’re headed toward a correction of sorts, and that as such, it’s best to hold off on taking out a mortgage until the market recalibrates.

Matt dismissed that notion. In spite of rising rates over the last few months, he said, rates are still impressively low. And if the current trend continues, those rates won’t be coming down again any time soon. In fact, this loan officer—and others we speak with—expects rates to be higher six months from now, and for that trend to continue. With that in mind, he recommends acting now.

There are multiple reasons to do so. For one thing, New York’s economy is booming. With tens of thousands of tech jobs coming into the city (witness Amazon’s upcoming move), this likely means higher demand. It’s impossible to predict how and when the market will be impacted, but suffice it to say interest in New York City will only continue to grow. Of course, there’s also the cost of waiting to buy. Waiting for prices to re-calibrate means building in a 12-24 month period for the market to adjust (sellers don’t drop prices overnight), all the while paying rent somewhere else and in the meantime if rates continue to rise, it will by default mean you’ll have less purchase power. You are probably better off using your time wisely and taking advantage of the current market dynamics: negotiate, negotiate, negotiate.

“If I was on the fence about buying, I would buy now instead of waiting,” Matt said. “It wouldn’t surprise me if we were in the low fives, or five and a quarter, before 2019.”

From what we have observed and understand, Matt’s words reflect a consensus among industry veterans and insiders. With rising interest rates still astonishingly low, now is in fact the ideal time to buy. Of course, only history is 20/20…but we are certainly bullish on this market, as you’ll read, and we think Matt is right.

 

At the Core – Navigating the New Normal

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This month, we discuss the essentials of buying, selling, and negotiating in the new real estate market.

Which way is the NYC economy heading?

By any account, the New York market is thriving. The economy is booming, with 76,000 new jobs added to the city in the last 10 years, and more increases to come. Because of the exceptional concentration of talent, companies from across the globe continue to flock here—promising durability for our thriving times.

And that’s true across all five boroughs. Amazon’s choice to move to Queens/Long Island City stands as clear evidence to what is unfolding in technology and medicine: the move is typical of what we might expect in the years to come: more well-paying jobs, more spending, and growth.

The signs of NYC’s healthy economy are exciting, and they’ve created anticipation about where our market is headed. While we don’t have a crystal ball, we feel it’s safe to say that New York will continue to be a highly desirable global capital in which to invest.

Transitioning to the new normal

Buyers and sellers alike are still adjusting to the current housing market. Over the last couple of years, that market has been re-calibrating: settling gently into its natural valuation. And across NYC, property owners and investors are still transitioning to the “new normal.”

The new normal involves a return to traditional values in terms of real estate. When our parents bought property, they knew they were making at least a 30-year investment. While most buyers today may not stay in the same place for as long, they should plan for an investment cycle of about five to 10 years.

As buyers and sellers adjust to the current market at different rates, there are bound to be some differences in approach. A buyer and seller who aren’t on the same plane regarding the current market will inevitably clash on pricing. But a broker who’s in tune with the current market can bridge that gap and help both parties reach a meeting of the minds and land on an accurate market trade.

Negotiating in the new market

Buyers often ask us what percentage of a discount, on average, they can expect for each potential purchase (for example, can they take a two to four percent discount across the board?). They assume that we can bring them the exact same discount on any property out there. While it’s an understandable question, it’s ultimately unanswerable. Because each property is different, especially in NYC, negotiation won’t work the same way in every situation — there’s no “one size fits all” approach. Even in a single building, individual units often sell for vastly different prices. Variations in pricing necessitate variations in negotiation approach. That means adapting your negotiation strategy for each individual property is crucial.

Savvy sellers who have transitioned to the new market will price their properties accordingly. Understandably when this is the case, it is logical that we would not apply the same negotiation strategy as in the case of a property in another building, which is overpriced and has been sitting on the market for a number of months. A seller who has priced aggressively in order to sell knows it—and is doing so to get a deal done. This is a very different stance than a seller who doesn’t have a firm grasp on where the market is and chooses to enter the market highly overpriced. Therefore, sellers who have already adapted to the new normal will tighten their expectations, allowing for less variance between asking and closing prices. Inevitably this will affect the approach in one kind of bid vs. the other.

With that in mind, a negotiator must be firm in their market knowledge and confident in their ability to pin down pricing. Negotiation is an art, especially in our current environment, that requires both creativity and the ability to intelligently structure and think out-of-the-box. Each phase of the process must be carefully considered and strategized—with the understanding that timeframes are flexible and everything is open for discussion.

Our New Year’s advice to you

As 2018 draws to a close and 2019 approaches, our guidance is three-fold:

First, don’t procrastinate buying or selling a property. If you’re thinking about taking that step, you’re in the perfect place to do so now.

Second, work with a solid negotiator. You’re not likely to get a better deal in the near future than you are now, but you are likely to get the best deal possible if you partner with a trusted real estate professional. (And by that, we mean us!)

Third, embrace the new normal.

Marie & Jeff

New Year’s Eve with Renée Fleming

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In “NYC Happenings,” we highlight a single, unmissable event taking place this month in the New York City area.

 

Happening in December: New Year’s Eve with Renée Fleming

When: Monday, December 31 at 7:30 pm

Where: David Geffen Hall, Lincoln Center

Internationally renowned soprano Renée Fleming has received numerous honors: including the National Medal of Arts, four Grammy Awards, and a Tony nomination. She’s sung to audiences in Buckingham Palace, at the Nobel Peace Prize ceremony, and at the Super Bowl—not to mention various locations across the globe. This New Year’s Eve, she’ll sing to you.


On December 31, Fleming shares the spotlight with the New York Philharmonic, under the direction of newly instated Music Director Jaap van Zweden. The concert promises sizzling Broadway hits and film score classics, beguiling Viennese waltzes, and dazzling operatic fireworks.

Ring in the New Year in high style at this formal dress affair.

Purchase tickets on the New York Philharmonic’s website.

ASK THE EXPERTS | HOW HAS THE NEW TAX LAW EFFECTED NYC REAL ESTATE?

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Trump’s Tax Reform and New York City Real Estate

 The Tax Cuts and Jobs Act signed by President Trump on December 22, 2017, has initiated numerous changes to how residential property owners can write off their local taxes and mortgage interest payments on their federal tax returns. It caps state and municipal property tax deductions on federal tax returns at $10,000, reduces mortgage interest deduction caps from $1.1 million to $500,000, and prohibits such deductions on second homes.

But what does this really mean for the Manhattan and Brooklyn real estate markets? Well, we’re here to ask the experts just that: does this new tax law have any effect on the real estate market here in NYC? Initial views on this were mixed, and current market trends reflect those prognostications.

The fourth quarter of 2017, when New York buzzed with a mix of suspicion and sanguinity about its native President’s impending tax overhaul, saw Manhattan housing sales activity at its lowest fourth-quarter total in six years, Douglas Elliman and Miller Samuel reported. This included a 12.3% sales volume softening from Q4-2016 to 2,514 closed sales from 2,868 in Manhattan real estate, an average sale price drop to $1,897,503—the first below-$2M figure in two years—and a 13.2% increase in luxury listing inventory to 1,439, the first increase in nine consecutive fourth quarters. To circumvent the lack of tax-write-off incentives for homeownership the Act would create, cash buyers purchased 51.2% of all co-op and condo units sold.

But why? These trends were due largely to the market cautiousness the Act’s reduction of tax benefits provoked in the minds of many buyers, Miller Samuel’s CEO Jonathan Miller told The New York Times in January. Our very own Steven James echoed this sentiment to Bloomberg and Newsweek: “The buyer is very worried about overpaying.”

The Brooklyn market fared a bit better, perhaps due to its up-and-coming status in New York’s higher-end real estate market compared to Manhattan’s long-established one. Brooklyn’s Q4-2017 closed with 2,627 sales, a 1.7% increase from 2,582 in Q4-2016, causing a 23.1% reduction in inventory over the past year. Brooklyn’s $948,706 average sales price was up 0.1% from Q4-2016’s $947,553, and its median sales price rose 2.7% from $750K to $770K over that period. Its luxury median sales price, however, went down 1.9% to $2.4M over that time frame.

Now let’s dive into the 2018 numbers. Elliman and Samuel’s Q1-2018 reports generally indicated continuation of these cautious trends. Manhattan’s home sales dropped 24.6% from 2,892 sales in Q1-2017 to 2,180, which included a 24% fall in luxury home sales. The average sales price dropped from $2,104,350 in Q1-2017 to $1,933,198 (slightly better than the Q4-2017 showing, however). Brooklyn’s market growth slowed its pace but remained strong: the average sale price reduced from $993,955 to $982,093. Then we have the luxury sales, where the median sales price fell 4.7% to $2.425M.

These reports painted quite a different picture from Dezeen’s rosy reportage that Manhattan’s high-end residential real estate market was “booming, thanks to President Donald Trump’s economic policies and tax cuts for the wealthy,” with a reported overall 27% sales volume increase by the beginning of March. Whatever truth those findings hold may be partly attributable to the downward pressure the market’s highest end was already under, pricing-wise.

Prices in the over-$8M+ market have dropped significantly over the past 18 months, possibly to move inventory faster in light of the Act’s diminution of homeowner tax benefits, even though many of these sales involve cash purchases that make the lowered interest expense write-off irrelevant. (In fact, 90% of Q4-2017’s over-$5M sales were cash transactions, Elliman reported.) To boot, some buyers are actually using Trump’s tax reforms to bargain down home prices so they hopefully won’t get socked with higher taxes once the sales are closed, The New York Times reported in June.

Manhattan’s individual neighborhoods varied in RE market sales percentages over the first half of 2018, most showing incremental increases. Downtown consistently held the largest share of the borough’s market, 36% in January and 40% by May. The East Side carried 19% in January and 20% in May. The West Side went up from 18% to 20%, Midtown increased from 16% to 20%, and Upper Manhattan dropped from 7% to 4%.

Brooklyn’s market softened slightly as well. Q2-2018 sales were 5.7% down from last year’s second quarter, from 2,845 to 2,683, the first such decline after ten consecutive year-over-year gains, though sales increased 11.3% from Q1. Inventory rose 18.5% from Q2-2017’s 2,257 to this second quarter’s 2,675, which was up 30.9% from Q1. This significant inventory expansion followed 11 consecutive quarters of year-over-year depletions. Median and average sales prices both dropped from Q2-2017—$997,654 to $984,047 and $795K to $780K, respectively—with very minimal differences from Q1.

With all of this data being enough to make your head spin, what does this mean to our buyers and sellers who are uncertain about the effects of Trump’s new tax law on the NYC real estate market? The answer is, of course, nuanced, like any complex market. Because of the multiple up-and-down pressures the real estate market must weather consistently, assigning responsibility to any individual cause, trend or force wouldn’t be fair and/or accurate.

“External influences outside of the vibrant city economy such as rising mortgage rates, the potential impact of the new federal tax law, and an unclear direction of the national economy have continued to remain a concern of market participants,” Miller reported in the Q2-2018 Elliman Report on Manhattan sales. Another external influence could be a predicted mass exodus from New York to lower-tax states like Florida, where “you can save a million [dollars] a year,” our own Richard Steinberg told The Real Deal.

So there you go. No omens of a recession or bubble-burst are on the horizon, but cards are being played cautiously in NYC real estate investment, yet with hopeful signs that Brooklyn could be a worthy “Trump” card for the homebuyer or investor. Looks like we’ll have to stick around and see what happens in Q3 and Q4.

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