At the Core: Our Trip to Saudi Arabia

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Around five years ago, we were introduced to a Saudi Arabian family that loves visiting New York City. During the course of the next two years we developed a friendship while we helped them find an amazing condo in Manhattan. In business and in life, relationships are the most valuable reward, and in so many instances we’ve been fortunate enough to stay connected with our clients long after they’ve closed on a new home.

Eventually, our friends from Saudi Arabia introduced us to their friends, and we worked hard to help them successfully negotiate on an investment property. After that, our network started to grow. We were working with more than a half dozen families from that region of the world. So many times, we were invited to visit our growing network of friends in their home countries. They’d tell us that Americans don’t visit there enough, and they genuinely wanted for us to experience it ourselves.

We visited Saudi Arabia late last month, first Jeddah and then Riyadh. We met dozens of the most gracious and most interesting people in an unbelievably fascinating part of the world. Our hosts treated us like royalty. They gifted Marie a beautiful traditional Abaya and invited us both into their home for weekly dinner with their extended family.

Saudi Arabia is still a conservative place but being there was enlightening. It was demystifying. Personal freedoms are spreading and becoming the norm. Among the professional class, there’s a palpable level of excitement as they watch the country liberalize faster than anyone might have imagined.

New regulations have brought order to industry, making investments safer and more stable. Enormous resources are flowing into the diversification of the economy and the growing pains are mitigated by the optimism of what the leadership’s vision and steps will eventually lead to.

Not far from our hotel, we saw a McDonald’s and a KFC. Then we saw all of the high-end retail stores you’d find on 5th Avenue. Jeddah is clean and beautiful, but unlike New York City, during the day, you’re not likely to see a parade of pedestrians navigating the sidewalks. Instead, they opt to travel from the confines of their air-conditioned vehicles.

On foot, we didn’t make it more than 5 or 6 blocks before we turned back to get out of the sun. When we got back to our hotel, a musician sat playing on a Grand Piano that was setup in the lobby, something that would have been revolutionary less than 2 years ago.

Our visit to Saudi Arabia was transformative. We learned so much and we had the most amazing time. But officially, we were there on business. Our network expanded exponentially. We met with groups and individuals and were given the opportunity to explain the complexities of investing in New York real estate.

Naturally, almost all with whom we met compared New York to London, the city that Gulf State homebuyers have been most comfortable investing in for years. There were so many questions. “What’s the story with the NYC market?” “Is it soft?” “What does the data show?” “How does it compare to London.”

Thankfully, we spent weeks preparing. We felt like true real estate “diplomats.” On the flight home, we talked about becoming global brokers. It’s almost too exciting to think about all that we could learn from meeting with some of the world’s most interesting people and learning about their cultures while exploring parts of the world that we’ve never visited.

We imagine an annual trip back to the Middle East, but we’ve also set our sights on Europe and Asia. What an amazing job we have!

Ask the Experts: Compliance Experts Open Doors to Mortgage Lending For NYC Developers

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Behind-the-scenes, Orest Tomaselli is a key figure in the reshaping of New York City’s skyline. Many of the most prominent luxury residential developers turn to him and his team at National Condo Advisors to help coax lenders into offering financing to homebuyers who are interested in their buildings.

Tomaselli started National Condo Advisors a decade ago after Fannie Mae and Freddie Mac changed their condo and coop guidelines, leaving management company’s and boards confused and often out-of-compliance. The government agencies created a specific process and set of rules that nobody knew how to follow, leaving hundreds of buildings and thousands of unit owners unable to get mortgage financing. After years of handling compliance in the back offices at mortgage banks, Tomaselli saw an opportunity and he took it.

“Nobody knew how to do it,” he explained. “If I work with existing, established developments and new construction developments, I could work them through the process of getting them healthy, getting them compliant, getting their bylaws and budgets in-line. Making mortgage financing available.”

When they first started, the aim of National Condo Advisors was to obtain a blanket approval from Fannie Mae for an entire building – an “Agency Approval.” That would often stoke the fire and help with the first several sales until lenders became comfortable with a building. The focus now is portfolio lender approval, directly from banks and mortgage companies.

An approval from Fannie Mae isn’t as relevant in New York City as it might be elsewhere. The agency will only purchase mortgage loans for amounts less than $726,525, which is impractical for so many of the multi-million-dollar units throughout the boroughs. So, in many instances, they’ve eliminated Fannie Mae project approvals and they’ve gone directly to the lenders.

“The lender piece has become incredibly important,” Tomaselli said. “When a developer is looking at a site, they will call (and they will say) we need mortgage financing on this building as soon as we record a condo declaration, which happens when 15% of the units are in contract.”

What once seemed a tall order, considering Fannie Mae calls for 50% of the units in a building to be in contract, is now a common request that National Condo Advisors is equipped to handle. A developer wants to capture every buyer that likes their building, so the ultimate goal is to be able to close on a unit as soon as there is a temporary certificate of occupancy on the building, which doesn’t always happen in New York City.

“Letting a buyer go because a lender can’t provide mortgage financing is ridiculous,” Tomaselli said.

The most common impediment standing between a building and a blanket lender approval is the same as it was when Tomaselli started his business more than a decade ago. The Fannie guidelines state that a condo should have a line item in its budget that allotted 10% of its revenue from common charges toward a reserve account.

During the early years for National Condo Advisors, they assisted a massive Brooklyn new construction condo project that had an annual budget of more than $5 Million. To become compliant, they would have to add a line item showing $500,000 was earmarked for reserves. Since all of the assets were already allocated, one of the few solutions was to jack-up common charges, which would make it extremely difficult for the marketing team to sell units in the building.

“Nobody wanted that,” Tomaselli said. “It seemed like a really innocuous kind of guideline. We had to figure out a way around it.”

The solution became a reserve study – An engineering study where every single component within the property is inspected and assigned a value and a remaining useful life over a 30-year horizon. The undertaking was designed mostly to determine if the building really needed to dedicate 10% of its budget toward a reserve fund. Fannie Mae allowed for it, so many lenders followed suit.

A reserve study done on the Brooklyn condo project determined that it needed to allot only $112,000 annually toward reserves. Since it was a brand-new building with very few unit owners paying HOA dues, the burden of funding the reserves fell on the project developer/sponsor. Regulations state that once the project’s sponsor contributes toward reserves, that money cannot be taken back. So, having the reserve study done saved the developer almost $400,000 every year until they sold out the building. It also kept the maintenance fees at market levels at a time the marketing team was trying to sell units.

Since then, National Condo Advisors has mimicked that plan Across New York City and elsewhere. They assist new and existing buildings obtain an initial reserve study, help them align their budgets, work with the marketing team to outline how to keep maintenance fees low, and they work to get a building’s bylaws, budget and insurance compliant so it will gain approval from the Attorney General’s office and pass muster with lenders.

Tomaselli started Strategic Inspections just a year after he launched National Condo Advisors because the reserve studies were taking up to 3 or 4 months to complete, which “did not go over well in New York,” he said.

Today, a typical reserve study takes Strategic Inspections 30-45 days to complete. It costs between $8,500 and $15,000 for a 100-200-unit building. The company provides a 70-page report that details the cost to repair and replace every specific component in the building that’s paid for by the board. They outline a cost to contribute to the reserve account over a 30-year horizon, in many instances eliminating the need for special assessments, and ensuring that the building is healthy, and mortgage financing will always be available. Strategic Inspections completes 40-60 reserve studies every month.

Reserve studies have saved the day in more unusual circumstances as well. Mortgage financing was unavailable at a condominium in the Financial District because the board sued the developer for shoddy workmanship. Lenders were too uncomfortable with multi-million-dollar litigation pending. But when a reserve study revealed that repairs would cost $2.5 Million, and the board documented it had more than $6 Million in its account, Tomaselli was able to prove to one of the biggest mortgage lenders in the city that the building did not represent too high a risk to lend in. Property values in the building skyrocketed afterward.

Having a 10% line item in a building’s budget isn’t the only compliance issue that stands in its way of gaining a blanket approval from a lender. They’ll often balk if a building has too much commercial space, insufficient master insurance, a high percentage of single-entity ownership, too many non-owner-occupied units, and/or low pre-sales at new buildings. In all of these instances, National Condo Advisors either can help a building get healthier or it can make a case that it’s already worthy of mortgage financing.

Still, Tomaselli said he sees pushback from some management companies and attorneys that are just fine with the status quo. He said there usually has to be a trigger for people at existing buildings to call on his team for help.

“People don’t often do a reserve study because they should do it,” he said. “They call us because they can’t get mortgage financing, or when people complain to the board about a special assessment.”

A troubled building might spend $10,000 on a reserve study and another $10,000 on compliance, but then it could quickly get approved by three lenders or more, Tomaselli said.

“From our perspective, it’s such a low-cost barrier for these developments.”

 

At The Core: Knowledge is Power

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We’re preparing for an upcoming business trip. It’s been in the works for months or even longer, but its finally almost upon us.

An audience on the other side of the globe waits for us to deliver our expertise. That’s a massive responsibility, one that we embrace and take very seriously. But It doesn’t matter who or where the audience is, being called an expert in any profession is an immense responsibility.

A trip like this one has a way of forcing us to dig a little deeper and work a little bit harder to ensure that we exceed expectations. For weeks now, we’ve been gathering information along with other members of the Espinal Adler team. We’re creating reports to help tell the story of our current marketplace and the opportunities that exist within it.

It’s true that we’re gathering this information for an audience far away. But the effort and energy we invest preparing and further educating ourselves, and the willingness to push beyond an antiquated idea of our own comfort zone is going to make us better at our jobs – and that’s a good thing for all of our clients, even the ones right around the corner. Because of that, no matter how successful we are based on traditional business standards, this trip represents another massive step in our careers.

We believe that knowledge, and the effort put forth to gain it, and the desire to deliver it genuinely to others, is what separates an ordinary real estate agent from an expert.

Since well before the itinerary for our trip was finalized, we’ve been surrounding ourselves with the best, most respected, and most knowledgeable people in our industry. Learning from them is part of our job — part of our responsibility – it’s part of being a true professional. We meet every week with experts from different niches within our industry, doing what we can to pry from them whatever knowledge they’re willing to share so that we can deliver it to our clients.

In the first few months of 2019 alone, we’ve met with:

  • An attorney that specializes in representing foreign nationals.
  • One of the most talented interior designers in New York.
  • The CEO of a company whose expertise in compliance is sought out by virtually every condo developer in the region.
  • Perhaps the most respected appraiser in all 5 boroughs.
  • The president of one of the most widely used NYC property search engines.
  • More than a dozen lenders to find out exactly what each of them might offer our clients.

During the last year, our team has promoted a marketing expert, added a mortgage expert, and we hired another multi-lingual agent. All of those actions fit within the same mantra of bringing to our clients the most knowledge and expertise available.

Knowledge is Power

In our personal lives we interact with professionals who work in fields that we know very little about. We expect those professionals to guide us appropriately, especially when we’re making a purchase. But if we have no history or established relationship with the person offering their guidance, it’s not easy to put our complete and total trust in the advice they are giving.

One of the members of our team told us he went to a “big box” hardware store last week to gather information about a flooring project he was working on.

He expected the sales person would be able to provide the price per square foot – after all, it’s written right on the display. He expected that the salesperson would be able to tell how long it takes to order a product and to have it delivered and installed.

But our team member was caught off-guard and pleasantly surprised when the salesperson provided details about the tax benefits of specific capital improvements made to a primary residence, including the installation of new floors. It was obvious that the salesperson took pride in his profession. His knowledge exceeded expectations and provided instant credibility.

The same principles can and should be applied in real estate. An agent has to be so much more than a scheduler and a door opener – That is the least amount of value we can possibly provide. Every day, we have to work on our craft. We have to surround ourselves with and learn from other experts in our field so that we can live up to the responsibility of being called a professional and an expert.

 

Ask the Experts: Foreign Buying Challenges and Solutions with Martin Jajan

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Martin Jajan, Founder and Managing partner at Jajan and Associates located in the Financial District, has helped hundreds of foreign national buyers purchase property in the United States. Our team asked him to share with us some of the challenges they face and some of the solutions he offers.

 

The Buying Process

The foreign buyer isn’t always aware of the complexity of a real estate transaction in the United States. Many European and Latin American nations tend to be “civil law countries” in which transactions are done through what their concept of a notary is. In the United States, a notary has the power to authenticate a signature, but in civil law countries the state grants a notary the authority to supervise an entire real estate transaction. So foreign buyers are often surprised that they need a lawyer, and that a separate attorney would represent the seller and a lender in instances when the buyer is financing a property.

The foreign buyer is often unfamiliar with the need for title insurance as well, according to Jajan. “In foreign countries, if there is a mistake with chain of title, it’s on the notary,” he said. “There isn’t a separate title company that is insuring title. There is no title insurance.”

 

Strategies and Structures

Jajan’s first conversation with a foreign buyer always begins with a description of the American buying process, but before long the dialogue shifts more specifically toward the tax implications of the purchase, and in many instances toward privacy and maintaining anonymity.

“The foreign buyer is not going to be taxed the same way that U.S. people are going to be taxed,” Jajan said. “The IRS code is clear that they will tax foreigners that are investing in property in the United State vastly different than they would U.S. citizens.”

The inheritance tax is most commonly the primary tax consideration when deciding upon how to structure a transaction. The exemption for U.S. citizens is $11.5 Million, and it’s doubled for a married couple. Foreigners are only given a $60,000 exemption. So, if a U.S. citizen passes away, their heirs could inherit up to $11.5 Million in assets free and clear of any tax. But a foreigner would pay tax against an inheritance in excess of $60,000. The amount of that tax tends to fluctuate between 35% and 45%.

Hundreds of documents have been written on how to avoid the estate tax, but Jajan says he can distill the information and deliver it in a conversation that lasts about 20 minutes. From there, based on his clients’ circumstances, he can make a recommendation that will quickly and effectively protect them from the estate tax in a relatively inexpensive manner.

Jajan estimated that 90% of his foreign clients form an entity of some kind and the entity created ultimately is the buyer in the transaction. He identified three common strategies.

  1. Form an LLC.

The Limited Liability Company (LLC) acts as a pass-through entity that will provide his clients with a higher level of anonymity and they would also gain some tax advantages compared to buying as an individual. Forming a simple LLC, however, will not protect the property owner or members of the LLC from the estate tax.

  1. Form an LLC that is taxed as a corporation and is linked to an off-shore corporation.

This multi-faceted structure would protect a foreign buyer from the estate tax. The estate tax is not imposed upon the death of the owner of an offshore corporation because the asset itself is not within the United States, and therefore falls outside the government’s jurisdiction.

With this structure, the owner would be subject to higher capital gains taxes compared to the first structure.

  1. Form a Trust

Forming an Irrevocable trust is a common solution for foreign buyers that are making a purchase in excess of $5 Million, because it can offer a client the best of both worlds according to Jajan.

The trust would own an LLC and the LLC would own the property being purchased. The trust would be taxed at a lower rate compared to an individual, and, because the trust will never die and continue in perpetuity, an estate tax would never be imposed.

 

** Some of the suggested structures can present an issue for lenders. So, Jajan always asks if his client plans to finance the purchase or pay cash. He’s met with multiple lenders that specialize in situations like these and are often more flexible and more amenable to starting a relationship with a foreign national.

 

Ideal NYC Property Type for the Foreign Buyer

For many foreigners, privacy is paramount. Structuring in any one of the methods that Jajan suggests would certainly provide a high level of privacy from the public. But buyers purchasing a co-op, or an existing condominium will be asked to disclose significant personal financial information.

Very rarely is the foreign buyer trying to hide anything, Jajan said. “From a cultural perspective, it’s very invasive to have to give financial disclosure information, when the fact is, that’s not what’s done in their home country.”

A foreign buyer purchasing a pied-a-terre, or an investment property is usually someone of means, and in some cultures, they’re used to a very high level of service and they’re used to people wanting to do business with them.

“The idea that they have to provide tons of financial disclosures and go on a co-op interview and beg someone to take their money and let them into their building doesn’t sit well with them,” Jajan said. “It’s offensive.”

Perhaps more importantly, in some instances the disclosure of financial information can bring with it a security threat.

“People hold their cards very close to their vest in terms of what their assets are and how they made their money,” Jajan said. “If this information falls into the wrong hands, that’s when kidnappings occur. That’s when other crimes and security risks might occur.”

The Ideal Property Type for a Foreign National Buyer

A new construction condominium is the ideal property type for a foreign buyer that wants to avoid disclosing personal information. A new project likely hasn’t assembled a board and the developer/sponsor has the right to sell without commanding a board package, so there is no financial disclosure involved (outside of what a lender would ask for in a situation where financing is involved).

Although an existing condominium has no ability to approve or decline someone who wants to buy in a building (like a co-op board does), a board has the ability to waive the right of first refusal or to exercise it.  They often use that ability as leverage to collect a full board package from a potential buyer.

Many condominiums include in their by-laws a right of first refusal, which would force an owner to offer their unit back to the condo before selling to a third party. It’s important to note that a title company won’t issue a title policy unless the condominium waives their right of first refusal, and most lenders won’t issue a mortgage unless that right is waived. Its not unusual for a condo board to have concerns with absentee owners living overseas because it might be more difficult to collect common charges and/or special assessments. They’re also cognizant of their owner occupancy levels in an attempt to remain compliant with lender guidelines.

“They are using their power to get as much information on someone as possible so they can make a decision on how to protect themselves,” Jajan said.

 

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