Our Real Estate Finance Specialist Talks about First Months on the Job

In this space The Apple, Peeled usually features an expert that has made their mark on our industry. We’re constantly looking out for guest experts that our team and our readers can learn from. And in so many instances, our subjects have become our trusted resources and guides in their areas of expertise.

We always choose someone from outside of Douglas Elliman. Certainly, it’s someone from beyond the walls of our own office. But for this month’s edition, we decided we’d try something different. Early this year, our team created a position that seems quite unique to our industry. We added our own “Real Estate Finance Specialist,” a role designed to provide our clients unlimited access to an unbiased, unaffiliated mortgage expert.

How It Happened

Almost 6 months ago, Matthew Jablonski made one of the scariest decisions of his life. He was a mortgage originator for 15 years, entrenched in the industry, consistently placing in the top 1% of loan officer in the country every year.

But then he quit! And he joined our team.

Matt told us that the mortgage industry changed, the people he was surrounded by changed, and just about everything else in his life was changing, so the timing was spot-on to change careers too.

“I decided it would be better to change everything all at once,” he said. “I needed a shot of adrenaline. Something more dynamic with more possibilities. Something that was new on a daily basis.”

During the train ride from his house, Jablonski opened his notebook and double-clicked his mechanical pencil. On his way into the city to see our team at our weekly meeting, he got all of his ideas down on paper, and then he created an outline and a specific job description.

A few times before that morning he thought, “What if I quit my job and got my real estate license and I joined Marie and Jeff’s team?” he said. “I had absolutely ZERO days experience as a real estate agent, but I played a role in over 2,000 real estate transactions during the course of the last 15 years. Surely, I thought, I brought something to the table.”

On a page inside his composition notebook, not lost inside all of his other thoughts, there’s a bullet-point list that says:

  • I’d be completely unaffiliated with a mortgage lender or a bank, so the clients might be more at ease if I gave them mortgage advice.
  • I’d use my experience to help these clients find the mortgage program that best suits them.
  • I’d be able to hold lenders accountable, both in the efficiency of their process and with all the numbers.
  • I could translate things that may not have been made clear by a loan officer.
  • I could help a client understand how to negotiate for the best terms.
  • I could vet pre-approvals for anyone that makes an offer on one of the team’s listings.

Even though he was confident in the idea, and he thought it was a completely unique position that could give our team a leg-up on the competition, Matt later told us that he was really afraid to pitch the job to us.

“What if (Marie and Jeff) weren’t interested,” he said. “Over the years, (the Espinal Adler team) referred a ton of business to me. As soon as I pitched the job, everyone would be completely aware that I wasn’t completely happy with being a loan officer. That could have been bad for business.”

The Beginnings

Nearly a dozen years ago, Matt and Marie sat next to each other at a Manhattan closing. Matt helped the buyer with her mortgage, and Marie listed the property for the seller. Marie and Matt spoke very briefly once or twice during the process. But while their clients were signing the massive pile of documents on the closing table, they discussed strategies for refinancing Marie’s personal home.

Soon after that, Matt closed the refi for Marie and her husband. Then the team started referring a lot of our clients to him because he was such a good hand-holder. We’ve worked on a lot of complex transactions over the years, and all of our buyers that worked with Matt made it to the finish line and he always gave them all the time they needed. And he always kept us in the loop too.

“At every bank or mortgage company I’ve ever worked at, there’s always been a manager around to remind me to go to my closings,” Matt said. “Face-to-face time is always good for business. It’s kind of crazy what can happen if you put everything aside and show up to your closings! Luckily, I showed up that day.”

In an interesting twist, the Espinal Adler team very recently helped a client close on the sale of her property and on the purchase of a new, bigger and better unit. The client was the same one who Matt helped get a mortgage when she was buying Marie’s client’s apartment. The stars were aligned.

Pitching the Job

Despite his fears, Matt pitched his idea because he said getting referrals from us would force him to stay in the mortgage industry longer. Logic dictated that he share his idea.

Marie’s jaw dropped.

“I was kind of in shock because the same idea was sitting and stewing in my brain for at least a year,” Marie said. “I thought it would be great if Matt could run a ‘Mortgage Desk’ for our team. But I always dismissed the idea because I didn’t think he’d want to leave.”

In theory, we were on the same page as Matt, but there was still so much to work out. He still wasn’t licensed. We still had to further define his role and figure out if we could make it work financially. And Matt had to be 100% sure he was ready to take a leap of faith.

“I had to overcome the fear of failure and the fear of leaving behind a job that provided for my family for so many years,” Matt said. “And, the hardest part was leaving behind an amazing colleague that worked alongside me and helped me achieve amazing success over the last couple of years.”

We kept an open line of communication. All of the pieces started to fit. Matt took his real estate courses, passed his tests, and joined the team when he got his license shortly after the new year.

Typical Client Interaction

The very first client that Matt assisted in his new role comes with a success story that will be difficult to duplicate.

Our client Sachin, who is a busy executive at a well-known accounting firm, already called three different lenders before he spoke with Matt for the first time. He chose a loan officer that he was completely comfortable with, whose bank offered a very low interest rate.

Sachin and Matt spoke several times while his mortgage application was ongoing. discussed loan program options and about the city and state taxes that Sachin would ultimately be responsible for at closing. The application process was running smoothly and Sachin received a commitment well in advance of the contingency date written into his contract. But when Matt reviewed the commitment letter, he noticed that the low rate came with a sizable origination fee approaching $30,000.

Sachin let Matt know that he wasn’t aware of the fee. So, Matt called the loan officer to find out if there was an error or miscommunication. There was no error. The only hope to eliminate the fee was to obtain a loan estimate from a competing lender the documented they were offering the same rate without the origination fee. Armed with that information, Sachin’s loan officer could request a pricing exception to reduce or eliminate the fee.

“I called all of my contacts within the industry to see where they would “price-out” the loan,” Matt said. “Sure enough, one of them was able to offer the identical rate without charging the extra fee. Sachin could have switched gears and applied with this new lender. But instead, he passed along the competitive data I helped him to obtain.”

Sachin’s loan officer’s request for a pricing exception was granted. The fee was eliminated and the deal closed right on-time, without the fee.

“Matt’s insight into financing options and their implications, given my unique deal structure and circumstances were invaluable,” Sachin said. “I secured the right product for my needs at an optimal rate and cost and managed the timeline to a timely close.”

Getting Creative

Our client Rick is a self-employed resident of California who was in search of a Manhattan apartment that he could use as a second home when he was in New York on business, or if he was in town to watch a St. John’s basketball game (he’s a huge fan).

We connected him with Matt before he flew in with his wife Anita to look at properties. Apparently, Rick did his homework on the team and he notice that Matt was a St. John’s alum and he covered the basketball team when he was Sports Editor and Editor-in-Chief for the student newspaper. They had an instant connection.

Shortly after they made contact, Rick sent to Matt a very complex set of corporate tax returns and they reviewed them over the phone. Matt told Rick that because he was self-employed, the way his income was calculated would be open to interpretation, and unless they obtained specific clarification from Rick’s accountant, an underwriter might use less qualifying income than what he deserved.

Matt and Rick decided that the best course of action would be to submit an official mortgage application and seek an official approval in lieu of a pre-approval, even before a specific property was identified. That way, we would know exactly how much income the mortgage underwriter would give him credit for. Having a commitment letter would put Rick and Anita in better bargaining position, but just as importantly, the proactive measures would provide our clients with additional peace of mind.

About 10 days after they applied, they were issued a commitment letter. Rick and Anita had no preference between condo or coop, but Matt and Rick spoke at length about how a coop board is even more strict than a lender — A board would insist that his debt-to-income ratio be significantly lower than what a lender called for, and the board might not calculate his income exactly the way the underwriter at the bank did.

During a trip to New York, we helped Rick and his wife find an Upper-West-side co-op that they loved. The monthly maintenance was higher than the estimates the bank used to obtain the mortgage commitment. We were all concerned that a co-op board might balk at Rick and Anita’s application if they didn’t take the time to properly analyze the corporate returns.

Matt walked Rick through all the numbers. He saw that if Rick and Anita refinanced their California property, they could take advantage of better, more flexible terms compared to what was in place. Ultimately, it would result in numbers that even the strictest co-op board would love to see. An action plan was implemented and Rick and Anita applied simultaneously to refinance their California home while they applied for the mortgage for the New York property. During the first week of June, the co-op board approved their application.

“The Espinal Adler team afforded us advantages not available in other real estate offices,” Rick said. “There is little doubt that we would not have been successful in our Manhattan Co-op search and ultimate purchase had we been with another brokerage team.  The Espinal Adler team is truly unique in having Matt Jablonski, a real estate finance specialist, as an integral part of the team. Matt shepherded us through the process, minimizing our time commitment as our particular situation was quite complex.  Moreover, as Matt’s loyalty is to the Espinal Adler client, not to a particular bank or lender, he was able to arrange the best financing options for us. Having Matt as part of our purchase team, we believe, was one reason we were successful in our co-op purchase.”


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

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.”

 


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

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

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


Ask the Experts: Market Dynamics with Jonathan Miller

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

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.”


Ask the Experts – Mortgages: What You Need to Know

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.

 


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

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.

Sources


ASK THE EXPERTS | WHAT NEGOTIATIONS IN REAL ESTATE LOOK LIKE

As seasoned real estate brokers here at Douglas Elliman, we are often asked the question of what it’s like negotiating during the buying or selling process. People seem to want to be a fly on the wall to hear exactly how the magic happens, so we thought we’d pull together a sample scenario that does just that: realistically conveys the back and forth between seller, broker and buyer (because let’s recall:  the broker isn’t just negotiating with buyers but is always also negotiating with the seller in terms of what the market can bear).

Therefore, we welcome to the first micro-episode of “Ebb and flow: negotiations in real estate.”

Broker: We have run the comps on your apartment, and after visiting the apartment various times and assessing its value, we believe that the apartment should be listed at $1.495M, considering that its value ranges from $1.3M-$1.6M.

Seller: I have lived in this building for over 22 years and I am not selling it for under $1.6M.  Plus, it’s a renovated apartment.

Broker: We understand, however your renovation is over 5 years old now and no longer feels new to prospective buyers.

Seller: But everyone wants to be in this building; the parquet floors and the location are real attractions.  This apartment has fantastic space! I am not selling it under $1.6M so let’s price it high so then we can absolutely get the $1.5M you’re talking about.

Broker: Mr. and Mrs. Seller, nothing has sold in the building for over $1.5M but we will price it where you want it.  We do want to reiterate, that buyers today are knowledgeable and research savvy – brokers are even more so…If we go on the market at that price, we will get offers on where the property should actually be priced.  Not to mention that when buyers are researching properties below $1.5M, your property will be missed despite it being overpriced.

Seller: Let’s try $1.6M

(Hits the market at $1.595M…)

Broker: Mr. and Mrs. Seller, our Open House was well attended with 30 people.  We received four offers, one at $1.3M and three at $1.4M.

Seller: The number has to start with a 1.5 in front of it.  We put $300,000 into the renovation.  I have to have a number starting with 1.5.

Broker:  Mr. and Mrs. Buyer, thank you for your offer at $1.4M but my client is countering at $1.5M.

Buyer: The trades don’t support that price.  There is a unit in the same building, on the same line that is trading at $1.3-$1.4M.  We can come up to $1.43M

Broker: I will revert back to my client with your counteroffer.

Seller: I know what my apartment is worth and we must have a 1.5 in front of it.

(A few weeks later)

Broker: Hi, Mr. and Mrs. Buyer – I have good news, my client has lowered the price to $1.45M.  Are you still interested in the property?

Buyer: I’m sorry but we have moved on.

Broker: Mr. and Mrs. Seller, we need to move on from that offer, they have already placed an offer elsewhere.

Seller: Great, because I want an offer with a $1.5 in front of it anyhow.

 

TO BE CONTINUED…


ASK THE EXPERTS | To Sell and Buy Real Estate Simultaneously: Can it be Done?

The answer is yes, it can be done! However, it’s very important to know that there are many factors that go into making a situation work where someone is selling and buying real estate simultaneously, especially when there’s the need to use the funds from the first transaction to purchase the new home without having to rent an apartment in between. Today we ask the experts, Howard, Marie and Jeff of the MARGOLIS ESPINAL ADLER Team if this can be done, how it can be done, and what the key factors are that go into making sure their customers are successful in buying and selling simultaneously.

Q: How many deals have you done where a customer is buying and selling at the same time?

Howard: “We’ve been doing this for years since we’ve been together. We’ve been working together for eight years and as partners for six years and we’ve done these “sell-buy” at the same time deals every year, but for some reason 2017 was the grand-daddy of all years on this. I mean, we did four or five deals, and maybe that number doesn’t sound like so much, but you have to think about all of the moving parts that are involved.

Q: Do you think people are hesitant to sell and buy real estate simultaneously?

Jeff: “It’s so incredibly daunting and stressful for a customer who wants to buy something better and bigger, but needs to sell what they already own in order to make that purchase, and doesn’t want to rent in between. There’s a lot of detail that goes into that and a huge amount of hand-holding and this is Marie’s thing. I sit there and I’m thinking “no, they can afford a rental in the interim, and let’s do this in isolation”, and Marie just forges ahead and you’ll see from our customer testimonials how happy people are with the outcome.

Q: Do you see a pattern of any sort with price/time of year/etc. when people will sell and buy at the same time?

Jeff: “It seems to be really common where the buyer essentially needs the funds from the sale of their current home before purchasing the new home particularly in that $1.5 to $3.5/4 million range. Someone purchasing a $6-7 million dollar apartment, in our experience, likely doesn’t need the funds to be moved so quickly. Sadly enough, a $4 million budget, while still luxury, is a middle kind of market in NYC, so it’s all financial and not about the calendar.

Marie: “Adding to that, even though the customers normally looking to do this are extraordinarily well-qualified, with (on average) a combined income of .5 million and $1 million, they are still having to structure it this way because of the need to tap into the capital funds. In the end that’s what it all translates to – you have somebody that wants to make a move either for personal reasons, for example their family is growing, they’re having another child, etc. or they’ve been living in the same apartment for 5 years and they want change, and they simply cannot afford to go buy something without having that money from selling their current home, yet it’s a conundrum because if they rent in the interim, they are out $50-$60,000 for various moving expenses and rent for a year afterwards.

Q: How exactly do you ensure your client will be approved for the apartment they’re applying for since they’d then be in contract with their previous home?

Jeff: “The whole other part of this equation are the banks and the buildings, right? So the mortgages are based on income, not money you have in the bank. So when they’re based on income, you have to be able to get a mortgage. Also with co-op boards, they’re all over your finances. They want to see what your monthly expenses are, what your debt-to-income ratio is, all of these things. So you really have to walk a very fine line and build a narrative to make our buyers look as attractive as possible to these buildings so they’ll get through the approval process. That’s where Marie’s background in finance comes in and my background in customer service comes in. This is 24-7 hand-holding and it can seem daunting. A transaction doesn’t happen in 15-30 days, it can take 60-90 days and when you’re doing a sell and a buy at the same time, you’re talking 4-6 months before both transactions are completed, although we have done it in less time.

So what exactly does the process look like? Jeff, Marie and Howard give a breakdown on how the process should go with a few easy guidelines. Disclaimer – even though these are set up in easy-to-follow strategies, the process is a lot more complicated than one may think! The customer should always keep this in mind when choosing a broker to work with and make sure they’ve already been through the “sell-buy” process numerous times.

Determine your timeline.

Determine what timeline works best for you and then work backwards from the timeline you’ve created with your broker. Take into consideration any work events, life events, family events, etc. that may be scheduled to happen during this timeline that could alter plans. Is someone in your immediate family getting married? Is someone having a baby? Is someone going on a long business trip/vacation? These are all things to take into consideration when creating a timeline, because once it’s created, sticking with it is imperative.

Selling-Side

Lay everything out on the table with regards to financials, etc.

Laying everything out on the table for your brokers is something that can’t be stressed enough. Questions to ask: Are there enough assets in place to have a down payment or do we truly need to wait until the property is sold until we can tap into the cash from the previous property’s sale? Being honest with your brokers will only help the process!

Evaluate the market/agree on pricing.

Pricing correctly is everything. Working from the timeline you and your broker originally came up with, research and evaluate the market and work strategically with your broker on pricing the apartment to sell and to maximize your return in an efficient period of time. Example: Customer “A” has a six-month timeframe to be in their newly purchased home. Since that’s a constricting timeline, Customer “A” and their broker need to make sure everything is going to run smoothly by ensuring they have every detail of the process figured out. From day one, make sure the property is priced accurately and that all pieces of how the apartment go to market are thought out. Also, it’s imperative to make sure that the apartment is staged properly, the photography is spectacular, the narrative for the listing description makes sense, and that it’s going on the market at the right time. All of these factors will affect how the property does on the market, and will ultimately determine if it sits, or if it sells.

Hit the market and follow the pulse of the listing over the first month, then reevaluate if needed.

In general, it’s easy to know very quickly how the listing is doing based on client feedback. Be sure to listen to what prospective buyers and their brokers are saying about the property and how they’re engaging at open houses, etc. Usually if things are done correctly, an offer will come in within one to two weeks if there are no building issues, such as maintenance, assessments, legal issues, etc. As a rule of thumb, the barometer for knowing if anything needs to be shifted is two weeks. If no offers have come in and there are no serious prospects, it’s time for the seller and the broker to address the issues and talk about how to fix them in a timely manner. Remember: time is of the essence!

Typically in these situations, within one month (and possibly up to 45 days) the property is in contract. Once the home is in contract and the terms of the contract are understood, then creating a narrative and building a story is the next part for the customer purchasing the apartment they’re interested in. Keep in mind this entire time, the broker and customer have been viewing apartments and generally have their eye on one or two homes that they love. They have also done their due diligence and are ready to move forward once their current place is in contract.

Buying- Side

All along this process, the customer and broker have been looking at properties to purchase and will act on a property of interest once the previous property goes into contract. Once the customer is in contract on the new property, they will go before the board in their interview, which is when it’s imperative to create a story to ensure they’re approved.

Create a narrative (for Co-Ops)

It’s all about positioning a buyer strongly, in a packaged and very buttoned-up way, and creating a narrative where their qualifications are properly laid out in front of the board. All of this is built into the financial rhetoric and whoever is on the receiving end of the offer is usually much more comfortable with the financials that are being presented, especially if the funds are not reflected on the bank statements.

Close!

If all goes well, the broker ensures that the timing works out where the customer will close on the original property. Then shortly thereafter, they close on the new property with the proceeds from the sale of the other property.

Over the course of their six-year partnership, Howard, Marie and Jeff have done a significant number of transactions where their customers are buying and selling concurrently. When asked what the most important factor is, Marie says, “If you’re thinking of selling and buying simultaneously, make sure you are working with a seasoned broker who has been through the process numerous times. I can’t stress that enough: Always work with a really seasoned broker! It’s not something I would recommend doing on your own, with a broker who is just starting out or without proper guidance in general. Your broker has to understand all of the red flags and all of the little things that that need to be caught, which will happen if they’re familiar with the process.  Problems do come up every so often and things do go wrong, but in the end, things always work themselves out and our clients are very happy in their new homes once the process is done.