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 | “How will the tax reform affect buyers and sellers in a real estate market?”

With April right around the corner, and with the first significant tax reform passed since Reagan’s in 1986, taxes are on everyone’s mind. With good reason, as its implications could be significant, depending on your profile.

We thought we would take the time to outline the specific changes at play.  Note: this may be worth a forward to family and friends considering buying and selling real estate in 2018. Importantly, as you may imagine, none of the below will affect you when filing 2017 taxes as the new laws will be first applied in 2018 (filing in 2019).

*Please note that the opinions below are derived from our team brainstorming and analyzing together — the final outcome from these tax cuts is still under consideration and consulting a tax specialist remains the best route to take while tax planning.

So let’s take these changes one by one, and see what’s in store:

  • SALT deduction gets salty: The existing state and local tax deduction, or SALT remains in place for those among you who itemize your taxes, however with a $10,000 cap. As of this new bill, real estate taxes are now grouped together with SALT, and thereby also capped at $10,000.   Previously, you could have deducted an unlimited amount for state and local property taxes, in addition to income or sales taxes; alas, no longer (which has Albany scrambling to create fixes or legal loopholes to bypass this material added burden for coastal blue states, including classifying taxes as charitable gifts … stay tuned on this front)
  • Lower mortgage interest deduction: Those of you who already own a home, you’re in the clear and grandfathered in.  The new home buyers among you will only be able to deduct the first $750,000 of your mortgage debt, down from $1 million previously.
  • No more deducting moving expenses: You won’t be able to expense your U-Haul costs if you relocate for work (did anyone do that?) TBD on whether exceptions will be made for the military.
  • The corporate tax rate is coming down: The corporate tax rate has been slashed from 35% to 21% starting in 2019 – that’s material and has prompted many to call foul.   The alternative minimum tax for corporations has been thrown out altogether, prompting many to call a double foul.  The greatest impact will likely be on stock holders, as earnings are expected to go up as a result of these corporate goodies; lots of debate exists around how much this additional wealth will make its way to employee salaries, if at all.
  • The endangered species of the estate tax: Prior to this tax bill, a paltry number of estates were subject to the estate tax, with the first $5.49 million being exempt for individuals and a whopping $10.98 million of transferred assets exempt for married couples.  Now, those thresholds have doubled at $10.98 million for individuals and $21.96 million for married couples … so who exactly will be paying this?
  • Pass-through entities will also get a break: Pass through entities, meaning owners, partners and shareholders of S-corporations, LLCs and partnerships (who pay their share of the business’ taxes through their individual tax return) will now benefit from a 20% tax deduction.  Although the legislation includes a rule to ensure these owners don’t game the system, tax experts remain concerned about abuse of this provision.
  • AMT minimized: The Alternative Minimum Tax came about from the intention to ensure that people who receive lots of tax breaks still pay some federal income taxes; since, it’s ensnared many W2 filers, accused of taxing working income far more heavily than investment income (aka the truly wealthy).  While the AMT will remain in place for individuals, fewer people will have to worry about calculating their tax liability under the AMT moving forward, as the exemption has been raised by $70,300 for singles and $109,400 for married couples.
  • Tax bracket simplification? Not quite: Americans will continue to be placed in one of seven tax brackets based on their income, but the rates have been lowered: 10%, 12%, 22%, 24%, 32%, 35%, 37%.  While individual provisions in the new legislation technically expire by the end of 2025, many people “in the know” expect that a future Congress won’t actually let them lapse.
  • Doubled standard deduction: Lawmakers want fewer people to itemize their taxes and so they’ve doubled the standard deduction.  Single filers’ deduction has increased from $6,350 to $12,000 and joint filers’ from $12,700 to $24,000
  • Bye bye personal exemption: No longer can you claim $4,050 personal exemption for yourself, your spouse and each of your dependents to lower taxable income.
  • Bye bye alimony deduction: Alimony payments codified in divorce agreements for ex-spouses who earn less money are no longer deductible for the payer.  This provision will apply to couples who sign divorce or separation paperwork after December 31, 2018 so … hurry up and get divorced??? That feels like an off recommendation.
  • Homeowner loss deductions toughened: Losses sustained due to a fire, storm, shipwreck, or theft that aren’t covered by insurance were deductible if they exceeded 10% of your adjusted gross income.  Now through 2025, you can only claim that deduction if you’re affected by an “official national disaster” … hmmmm.  It makes you hope that if your house is destroyed by a fire, it’s by the California wildfires and not little Johnny playing with some matches.
  • Lower inflation adjustments: The new legislation uses chained CPI to measure inflation, a slower measure than previously used; over time, this will raise more money for the federal government, but deductions, credits and exemptions will be worth less.
  • Homeowners’ profits unchanged: Homeowners who sell their house for a gain will still be able to exclude up to $500,000 (or $250,000 for single filers) of capital gains.

Phew!  Quite a list.  We hope this is a helpful compilation of the new tax legislation for you and those dear to you.  We’ll keep you updated on any updates to these changes or related information as it all unfolds.


Ask The Experts | “What is Happening With StreetEasy?”

Question: I am seeing all of this talk about brokerages and StreetEasy… “What is happening with StreetEasy?”

Answer: For years now, brokers have had a love/hate relationship with StreetEasy.

The pros until now have included:

  • For Buyers: Helping to engage the client in the search for their new home, by creating a real-time communication channel with their broker in terms of what they’re seeing and what they like. The site also helped to set clear expectations of what buyers could expect to pay for a certain level of quality, amenities or neighborhood.
  • For Sellers: Helping to level-set pricing expectations by having a real sense of competitor pricing, availability and a sense of comparison to one’s own listing.
  • For Renters: Helping to see in one quick view a majority of rentals available in the market at any point in time, along with setting pricing expectations of what one should assume to pay.

The cons have included:

  • For Buyers: Constantly chasing the next best thing, waiting with bated breath for that alert to arrive in their in-boxes, with the hope that the next listing will do the trick.
  • For Sellers: Giving them the false sense that they could list on their own and that StreetEasy could somehow be a substitute for brokerage services.
  • For Renters: Stale listings used to bait renters into calling the listing agent, or feeling overwhelmed by the sheer number of listings, not knowing which are real.

You see, the name of the game hasn’t been about access or hoarding of knowledge for years. Over the last decade, the brokerage model (for successful players that is) has been defined by a trusted advisor relationship, where the real work happens in the process of getting the deal done. This means strategically preparing the buyer to put their very best foot forward; effectively advising the seller on the right pricing strategy, vetting buyers who are most qualified and would have the highest chance of having the deal materialize. For both buyers and sellers, a broker partner will manage all of the numerous parties involved in a deal (think lawyer, other party, other broker, bank, appraiser, inspector, board, you name it) to ensure no one drops the ball and that the deal actually comes to fruition.

And now, recent platform changes on StreetEasy only serve to highlight the very important role that intelligent, proven and strategic brokers play. These changes are making it difficult to find proper agents online. Furthermore, many brokerages have pulled down their listings altogether which now make searching for a property online woefully incomplete. This doesn’t even touch on the fact that total rental inventory dropped to a fraction of its previous size literally overnight.

Don’t get us wrong: this is not a disparaging post towards StreetEasy. It is a “must-know” reach-out to our readers to highlight the always and ever-present importance of a real partner in the world of NYC real estate. And now, based on these changes, that partnership is even more important to ensure you have access to all of the inventory that’s actually on the market as a buyer, and access to professional marketing support as a seller.

Now, more than ever, your very first search should be focused on finding a real estate broker who can maneuver through the various platforms, in either buying a home or selling it, and manage all the moving pieces to make it happen in your best interest!


Ask The Experts | “Ready To Sell” To-Do List

So you read our piece last month about now being the time to plan your sales strategy for the fall, and you’ve decided “yes, I want to list my home in September.” Great! “And I want your team to be my partner.” Even better! “What should I absolutely do now to make my home sell faster when I do list?”

What a great question! We wish more savvy sellers like yourselves would be open to truly embracing the answers to this pro-active question. There are several things to tackle that, if you do so now, will play to your benefit come fall.

  • Have us walk through the property with you. A broker walk-through will give you all of the tips you need to have your apartment look as fresh and appealing as possible when you pull the trigger. This way, you benefit from the daily experience we have showing and viewing properties, to help your place stand out (or at the very least meet the bar) in the market.

 

  • Paint. You know that incredible hue of red you and your partner found together that just screams “you”? Well that’s precisely the kind of shade that may scream “run” to one too many prospective buyers out there. Although it may seem bland and boring, the primary purpose of the paint is to create as neutral a palette for the apartment to appeal to the most number of people. This is not the time to squeeze your creative juices or exercise your interior design courage.   The secondary purpose of the paint is to help the place look crisp and clean, so it pays to hire someone truly qualified to make sure those edges are sharp and the coats are even.

 

  • Fix. You know that chipped baseboard corner that you stubbed your toe on more times than you can remember? Or that cracked mirror in the bathroom? Or how about the nicked kitchen countertop? Now is the perfect time to fix those little things that you think only you notice. They, in fact, accumulate little by little and add up to an “eh” feeling from buyers walking through your property. There should be as little as possible left for anyone to “fix” when buying the place; you want to make the apartment turn-key, making the decision to buy as seamless as possible.

 

  • De-clutter. We’ve said it once, and we’ll say it again, and again, and again. The minute you decide to list your apartment for sale, it is no longer “your” apartment but a product to sell. You are looking to create a neutral space that when others walk in, they think “aaaaah, I can live here.” This means a picture of you on a sailboat or of your parents in Paris shouldn’t bring that vision to a screeching halt. Those kinds of personal items serve as an heavy reminder to others that someone else lives there, an obstacle to their seeing themselves in the space already. Further, look at all of the “things” you have in your place, and try to get rid of 20-40% of it. The extra shelves, the extra side table, the excess seating, the storage containers … and the closet contents, especially the closet contents. You want to leave room for additional clothing to go in there, sending the message “oh, the closet it so big, they didn’t even fill it.” Ultimately, you are looking to create the physical and mental space necessary for others to insert themselves into it. (Yes, we’re often psychologists in our role.)

 

  • Photograph. Schedule a photography session of your apartment now. “Now? But we’re two months away!” you say. Yes, but flowers are in bloom and the light of the summer sun always helps to show your building off, especially the exterior. Further, you benefit from photographers being far more available now, with more flexible schedules, than they are when everyone is rushing to list in the fall. Take your time, do it right, do it when the time suits you best, and you’ll be better off for it.

Ask The Experts | “How Do I Make My Home Sell Faster?”

Last month, the question we received most was “how is the market?” We hope you have a good sense of what’s happening on the ground in NYC after our last post (which can be found here).  Over the past few weeks, we have heard a consistent set of questions (mostly from referral prospects) around, “how can I make my home sell faster?”  We hope the following helps those among you who are currently looking to sell or on the market, but not getting the results you seek.

We’re going to split our answer into the three driving factors behind the speed of the sale. We believe that the following attributes combined are responsible for how long a property sits on the market.  When you get their combination just right (often as much of a science as it is an art) then you create the perfect storm of selling in a short period of time, for the right price, via an uncomplicated transaction as possible.

Price

First and foremost, pricing is the single biggest factor in determining how long your property is on the market.  Period.  Now that we’ve gotten that proclamation out of the way, let’s expand.

You may have heard us or other savvy brokers say “the market prices your property, not you.”  And this is true – kind of.  Ultimately, “the market” is, indeed, the overarching determinant of how much your property will sell for.  But who is this magical, know-it-all “market”? It’s the sum pool of buyers looking for the kind of property you are selling, and their collective wisdom around what that property is worth.  The more buyers in your market pool, the quicker the market will be to price the property and the more “accurate” it will be in doing so.  There are always outliers, of course, which tend to sway this market price one way or another.  Generally speaking, the market is pretty intelligent.

That said, there are ways to maximize your desired outcome (and there are definitely ways to shoot yourself in the foot).   As the market is made up of human beings, who are not hyper-efficient decision makers individually.  And they tend to influence one another (think herd mentality, group-think and peer pressure).  Natural cognitive biases kick in when stakes are high, which influence market pricing.  This means when people walk into an open house with 20 other prospective buyers walking around, they perk up and feel a need to act if they’re interested.   This also means that if buyers see a property has been on the market for more than four or five months, they feel that something must be wrong with it and don’t include it into the mix.

All of this said, the optimal pricing strategy for a property is to come in at or just below the market price.  This does not necessarily mean that this will be where you end up. It’s easy to say “well, if we start there, then we’ll only negotiate down from there.” Not true!  If you price slightly below the market, the strategy is to get enough volume going to get multiple bids which then drive the price up and shorten the time on market simultaneously. This strategy also maximizes the “new kid on the block” benefit at a right price, by luring buyers in at an attractive price.

Makes sense, right? It still takes some courage or faith that the strategy actually delivers (believe us, it does) and so you shouldn’t be surprised to learn how many sellers price their properties above the market only to see cobwebs form on their listing.  Buyers think they’re not a serious seller, they forego seeing the property, not enough volume generates no offers, and the listing becomes stale in no time, preventing new buyers in the market from seeing it because “something must be wrong with it.” The vicious cycle is fulfilled.

Timing

Timing is everything:  when you list, how often you host open houses in the first two to three weeks of the listing, how often you accommodate buyer viewing requests during that time … all of this matters.  You want to feel a sense of urgency from your broker when you hit the market.  You, in turn, want to make your apartment as available as possible, as often as possible, to give as many buyers the opportunity to include your property into their finalist list.  Volume and frequency are your friends when you list, which is why listing during a peak time makes a difference.  (Remember: once you decide to sell, your apartment is no longer yours; it becomes a product that you must help move.)

Now, on the flip side, if you’re the nicest, smartest kid on the block when few other kids are around, then you can shine, as well.  This requires a modified strategy of maximizing the scarcity of inventory and standing out as the shining star.  Buyers are in the market year-round, some needing to act sooner than later.  There’s always a way to make sure that timing is on your side, and this is where that trusted broker relationship comes in.

Appeal

If you’ve ever seen any cable real estate shows, you’ll be hard-pressed to make it through one episode without hearing about “curb appeal”.  Clearly this is less directly applicable to urban settings but the underlying message still applies:  your property needs to show well.  What does this mean?

It means that buyers need to be able to see themselves in the space; they need to envision themselves living in your place.  Tangibly, this means you must remove as many peculiarities and specificities about you that are in there:  photos of you, eccentric colors that “so express your unique personality”, that funky wallpaper that the two of you picked out on your honeymoon reflecting the inside joke none of your friends ever got … you get the gist.  You need to neutralize your property to make it appeal to as broad an audience as possible.

Further, decluttering is key, as is cleanliness.  You want to create a clean palette that allows others to paint their own pictures of themselves.  Anything stained, torn or broken should be fixed.  Smells should be pleasant (no, you don’t need to bake cookies), and lighting should be inviting.  People make up their minds about a space as quickly as they do about a person: in less than 30 seconds.  “Do I want to continue walking through and discovering this place, or is it not worth my time?”  Eliminate all the possible obstacles to someone saying “no” in their minds.

Especially in this regard, listen to your broker. (S)he sees dozens of apartments every week, if not every day. (S)he has a great understanding of what works and what doesn’t, what will turn buyers off and what won’t.  Once you hire this expert (assuming, of course, you’ve done your due diligence and picked the right partner), listen to him/her.  And if you’re not willing to listen, find someone else, because as fast as this world can move, it’s more of a sprint than a marathon, and you want to make sure you have a trusted advisor by your side, through thick and thin.


Ask The Experts | “How’s The Market”

When was the last time someone asked you “how are you doing?” and you answered back the auto-pilot response “good, thanks” … regardless whether “good” was an accurate answer?

That’s how we feel about the question of “how’s the market?” It’s very easy for most brokers to have a canned answer that projects conditions that incentivize the inquirer to either sell or buy. However, if you know us by now, you know what we’re going to say: “it’s not that easy, and the primary reason for this is that there is no one market. There are a gazillion ‘micro-markets’”:

  • Geographic: Tribeca, Dumbo, UWS, etc.
  • Stakeholder: Seller, investor, occupying owner, etc.
  • Property type: Co-op, condo, single family, etc.
  • Property size: Studio, 1-beds, 2-beds, etc.
  • Pricepoint: <$600, $2MM, $6MM, $10+MM, etc.

And these micro-markets are not stand-alone; they are matrixed, with many different possible combinations. Dumbo investment 1-bed condos <$2MM, UES owner occupied 3-bed co-ops > $4MM, LES investor studios <$800k … you get the gist.  NOW ask us how’s the market. It doesn’t make sense, right?

But you’ve done your research and are ready to get into a full-out debate with your broker on “the market” with a few handy and often sophisticated statistics up your sleeve. Great! Now the only issue is that the data you have, by definition, lags the market. It takes 2-3 months for a closed transaction to appear in public record, after 2-3 months of a closing process post signed contract. We’re talking 4-6 months or more of lag time, which is everything when it comes to having real-time, actionable, intelligent data at your fingertips. For as instantaneous data is, its currency is far from it.  It’s like Venmo: it looks like you just paid someone instantly but that’s a mirage; the payment doesn’t actually occur for 3-4 days. Do not mistake instantaneous access to data for instantaneous relevance of data.

This is where intelligent, observant brokers really make a difference. By being in the market each and every day, through anecdotal data about micro-markets, after understanding historical building data and trends from experience versus charts, brokers continue to be the best source of real-time information. The market is still “old school” in these ways and it takes someone who can put these pieces together to turn it to your advantage and translate all this data into wisdom.  After all, data is just that: pieces of information. You want to not just have the right data, but partner with someone who can harness its power to help you make the right decision at the right time.


Ask The Experts | The Wealth Report Takeaways

As many of you have seen, The Wealth Report was just released, which provides the global perspective on prime property and investment around the world. We’ve been asked several times to share the key takeaways for the investors among you, and for non-investors who are merely seeking a macro perspective on their home ownership in The Big Apple.

So here’s what you can learn:

  • NYC is the leading city that’s home to the wealthiest individuals from across the globe, with 6,570 Ultra High Net Worth Individuals (UHNWI) It’s even outranking London, in that regard. That said, it’s noteworthy that London and NYC ping pong between #1 and #2 in the world for Current Wealth, Investment, Connectivity and Future Wealth, with LA, San Francisco and Chicago all making it into the Top 10.

 

  • The US and the UK continue to be the most attractive investment environment for the UHNWIs, with Lifestyle and Security as the primary driving factors, followed by Safe Haven for Capital and Education for Children. It’s not hard to see why the prediction is that the US and UK will continue occupying the #1 and #2 spots for some time to come.

 

  • We have to mention our published quote on NYC neighborhoods: In NYC, one of the more promising investment opportunities lie on the “Lower East Side, “where gritty meets trendy”, offering authentic New York without the whitewashing. The neighborhood between Houston and Delancey and east of Bowery to the East River is undergoing a transformation, with modern glass-fronted condos springing up alongside century-old red brick tenements, and projects such as the US$1bn Essex Crossing development acting as a catalyst for wider gentrification. Due for completion in 2024, this nine-building project will encompass a 15,000 sq. ft. public park, retail and office space and will be the new home of the Essex Street Market, reflecting the area’s burgeoning reputation for gastronomy and artisanal crafts.”

 

  • In NYC – luxury prices proved resilient (rising 3.5% year over year) – despite the hiccups felt by locals and the local real estate industry. Remember, everything is relative on the global stage, so you always need to look at global investment when you consider future prospects for NYC real estate.

 

  • The promise of federal investment in the US infrastructure has led to expectations of higher inflation and interest rates – pushing the dollar higher. While this does serve to put a short-term damper on foreign investing, the long-term outlook does not appear to be weighed down by such currency fluctuations.

If these highlights piqued your interest, you may want to take a deeper look into the report. There are fascinating insights into what the UHNWI’s are worried about, their shifting spending patterns and much more. Enjoy!


Ask The Experts | The Impact from the Rise of Interest Rates

Interest rates headlines are all the buzz nowadays. Yes, after years, and years, and years of us writing that interest rates have nowhere to go but up, it’s finally happening. Interest rates are on the rise. So we thought we’d answer the primary question we’re constantly being asked about this long-forgotten feeling of increasing interest rates.

Question: “Will the recent rise in interest rates have a big impact on mortgage rates?”

Answer: Rule number one as we talk about rates: interest rates are not mortgage rates. Jumbo mortgage rates react differently than conforming rates; Interest Only ARM rates react differently than 10-year fixed ones. Interest rates certainly influence mortgage rates, but if you’ve ever been rate obsessed and called your mortgage broker asking for a refi rate after seeing some clip on CNBC about the falling 10-year yield, you know that it’s not that simple.

In fact, many financing experts are saying that Fed increases are already “priced in” to mortgage rates – meaning no move, at all. Hah! Go figure. Here’s more from the “pros”:

The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.

Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.

“With this increase well anticipated by most markets, Keller Williams does not expect any dramatic change in the current path of mortgage rates. Rates will likely continue to slowly rise this year barring a change in the economic situation,” said Ruben Gonzalez, staff economist, Keller Williams, in a statement.

“While higher mortgage rates will likely have some downward impact on demand, housing remains very affordable by historic standards and we anticipate another year of healthy home sales despite an environment of increasing mortgage rates,” added Gonzalez.

What we do believe is that mortgage rates will likely trend up.  We therefore anticipate another year of solid activity, despite an upward trend in rates. More aptly put, we believe that local housing dynamics in the city, and supply and demand considerations, will be far more impactful drivers of the NYC market than will rate movements.


Ask The Experts | Pricing Effects from the Second Avenue Subway

There’s a saying in the investment world: “buy on the rumor, sell on the news.” No, this isn’t an encouragement to listen to rumors. Instead, it showcases the general behavioral dynamic of “pricing” in good news before it fully materializes. The idea is that, once the event actually occurs, once the good thing is already in place, the upside of its benefits is already priced in so it’s time to sell.

This is also the case for the 2nd Avenue subway station, as we’ve been asked by so many looking on the Upper East Side.

It would seem logical, now that the new stations are up and running (with much praise and fanfare, might we add) that apartments along the new subway line would experience a sustained uptick in prices immediately and for several months after the ribbon cutting. After all, current and future residents would experience a substantial increase in their quality of life based on both the proximity and utility of the new line.

That said, condo prices experienced only a 5.12% increase near the station from 2016-2017, and are not expected to pop that much further. Why? Because the increased value of the line was already priced in. Roughly speaking, once some initiative is underway, the relative value of that initiative begins to be priced in roughly 1/2 to 2/3 of the way towards its completion … when the light at the end of the tunnel can be seen (pun intended). At that point, the experience of the utility of that thing merely catches up with expectations.

As you might imagine, however, this is a bit different for the rental market, which is representative of a much more transient demographic. During construction, renters who could pay more to live somewhere else did; renters who were willing to put up with the dust and the noise in exchange for lower relative rent did. Now, those rents are likely to jump up to the level of median rents in the neighborhood, plus a bit more due to the premium from the added transportation options. This is all relative, of course, and based on the overall health and trajectory of the rental market, which at this time is marked by concessions due to its overall softening.


Ask The Experts | Pricing and Comps

A truism that all sellers should know: in a rising market, you’re pricing in future gains; in a falling market, buyers are pricing in future decreases; you’re always playing catch-up.

Think about it: anyone selling anything always has a bias of wanting more for that item than the market can bear.  In a rising market, that bias doesn’t hurt you so much.  Buyers are pricing in a premium and are willing to slightly overpay based on the assumption that they’ll more than make up for it over the long haul based on robust market conditions.

In a falling market, however, you’re in a bit of a pickle. On one hand, you don’t want to leave money on the table and price too low. On the other hand, you know that by pricing too high, you risk having one price decrease after another to just meet the market where it is (i.e. below your adjusted expectations).  Chances are, just by the sheer bias as a seller, you’ll find yourself in the latter camp.

One other dynamic feeding into this likelihood: comps.  You see, comps are lagging the market by their very definition.  In a rising market, comps will always be lower than what the market can bear, which is why so many properties end up in a bidding scenario: because where a property was priced is just slightly below where the market is, and buyers are always at or ahead of the curve.  On the flip side, in a falling market, comps will always, always, and (one more for good measure) always guide you to overprice.  Why? Because they represent properties that closed in the past, which themselves are representative of deals that likely closed 3 months ago (the delay in public reporting), which themselves were signed 3 months before closing … meaning comps tend to lag about 6 months behind the market, a falling market. Therefore, if you’re trying to price “at” the market, you should likely try to price at or below where deals were closing at least 6 months ago; this, of course, depends on the speed at which prices are falling.

Otherwise noted: if you’re a seller in today’s market, you can’t afford to price “at” the market.  How do you finesse your way into precisely the right price range at which to negotiate your property?  That’s where an experienced broker partner comes in. If this sounds like we may be tooting our horn a bit, we are.

How many teams can say they’ve successfully weathered more than three NYC real estate cycles … let alone 5? How many of them can say they have a holistic approach to managing all sides of the transaction, along with all its players?  Accomplished, proven real estate brokers are your most significant asset; they know the product, the specific building and history, and understand the respective comps intimately.  There’s no substitute for experience here!    And the key to benefiting from that rich, valuable experience is trust.  Don’t stop until you are in a partnership with a broker whom you trust.  And then, for god’s sake, trust them to leverage their know-how and perspective in your favor.

Points of inflection in market trends (from rising to falling prices, from sellers’ to buyers’ markets) are tricky and require an extra level of expertise to navigate. Make sure you’re in the right hands and then you can keep calm and carry on :).