ASK THE EXPERTS | WHAT NEGOTIATIONS IN REAL ESTATE LOOK LIKE

Leave a comment

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?

Leave a comment

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.”

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

Leave a comment

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.

Monthly Gem | 40 Bleecker

Leave a comment

Noho’s new 12-story condo at 40 Bleecker Street is our pick for February’s Gem. Broad Street Development brought on Ryan Korban as the interior design master, who Architectural Digest just named on its AD100 list yet again.

While Korban is predominantly known for his work with celebrities like James Franco, Kanye West, and Alexander Wang, along with top fashion labels, the interiors at 40 Bleecker mark his first full condo building. The overall design team on the project is rounded out by Rawlings Architects and Hollander Design, the latter of which will work on landscape at the project. When complete, this 12-story building will bring 61 one- to three-bedroom apartments to the in-demand neighborhood.

The photo the developers shared in the hyperlink above is a mock-up of the building’s lobby that’s currently located at the sales gallery for the project, which is nearing completion. Sales of the condo are expected to be underway early next year.

This is Jeff’s new development obsession for 2018, and rightfully so. It’s a must-see!

Apple Bites | Loring Place

Leave a comment

This month’s culinary attraction is none other than Chef Dan Kluger’s Loring Place, located at 21 W. 8th Street in the heart of Greenwich Village. The restaurant represents the culmination of a lifelong dream for the chef who has cooked in some of New York’s most beloved restaurants for the city’s very best.  Chef Kluger is best known for leading the teams at ABC Kitchen and ABC Cocina as their Executive Chef, the latter of which was famously named Best New Restaurant 2011 by the James Beard Foundation.  No small feat.

Chef Kluger’s skill for creating delicious market-driven dishes marked by unusual flavor combinations has a new home and is on full display at Loring Place via its menu.  Comprised of small and large plates, alike, the dishes feature farms and farmers whom Kluger has gotten to know intimately over his two decades frequenting the Union Square Greenmarket.

The restaurant’s name was inspired by the street that Kluger’s father grew up on in the Bronx.  This beautiful homage to Arthur Kluger is just one of the many ways in which the spirit of the city is so deeply rooted in the restaurant, itself:  from the energy of passersby seeping through its front windows, to the original beams of the late 1800’s building reincarnated as the restaurant’s refurbished tables.  The style of warm, effusive hospitality that’s a centerpiece at Danny Meyer’s establishments, Kluger’s original introduction to the industry, is palpable, as is the culinary craft of years’ worth of experience passed down to the current generation.

Loring Place, simply put, is a celebration of New York and all things local.

Date Your City | Hockney Exhibit at the MET

Leave a comment

Hockney at the MET. Need we say more?

For nearly 60 years, David Hockney (British, born 1937) has pursued a singular career with a love for painting and its intrinsic challenges. This major retrospective is the exhibition’s only North American venue, so don’t miss it unless you plan to travel abroad.  In it, the artist is honored in his 80th year by presenting his most iconic works and key moments of his career from 1960-current day.

Working in an impressive range of media, thoroughly seasoned by his wit and intelligence, Hockney has taken a deep dive in capturing the perceived world of movement, space, and time … yet in two dimensions. The exhibition offers a superb overview of Hockney’s achievements across his chosen media, including painting, drawing, photography, and video. Go marvel at early experiments with modernist abstraction and mid-career experiments with illusion and realism … and take in the jewel-toned landscapes of his most recent work to partake in his exploration of the nature of perception and representation.

The last day to see this exhibit is February 25th!

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

Leave a comment

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!

Monthly Gem | 135 W. 79th Street, #12C

Leave a comment

We often feature shiny new developments as our monthly gems, but they’re not the only kind of real estate that inspires us.  This month, we want to highlight a listing of ours that has truly caught our attention:  apartment 12C at 135 W 79th Street.

There are many reasons why we’re enamored with this 1-bedroom gem.  First is the combination of 10-foot ceilings and abundance of natural sunlight that floods the apartment.  Second are the custom beams and dark hardwood floors which create a wonderful blend of elegance and pre-war charm, augmented by exposed brick walls and custom beamed millwork. (Those looking for modern touches will be pleased by its windowed kitchen featuring dark granite countertops, a Viking four-burner stove-top and a Sub-Zero refrigerator, among other updated features) Third is the location of the Lyons, which is on one of the most desirable blocks on the Upper West, moments away from Central Park. Last, but most definitely not least, is the flexible co-op policy that allows both pied-a-terres and pets.

The combination of these features have created a special place in our heart for this listing, that we’re certain will create incredible memories for the next owner to live here!

Apple Bites | Becky’s Bites

Leave a comment

Some people love bacon, others adore ice cream, and others still can’t get enough of cream cheese, one of the main NYC food groups.

If you are one of these cream cheese lovers, we’re about to make your day: Becky’s Bites has just opened in the East Village to much fanfare. A friend of our team is responsible for bringing her love of cream cheese to the masses via her cream cheese bakery, featuring Beckaroos (think dunkaroos but even more addictive), various mini bagels and scrumptious cream cheese flavors (we recommend the bacon, egg & cheese cream cheese) as well as tiny tarts too . And that’s not all: the venue offers a spread of sweet and savory treats, alike.  If this doesn’t excite you, Becky’s Bites can also be found on Seamless – a sweet bite of perfection from your couch.

Her vision is making NYC as famous for its cream cheese as it is for its bagels. Let’s help make her vision a reality … ‘Meet you there!