Ask the Experts: David Halberg Untangles NYC Condo & Co-Op Insurance

This month, we interviewed David Halberg, a Principal of KDB Brokerage Services, LLC, which was established in 2003.  He is a Licensed Insurance Broker for Property and Casualty, as well as Life, Accident, and Health in New York, New Jersey, and Florida.  He has extensive experience working with international clients, as well as individuals relocating to New York.  Prior to founding KDB, he headed the Latin American Crisis Management practice of American International Underwriters for nearly seven years.  Fluent in both Spanish and Portuguese, he lived and worked in Mexico, Brazil, and Chile. We get a lot of questions regarding insurance from our clients, so we figured he’d be the perfect person to interview.

Here’s our Q & A session with David:

Question: What is a Master Insurance Policy?

The Master Insurance Policy of a Cooperative or Condominium is designed to cover the common areas of the Building including hallways, courtyards, and the lobby, as well as the actual Building structure, equipment and apparatus.  In addition, it contains Liability coverage which protects the Building in the event of legal action due to events such as someone injuring themselves in a common area.

It is important to note that in Cooperatives the coverage also extends to the actual structural interior of the apartment i.e. floors, walls, ceilings, but it excludes paint, skim coating, wallpaper, flooring, etc.

Question: Is it Necessary to Review the Master Insurance Policy?

Regardless of whether the unit is in a Cooperative or Condominium, it is crucial that the Proprietary Lease and/or Bylaws, as well as the Offering Plan be examined by a real estate attorney as part of the due diligence process. This review can identify the specific responsibilities of the Building and Shareholder/Owner should damage occur to the unit.  Moreover, many Buildings now require Shareholders/Owners to obtain certain minimum limits of Homeowners Insurance.

Question: What is an H0-6 Policy and what does it cover?

Cooperative and Condominium Homeowners Insurance (HO-6 Coverage) is an essential complement to the Master Policy.  It provides what is often referred to as “walls in” coverage for the interior of the unit.  Under most Proprietary Leases/Bylaws, Shareholders/Owners are responsible for repairing damage sustained to their units including the Improvements and Betterments such as hardwood floors, built-in cabinetry, and tiling.  Moreover, Personal Property such as clothes, electronics, bedding, furniture, artwork, etc. are not covered by the Master Policy, but are protected under an HO-6.

Question: Does an H0-6 Policy cost more for a Condominium or a Cooperative?

Whether the unit is located in a Condominium or Cooperative, the premium for an HO-6 Policy does not vary significantly and the coverage is relatively easy to obtain.  If the unit is located in a prewar Building, it is important to ensure that the policy has Mold coverage due to the frequency of leaks in old plumbing infrastructure.

The cost of an HO-6 policy in New York City depends on a number of factors.  A key one is the Replacement Cost of the unit which is calculated based on labor costs, the square footage of the unit, as well as its interior finishes and appliances.  Other important elements are the construction material and age of the Building, the value of the Personal Property contained within the unit, the existence of Building security such as CCTV, keyed elevator entry, or a 24 hour doorman, loss mitigation components such as sprinklers, and any prior Shareholder/Owner claims history.  Another factor that will affect the cost is the Deductible amount, as well as the selection of Insurer.  Some offer very broad policy coverage and a more client centric approach to claims resolution, while others are not as consumer friendly.

Question: What are the Different Components to a Homeowners Insurance Policy?

Homeowners Insurance principally consists of the following components – Dwelling, Personal Property, Loss of Use, and Liability.

The Dwelling portion indemnifies the Shareholder/Owner for damages that occur to the interior of the unit as the result of a covered loss such as a fire or leak from a pipe.  The Dwelling Limit represents the amount available to the Insured for replacing and/or repairing hardwood floors, skim coated walls, permanent lighting fixtures, countertops, moldings, cabinets, large appliances such as refrigerators, stoves, or dishwashers, tile work, drop ceilings, etc.  Given that NYC real estate is so costly, it normally represents a significant portion of clients’ net worth.  Therefore, it is crucial to accurately calculate the Replacement Cost of the Dwelling.  In other words, should the worst case scenario occur and the unit is completely destroyed, there must be enough funds to reconstruct/repair the apartment to its condition prior to the loss.  Moreover, when financing the purchase of an apartment with a mortgage, the bank will usually require Homeowners Insurance and a Dwelling amount calculated on a Replacement Cost basis, so that it is protected against a catastrophic loss.

The Personal Property section indemnifies the Shareholder/Owner for items such as electronics, furniture, clothing, bedding, portable light fixtures, glassware, silverware, etc.  Essentially, if an apartment could be flipped upside down, it covers everything that would fall on to the floor.  Personal Property is covered on a Replacement Cost basis which means that the Insurer will pay out the necessary funds to purchase a new item that is of like kind and quality, instead of adjusting for depreciation. Separate Limits can be obtained for valuable pieces of jewelry, art, or furs.

Loss of Use protects the Shareholder/Owner in the event of a covered loss that renders the apartment unusable.  For example, a significant leak would necessitate the replacement of floors and possible mold remediation.  Obviously, the Shareholder/Owner could not be present in the apartment while this work is ongoing.  The Loss of Use cover allows rental of a unit of like kind and quality in a similar neighborhood until the apartment is habitable again.

The Liability portion provides protection against Third Party claims should someone get injured in the apartment of the Shareholder/Owner or if there is an incident such as fire that causes damage to an adjacent unit.  The Homeowners Insurance would provide Primary Coverage of anywhere from $300,000 to $1,000,000.  However, a severe incident could result in a claim that pierces through this Limit and that is when an Umbrella Liability Policy would be essential in asset protection.

Question: What Should People know About Insuring an Investment Property?

Investment property units present unique challenges with regards to Homeowners Insurance (HO-6 Coverage).  Normally, a Primary Residence can be insured by a Standard Lines carrier such as Hanover.  However, in the case of an Investment Property, the unit is generally rented out to tenants, so it is not even utilized as a Secondary Residence.  Moreover, Investment Properties are often purchased in the name of a Corporation or LLC.  As a result, the Standard Lines companies have very little appetite for these types of risks.  Consequently, it is necessary to approach Excess and Surplus Lines carriers such as Lexington Insurance Company and Underwriters at Lloyd’s, London, which are generally more expensive.  These Insurers are not subject to the same regulatory framework as Standard Lines companies and, as a result, have greater flexibility in determining the premium charged for a particular risk.  Furthermore, they are required to collect an Excess Line Tax and a Stamping Fee on each policy.  Despite the additional cost, the coverages offered under the Excess and Surplus HO-6 are very similar to the ones described earlier and provided by Standard Lines insurers.

Question: Should Renters Obtain Insurance and should Landlords Insist Upon It?

Investment Property Owners should absolutely insist that any Lessee of a unit obtain Renters Insurance (HO-4 Coverage).  This type of Insurance has three principal components – Personal Property, Loss of Use, and Liability.  Should a loss such as a fire or leak occur, the Lessee would rely on the Renters Policy to replace damaged Personal Property rather than turn to the Owner for compensation.  Moreover, if a guest of the Lessee trips in the unit and is injured, the Renters Policy would respond to any subsequent Liability that might occur thereby mitigating the Owner’s exposure.

Question: Are there Additional Policy Types That People Should Consider?

Umbrella Insurance is simply defined as overlapping Liability Coverage. It protects against claims above and beyond the amounts covered by Primary Insurance policies such as Homeowners or Automobile. Moreover, Umbrella Insurance also provides protection against claims arising from slander or defamation. Coverage is usually offered in $1,000,000 increments and the cost is quite reasonable.

 


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: 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 | “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.

At The Core | Q2 Market Report Summary

Q2 is now behind us and it’s time to take a look at what it’s telling us.  There’s nothing like diving into the data, itself, to complement anecdotal evidence and get a clear picture of the market.

So, here are some of the take-away sound bites from Elliman’s own 2nd Quarter Report:

  • The average NYC sale hit yet another all-time record of $2.19 M – that’s a healthy margin over the $2 million mark that defines the average price for a NYC apartment … no small feat
  • Strong sale prices were driven by two primary factors: more realistic sellers who have been adjusting to the new norm in the market, and the pent-up demand that we’ve seen from buyers either sitting on the sidelines or trying to buy to no avail during the past year
  • The sheer volume of sales was the strongest in 7 quarters, driven by increased inventory and the fear of rising interest rates looming right around the corner
  • Condos continued to fuel the rise of price-points, overall, and the entry-level market (as defined by the combination of size and price – studios and the sub $1 M price-point) continued to be strong and the arena for the greatest number of bidding wars. To that end, make no mistake about it, the sub $1 million market has been hot, hot, hot!
  • The outlook for the upper end of the market has improved and will be stronger than we think this year, as resale inventory has dropped sharply
  • Interestingly, the share of all-cash sales fell by 4% to 42%, the lowest since this metric began tracking 3 years ago. (Still, we’re always in awe that close to half of all sales are cash – keep this in mind when it comes to making an offer on a place you love.)
  • New development prices nudged up over the past year, as did sales volumes, despite their lower share of overall sales volume, and despite the increase in both time on market and listing discount.

 The bottom line for the last quarter is that buyers and sellers continue finding common ground. Sellers have adjusted to the new market reality, and prices have followed suit.  We are in a far more sustainable phase of this market’s growth now.  Buyers and sellers, both, can expect that focusing on the fundamentals will serve them well.


Monthly Gem | 527 W. 27th Street

This month’s gem is paying homage to the summer, and reveling in the indoor/outdoor experience that is all too often rare in the city.  We’re focusing on Jardim at 527 W. 27th Street.  This West Chelsea development truly is a little oasis in the heart of one of the most dynamic neighborhoods of the city.  Home to Hudson Yards, the High Line, and plenty of galleries, this City nook is rapidly developing into its own destination.  When we say it’s a little oasis, we are also referring to its size of 36 units, ranging from 1 to 4 bedrooms, albeit at a generous average of 2,500 square feet.  Isay Weinfeld designed it to maximize the use of greenery in our concrete jungle (which is also the visual reference of its concrete boxy exterior).  An interior garden, the roof top and its terraces will all be overflowing with trees, plants and hanging, lush greenery.  Its interiors are defined by simplicity and warmth, two attributes that rarely come together in such a complementary way.  Amenities include a stunning indoor pool, a spa-like fitness center with a steam-room and sauna, a children’s playroom, and automated parking.  All of this comes at an attractive, accessible price-point as a contrast to the ultra-luxury new development inventory that has dominated the market for the past several years.  If you’re in the market to buy, Jardim will be well worth a look.


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.


At The Core | Now Is The Time To Engage Your Broker

Last month in this section, we strongly advised against betting on NYC, articulating the transition we see occurring in the markets.  Based on the many conversations we’ve had since, this month we’re urging you to engage us if you are in any way considering entering the market as a buyer or seller over the coming months, especially as a seller.  With no further ado, our official headline is “Now is the time to engage your broker!”  There, we’ve said it quite explicitly.

“Why now?” you might ask. “I have plenty of time before the fall.”  It’s very funny for us to talk with clients as they tell us in a relaxed, sit-by-the-pool kind of voice, “we are more than 10 weeks away from Labor Day”, and have us respond in a pot-is-boiling-over voice “you are a mere 10 weeks away from Labor Day!”.  Same facts, different perspectives.

You see, our team believes in being prepared; we believe in doing our homework, being strategic, and doing everything in our power to hit the ground running successfully, selling your property of the highest price we can get you in the shortest period of time.  Doing so doesn’t happen in one week; being prepared takes time, research and planning.

The markets start significantly picking up with the pitter-patter (more often stampede) of buyer feet pounding the pavement, en masse.  We want to capitalize on that increased volume of demand to your advantage starting late-summer, early-fall, when prime listing season beings.  This means:

  • We need to begin talking to you about valuations and real-time trends and metrics we’re seeing.
  • We want to start creating tailored marketing plans that speak to your specific property, in your specific building, in your specific neighborhood.
  • We want an effective narrative that speaks to your target buyers, that’s relevant and impactful.
  • We need ample time to assess any repairs or requisite work that will, in turn, optimally position your property to achieve our objectives.

If you’re even considering upgrading a kitchen or updating flooring, this takes time.  You want to be in the market come fall, not working with contractors and running into the holiday season.

Luck is when preparation meets opportunity, and we like to think that we help our clients maximize their luck of finding “that all-cash buyer” who is looking to pull the trigger next week; or “that quirky family” who wanted that exact ratio of outdoor and indoor living space; or “those empty nesters” who really want that large living area for entertaining in their golden years and don’t care about the small bedroom size.  Real estate is made up of stories that seem anomalous, that seem like the stars all aligned in just the right way to make a deal happen; those lucky sellers!  We like to believe that we create our sellers’ “luck”, and are ghost-writers of such stories …  so long as we have the time and trust to do our jobs the best way that we know how – through hard work, research and preparation.

So let us help all of your stars be aligned and let’s have a conversation sooner than later about how to hit the fall listing season with a magical story of your own!