At the Core: A Tale of Two Cities

A Tale of Two Cities

Technology is shrinking the world. The other side of the planet is less mysterious than it used to be. Social media has had a figurative Pangea effect on the planet, pulling every nation and every continent closer to one another one YouTube video at a time.

The effect has the same hold over the business world. Our office is in the heart of Manhattan, but our clients are from all over the globe. They come to New York for a day, or a week, or a month, or even for years at a time, or forever. They love the city, but they still want to know that their investment in it was a wise one. Not only compared to the other properties in a building or in the surrounding neighborhood, but also compared to other properties in Europe or Asia.

As the world shrinks, our responsibility as real estate agents grows exponentially. We are number-crunching conveyors of information. And with so much good information ready to be collect and so many tools to help collect it, really there’s no excuse for us not to offer valuable real estate information about any plot on the planet.

One of our clients recently told us he was leaning toward a new investment in London rather than buying in New York. It was safer, he thought, and many others in his family had done so in the past. He asked us to create a comparison of costs and market trends between the two cities.

Here’s what we found:

The Cost of Buying a Condominium (London vs. New York):

Taxes paid at closing to the U.K. government are significantly higher in London compared to the taxes paid at closing to the city and state of New York. New York saw a recent bump to their mansion tax, while the U.K government is pondering an additional Stamp Duty Land Tax paid by non-residents of the U.K.

 (A Comparison) New York Mortgage Tax and Mansion Tax vs. London Stamp Duty Land Tax

New York

New York State Mortgage Tax (in New York City) — Buyers in New York that obtain mortgage financing are required to pay a mortgage tax based on the size of the loan (not the price of the unit). The amount of the tax is dependent upon the county where the subject property is located. In all five New York City boroughs, a mortgage borrower would pay 1.8% of their loan amount on mortgage balances of $500,000 or less, or 1.925% of their loan amount on mortgage balances greater than $500,000.

New York State Mansion TaxPrior to June 2019, there was a flat 1% Mansion Tax levied against all properties sold at a purchase price of $1 Million or more. There was a lot of buzz about creating an onerous Pied-a-Terre Tax. Instead though, lawmakers altered the mansion tax rule and created a tiered structure that charges a higher percentage to people who buy higher-priced properties. The tax is against the full purchase price.

$1 Million – $1,999,999 = 1%

$2 Million – $2,999,999 = 1.25%

$3 Million – $4,999,999 = 1.5%

$5 Million – $9,999,999 = 2.25%

$10 Million – $14,999,999 = 3.25%

$15 Million – $19,999,999 = 3.5%

$20 Million – $24,999,999 = 3.75%

$25 Million + = 3.9%

London

Stamp Duty Land Tax (SDLT) – -Most homebuyers in England and Northern Ireland pay a Stamp Duty Land Tax. It’s a tiered tax, based on purchase price and whether or not it’s your primary residence. The tax is against the full purchase price.

When Purchasing Your Primary Residence

£125,001 – £250,000 = 2%

£250,001 – £925,000 = 5%

£925,001 – £1,500,000 = 10%

£1,500,001 + = 12%

When Purchasing Additional Property/Non-Primary Residence

£40,001 – £125,000 = 3%

£125,001 – £250,000 = 5%

£250,001 – £925,000 = 8%

£925,001 – £1,500,000 = 13%

£1,500,001 + = 15%

** First-time homebuyers avoid an SDLT on any home with a purchase price under £300,000

*** The U.K. government is considering a new 1% Stamp Duty Land Tax for non-residents of the U.K. who by homes in England and Northern Ireland. This would be in addition to the existing SDLT fees. The surcharge would apply to homeowners that spend fewer than 183 days in the U.K. during the 12 months prior to the date of a property transaction.

Other Closing Costs to Consider

Aside from government taxes, there are other fees to consider when purchasing a property in New York or in the U.K. mostly due to the American practice of obtaining an expensive title insurance policy when purchasing real property, the typical non-tax closing fees in New York are higher than they are in London, but not nearly enough to account for the massive difference between Mortgage/Mansion Tax and SDLT. Ten, twenty, or even $30,000 in title fees isn’t out of the ordinary in New York, whereas in London a buyer might pay a conveyance fee of less than £2000.

Mortgage Rates

Mortgage rates in London were generally about 1% lower than what we see in New York right now.

Lenders in London advertised Adjustable rate mortgages almost exclusively, whereas in New York, we often see 30-year fixed rates advertised just as often.

The State of the Market in London

London had 3,703 annual Transactions in 2018. That number is down in Prime Central London by 15% compared to 2017 and down 45% compared to 2014. For greater London the numbers are down 4% compared to 2017 and 26% lower compared to 2016.

Prices were increasing by about 20% per year from around 2008 – 2014. But in 2018, Prime Central London prices dropped 2.9%. Prices dropped .2% in Great London.

The average price of a home in London was $266,999 in 2008. That average jumped to $473,609 last year. Prices in London were down though by .5% in 2017 and by .8% in 2018.

New construction is typically priced 15-20% above market.

The average home price in London is now 16 times the average salary in the U.K.

High-end transactions are down 25% in London compared to a year ago.

 Brexit Conversation Dominates the News

Uncertainty and hesitation are likely the most common words spoken in any conversation that relates to the London housing market. A lot of buyers and sellers are waiting out a Brexit resolution with a current deadline set for Octobert 31st.

The Bank of England’s Mark Carney said an extreme “no-deal,” hard Brexit scenario could bring spiraling interest rates and a drop in house prices of up to 35% over the course of the next three years. Other forecasts were much less extreme though. Most analysts thought there would be some downward movement no matter what the outcome.

 Taxation of non-resident investors in U.K. real estate (Major Changes made April 2019)

Non-residents had an advantage over U.K. residents when it comes to the taxation of U.K. real estate. But the British government is attempting to level the playing field.

As of April 6, a uniform tax code applies to sales of both residential and commercial real estate and includes non-residents. The tax charges will apply to gains on direct sales of U.K. real estate as well as indirect disposals of U.K. “property rich” interests.

Non-resident companies would be taxed 19%. Non-resident individuals would be taxed up to 20% on gains from commercial properties and up to 28% on gains in the case of residential property.

 

 


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.”


At the Core: Our Trip to Saudi Arabia

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

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

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

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

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

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

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

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

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

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

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


At The Core: Knowledge is Power

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

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

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

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

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

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

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

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

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

Knowledge is Power

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

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

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

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

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

 


The Psychology of your Home

Every day, all day, we help people buy and sell real estate. So naturally it’s easy to get hypnotized into commoditizing properties and to think of them as nothing more than square footage or a bedroom count. We could all use a reminder that the space we live in is so much more than just space.

After members of our team sat with Interior Designer Benjamin Noriega Ortiz, we had a long, in-depth conversation about the impact that our living space has on our personal well-being. Jeff was only half-joking when he said an apartment could adequately function as a therapist. But, is it really a stretch to assume that science might actually support that hypothesis? We seriously doubt you could find any mental health professional who’d argue that someone’s environment has no impact on their emotional state.

After extensive research, we found dozens, if not hundreds, of articles, books, and scientific studies that draw a line between our living space and our mental well-being. We found studies that were conducted here in the United States, in Europe, China, India, Australia, and just about every corner of the globe. Some of the studies focused specifically on architecture, size of space and quality of construction, while others put an emphasis more on comfort, colors and other aesthetically pleasing elements.

With almost no exception, whether it was a blogger, an interior designer, a real estate agent, a doctor or a scientist, there is a consensus: Where we live affects the way we feel.

The conversation we had after Benjamin left our office was pretty amazing, and it made sense to think about real estate in such a personal way. Our homes are our physical and emotional fortresses. They should always be our safe place, but they also have the potential to be our happy place.

Our Homes are a lot like Yours

We love it when our conversations offer clear and obvious perspective. We can only do our job exceptionally when real conversations and real-life experiences provide that type of outlook and it becomes a part of our team’s collective mindset.

The talk we had about our living space provided the most amazing perspective. We thought about how important our own personal living space is to us; We thought about all the time and energy we’ve spent on the smallest details that transformed our own houses into our homes, and we thought about the way we feel when we’re at home.

Just a few weeks ago, Jeff was over-the-top excited about a new dining room table he ordered. On his computer screen, he showed it to the team from every possible angle. While he knew exactly how it would look in his apartment, it could have been the way it felt or the way it looked. But more likely, Jeff was envisioning the conversations and laughs he would share with friends that will gather around it for years to come.

We all have things that do nothing more than occupy our precious living space – things that serve no real purpose and offer nothing to connect with on an emotional level. But everyone in the office could tell by the look on Jeff’s face, that this table was going to make his happy place even happier.

This week Marie described chasing her new beagle puppies for several laps like a NASCAR car driver on a track that started in her kitchen and looped through her dining room and living room before zipping past the starting line somewhere near the dishwasher. When Marie suddenly reversed her course, she caught the puppies off-guard and their momentum made them slide across the kitchen floor and caused a doggy pileup at Marie’s feet that was gentler and happier than a wreck at Daytona. Marie was genuinely, laugh-out-loud happy in her home. And that’s how it should be for everyone.

Our homes play host to so many of our memories, and our friends and family members, and our alone time, and Sunday morning breakfasts, and birthdays and holidays, and children and pets, and home offices and inspiring views. Our homes are where we rest and recover and relax. It’s where we think quietly, away from the distractions of the outside world.

We have so much control over what our living space is, how it looks, and what it ultimately becomes. We control the way we arrange it, the colors we paint it, and the way we accessorize it. We even control the sounds and the smells that glide through and blend into the unseen air that we share the space with.

So much goes into turning your house into a home. But the very first step in making the perfect home is finding the perfect home. At every property showing, and during every phone conversation and every email exchange, it’s all about maintaining the proper perspective. We can never forget just how unique and personal your home will become to you. Finding your home is a huge responsibility; one that we’re honored you’ve entrusted us with.


At the Core: Espinal Adler Team Takes “Full-Service” to a Whole New Level

After eclipsing $100 Million in sales last year, the Douglas Elliman team led by Marie Espinal and Jeff Adler announced their relaunch as the Espinal Adler Team in January 2019.

The veteran duo credits the team’s success to its holistic and hands-on approach with its clients, resulting in consecutive year-over-year growth for a decade by toppling the impressive $100 Million annual sales benchmark.

“I think it’s a testament to the things that we’re doing right, and all the while without compromising the way we service our clients or how we want to run our business,” Espinal said. “We want to advise our clients the way that patients are advised by their doctors.”

That consistent, high-level of service allowed the team to stay focused and thrive in a year that volume was down for a lot of NYC realtors, according to Adler, who prioritized cultivating long-term relationships over chasing the immediate sale.

“Even with all the volatility in this industry and this market, we have consistently grown since we’ve partnered,” he said. “Last year, everybody was down and freaking out. But we were optimistic. Because the way we do business is what the market is shifting to.”

The Espinal Adler team is being built specifically with the client experience in mind. It already had its own Marketing Director, a powerhouse of multi-lingual agents and expert market analysts. But this month, the team took an unprecedented step in adding 15-year mortgage-industry veteran Matthew Jablonski to their roster. Jablonski will serve the team’s clients in an advisory role, completely independent from any bank or mortgage lender.

Jablonski will be tasked with having his finger on the pulse of a constantly evolving mortgage industry, identifying lenders who offer the most competitive rates with the most efficient process, all in an effort to spare the team’s clients from the time-consuming information gathering process. “Our clients should rest assured that we’re in constant pursuit of information that will help them secure the best available mortgage terms,” Adler said.

Jablonski will prepare clients for the mortgage application process and be available to conference with a buyer’s loan officer or mortgage broker to ensure all the right questions are asked and answered. He’s also a trained solutions expert, or as Espinal phrased it, “a thought partner” in the event there are any roadblocks during someone’s mortgage application process. “We want our buyers to get the best possible loan for their needs, and this will help them achieve that,” Adler said.

For sellers, Jablonski will carefully vet pre-approvals when offers are made. He’ll review appraisal reports if a listing property under-appraises and offer alternatives to unnecessarily lowering a sales price.

Espinal said she and her team have worked with Jablonski for over a decade during stops he had at Chase, Mortgage Master and most recently Citizens Bank. His addition to the team will change the homebuying process for clients working through the Espinal Adler Team. A real estate broker is there for their client at every step of the negotiation, both Espinal and Adler pointed out. But, for the most part, a buyer is on their own when it comes to securing funds for the transaction.

“This was the one missing component,” Espinal said. “With the inclusion of a mortgage advocator, it really does become a full suite of services. We think it’s going to make a monumental difference in how a client experiences real estate through us.”

“It’s unparalleled,” Adler said. “How many other real estate teams have their own mortgage specialist?”

Many real estate agents have a decent understanding of mortgage finance, especially in New York City, Jablonski said, but getting to the closing table can be like navigating through a minefield of potential pitfalls. With 15 years and more than 1,500 mortgage transactions under his belt, Jablonski said his familiarity with the process, his understanding of mortgage guidelines and his ability to think like a mortgage underwriter will undoubtedly enhance the customer experience, and just as importantly, Espinal Adler clients will ultimately save money.

“I was in the mortgage business for a long time, but I never crossed paths with anyone that performed the role that I’m taking with this team,” Jablonski said. “It’s new and it’s exciting and it makes all the sense in the world.”

In addition to Espinal and Adler, and now Jablonski, the team includes Marketing Director Cortnie Schultz, and salespeople Joseph Chaplin, Ya (Amy) Wang, Jessica Escobar and Jennings Lee Culver.

 


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

Trump’s Tax Reform and New York City Real Estate

 The Tax Cuts and Jobs Act signed by President Trump on December 22, 2017, has initiated numerous changes to how residential property owners can write off their local taxes and mortgage interest payments on their federal tax returns. It caps state and municipal property tax deductions on federal tax returns at $10,000, reduces mortgage interest deduction caps from $1.1 million to $500,000, and prohibits such deductions on second homes.

But what does this really mean for the Manhattan and Brooklyn real estate markets? Well, we’re here to ask the experts just that: does this new tax law have any effect on the real estate market here in NYC? Initial views on this were mixed, and current market trends reflect those prognostications.

The fourth quarter of 2017, when New York buzzed with a mix of suspicion and sanguinity about its native President’s impending tax overhaul, saw Manhattan housing sales activity at its lowest fourth-quarter total in six years, Douglas Elliman and Miller Samuel reported. This included a 12.3% sales volume softening from Q4-2016 to 2,514 closed sales from 2,868 in Manhattan real estate, an average sale price drop to $1,897,503—the first below-$2M figure in two years—and a 13.2% increase in luxury listing inventory to 1,439, the first increase in nine consecutive fourth quarters. To circumvent the lack of tax-write-off incentives for homeownership the Act would create, cash buyers purchased 51.2% of all co-op and condo units sold.

But why? These trends were due largely to the market cautiousness the Act’s reduction of tax benefits provoked in the minds of many buyers, Miller Samuel’s CEO Jonathan Miller told The New York Times in January. Our very own Steven James echoed this sentiment to Bloomberg and Newsweek: “The buyer is very worried about overpaying.”

The Brooklyn market fared a bit better, perhaps due to its up-and-coming status in New York’s higher-end real estate market compared to Manhattan’s long-established one. Brooklyn’s Q4-2017 closed with 2,627 sales, a 1.7% increase from 2,582 in Q4-2016, causing a 23.1% reduction in inventory over the past year. Brooklyn’s $948,706 average sales price was up 0.1% from Q4-2016’s $947,553, and its median sales price rose 2.7% from $750K to $770K over that period. Its luxury median sales price, however, went down 1.9% to $2.4M over that time frame.

Now let’s dive into the 2018 numbers. Elliman and Samuel’s Q1-2018 reports generally indicated continuation of these cautious trends. Manhattan’s home sales dropped 24.6% from 2,892 sales in Q1-2017 to 2,180, which included a 24% fall in luxury home sales. The average sales price dropped from $2,104,350 in Q1-2017 to $1,933,198 (slightly better than the Q4-2017 showing, however). Brooklyn’s market growth slowed its pace but remained strong: the average sale price reduced from $993,955 to $982,093. Then we have the luxury sales, where the median sales price fell 4.7% to $2.425M.

These reports painted quite a different picture from Dezeen’s rosy reportage that Manhattan’s high-end residential real estate market was “booming, thanks to President Donald Trump’s economic policies and tax cuts for the wealthy,” with a reported overall 27% sales volume increase by the beginning of March. Whatever truth those findings hold may be partly attributable to the downward pressure the market’s highest end was already under, pricing-wise.

Prices in the over-$8M+ market have dropped significantly over the past 18 months, possibly to move inventory faster in light of the Act’s diminution of homeowner tax benefits, even though many of these sales involve cash purchases that make the lowered interest expense write-off irrelevant. (In fact, 90% of Q4-2017’s over-$5M sales were cash transactions, Elliman reported.) To boot, some buyers are actually using Trump’s tax reforms to bargain down home prices so they hopefully won’t get socked with higher taxes once the sales are closed, The New York Times reported in June.

Manhattan’s individual neighborhoods varied in RE market sales percentages over the first half of 2018, most showing incremental increases. Downtown consistently held the largest share of the borough’s market, 36% in January and 40% by May. The East Side carried 19% in January and 20% in May. The West Side went up from 18% to 20%, Midtown increased from 16% to 20%, and Upper Manhattan dropped from 7% to 4%.

Brooklyn’s market softened slightly as well. Q2-2018 sales were 5.7% down from last year’s second quarter, from 2,845 to 2,683, the first such decline after ten consecutive year-over-year gains, though sales increased 11.3% from Q1. Inventory rose 18.5% from Q2-2017’s 2,257 to this second quarter’s 2,675, which was up 30.9% from Q1. This significant inventory expansion followed 11 consecutive quarters of year-over-year depletions. Median and average sales prices both dropped from Q2-2017—$997,654 to $984,047 and $795K to $780K, respectively—with very minimal differences from Q1.

With all of this data being enough to make your head spin, what does this mean to our buyers and sellers who are uncertain about the effects of Trump’s new tax law on the NYC real estate market? The answer is, of course, nuanced, like any complex market. Because of the multiple up-and-down pressures the real estate market must weather consistently, assigning responsibility to any individual cause, trend or force wouldn’t be fair and/or accurate.

“External influences outside of the vibrant city economy such as rising mortgage rates, the potential impact of the new federal tax law, and an unclear direction of the national economy have continued to remain a concern of market participants,” Miller reported in the Q2-2018 Elliman Report on Manhattan sales. Another external influence could be a predicted mass exodus from New York to lower-tax states like Florida, where “you can save a million [dollars] a year,” our own Richard Steinberg told The Real Deal.

So there you go. No omens of a recession or bubble-burst are on the horizon, but cards are being played cautiously in NYC real estate investment, yet with hopeful signs that Brooklyn could be a worthy “Trump” card for the homebuyer or investor. Looks like we’ll have to stick around and see what happens in Q3 and Q4.

Sources


ASK THE EXPERTS | WHAT NEGOTIATIONS IN REAL ESTATE LOOK LIKE

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

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

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

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

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

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

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

Seller: Let’s try $1.6M

(Hits the market at $1.595M…)

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

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

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

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

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

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

(A few weeks later)

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

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

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

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

 

TO BE CONTINUED…


Monthly Gem | 40 Bleecker

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!


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

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!