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tips for sellers:

January 22, 2011

I have to pay a higher interest rate because of a delay in closing, who's responsible?

Q&AToday we have a couple of questions answered by New York City based Real Estate Attorney Keith Schuman, about the closing process on your coop, condo, or loft. After the deal is struck, your attorney and broker will work to get it closed. The road is often smooth, but issues can arise. Having the right representation can really help keep a deal on track.

deed and keys

If a Purchaser must pay a loan extension fee or a higher interest rate as a result of a delay in closing, is the Seller liable for these expenses?
Closings are delayed for many reasons. A Seller has no control over how quickly the Purchaser obtains financing or the timing of the Board's review of the Purchaser's application and the Seller is not responsible if the delays cause the Purchaser to incur additional financing costs. Often, closings are delayed because a Seller has exercised its legal right to postpone the closing or a transfer agent is not available. All of this should be properly explained to a Purchaser at the beginning of the process so that a Purchaser understands and is prepared for the possibility of a delayed closing. This is particularly important as it relates to interest rate locks. Purchasers frequently lock in their interest rate prematurely and may incur additional bank fees if they do not understand that closings are commonly delayed.

What Due Diligence should a Purchaser's Attorney Perform?
Prior to signing a contract, the Purchaser's attorney should review the underlying documents relating to the Coop or Condo. For a Condo purchase, the lawyer should examine the offering plan and all amendments; the bylaws, the rules and regulations of the building (sometimes called the House Rules) regarding pets, guests, alterations, repairs, sublet policies and home occupations, the board's minutes and the financial statements for at least the previous two years. Although there are no financial statements or board meeting minutes available for new condominium construction, the offering plan will outline the potential risks for the buyer and describe the closing fees and procedures. For an existing coop or condo, the Purchaser's attorney should review the materials described above and read the Board minutes and interview the property manager. The attorney's role is to thoroughly investigate and analyze the Coop or Condo's underlying documents as well as the physical and financial condition of the building to uncover any serious issues which would be important to the Purchaser to be aware of when making a decision to purchase in a particular building. Of particular importance are potential or current special assessments to raise additional capital, pending maintenance increases, discussions of the need for capital improvements or other necessary repairs to the building, lawsuits involving the building, and quality of life issues with neighbors or neighboring buildings such as problems with noises, odors and leaks.



About the author: Keith A. Schuman, Esq. is the founder of Schuman & Associates, LLC, a full service real estate firm that provides legal services to its clients, through all aspects of their transactions. Keith is a frequent contributor to comitini.com. Contact him at keith@schumanlawfirm.com or phone 212.490.0100.


June 4, 2009

I'm ranked in the top 2% nationally!

Peter Comitini is ranked in the top 2% of real estate agentsheadroomI learned this week that I have been once again ranked in the top 2% of my company's real estate agents nationally! NRT is the parent company of The Corcoran Group, CitiHabitats, Sothbey's Real Estate, Coldwell Banker, and Century 21— with over 54,000 agents. It is always gratifying to be recognized for producing results, but this citation is even a bit sweeter. The point is made in the testimonial letter below by NRT President and CEO Bruce Zipf; "Your achievement is even more impressive given that your high-level of production occurred during what many now feel was the most challenging quarter of our professional lifetime. You have truly proven that you are the best of the best." Indeed, since the financial crisis blew up at the end of 2008, I've been cited consistently as a top producer, and as a member of Corcoran's elite 'Multi-Million Dollar Club'.

click image to read the testimonial letter

Bruce Zipf citation letter May 2009
In my business, I can only succeed when my clients do. What it actually reflects are the successful outcomes that they have experienced. A number of sellers I've represented had been on the market previously with others. I was able to engage buyers with a visibly superior marketing and sales process for their homes, and closed the deals for them. I negotiated for buyers who's focus was to take advantage of improved home prices and low mortgage rates. We got deals that would not have been possible three months earlier.

Negative stories about the housing market are still abundant, even as glimpses that the worst may be over, begin to show. I believe that this accomplishment shows that while the marketplace sets up a general operating environment, the details of any individual deal are subject to professional knowledge of a much more granular nature. One should certainly consider what the Case-Shiller Index lumps together about single family home prices in New York, New Jersey and Connecticut; but what does that mean when you want to buy a condo on Reade Street in Tribeca? Success is always possible.

May 25, 2009

Summertime to negotiate your best deal?

Manhattan real estate price negotiability

click chart to enlarge
source: Corcoran Group, April 2009, contacts signed

(above) Price negotiability, April 2009: This chart shows that we are negotiating substantial price discounts for buyers, after asking price reductions on many properties. The largest spreads are for three bedroom or larger units. Condo buyers have been able to generally negotiate larger discounts than co-op apartment buyers, which usually come to market as less expensive than condominiums.

Manhattan buyers market reportIn Manhattan, as the weather heats up, the market traditionally cools off a little. That creates opportunities for buyers as offers are often a bit more scarce, and traffic slows down, due to vacations and the weekend migration out to the east end of Long Island. Summertime could be the best time in several years to negotiate for a new home. Conditions for buyers are ideal:
  • Even with discounted asking prices, price negotiability is unusually high for the Manhattan market (see chart)
  • The median price of all properties (condo + co-op) are down 26% in April 2009 from a year earlier.
  • Mortgage rates are at historic lows, with interest well under 5%
  • Inventory remains high, creating an excellent selection of homes for buyers in all price categories
coming to grips with shifting realities
I wrote about the disconnection between buyer's and seller's points of view earlier in the year, when the first quarter report was released: "owners who want to sell are not yet embracing the new realities of the market... Buyers, on the other hand, can be dire in their predictions about the market, fueled in part by negative press and blogs that irrepressibly look for the worst case scenarios." Consumer confidence is substantially up since then. The first quarter was characterized by a lack of transactions, little moved. They remain substantially off from a year ago, but company wide we experienced a greater number of contracts signed in both March and April. This corresponded with both price reductions and the greater degree of negotiability off asking prices that sellers are beginning to conceded to, as the chart here shows. It acknowledges more of an an acceptance by some sellers of the market's state—a psychological adjustment that manifests itself in done deals. Buyers and sellers are beginning to find common ground, albeit not without a bit of haggling over price.

I've represented buyers for the past few months who have gotten great deals, and they have all taken considerably longer to negotiate than usual. I've done deals in Manhattan and Brooklyn, in new developments and resale properties. In more than a couple of instances, multiple offers were present, but the other buyers, convinced that no one was going to buy, were surprised to find out that they had lost the deal. Just because it's a buyer's market doesn't mean that aren't other buyers who recognize value too. It is where having a reliable agent's guidance can be crucial. It feels just as bad to loose the property that you have your heart set on, in any market. Those who did have the common sense to follow my advice, digest the data that I presented, and close the deal, I believe will find that they purchased at, or very near to the bottom. More importantly, they purchased when the confluence of factors cited above allowed them to get a home that they love and are able to afford.

why wait?
Waiting for prices to drop drastically further? Low rate mortgages have contributed recently to the market's affordability, and may well help cushion the downward trend. Apartment inventory, although high, appears to also be stabilizing due to a virtual halt in new development project starts. Consider that a purchaser of a property at $650K, putting 20% down and borrowing $500K at an interest rate of 4.75% will pay $2608 monthly on a 30 year fixed mortgage. If rates rise just 1.75% to 6.50% (a rate we've seen within the past year, and still very low historically), the payment would increase by 17% to $3160 monthly. The property would have to be reduced by another $90K or about 14%, just to achieve monthly cost parity in this scenario, even more for it to be any better of a deal. How likely is that? Moving forward, the unknowns about the economic recovery, how long it will take, and how inflation could put upward pressure on rates, are sure to be a point of debate. But for a person looking to cut a great deal now, live in the property, and hold it for several years, there is little reason to hesitate.

Sellers holding out for an unrealistic price, need to understand that the market has spoken, and every week on market unsold is working against them. Interest rates increasing, and a little more downside in prices are likely in my opinion; but the ultimate timing of these factors is very hard to see with certainty. Sellers need to get ahead of the curve now. Feel free to call or comment with any questions.

related items:
April 2009 Inventory and negotiability report (pdf 420 kb)
Market snapshot, April 2009
First quarter 2009 Manhattan market report


March 9, 2009

Making the best of the Manhattan real estate market

selling a manahattan co-op or condoThe NY Times ran an article on the market downturn in Manhattan real estate. Looking for Bottom in N.Y. Real Estate reminded me of conversations I've had recently with buyers, and it gets to the crux of the slowdown. Sellers and buyers simply are entrenched in their mindsets. Buyers are being cautious of paying too much, and sellers are in denial that their values have dropped. The result is that fewer deals are being done. They call this a buyer's market, yet the irony is that fewer people seem to be actually buying.

“What we’re seeing is a big disconnect — sellers need to get more realistic, but buyers don’t even think it’s enough. Buyers are not hesitating to walk in and bid 40 percent off the price, but sellers aren’t taking it.”
PAM LIEBMAN, CEO, CORCORAN GROUP IN THE NY TIMES

It's not like the phones aren't ringing, and properties aren't being shown. Traffic at open houses has been both decent and steady, but when one gets down to bargaining, it is harder to close the gap. The number of transactions taking place are off by 55% since last year by some reports. Values have dropped, and there is a lot of wild speculation at this point about how far. The correction is real, but in the downtown neighborhoods like Tribeca, the Village and Soho where I work, the anecdotal evidence would indicate that the deals are happening well above 40% off asking. It pains me as I read anonymous comments on blogs from people gleefully looking forward to an economic meltdown in which they can profit. No one likes a bottom feeder, and they rarely close a deal since greed gets the better of them. The market is pricing fear into its bidding and it is as hard to justify it, as it is difficult for sellers to accept that they have lost value.

how does a listing broker respond to the new market?

Some agents would have you believe that the market has absolute control over pricing and that their contribution to marketing the transaction is irrelevant. They will approach this market as a an exercise in financial analysis, and drown in a sea of data. Where is the value of what they bring to the table in that? It does require an approach that is different from a year ago when the market was still climbing. To close a deal today it takes better brokerage, advice on pricing that understands the realities of pricing in the marketplace, and uses the best approach to marketing it available. With less money chasing more listings, can a seller really afford to not have their property stand out? I see the broker's job in the context of market forces (macro influence), and using tactical promotion + pricing + negotiation (my influence). Striking the right balance is crucial to closing a deal in which everyone wins.

marketplace.gif

It is painful to see some sellers making decisions which will hurt them in the short run. Pricing their homes too high, in a declining market, and not closing the deal, means that you are going to be chasing the market down and quite possibly selling even lower in a few months. I wouldn't be the first agent who lost an exclusive to another firm that pitched an unrealistically high selling price to get the business. Agents get to meet buyers by "buying" listings this way. It is a huge disservice to their clients, who will sit and watch their values decline, and reduce their price eventually to a level that they will be pitched on later. The real rub is that level may be lower than it would have sold for if they had listed at a proper go to market price in the first place. I had an unusual year in 2008 in that almost all the properties I listed were taken over from other agents after their exclusives expired, then turned around and closed by me.

A good broker will lay out the hard and soft data that supports asking price, and will actually want to get paid for representing you. The one who walks in with inflated figures, and sells a discounted commission is often someone to be wary of. If you can't sell the property, you'll try to sell the fee, and get the customers. It's the oldest trick in the book. We will have real 1Q/2009 data next month, and while I don't expect it to be pretty, it will be better for the marketplace to know where it stands.

can sellers be successful in this market?

I believe that a professionally represented property will still sell for it's highest price possible, most will trade within a range that will vary and in relationship to it's features, and how well the marketing highlights them. This can still be a surprising market. I had a conversation recently that summed it up. I got a phone call from a colleague who was looking for some advice on pricing an apartment at the Cielo on East 83rd Street, which is a building that I've done some business in. The conversation went something like this:

"Peter, I see you're in contract with your exclusive at the Cielo, I have a friend in a similar unit in the building. Can you tell me what the negotiated price was?"

"Not until after until it closes, but it was not that far away from asking."

"Incredible! The market's is really sputtering, there are 17 apartments listed for sale in the building, but yours is the only one that's gone to contract. Why is that?"

"Since you're asking, my practice operates a bit like a boutique advertising agency. The quality of the graphic design, photos, and overall presentation are things I spend a lot of effort on— I think it makes the difference. We actually had simultaneous, multiple offers, for all cash on it, within just a few days of each other."

Her line of questioning was actually going to "did you have a fire sale?". We did not. It was sold within 5% of asking. Within that conversation are mentioned each of market forces that every real estate deal has in common. Pricing, promotion, and negotiation; subject to the environment of the marketplace. The first three being the levers which a broker can use skillfully to produce results. When your broker gets them right, you will get a closed deal. They work in every market. In this one in particular they are of more value than ever.

October 6, 2008

Corcoran's Manhattan Real Estate report shows price increases, but a more challenging market ahead

have we seen a peak in the manhattan real estate market?
download the latest corcoran report on the Manhattan real estate marketcorcoran reportIt's the question on peoples' minds as the current economic climate puts Wall Street in the national spotlight and the global economy lacks confidence that things will improve quickly. Interestingly enough, the third quarter Corcoran Report on the Manhattan Real Estate Market shows that the overall median price of Manhattan apartments are up 10% since a year ago. Manhattan real estate continued to out perform the national housing and capital markets. Yet, the report also tells us about rising inventory and slowing property sales, giving us important information to adjust buying and selling strategies to meet what clearly seems to be a changing economic landscape. The report looks at new developments and re-sale as different categories, which gives it a bit more clarity about the state of the market in different parts of town. New developments may have gone to contract over a year or more ago and reflect a market which existed then. These were 43% of total sales volume in the quarter; whereas re-sale prices reflect transactions that have sold and closed in a much shorter time frame. Re-sales provide a more accurate picture of current activity. The full picture is broken down by East Side, West Side, Uptown, Downtown, Lofts, Townhouse, and Luxury sub-markets. property shark interactive map of Manhattan salesThe report was once again published in collaboration with propertyshark.com using the most accurate data set available. They have published a great interactive map plotting Manhattan sales by location, volume and price per square foot. Download your copy of the third quarter 2008 Corcoran Report here, and read on for my take on how to best use this data.
prices hold steady, sales are fewer
In the third quarter of 2008 the city's overall market held steady on prices. It did so with a significant dip in the number of transactions; down by a third from a year earlier. The sales which took place were generally at higher price points in both re-sale and new developments. Manhattan apartments reached an average sale price of $1.45M, a median price of $975K, and a price per square foot of $1,180; all substantially up. When taking the new developments out of the third quarter metrics, it shows that individual homeowners, hiring agents like me to represent their properties, did very well— with an average selling price of climbing to $1.394M, and the price per square foot rising to $1,152. The median price for re-sales was flat at $850K.

click any chart to enlarge

all sales (re-sales + new developments) market wide

re-sales only, market wide

housing inventory rises, economic uncertainty slows the market
The news in this report is not really the fact that Manhattan has continued to outperform the national housing market, but that the marketplace is less active. It's not really all that surprising considering the economic news. Many people have decided to wait on the sidelines to see what will happen next. It also takes a larger down payment to buy an apartment today due to tighter credit standards, 20% to 25% down is again the norm. This affects the co-op resale market a lot less since that standard has always been required. Co-op board oversight is one reason why the types of exotic, no documentation, mortgages which have gotten other parts of the country into trouble, are non-existent in the vast majority of Manhattan transactions.

In the charts below we see that sales activity has slowed down steadily since last year, and that apartment inventory is on the rise. Appraiser Jonathan Miller was quoted in the Wall Street Journal as saying that it's a "roughly 8 month supply". So moving forward, we will be seeing a smaller pool of buyers chasing a better selection of apartments.

click any chart to enlarge

manhattan absorption vs. new & total listings



five year trend of sales activity (number of sales)

Sales activity dropped off in the third quarter and inventory has built up to an eight year high. It increased 26% in Q3 2008 ending the quarter above 10,000 units of housing for sale. As mentioned above, this has not yet put downward pressure on prices, but it is clear that serious sellers need to price properly and bring on effective broker representation. There will be few winners in this sort of sales environment where every opportunity is not fully vetted, and creative marketing counts more than ever.

It is notable that unlike other national housing markets, Manhattan has a limited supply of land. Housing is expensive and complex to develop. The pipeline of new developments we've seen coming to market, have a couple of significant valves closing to restrict supply. First the credit crisis itself has slowed the pace of development since October 2007. Fewer projects have been started. Second, the amending of the 421 Tax Abatement program earlier this year has given developers less of an incentive to start new projects in prime areas of Manhattan. Sellers who do not need to sell, will take their homes off the market until the confidence in the economy comes back. So far asking prices are dropping past people's expectations, but in most cases not the most recent comparable sales. While I do see short term rising of supply, I would suggest that market forces are already working to restrict supply just a little further out.

so it's a buyers market?

Well not exactly, the Q3 numbers don't say that, but it would be fair to say that it is trending that way. It is the best opportunity in a few years for buyers to negotiate a great deal on a home. I remember people saying to me just a couple of years ago that there was hardly anything on the market that they wanted. Well they have a good selection now, and I've noticed that people are not shy about making offers below asking prices anymore. Inevitably, buyers and sellers will have different opinions as to value, and my recent experience is that buyers are cautious and trying to price in a safety net for themselves. While understandable, it is important to offer in a realistic range. Everyone thinks that they are overpaying when they buy, and getting too little when they sell— its human nature. It may be that an unprecedented global economic crisis will start to put downward pressure on prices in NYC; but the smart buyer will use this as an opportunity to actually secure a property at a good price, rather than talk themselves into inaction. We have a crisis in confidence right now that is largely perception, we polled consumer sentiment recently and found that 66% of the respondents thought that short term, the Manhattan market would be down; not surprising during a week in which the biggest financial crisis in recent memory was unfolding. Confidence is highly malleable. I think that the landscape fundamentally changes after the U.S. elections on November 4th; and whoever gets in, it will be an improvement over the current administration, and a begin a swing toward more certainty and optimism moving forward. It might seem counter intuitive to some, but I'd be out there looking right now.
how should a seller respond to the changing market?

You might be a seller with a truly unique home— a fabulous one of a kind penthouse with panoramic views, or a historic brownstone restored to mint condition— but if the scarcity of your product is not what makes it special, then you are going to need to compete on price. Sellers need to shake up the inertia in the market and get interest moving. Serious buyers will respond to a price that buyers will see as "attractive" and want to deal with a seller they regard as realistic. You will get offers when there is a perception of fair value. Sellers are competing with more, similar homes, on the market. Make sure that you price yours to stand out from the crowd. There is definitely buyer demand; but it is taking a greater effort from sellers to tap into it.

Look at the truly comparable sold and closed data and use that as your benchmark, not what people are asking. Get ahead of the curve, you'd be better off coming in a bit lower than your competition. Set a very fair price that will get a deal done quickly. I don't see the market conditions improving drastically in the next six months, so seize the moment, and get your property out in front of the crowd. Capture the attention of buyers now before they buy your neighbor's property.

download the third quarter 2008 corcoran report »


April 28, 2008

Its a real estate market!

The Manhattan market has been interesting recently. It is hard to characterize it as either a buyer's market, or a seller's market. Its just a real estate market, and a more balanced one than in the last few years.

continued »

January 2, 2008

Capital gains exemptions on a primary home sale

Happy New Year! Please welcome once again Barbara Corcoran answering questions about avoiding capital gains on the sale of a primary residence and more, in an excerpt from 'Ask Barbara' in the New York Daily News

continued »

December 20, 2007

Manhattan real estate continues to defy gravity

"Last month, the number of closed sales just about matched the number closed in November 2006, and prices were considerably higher, but roughly flat compared with the prices in the previous quarter, according to a review of sales records filed with the city."

continued »

September 24, 2007

Ask Barbara

Today we welcome a Q&A from special guest and real estate diva extraordinaire Barbara Corcoran from her column 'Ask Barbara" in the New York Daily News

continued »

August 28, 2007

How are disclosures different for co-ops and condos?

In Manhattan about 80% of the owned residential housing market is co-op. Condominiums are probably less than 20 %, with townhomes as a small group of select, boutique properties. Purchasing any of them involves some sort of application process. It can be as simple as a request for information between principals in a townhouse transaction, to full finacial disclosure co-op board packages with a rigorous process requiring an interview with a Board of Directors.

continued »

July 5, 2007

Making lemonade at 9 West 19th Street

Now available for download is a complete web brochure for this outstanding property. In a related story, this was a classic case of bad timing for my client, as we were preparing to go to market with 9 West 19h Street, the owners of the adjacent property put up a scaffold; unfortunately obscuring part of the facade of our building for sale. It posed new physical challenges as to how best market the property.

continued »

May 31, 2007

Barbara Corcoran on staging your home for sale

We welcome The Cocoran Group founder, Barbara Corcoran, to the center column here via youtube, to see her recent three part series about preparing your home for sale. They cover several different locations, including one in NYC, but the principles of home staging remain the largely the same for houses and apartments. These videos are full of great tips for selling your home.

continued »

May 29, 2007

Ranked as a top producer for the third straight quarter

I noticed a sign in the window at my barber shop on last Friday which read, "I don't make my business, my customers do". It's simple, but meaningful business wisdom. Earlier in the week, I'd received a letter from Bruce Zipf, CEO of NRT that cited my sales performance in the top 1.6% of the company for the third straight quarter in a row.

continued »

February 18, 2007

The psychology of pricing & achieving critical mass

The New York Times Real Estate section's cover this week is on 'The Psychology of Pricing'. It follows on the heals of last week's cover about presenting properties for sale on the Web titled 'Making Evey Pixel Count', they are both must reads for buyer's and sellers. The pricing article is a particularly accurate assessment of many factors and influences, which might affect how to market a home. Permit me to use it as a jumping point to add some greater depth about how the psychology of pricing connects with the timing of the best opportunity to sell a home.

continued »