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Monday, July 26, 2010
Enter Summer
Well I have not had much time to blog, really been swamped with work, but things have been interesting and much different than the first 4 months of the year. Not only was I very busy through about May, my busyness was leading to signed contracts. Since about the end of May I have been bogged down in the stress of bringing deals to a close, which means dealing with banks and their very demanding new standards, especially if one does not fit a very "vanilla" profile. One deal in particular, a Condo, has been really killing me, not to mention about to give my client a nervous breakdown! based on this experience I would say stay clear of Bank of America....if you are self employed especially. They also turned down another very qualified buyer of mine that was able to secure a Jumbo loan from another bank. My buyers are all very educated people making sound decisions to purchase, all long term with substantial savings, income and assets well above what would be considered prudent. They also have me in their ear advising not to purchase unless they plan on owning for at least 7-10 Years among many other data points. Sure there are no guarantees either way, but the longer you hold real estate the more risk of capital loss is mitigated(assuming you are not buying at the top of a bubble!). I sometimes get to caught up in the numbers side of the transaction, but of course the emotional component is as important if not more so to some. I just cant ignore the math, drives my wife crazy, but boy do I look smart when at dinner parties she can tell people we put off buying in late 2006 because I sensed we were in for trouble. (I just listened to people much smarter than I am.)
Just got back to this blog, it's been sitting unfinished for about a week. Today's Monday July 27th, man this summer is flying by! All of a sudden the pace of action has escalated and I have four new offers and counter offers to submit today...we'll see if any stick. I work very hard with my clients to try and assure they are making a prudent decision. But being a consultant, not just a salesperson means sometimes telling clients that a deal just does not make any sense. Last week I had to tell a client that the apartment they wanted to make an offer on, one that they felt would be accepted,would not be very good at almost any price. This was a place they had on the back burner as two other deals had not worked out, so they thought lets tell Keith about plan C and see what he thinks.....me did not think much. They were a little bit shocked at how serious I was as I quantified why this deal did not make sense(poor design, over priced,less than desirable location.) After the fog lifted they thanked me for telling them what I thought...A very sophisticated buyer almost made a big mistake simply because they were worn out. I don't want to name names and give all the particulars of what buildings I am speaking of, although that would be fun to show you one brokers method for breaking it all down.
One very basic, yet important element of understanding price is there has to be a significant discount for a generally poor location. A building on 33rd street and 2nd avenue has to be discounted compared to a similar building on say 77th and 2nd avenue...that is a given. As the market consolidates tepid buyers are going to flock to the best of the best and good location is always a good hedge against a falling market. I have been around long enough to have lived through the bubble years of the mid 80's to the collapse, followed by a bubble to another collapse. I don't know if this is the bottom (I don't think it is) but I do feel that with a careful thoughtful search for a home, there are prices that I believe are safe to purchase at. There are also still many delusional sellers as well and I don't use the word "delusional" as a negative personal attack, just a fact. Recent example, a studio we made an offer on last week. My buyer really, really wanted it and got nervous when he read my proposed initial bid along with supporting comps and just basic price history of the unit. I mean $1247 dollars a square foot for a mediocre studio of 327 F2???? I thought a thousand dollars a F2 was way to generous, but I allowed for the emotional component.....anyway the fact the purchase was made in 2008 would not permit this seller to price accordingly. My buyer with the help of his partner looked at the data I showed him and also did a little of his own research and agreed I was on the money with my thoughts on price. He was willing to "overpay" but not willing to just get plain stupid crazy, up to this point he has managed his finances very smartly and conservatively. We did counter with a very generous amount in my opinion and were bluntly told it had to be a certain price or we should move on....we moved on. A side note is that this unit has been on the market for over 4 months. I have many similar stories, a recent one in Brooklyn with a unit that has been listed, re-listed, price raised, lowered and raised for over a year!!! Still available and I get shit for for presenting a real offer from a qualified buyer.
Note to sellers: If you have been on the market since the Spring of 2010 and have not sold or had some very serious offers, you should seriously re-think your strategy. The first half of 2010 was hot, brisk sales....if it didn't move then....somethings gotta give. I for one think the best case scenario for the Fall is a stable market, I wont get into worst case; really I don't think there will be a worst case in general, it will be segmented across the bloated parts of the market sphere.
So off to work I go, let's see if we can talk some sense into these sellers and their brokers (:
Just got back to this blog, it's been sitting unfinished for about a week. Today's Monday July 27th, man this summer is flying by! All of a sudden the pace of action has escalated and I have four new offers and counter offers to submit today...we'll see if any stick. I work very hard with my clients to try and assure they are making a prudent decision. But being a consultant, not just a salesperson means sometimes telling clients that a deal just does not make any sense. Last week I had to tell a client that the apartment they wanted to make an offer on, one that they felt would be accepted,would not be very good at almost any price. This was a place they had on the back burner as two other deals had not worked out, so they thought lets tell Keith about plan C and see what he thinks.....me did not think much. They were a little bit shocked at how serious I was as I quantified why this deal did not make sense(poor design, over priced,less than desirable location.) After the fog lifted they thanked me for telling them what I thought...A very sophisticated buyer almost made a big mistake simply because they were worn out. I don't want to name names and give all the particulars of what buildings I am speaking of, although that would be fun to show you one brokers method for breaking it all down.
One very basic, yet important element of understanding price is there has to be a significant discount for a generally poor location. A building on 33rd street and 2nd avenue has to be discounted compared to a similar building on say 77th and 2nd avenue...that is a given. As the market consolidates tepid buyers are going to flock to the best of the best and good location is always a good hedge against a falling market. I have been around long enough to have lived through the bubble years of the mid 80's to the collapse, followed by a bubble to another collapse. I don't know if this is the bottom (I don't think it is) but I do feel that with a careful thoughtful search for a home, there are prices that I believe are safe to purchase at. There are also still many delusional sellers as well and I don't use the word "delusional" as a negative personal attack, just a fact. Recent example, a studio we made an offer on last week. My buyer really, really wanted it and got nervous when he read my proposed initial bid along with supporting comps and just basic price history of the unit. I mean $1247 dollars a square foot for a mediocre studio of 327 F2???? I thought a thousand dollars a F2 was way to generous, but I allowed for the emotional component.....anyway the fact the purchase was made in 2008 would not permit this seller to price accordingly. My buyer with the help of his partner looked at the data I showed him and also did a little of his own research and agreed I was on the money with my thoughts on price. He was willing to "overpay" but not willing to just get plain stupid crazy, up to this point he has managed his finances very smartly and conservatively. We did counter with a very generous amount in my opinion and were bluntly told it had to be a certain price or we should move on....we moved on. A side note is that this unit has been on the market for over 4 months. I have many similar stories, a recent one in Brooklyn with a unit that has been listed, re-listed, price raised, lowered and raised for over a year!!! Still available and I get shit for for presenting a real offer from a qualified buyer.
Note to sellers: If you have been on the market since the Spring of 2010 and have not sold or had some very serious offers, you should seriously re-think your strategy. The first half of 2010 was hot, brisk sales....if it didn't move then....somethings gotta give. I for one think the best case scenario for the Fall is a stable market, I wont get into worst case; really I don't think there will be a worst case in general, it will be segmented across the bloated parts of the market sphere.
So off to work I go, let's see if we can talk some sense into these sellers and their brokers (:
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