Luxury Real Estate

Courtesy of Frederick Peters, President of Warburg Realty

How do co-op Boards manage the purchaser approval process, and are they acting in an appropriate manner when doing so? These questions are the driving forces behind a contentious new bill which is currently before the New York City Council. The bill has been proposed to end hidden discrimination in the co-op selection process; it would require that all Board members sign an affidavit every time they reject an applicant confirming that they have not discriminated based on the New York City Fair Housing guidelines, which are among the most stringent in the nation. The bill would also create some parameters around Board response time: Boards would be given a certain number of weeks to request more information, a certain number of weeks within which to meet or reject an applicant without a meeting, and a final number of weeks within which to render a decision after a meeting.

Last week at The Real Estate Board of New York, members of the Residential Brokerage and Residential Management Divisions met together to discuss the bill and how REBNY should best respond to it. All were in agreement that, as long as they are reasonable and leave the Boards some latitude, time limits make sense. It is simply not fair to punish prospective purchasers, who only want to buy a new home, and prospective sellers, who only want to sell the home they have, by forcing them to waits months for a decision, or by issuing a seemingly endless series of requests for additional information. And of course these delays are particularly dispiriting when the ultimate answer from the Board is a “no”.

The other part of the bill requires a more nuanced response. First, those of us who have been in the industry for many years must acknowledge that co-op Boards do occasionally indulge in discrimination. It is not the norm, but it happens. Many protected categories, including race, children and family, sexual orientation, marital status, and religious faith, have been known to lead to turndowns in certain buildings. That said, the vast majority of co-op Boards act with the utmost integrity in pursuing the greater good of the buildings they manage. Evaluating prospective purchasers occupies a small percentage of their time; most of their work as a group is devoted to overseeing the staff and physical plant of the buildings for which they are responsible. And let’s not forget that this often thankless and time consuming task is done on a volunteer basis.

So the question is: is this bill the most effective way to guarantee that Boards do not illegally discriminate in their choices? I would argue that the answer is no, for several reasons. First and foremost, the proposed law is simply an invitation to litigation. Even if it does not cut back on discrimination, it will certainly discourage any well-informed person from wanting to expose themselves to lawsuits by serving on a co-op Board. Insurance costs for co-op buildings would almost certainly skyrocket. And who would be in charge of all those affidavits? And affidavit or no affidavit, who will admit to discriminating? Often Board members are not even aware that questions they ask are illegal or inappropriate. And some believe that because a co-op Board is a private corporation, these laws do not apply to them.

At the REBNY meeting I attended, Hall Willkie, the President of Brown Harris Stevens, had a terrific suggestion: Board education. Real estate agents are required to complete Fair Housing training. Why not do the same for Board members? One hour each year, why not require that an attorney come in and school the Boards on what they can and cannot ask, or consider, when evaluating a candidate? Before the law is punitive, it should be didactic. I am certain that Board education would substantially reduce discrimination of all sorts in the co-op world. And that would be a win/win outcome for buyers, sellers, Board members, and brokers.

You can read more on www.warburgrealty.com/blog.

Courtesy of Frederick Peters, President of Warburg Realty

Throughout the country real estate is beginning to recover. Unevenly, with false starts and disappointments, as the economy strengthens, inventory is being absorbed. Prices are still depressed, time on the market still extends into the multiple months, foreclosures still abound, but the situation now improves a little bit each month.

Against this backdrop of gradual improvement, the behavior of the luxury marketplace in New York, where prices are rising, there are multiple offers on many properties, and absorption is quick - seems all the more exceptional. Why is it happening? None of us know the complete answer, but I have a few ideas:

· We are a confined market. Manhattan is an island, and an island with little construction currently under way. Between the recession and the loss of tax incentives, developers do not have much in the pipeline. The prewar co-ops are, of course, impossible to duplicate. There has been, without exaggeration, NO foreclosure inventory among the Manhattan co-ops. And we have a vicious cycle regarding inventory: owners won’t sell unless they know where they are going, and since so there is so little for sale they cannot find anyplace to go. So they renovate, or hang on. Inventory stays low. And when good new property appears, ten people are waiting to pounce on it. Someone wins, but for the other nine, there is STILL no place to move. So their properties don’t get listed. And so it goes.

· Manhattan is an international financial and business center. In many respects, our market is driven more by global than by national forces. And since finance is our hometown industry, the behavior of the stock market impacts our real estate market more than it does other locations. That said, real estate is still viewed as a separate asset class which does not always move in tandem with the market. We are also seeing, as we did a decade ago, an interest in bricks and mortar as a hedge against volatility with bonds and securities.

· Our condo market is driven by non-US nationals. They come from all over the world, with buyers from Russia, China, Korea, and Brazil currently leading the charge. For them, New York represents both a secure safe haven for their money and a good buy. Paris, London, Moscow, Hong Kong – the real estate in these cities costs more and (at least in London, Paris and Moscow) the economic situation looks less stable. For a variety of reasons, buyers from the Arab world still prefer London.

· New York is awash in cash. For many in the financial world, the last two years were not at all bad. AND many of the Wall Streeters have also seen their Restricted Stock Units from the boom-years earlier in the last decade vest, creating big windfalls. Certain legal specialties, especially those regarding bankruptcy and restructuring, have had several banner years. And merger and acquisitions activity is soaring in 2011.

· Commuting is a tough life with today’s work schedules. The suburbs were conceived based on a 9 to 5 workday, with Mom at home. With Mom and Dad both working high level jobs often stretching from 9 AM till 8 or 9 PM, boarding that train at the end of the evening, and getting home after the kids are already asleep, doesn’t seem so appealing. So even though there are great buys in Westchester, Connecticut, and New Jersey, a lot of New Yorkers want to stay in New York.

What are some other reasons? You tell me – fpeters@warburgrealty.com

Courtesy of Frederick Peters, President of Warburg Realty

Officially our recession is over. That said, there was more to our recent economic woes than bad mortgages. Too much borrowing by everyone - the Federal government, investment banks, individuals -, a NIMBY attitude towards any sort of economic pain inherent in realigning debt with equity, and the difficulty of competing with incredibly cheap third world labor in our globalized marketplace, all have their part in bringing us to our current economic identity crisis. And we are seeing a similar scenario play out in other nations around the world. So what does this mean for our local real estate marketplace?

First, condos, especially the prime buildings and locations, will be more in demand than ever. The US is still seen as a safe place for money, and buyers from all over the economically destabilized world want to park money here. The recent sale at 15 CPW for $10,000 per foot is only one of numerous examples, although the price is unique. But large units in ultra luxury condo buildings all over town are seeing multiple offers as Russian, Korean, Chinese, European and South American buyers compete for them. Alongside this phenomenon we still see an overhang of smaller condo units from the overbuilding of the last few boom years. Increasingly these units are moving from the rental market, where the developers had parked them while there were no purchasers to be found, back into the sale inventory, where they are being absorbed when properly priced. Increased sales activity in FiDi, Harlem, and the East 20s attests to this. This market for smaller units is at least as likely to be domestic as foreign, and buyers are shopping price point more than anything else. My prediction is that this inventory will be substantially absorbed within 12 to 18 months, and then what? The city’s population is growing but very little is being built. We will move from glut to scarcity – the only condos for sale will be resales. That will put upward price pressure on the existing condo housing stock.

We are already seeing that upward price pressure in the co-op market, especially at the higher end. Admittedly there has been enormous price capitulation in the past two years. But here too the excess inventory has mostly been absorbed and buyers have returned to the marketplace, eager to take advantage of the new pricing. And very little is for sale. Each appropriately priced new listing, whether 7 rooms or 12 rooms, receives a flood of visitors and often multiple offers in the first few weeks. There is far more demand than supply. That said, the dynamic of this process is very different from 2007. Almost no-one pays more than the asking price. Buyers are cautious and care a lot about value, even in the most expensive properties. I do not expect that this situation will change much as 2011 unfolds. Buyers will continue to be astonished throughout the year that there isn’t more to look at.

In 2011 we need to begin to get our national and individual debt/equity ratios back under control, so banks will lend money and creditworthy buyers will have access to it. We need to incentivize our developers to build so we can accommodate the growing population of our city. We need appropriate taxation, Federal, state, and local, which will pay for what we need but will not drive business and opportunity away from New York. We need inventory to sell, and purchasers to buy. And, of course, brokers to manage the process!

Courtesy of Frederick Peters, President of Warburg Realty

Last week I wrote about the advantages of living in a co-op. This week I want to say more about the process of becoming a co-op owner. Buyers at every financial level feel trepidation about assembling a strong, coherent Board package which they must submit to the building’s Board of Directors for approval, and in my opinion many agents do not give enough guidance. So below I have put together a number of tips for making sure your Board package, whatever the specifics, is clear, concise, and doesn’t leave you tearing your hair out:

· Figure out up front if you really want to live in a co-op. Co-ops require FULL financial disclosure, a number of reference letters, and a willingness to adhere to the Board’s rules about renovation, carpeting etc. If this isn’t for you, buy a condo or a townhouse!

· Once you find the co-op of your dreams, make sure your attorney alters your purchase contract to give you at least 15 business days, not 10 as in the standard printed form, to prepare your Board submission. Two weeks is not an adequate amount of time to prepare a good package.

· Remember that the package is your calling card; it is introducing you and your family (if you have one) to a group of strangers. Try to make it as informative as possible.

· Most buildings are looking for at least four social letters of reference. Use those letters to let your friends really give some information about who you are and what you care about. What leisure activities do you enjoy? What sort of family background do you have? What are your philanthropic pursuits? If you have kids, what are they like? The more diverse information the social letters provide, the better. And the best letters come from other co-op dwellers, ideally members of their own Boards of Directors, ideally in the neighborhood of the property you are buying. Always get more letters than you need. At least one of them is bound to be only two sentences long and therefore not of much use.

· The business letters, of which two are usually requested, should be similar: as much career history as possible, combined with the traits which make you a successful and outstanding exemplar of the work you do.

· The most complex part of the Board package is always the financial statement. Most buyers do not keep a running tally of all their assets and liabilities, so assembling them all can be daunting. Here’s how to go about it:

1. Pick an “as of” date. All of your financial information will be compiled as of that date – it should usually be the end of the most recent month (so you can get back up bank and brokerage statements).

2. Begin to compile ALL your liquid assets and liabilities as of your chosen date. Make sure that EVERY number you enter onto the financial statement has a bank or brokerage statement to back it up. The numbers on the bank or brokerage statement must match EXACTLY the numbers you place on the financial statement.

3. Stock options or Restricted Stock Units MUST be vested to be counted.

4. All real estate assets should include either a broker’s letter or an appraisal confirming value.

5. Personal property, such as art, jewelry, or furniture, should be confirmed by insurance binders declaring the insured value.

These pointers, and a knowledgeable real estate agent, should have you well on your way to creating a seamless Board presentation. Every buyer is different, and creating your Board package is an opportunity to tell your story in the most flattering possible light!

Courtesy of Frederick Peters of Warburg Realty

Why do so many New Yorkers live in co-ops? I live in one myself. Are co-ops small minded, snobbish and a huge pain in the neck to get into? Well, no, not really ... Sometimes they can be difficult and seemingly arbitrary in their rules and rulings. But there are enormous advantages to the co-op system. Here are a few of them:

· There is a real sense of shared purpose. Co-ops have always been, and have increasingly become, vertical villages. They are like a small home town. Most have basement amenities such as gyms and playrooms where residents meet, and many throw several annual parties where the residents can mingle. They create a small town feeling in the big city.

· Co-ops are self-governing democracies, observant of the wishes of the residents. And most Boards have term limits, which guarantees that new blood and new ideas make their way into the governance structure. Everyone cares about where they live. And Board service is fun and interesting. I spent many years on the Board of our building on Central Park West, several of them as President. I learned an enormous amount about the running of this little enterprise which has made me both a better neighbor and a better broker.

· Co-ops have a high level of financial solvency. They scrutinize the financial statements of prospective purchasers carefully and tend to discourage excessive borrowing among their constituents. This led to minimal defaults in co-op buildings over the last couple of years where throughout the rest of the country mortgages were being foreclosed right and left.

· Since co-ops tend to have strict rental and residency requirements, your neighbors will actually live in the building with you. You will never have that feeling which can afflict condominium owners in which you feel like you are the only owner who really lives in the building. You know you are surrounded by people who care about the good health and reputation of the building as much as you do.

· New York’s historic apartment stock is mostly co-ops. If you long to live in an old building with high ceilings, large square rooms, and plaster walls – or if you only want an address on Park, Fifth, or Central Park West, chances are you will end up in a co-op.

· While Co-op Board Admissions Committees do sometimes make decisions I disagree with, they are most often both reasonable and perspicacious. They want to safeguard both the financial security and neighborly feeling of their communities. And residents are mostly appreciative of the work their Board members, who are all volunteers, do on behalf of the building. In the end, the Board application process is not a high price pay for the pleasure of the well run community into which you integrate yourself as a co-op resident.

Next week I will write about preparing a Board package and lay out clearly the steps which can be taken to simplify and demythologize the process.

By Garey De Martini of Hill & Co.

San Francisco, CA – (April 28, 2009) – “Why survive when you can thrive?” asks Paula Pagano, a broker associate at Hill & Co. and one of San Francisco’s leading real estate agents. She is the author of Secrets of a Top Salesperson – How Emotions Make or Break the Sale. The book will be sold to the general public at www.SecretsofaTopSalesperson.com beginning May 28th.

Pagano spent years pounding the pavement, dealing with challenging clients, and overcoming numerous obstacles. “I was not a natural born salesperson yet thirty years ago I became the #1 agent in my office for several years and this happened during a recession when mortgage rates soared to 17%,” she explained. With this book, she reveals the secrets to that success.

“The first secret is to embrace all of you,” said Pagano. “That’s why I separated Secrets into three parts: the eight essential virtues, the eight potential vices and how to capitalize on your strengths while minimizing your weaknesses.” Pagano suggests you review what you have done in your life so far and analyze what qualities have helped you along the way.

While teaching for Client Connect, an empowerment sales training program she founded in 2003, Pagano realized that most people give up too easily. “It’s okay to fail and make mistakes—just don’t ever give up,” said Pagano. “A superstar salesperson can be rejected as many as seven times, yet his or her self-esteem remains intact. This may seem like an obvious thing, but most people don’t know how to do it.”

Most importantly, you need to be able to manage your emotions so that they contribute to your success—not hinder it. Pagano points out that it’s important to take care of yourself, first and foremost, to maintain balance. Ironically, Pagano, who is proud to be of largely Sicilian descent with a bit of Irish and American Indian thrown in for good measure, finds this to be her biggest challenge. If you do happen to say something you regret, her recommendation is to stop the conversation before you get hurt or hurt someone else.

Secrets of a Top Salesperson—How Emotions Make or Break the Sale is as entertaining as it is educational. The book is for anyone following their passion because it shows how success comes to those who make life happen. Please visit www.SecretsofaTopSalesperson.com for more information.

Hill & Co.

Founded in 1956, Hill & Co. Real Estate is a San Francisco brokerage long associated with the City’s finest properties. With three offices and nearly 100 full-time agents, the company enables clients to successfully navigate San Francisco’s complex real estate market. Two additional Hill & Co. offices provide property management and rental services. For more information, visit www.hill-co.com.

By Garey De Martini of Hill & Co Real Estate

San Francisco, CA – February 10, 2009 – The property was extraordinary to begin with. Now, after more than a year of seismic upgrades and extensive remodeling, the former church has been transformed entirely into a stunning home, with enormous windows, hand-painted ceilings, warm hardwood floors and top-of-the-line appliances and amenities.

Once a church condemned by the City as no longer inhabitable, the home has been completely redone. Its interior has a modern sensibility about it, in breathtaking contrast to its Gothic Revival architecture. Some rooms, as you would expect, are enormous. Others are surprisingly intimate.

It is a remodel of remarkable scale and vision. Siamak Akhavan, owner of the home and a partner of BMP Construction, is delighted with the results and would be happy to live in the property. But he has engaged the Hill & Co. team of Woodruff & Miller, who represented him on the purchase, and asked them to facilitate a sale should a buyer be interested.

This is a one-of-a-kind property, and it will require a very special buyer. The public rooms give new meaning to the word “spacious”. The home includes a 5+ car interior parking area, spectacular stained glass windows and its own tower, with a custom steel and transparent plexiglass spiral staircase leading to a deck with 360 degree views.

Just a couple of years ago the building was in serious disrepair and abandoned. While occupying a desirable corner in one of San Francisco’s most vibrant neighborhoods, its prospects were bleak. Now, it is a true showcase. It is without question one of San Francisco’s largest, most extraordinary and stunning homes.

For more information and photos visit www.CastleOnThePark.com

Hill & Co.

Founded in 1956, Hill & Co. Real Estate is a San Francisco brokerage long associated with the City’s finest properties. With three offices and nearly 100 full-time agents, the company enables clients to successfully navigate San Francisco’s complex real estate market. Two additional Hill & Co. offices provide property management and rental services. For more information, visit www.hill-co.com.