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Manhattan Loft Guy

Sep. 28, 2013 - diversion is more of a (small) rant about Manhattan real estate "penthouses"

creeping nomenclature is all too common
It's the weekend, but instead of the usual diversion having nothing to do with Manhattan lofts, I'd like to do a short riff on a pice in The Real Deal this week,
When Is A Penthouse A Penthouse? TRD quotes some of the usual suspects (including The Miller, of course) about the entirely predictable if nonetheless disappointing practice of those in the Marketing Division of the Real Estate Industrial Complex stretching the bounds of language. Shameless broker babble, just imagine!!

“Now there is luxury living that feels like a penthouse even if you’re not on the top floor, so in order to fall under that [penthouse] category you need breathtaking views and amazing amenities,” said [an agent who will not be named here]. “They can all be of quality but this has something extra.”

Uh ... no. You can call anything you like a penthouse, but (as TRD notes, getting it half right)

The textbook definition points to an apartment or dwelling on the roof of a building, or any specially-designed apartment on an upper floor – especially the top floor – of a building.

 (Note to self ... research the origin; why a "pent" house??)

I have beaten this drum before, probably most recently in my January 30, elevator does not go to top floor at 258 Broadway, penthouse loft sells anyway (eventually, eventually):

There are penthouses, and then there are penthouses. My understanding is that the term originally referred to a residential unit built on the roof, usually having direct (private) access to at least part of the roof, and usually added on rather than part of original building construction. Of course, in the Real Estate Industrial Complex in which all apartments are “rarely offered” if not “unique”, as words tend to be diluted, the term penthouse came to be used for any top floor unit with outdoor space, then to units on upper floors (not just the top most) with outdoor space, then to some upper floor units without outdoor space. Sigh. 

Sigh, indeed. The indications in TRD are that the problem is going to get worse before it (if it ever) gets better. Apparently, overly enthusiastic members of the REIC will continue to stretch the word past its breaking point, as has already been done (without irony, of course) with "unique".

I get the point made by This Smart Guy, but doesn't it seem self-defeating to attract buyers looking for a specific thing by using that smae name to describe something that is not that specific thing?

Calling a unit a “penthouse” can also be a snappy marketing gimmick, enabling brokers to reel in the subset of buyers who confine their searches to penthouses alone, [The] Miller said. 

'Cuz, you know, buyers "who confine their searches to penthouses alone" are probably doing that because they want "penthouses", alone (only).

I don't suppose anything can stop this Alice In Wonderland approach from getting worse. At least for my niche you will see the stretching when a listing is called "loft-like".

End of rant (diversion) for today. Enjoy the weekend.

© Sandy Mattingly 2013


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Aug. 3, 2013 - New York Times explains "how to land a loft"


I take this personally

The headline feels like Manhattan Loft Guy bait, at least to me: the latest Michelle Higgins Sunday real estate piece in the Old Grey Lady is How To Land A Loft (in tomorrow’s physical paper, on-line now of course). The thesis is that in a tight Manhattan loft market, buying a commercial loft and going through the process of converting it to legally residential space expands the market. True that. Higgins can’t be accused of sugar-coating the difficulties, as her examples include folks who formed an LLC with complete strangers in 2010, paid their share of the LLC’s purchase of the building ($800/ft) around the beginning of 2011 and began renovation, moved in in September 2011 (not sure if that was legal, yet), while renovations continued through June 2012. They have a spectacular loft, now (apparently) a legal residence, which they believe “cost 20 to 30 percent less per square foot than a regular apartment”. It’s nice when it works.

Interesting stuff, not for the faint-hearted (or poorly capitalized). It is one thing to buy into an established residential coop or condo, with a history of operations that establishes that the strangers who will become your new neighbors can run a building for mutual benefit; it is another thing to start a LLC with the hope that all will get along well enough to build out the building and navigate the darn regulatory twists and turns to get legal residence status, and then run the thing for mutual benefit of all. It is one thing to get a standard residential mortgage (even a big one), at favorable rates based on your own credit worthiness; it is another thing to get a commercial loan as part of an LLC (higher rates, higher down payment) and hope to refinance down the line, when all is done. It is one thing to take on all this uncertainty, and project management as a professional developer; it is another for civilians to bite off the same challenges. Again: It’s nice when it works.

Fascinating stuff, and a sober (and seemingly fair) rendition. Having been involved with two buyers this year who considered lofts with Certificate of Occupancy or other Department of Buildings issues (one bought in, one bought elsewhere) I have seen the toll that uncertainty and bureaucratic swamps can cause even sophisticated buyers. (Those folks did not set out to buy such problematic properties, unlike the folks profiled by HIggins.)

cleaning up building issues, literally

The story about the “a green-insulation consultant, bought an 1,800-square-foot loft in the flower district in Chelsea for $970,000” 8 years ago makes for great journalism. First,

“It should have been a 6- to 12-month process,” ... adding that outstanding building issues have continued to thwart her efforts.

(That’s “continued”, as in 8 years later.) Second,

Ultimately, [she] and a few other residents in the 16-unit building who were in the same boat took matters into their own hands. First they tackled the fees accumulating from improperly sorted refuse. “I put on a mask and gloves and started going through our garbage,” she said. “It was disgusting.”

She supervised work on the elevator to make sure it would pass inspection. And with help from neighbors, she cleaned out the basement, clearing it of dusty sinks, old televisions and other discarded items. “We literally got rid of all that stuff, and then because the process took so long, we did that again.”

Sometimes it takes more than money to solve these problems. Eight years later.

That flower district building is pictured in the Times, so it is easy to see which building she has been cleaning up. That’s her purchase on February 17, 2005 on the StreetEasy building page. Only two lofts identified as commercial units in this 16 story building have changed hands since 2004, with 9 others sold without being identified as commercial. (Presumably, this building is like the nearby Capitol Building at 236 West 26 Street, which has a mix of commercial and residential lofts; hence, that energetic owner and [only] “a few other residents in the 16-unit building who were in the same boat”.....)

I’ve hit sales here only once, in my December 15, 2011, 151 West 28 Street loft sells at $694/ft, $400,000 short of triple mint. The data set is not large enough to see if there really is a difference in value between the “few” units in the same (commercial) boat and the others, but so far no one has sold for as much as $1,000/ft, even after mint-y renovations. (My post hit loft #4W as the ‘done’ pole in a pair of done/not done neighbors sold in 2011; the also done loft #4E could not break 4-figures-per-foot when it sold as recently as 9 months ago.

Not for the faint-hearted, my friends!

© Sandy Mattingly 2013

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Jul. 28, 2013 - OYAToMLG the ruthless stagers, revisited

one more time, again
I still haven’t gotten around to tweeting them, so only the most faithful of Manhattan Loft Guy readers checked out my two weeks worth of pre-scheduled vacation posts from the archives earlier this month. (Note to self ….) There’s good stuff, just as there is elsewhere in the archives. As a non-diversion, I offer from One Year Ago Today on Manhattan Loft Guy my July 28, 2012
ruthless stagers, indeed! NY Times nails story about marketing apartments (and lofts!), about a pretty terrific New York Times review of stagers and their (occasional) magic, with a very terrific before-and-after set of photos in the accompanying slideshow.


Those most faithful readers will remember a cross-referenced post from that set of vacation __Years Ago on Manhattan Loft Guy posts:


a link to my July 12, a tale of 2 lofts: did (removable) decor add $126/ft to value of one 32 West 18 Street loft?, a post I wrote after talking at length to Gootman and somewhat with this topic in mind. That was a rare exercise of aesthetics for me, looking at two essentially identical lofts with totally different ‘feels’ because of how they were decorated. There was nothing wrong with the one loft, but that other was just spectacular, a difference accomplished with only a few changes in materials, but mostly with minimalist decor and (especially) window treatments.




© Sandy Mattingly 2013


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Jul. 17, 2013 - memory lane: I don't think this anticipated market change ("end of uber-lofts?") happened

 Five Years Ago Today on Manhattan Loft Guy
You were warned in my July 4 post that you had a couple of weeks of archived Manhattan Loft Guy material coming up; almost up. In my July 17, 2007, end of uber-lofts? (uh ... no), I snarked on a Real Deal article that was long on anecdote, short on actual, you know, facts. (A common theme for the intersection of Manhattan Loft Guy and the Real Estate Industrial Complex, Manhattan Media Division.)

Taking up the challenge, I offered my view that what was predicted would not come to pass, at least not in developments of classically sized lofts in classic loft neighborhoods:

I don’t think this approach will work in Tribeca, for two reasons. Acquisition costs are probably too high to do anything other than a new uber-loft, with bells and whistles to drown out an orchestra. Second, the TriBeCa loft buyer who wants “new” probably wants the bells and whistles. Carriage House Chelsea looks as though it may attract more first-time loft buyers (who else is buying a studio?).

Of course, what killed the uber-loft market after this post was the nuclear winter. That little seasonal thing being now ended, the uber-lofts are back!


© Sandy Mattingly 2013


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Jul. 14, 2013 - memory lane: Real Estate Industrial Complex (kinda sorta) takes on schools and new developments


Three Years Ago Today on Manhattan Loft Guy

You were warned in my July 4 post that you had a couple of weeks of archived Manhattan Loft Guy material coming up; almost up. In my July 14, 2010, Times article disconnect / why developers should build schools UPDATED, I looked at some serious questions about whether and how new real estate developments burden the local infrastructure, including public schools. I got a little distracted with how the Real Estate Industrial Complex, Manhattan Media Division, covers such questions (hint: poorly) but did stay enough on point to make it a worthwhile read. (To me.)

There is a causation issue regarding new developments and ‘hot’ public school districts; I don’t believe that developers target school districts so much as they target economic opportunities. You can persuade me with data, but the New York Times (in this instance) didn’t. Great set of comments on my post, however.


© Sandy Mattingly 2013


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Jul. 11, 2013 - memory lane: 3 for the price of 1, with chills and views


Two Years Ago Today on Manhattan Loft Guy, and 4 and 7

You were warned in my July 4 post that you’ve got a couple of weeks of archived Manhattan Loft Guy material coming up. Don’t get spoiled, but I have a trio from the archives today, one better than yesterday’s two-fer. In my July 11, 2011, victim of 2009 chill, 395 Broadway loft sells quickly at premium, I looked at a 2011 sale in relation to 2009, while in my July 11, 2009, 50 Warren Street closes, off 45% from original ask + 14% off 2005 price, I looked at one of the few 2009 sales as the product of the nuclear winter and in relation to 2005. I like these as real-time in-context attempts to deal with asking prices and past sales of individual Manhattan lofts.

But I could not leave out my July 11, 2006,
Now you see it (and pay for it), now you don’t / what are views worth?, which is one of my very early attempts to talk about difficult-to-value property elements. One day I hit outdoor space, the next views.

Following nicely on my post yesterday about the values of Manhattan apartment outdoor space, The Real Deal segues with a piece about vanishing views and view values. Clearly, views matter, and command a premium. Equally – this being a dynamic market
in a dynamic city -- nearly all views are provisional.

The article talks about a (non)buyer on the seventh floor at 21 East 22 Street with (that day) “city views” and a partial view of Madison Square Park, whose feet got cold when plans were discovered to build a 40-story residence at 20 East 23 Street.

It seems as though in those days there was a fellow named Trump involved in Manhattan real estate; I wonder what happened to him....


© Sandy Mattingly 2013


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Jun. 30, 2013 - what do hang-gliding, beer pong, working out, tech tutorials or walking the dog have to do with Manhattan real estate?

not much (d’oh!)
I was going to leave this
The Appraisal piece from Liz Harris in Thursday’s New York Times (Agent to Client: Here’s the Apartment; Now Let’s Go Hang Gliding) alone, honest. But then I was reading the Times Sunday Real Estate section on-line last night and it (again) stuck in my craw. And I don’t have anything obviously set up as a ‘diversion’ post for today, so buckle your seat belt....

It is mostly a Look!-some-agents-are-people sort of puff piece, which is fine insofar as that goes. (Not my thing, but unobjectionable, dare I say … morally.) And it works as an-agent’s-gotta-stand-out-from-the-crowd piece. But some poor guy let himself be quoted as though he said first the first thing and then the second thing:


“Buyer loyalty is one of the most difficult things to obtain,” said [the guy], who is a certified hang gliding instructor. “You’ve got to have a gimmick.”

I withheld the guy’s name for his own good, with the (naive?) hope that he did not really say “You’ve got to have a gimmick to obtain buyer loyalty.” I hope he said, instead, something like (a) “Buyer loyalty is one of the most difficult things to obtain”, and (b) “becoming known by and to potential clients is really hard”, and (c) “You’ve got to have a gimmick to be memorable when you are competing against 28,000 other agents in Manhattan.” Because if he really thinks “You’ve got to have a gimmick to obtain buyer loyalty”, he’s in the wrong business.

His hang-gliding schtick is like the beer pong guy’s attempt to bond with his 20-something potential rental clients, and like the agent who helped someone learn to play with her technology tools, and like the agent who goes dog-walking with clients: these are attempts to help clients see the agent as a real individual person (not one of
those agents) so that the client remembers to call when she has a real estate need. All good, here. Not my thing, but all good. But if you think a stranger is going to trust you because you stand out in some way … well … that’s a lonely pursuit.

You may begin to buy enough mental time to impress the stranger that you can be trusted with real estate services (like the young woman giving iLessons), but the
stranger becomes a client because she is willing to trust you because of some combination of your personal qualities and real estate expertise. That hang-gliding offer might earn a call when a real estate need arises, but the agent still has to earn trust the old-fashioned way: by showing that client that he is someone to be trusted because of his manner, his expertise, his references, and/or his experience.

The rest is just a gimmick. Few clients are impressed by gimmicks, especially if you’ve identified it as such in The Newspaper Of Record.

Again, i assume the hang-gliding guy knows all this, and hope that he said it but that got edited out. End of rant. Have a nice day.


© Sandy Mattingly 2013


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Jun. 25, 2013 - a forgotten OYAToMLG about agent doubletalk

had this lined up for June 23, but [something, something, something]
This was a perfect post for this past Sunday, but with a succession of open house visits and some social business (actual social business, face-to-face fashion; not social media business) that slipped through the calendar. Had I posted Sunday, it would have been a perfect One Year Ago Today on Manhattan Loft Guy post, as it is I hope it will be a helpful bit of recycling.

In my June 23, 2012,
a troubling line potential sellers hear from agents all the time, I riffed on a puff piece from The Real Deal about real estate agent behavior (Doing deals in pajamas) that includes a conversation between an agent (in her pajamas!) and a neighbor in which the agent offers as an inducement to retain her to represent an owner as seller that she has done many deals in the building and, therefore, has “a roster of people looking to buy in the building”. The post explains why this statement should be more alarming than comforting to a potential seller, and walks through the minefield of New York State agency disclosure that this statement leads into.

Read the whole thing; it is not too long and it holds up pretty well a year later.

As I say there, one of the tragic things about how the Manhattan brokerage industry has perverted consumer expectations is that sellers are conditioned to believe that it is in their interests for
their agent to bring buyers. It ain’t necessarily so.

© Sandy Mattingly 2013


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May. 16, 2013 - OYAToMLG dual agency was in the news


it’s a perennial topic, if also an annual post
I came across a post from (yes) One Year Ago on Manhattan Loft Guy and figured it is worth a re-post because Agency Disclosure is an issue dear to me heart (honest) and the topic has been in the news enough lately to likely cause all the big firms to tighten up procedures, remind agents about rules, warn agents about consequences for not following rules. That was my May 16, 2012,
the Warburg guy wants to take the Dual out of Agency in Manhattan residential real estate, which is a bit of an homage to The Warburg Guy for taking on this topic. I’d love to know if there are any procedures or policies in place at Warburg to prevent agent from taking on this (legal, if done right) form of service.

If you follow the industry rags (or are in the industry) you surely know about
this story a few weeks ago from The Real Deal about an investigation (not an indictment, certainly not a finding) involving a rather well-known agent at a rather well-known firm who may have done a deal “representing” both buyer and seller without having adequately disclosed, explained, and signed up the documents. The part that rattled cages at every Manhattan residential real estate firm that pays attention to such things (I hope there’s 100% overlap of that group with Manhattan residential real estate firms) is that the investigation includes the branch manager and head of the firm, who are statutorily responsible for supervising the agent in question.

A finding (hypothetical, at this point) that the agent did not follow the dual agency rules here will certainly rattle cages; a finding that penalizes the manager and the head of the firm will rattle the whole zoo.

If “agency” is a topic that fascinates you, enjoy! If not, maybe you’ll learn something, and tomorrow is another day.


© Sandy Mattingly 2013


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Feb. 4, 2013 - Manhattan Loft Guy readers are ahead of the Times about loft sale at 32 West 18 Street, by 7 months

though (just) behind the Post
I am sometimes aghast, occasionally enthralled, and once in a while simply filled with wonder at the workings of the Real Estate Industrial Complex, Manhattan Media division. If you are an avid spectator of the Manhattan loft market you will have noted the loft sale at 32 West 18 Street in the Flatiron reported in the Sunday real estate section of the New York Times yesterday; after all, it is said to have taken just two weeks and closed just above ask.

I have noted before that the Old Grey Lady does not claim that there are recent sales in the “Residential Sales Around The Region”, but including this sale in a 2013 newspaper is simply bizarre. Given the timing, even close readers of this blog will be forgiven for not immediately noticing that this sale was, when truly “news”, reported in the New York Post and the subject of my July 12, 2012, a tale of 2 lofts: did (removable) decor add $126/ft to value of one 32 West 18 Street loft?.

Color me filled with wonder, without the energy to be enraged. Can there be a better proof that this feature on a “news” page of The Paper of Record is a wing of the Public Relations departments of real estate brokerages? I very much hope that no one trying to keep up on the market puts any faith in this wing of the Real Estate Industrial Complex, Manhattan Media division. This feature is the equivalent of tombstone ads placed by financial firms announcing their participation in a huge stock or bond placement, except that financial firms buy that space, while real estate firms beg for this free space.

any excuse is a good excuse
The sale of the “3,007 sq ft” Manhattan loft #2A at 32 West 18 Street was reported in the New York Post on July 12, 2012 before the deed had even been filed, apparently because of the media celebrity of the sellers (and the opportunity to pun). I ran with it the same day because I had already been interviewed by the New York Times for a story about staging listings for sale (that later story led to my July 28, 2012, ruthless stagers, indeed! NY Times nails story about marketing apartments (and lofts!)) and the #2A sale just following the sale of the “3,292 sq ft” loft #2B next door was a fascinating laboratory in which to study how non-structural elements and presentation can impact value.

Here is the key takeaway from my July 12 post about two essentially identical-in-2007-and-little-changed-since-neighboring-lofts:

What amazes me is how different the lofts feel, yet how much of that difference will be absent after these two sellers moved out. When all the windows are open to 18th Street, and all the rugs and furniture and art work is gone, the lofts will look much more alike than they do in the listing photos. #2A will still have a limestone floor in the large public room, and the black-and-white fireplace wall will still be an eye-catcher, but you probably won’t then notice the difference in ceiling lights or levels.


One more time: I believe that these bits of ephemera drove most of the $92/ft difference in value in favor of #2A in 2012, more than erasing the 2007 difference of $34/ft that used to be in favor of #2B.

(That conclusion follows a long analysis of the respective listing photos and an [unusual for Manhattan Loft guy] aesthetic discussion.)

That July 12 post remains a personal favorite. The New York Times piece in that July 28 post is my best personal exposure in the Old Grey Lady. I should be thankful for her craven participation in the Real Estate Industrial Complex, Manhattan Media division for any excuse to hit those two posts.

Aside from the PR person at either the listing firm or the selling firm who deserves a bonus for persuading the Times to put a July sale in a February newspaper, does anyone else think this is a good use of “news” space?

© Sandy Mattingly 2013

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Oct. 15, 2012 - hard to believe we are talking again about coop boards' power to reject price as too low

if New York Times front pages it, ‘we’ are talking about it
I will confess to a dropped jaw on seeing tha main article in this past Sunday’s New York Times Real Estate section: Board to Buyer: Nah. Not at That Price. Seriously. Again?? Reporter Michelle Higgins found 4 lawyers, a seller, a buyer, two agents, and (of course!) The Miller to talk about a horse that I had hoped had been long ago left for dead: the power of coop boards to reject a buyer solely on the basis that the board thinks the price is ‘too low’. (The seller, buyer and one of the agents all spoke about one specific deal in Hudson Heights; one of the lawyers is also a board member.) I guess this is a ‘problem’, at least for that noe lawyer’s clients. that other lawyer’s fellow coop board members, that the musician buyer and musician seller (and his agent). I’ve been (uncharacteristically?) emphatic that I don’t think this is a problem a board should concern itself with, but before we reprise that emphatic stuff, let’s see how Higgins teed up The Problem.

whose problem is it, anyway?
I am going to try to be scrupulously fair, by quoting all the people who weigh in on this silly topic, so that they put the best spin on their (sometimes) silly positions. That first lawyer addresses it from several perspectives:

“In the last month,” said Aaron Shmulewitz, a real estate lawyer, “I must have had 5 to 10 questions about that from various boards that have turned down or have contemplated turning down purchases for price, as well as various purchasers who contacted us for being turned down.” .

“I don’t know if prices have gone down, or if boards are expecting the price to go up,” he added. But the incidence of board rejections because of low sales prices has been “markedly increasing.”

The disappointed seller got the story straight from the horse’s mouth (to persist in equine figures if human speech):

[that seller spoke] with two board members and the building’s sponsor, who all confirmed that price had been a deciding factor. “It’s a business problem,” she said. “It’s not good business for them to sell apartments for a low price.”

Another lawyer has written a New York Law Journal piece on this, which I remember having seen reference to, but not having ready (it is behind a paywall, as I recall). Her contribution to the Times yesterday:

“a board’s price-based rejection of an apartment transfer is much more likely to be protected and insulated from challenge in 2012,” said Eva Talel .... “I think courts began to feel a greater comfort level in addressing the issue of the scope of the board’s business judgment to deal with what is a legitimate concern for buildings,” she said. “If prices are not sustained at a certain level, then it would likely have a negative impact on the values of other apartments.”

The lawyer / board member

said sales price had not been an issue there until earlier this year. “Suddenly, there were three or four apartments that came up, all of which were significantly lower than where the apartments had been previously selling for,” he said.

But rather than flat-out rejecting applicants who otherwise would have passed muster with the board, he said, “we actually took a chance and raised the issue with the broker and individuals and said, ‘Listen, before we say no to this application, we want you to know it’s because of this, and if you wanted to submit a different contract price, very likely no would be yes.’ And people did in fact come back.”

That’s the sum total of Team Turn ‘Em Down. But among the people who spoke out against this (heaven forfend) so-called solution to a “markedly increasing” problem, these two quotes from Team Get Out Of The Way stood out:

“The irony,” Mr. Miller said, is that “by being too aggressive in policing transfers of property in your co-op, you can actually make it worse.” When apartment deals are repeatedly turned down because the board wants a higher price, the properties end up lingering on the market. The inference, he pointed out, “is they are overpriced when they’re not.”


“This always says something to me about the board in the building,” said Ms. Cole, the broker who represented Mr. Bergeron, the trumpet player, “and it sends a really bad message. Now, when working with a buyer, I say: ‘By the way, just know there was a board turndown here with a cash buyer, and they pulled the rug out from everyone. So buyer beware.’ ”

Having given them their own words, let me sum up, emphatically but not unfairly: the articulation of Attorney Talel (“[i]f prices are not sustained at a certain level, then it would likely have a negative impact on the values of other apartments”) is a fundamental mis-reading of how The Market works and is a ridiculous (!) attempt to claim ‘power’ a coop board lacks; that it is also ineffective to accomplish its stated goal is a less important but also fatal flaw.

this horse has been beaten before
The Daily News ran a similar article 6 months ago, New York Magazine did it a year ago, and The Real Deal flogged a Habitats magazine piece about this more than 3 years ago. After each media outburst, I dutifully made an extended argument (the one summed up in the prior paragraph) likening the powerful coop boards to old King Canute on the beach. Go back and read my April 1, "price floors": the staggering stupidity of some coop boards, my October 26, 2011, NY Mag goes there: do coop boards reject prices as 'too low'?, and my June 19, 2009, power of a coop board to reject a deal as "too low"??.

I am once again going to use that big block from June 2009:

coop boards protect value like Canute protected beaches

Having been a coop board president in a small Manhattan loft building for ten years, I can't think of any other 'reason' for the board to reject a deal because of price than that articulated by the sighing lawyer: the board absolutely has "an obligation to protect the property value for the rest of the people." My considered judgment is that the solution (rejecting a shareholder's application to sell and get out because remaining shareholders will be struck with a bad comp) has nothing to do with the purported problem (fear that units will be worth less after the sale than before it); even putting aside for the moment the harm the board would do to one specific shareholder and the risk that other shareholders will be left dealing with a fellow shareholder who may be financially strapped (after all, is selling at a 'distress' price) and will be emotionally pissed.


For a board to insist that market value contracts will not be approved actually says this about units in the building: they have no value because they are unsaleable; any price that is low enough for The Market to accept is too low for us to approve.

to take one more shot at it....

  • boards don’t set values; only buyers and sellers set values
  • a  (truly market) sale that remaining shareholders view as a bad comp is a manifestation of the market as it existed for that unit at that time
  • a board that thinks that when it rejects a sale as too low it is actually protecting remaining shareholder value is, in fact, publicly stating that there is no current market value for units for sale

I am surprised that some of the smart people quoted in the New York Times disagree with me about something that I consider to be obvious and true. And if that writing lawyer is right about how courts approach this, I am surprised that a judge would not agree with me. But, having thought about it a good deal from the perspective of seller, buyer and coop board (3 roles I have had), I see no merit in the (naive) belief that coop boards can correct market values by rejecting arm’s length deals and I view it unwise and imprudent, even if boards have that ability under the law.

Read the string of posts for more words, driving to the same end point.

there are board actions that increase value, just not this one
If boards really want to increase the value of units, they can spend money on improvements that will increase value (common areas, for example), increase the reserve fund, or refinance or pay down the mortgage; they can also adopt policies that make it easier for shareholders to sell (eliminating restrictions on open houses, for example). If boards want to avoid market sales that are deemed to be bad news for shareholders, they can work with distressed sellers to, for example, permit a sublease on better terms for the owner.

© Sandy Mattingly 2012

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Oct. 13, 2012 - reprise: the square foot problem, its obvious (!) solution, and the horror that it will not change

a long time ago on a blog very near at hand...
For some reason I had someone comment this week on a rather old Manhattan Loft Guy post, reminding me of that November 3, 2010, the square footage dilemma: REBNY "leads" by protecting brokers, not buyers. That’s a keeper that I should refer to more often, as it is my one attempt to systematically address the age old problem that the square footage measurements used in marketing apartments or lofts … (trying [again] to be gentle here …) lack credibility. That post was prompted by a then-recent REBNY memo to residential brokerages and agents about the problem that

often one of the key factors for a buyer in their decision to purchase is a calculation of the cost or price-per-square foot of an apartment or townhouse

As you will see in that post (and have probably already guessed) that REBNY all-hands memo made no attempt to help consumers on this issue, but provided detailed advice on how firms could avoid legal liability when they quote square footage measurements that turn out not to be accurate. In short, that advice is to tell

buyers that all square footage estimates are not to be relied upon

BUYER: how big is this unit?

AGENT: 1,200 sq ft, but you can’t rely on what I just told you

BUYER: is there anything that you say that I can rely on??

AGENT: ummm

That’s supposed to be a good business practice, poobah approved.

Of course I made a suggestion. Read the whole post, really. But here’s the money quote:

If (a) you don’t have a number in the Offering Plan, and (b) you don't want to measure or pay someone to measure (it’s too hard!!), and (c) you don’t have another reasonable basis for estimating, then REBNY should have a rule that you cannot quote a measurement. At all.


Would this system be perfect? Hello??? Of course not. But it would be an improvement.

Note to self … link to the November 3, 2010 post any time I talk about the funky measurement issues regarding a particular loft.

© Sandy Mattingly 2012

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Jul. 17, 2012 - bromancing The Miller: squiggly chart explains (not quite) everything about Manhattan real estate trends

this is old, but so am I
You don’t have to be a long-time reader of manhattan Loft Guy to know I have a thing for The Appraiser Who Must Be Named, aka the appraiser who must be named The Miller as a sign of respect for his very public efforts to increase transparency in the Manhattan residential real estate market. His 3 Cents Worth series of now all-too-occasional charts on Curbed includes this gem from June 5, Condo Inventory At Low Tide In Sea of Bad Analogies, which with 7 years worth of squiggles and bars of monthly inventory data and text arrows, provides a snapshot of the overall Manhattan residential real estate market since early 2005.

Without tracking prices or volume, this chart packs a wallop. I suggest you bookmark it, as it is worth repeat visits.

The Miller’s focus in this chart is on new condo development sales as a percentage of all sales, and on the relationship between condo inventory and coop inventory. Long-time readers of Manhattan loft guy and anyone else familiar with the macro stats for this market are familiar with the trend points of 2007 being the year of greatest sales volume, The Peak in recorded pricing landing in the first quarter of 2008, the September 15, 2008 Lehman Brothers bankruptcy filing establishing a bright-line Before-and-After, what I usually term the nuclear winter settling in right after Lehman, followed by a thaw beginning in mid-2009.

With this chart, The Miller layers in the power of new development sales (and 'easy' credit) in driving the overall Manhattan market beginning in early 2006, then the beginning of credit tightening in the third quarter of 2007, bringing a slowdown in coop and condo resales but not (yet) in new development sales, because of the longer time-lag between signed contracts and new development closings. That trend was exacerbated by the Lehman bankruptcy, as overall sales volume plummeted. By mid-2009, the new development condo pipeline was thinning, and a year later coop inventory overtook all condo inventory, a return to the historical norm that had not been seen in 4 years of Froth + Peak + Trough + Thaw.

Great stuff. Play with it. Internalize it. (Or live a normal life; it's your choice.)

© Sandy Mattingly 2012

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Jul. 1, 2012 - Sunday driving: down memory lane for October 2008 predictions about New York real estate

not quite all of the usual suspects
Keeping up the lighter weekend fare, while staying away from the bread and butter of closed Manhattan loft sales for another post, I came across a piece from the New York Daily News with a fascinating title, given the publication date: Top property professionals assess New York’s real estate market, October 31, 2008. Those were the days, of course, when the overall Manhattan residential real estate sales market was newly into the nuclear winter that followed the Lehman bankruptcy filing on September 15 that year. Jason Sheftell spoke to a range of developers, lenders, construction people, and brokers to get paragraph length predictions from each, but somehow overlooked my personal go-to guy (The Miller).

Read the whole thing, unfortunately dragged out into 4 clicks on the inter-tubes. Sheftell’s real-tme overview:

You won't see empty plots of land being scooped up and your neighborhood will be safe from overdevelopment for the time being. You will, however, continue to see a sharp decrease in apartment and home prices that should inspire home buying from people with strong credit or cash on hand.

Some of my favorite nuggets:

I would guess that it will take about two years for things to even out nationally and globally and fortunately the city is solid enough to ride out this situation. [from some ‘hair’ with ego]


Typically, in these times you see an increase in infrastructure developments - something that from a sustainability and economic engine standpoint, the entire region needs for future development. [a buldiner who failed to anticipate Mitch McConnell’s #1 priority]


The Wall Street crisis and major decrease in the bonus pool that has largely driven the market, combined with the weakening euro, will affect the residential sector so that we should see a steady decrease in prices over the next six to 12 months. [a lawyer]


our city is indeed the center of the world. While the world is facing tough economic challenges today, New York will recover better than before, especially if our mayor is reelected. [a politicking developer]


I believe these conditions will lead to a modest decline in the short term, with a recovery in the first half of 2010. [a deeloper with a crystal ball]

And my absolute favorite, in a cheap shot sort of way:

I'm still experiencing a fair amount of traffic and interest in my properties. ... I don't see a dramatic decrease in value coming. [if you guessed residential real estate agent, you win]

Predictions are hard. Second-guessing is fun. (Cheap, but fun.)

© Sandy Mattingly 2012

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Jun. 26, 2012 - how to make sense of 475 Broadway loft sale, at $1,280/ft or $1,608/ft??

caution: rant is coming

You don’t need to know how big a Manhattan loft is to put a sale in the context of sales in the same building (assuming same footprints, of course), but it is very difficult to do a broader comp analysis if you don’t know if the loft is really “1,990 sq ft” or “2,500 sq ft”. That’s the challenge posed by the oh-so-provocative recent $3.2mm sale of loft #6E at 475 Broadway in the east half of the Soho Tower Condominium. The deed record has it as “1,990 sq ft” ($1,608/ft), while the listing has it as “2,500 sq ft” ($1,280/ft). That is a maddeningly high difference.

Did the buyer think this loft was more like other lofts valued under $1,300 ft or more like other lofts valued above $1,600/ft? Why oh why is there such confusion in the wacky world of Manhattan residential real estate over something as … er … simple as the size of a loft?

love from The Market
I did not notice this discrepancy when I used this sale as a comp in my May 23, playing with 475 Broadway loft comp that is up +58% over 2004, which used loft #6E to make a point about another loft that a client has been looking at (without identifying it, of course); now I need to revisit that post now that I know #6E is 20% smaller than advertised. I hate when that happens.... But that possible editing job is not (directly) the cause of my rant.

As I said in that May 23 post, The Market did not take long to make up its mind about the value of this loft:

Jan 10 new to market $3.25mm
Jan 25 contract  
May 7 sold $3.2mm

There can be quicker and higher sales, but 15 days to contract at a “discount” of 1.54% shows some serious love.

And why not? Nearly 25 feet wide, with 13 foot ceilings, and huge windows in front, there is great volume in the public space. The May 23 post lists other brag-worthy elements in the loft.

feets don’t fail me now
How do these myths start? For those of you who can read ACRIS documents, the Condo Declaration lists “Approximate Square Foot of Unit” in Schedule B (page 22 of 79), with #6E being “1,990.27” sq ft, just like 3 other “E” lofts (for reasons unknown, #4E is listed as 13.5 sq ft bigger and #7E is 112 sq ft bigger; #8E is a penthouse with newly built upper level and terrace, listed as “2,636.81 sq ft” interior and “668 sq ft” of terrace). Nonetheless, our listing system and the Streeteasy building page claim “2,500 sq ft” for the non-penthouse “E” units, as does the recent PruDE listing for #6E.

I will see if I can get an answer from our Listings Dept, but I can’t find anything other than the brokerage community as a source for “2,500 sq ft”. The Condo Dec shows that the “1,990.27 sq ft” calculation was made from interior wall surfaces of exterior walls and mid-wall of walls separating a loft from common space or the other loft on the floor (see p 7 of 79). The floor plans (done by Manhattan Loft Guy bromancer Joseph Pell Lombardi; see my June 6, a Manhattan loft pioneer (of a different sort) remembers, records) are not part of the Condo Dec, but even the #6E listing floor plan shows dimensions that easily ballpark consistent with “1,990 sq ft” and inconsistent with “2,500 sq ft”. (Start with space 24’8” wide, then add the room dimensions all the way back to the master bath [19’7” + 14’6” + 8’6”? + 5’ + 11’5”? + 7’ + 19’8” + ?5’? = 90’8”] = 2,235 sq ft before deducting for the common stairway, elevator, or where the second bedroom ends, all easily ballparked at 245 sq ft or more.)

so what?
So who cares if it is “1,900 sq ft” rather than “2,500 sq ft”? Apparently neither the #6E buyers nor their lenders, for two on the negative side. Anyone who would use any loft in this building as a comparable sale at $1,280/ft (assuming “2,500 sq ft”) should care; like Manhattan Loft Guy and the client with whom I had the conversation in my May 23 post.

Looking at the Master List of Manhattan Lofts Sold Since November 2008 for downtown lofts that have sold since January 1, I find only 6 that sold between $1,508/ft and $1,708/ft (out of about 185; I see I have not updated the Master List in weeks Note to Self …):

  • 124 Hudson St #5C $1,554/ft
  • 160 Wooster St #3A $1,580/ft
  • 99 Jane St #6A $1,631/ft
  • 252 Seventh Av #17E [Chelsea Mercantile] $1,684/ft
  • 48 Laight St #5S $1,698/ft

Let’s just say that these are all very nice properties.

In contrast, I count 46 lofts that sold between $1,180/ft and $1,380/ft since January 1. Can we agree that those lofts are not in the same category as the richer 5 above? (If not, do your own darn comparisons; the addresses are there.)

If you were a potential buyer for #6E, it would make a huge difference if you thought it was like:

or more like

Two different markets, right?

does #6E even fit in the building?
When I used #6E as a comp (at “2,500 sq ft”, als) for my May 23 discussion I did not need to look at other sales in the building. But now I am intrigued (provoked!) into doing so. The last sale in the building was the east penthouse: #8E cleared at $3.940,627 on April 21, 2011. As noted above, that is a duplexed ( and rounded) “2,637 sq ft” (as the deed record says), with a “668 sq ft” private roof terrace, although the listing claimed “3,000 sq ft”. A simple riff would ballpark the outdoor space as 50% of the interior, implying an adjusted value of $1,326/ft.

At $1,608/ft, #6E just outsold #8E by 21% on a dollar per foot basis. Does that seem rational, or efficient to you?

Before that, loft #3W (overlooking Mercer, not Broadway) sold on December 23, 2010 at $3,000,000, the same price at which it sold on May 7, 2007. That’s $1,570/ft using the “1,911 sq ft” in the Condo Dec Schedule B, roughly at par with #6E in May 2012. That should make efficient market theorists more comfortable with #6E, but start them on worrying about the penthouse ‘discount’.

we’ve been here before, of course
Really attentive Manhattan Loft Guy readers (thank you, thank you!) will remember that the last time I addressed this kind of thing at length I pilloried REBNY for a lack of leadership. My November 3, 2010, the square footage dilemma: REBNY "leads" by protecting brokers, not buyers, took off from (and took off on) a REBNY acknowledgment that square footage measurements are very important to consumers and then, instead of looking for a way to help consumers, advised REBNY members how to avoid liability for quoting measurements that turn out not to be correct.

See that post for my suggested rule (in this case, loft #6E would easily be marketed as “1,990 sq ft” based on the Condo Declaration, or actually (re)measured by an agent) and for the very informative video discussion by industry maverick and occasional blogger Doug Heddings, which features The Miller. I also point out that REBNY has had a guideline for measuring square feet in office buildings since 1987. (Cynic that I am, I have to wonder if there is such a standrad because there are often major players who are REBNY members on both sides of an office building deal.) Sadly, there is no will to fix this, even though REBNY knows this is a big deal for consumers:

We all know that buyers of apartments and townhouses in New York City often look to the approximate square footage of a property as a measurement for a property’s value. Indeed, often one of the key factors for a buyer in their decision to purchase is a calculation of the cost or price-per-square foot of an apartment or townhouse.

I will stop here, before I spin off again...

© Sandy Mattingly 2012

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Jun. 23, 2012 - a troubling line potential sellers hear from agents all the time

having nothing to do with pajamas (really)
The Real Deal has a puff piece in the June issue that was featured on their web page last week, Doing deals in pajamas, that has a dog-bites-man ‘news’ quality about it that is perfectly captured in the sub-heading: “In today’s market, brokers say living on-site can help secure a listing as well as drum up business among neighbors”. Ya don’t say!

I wouldn’t bother to snark about it if that’s all there was, but the article includes an agent quote that is so typical and so dangerous that it deserves discussion.

In the Bad Old Days in Manhattan residential real estate practice, this was an innocuous statement:

When [name withheld to protect the possibly innocent] met with the seller, “I presented him (with) the work I’ve done in the building,” she said.I have a roster of people looking to buy in the building.”

In the Current Enlightened Era of informed agency discussion (ha!), that red statement translates like this:

You should hire me to squeeze as much money as possible from the most qualified buyer because I have interested buyers who already think I am working on their behalf.

That’s not something I would brag about. That is something that suggests the agent and/or the seller don’t really understand the fiduciary obligations that should be involved with an exclusive listing. And that is something that implies that the seller does not understand how cooperation among brokerage firms works.

But even in the Current Enlightened Era of informed agency discussion I hear this stuff all the time; at least, every time when I talk to a potential seller about a listing, as they invariably ask “do you have a buyer?” and often comment that “so-and-so [a competing agent, who may actually live in the building!] told me that she has a roster of people looking to buy in the building.”

a seller should never hire “an” agent to bring a buyer
I will get to the ethical issues in a bit, but let’s start with practicalities. Any seller who hires any REBNY agent to exclusively represent a listing also hires every other REBNY agent to bring a buyer, thereby to share in the sales fee. A 50/50 split of the sales commission should be enough incentive for anyone, especially someone with a roster of people (already) looking to buy in the building, to bring a buyer to another agent’s listing. (Ignore for purposes of this discussion the possibility that the listing agreement can allocate the sales fee on a different basis than 50/50.)

To use the example in TRD, how likely is it that the pajama agent at 101 Warren Street (with that roster of people looking to buy in the building) would not help one of those buyers buy any listing in the building, regardless of who the exclusive listing agent is? If these are real buyers … zero chance, approximately. That agent, representing the buyer, will earn exactly as much as if she represented the seller and another agent brought the buyer. Exactly.

Structurally, REBNY firms cooperate in order to give buyer agents a significant dollar incentive to bring buyers to other agent’s listings. In the Bad Old Days of ‘pocket listings’ listing agents were not so willing to share fees and sellers did not have the sophistication to insist that fees be shared, so REBNY (finally) changed the rules to require cooperation (belatedly joining the long-standing and universal practice of residential real estate brokerage in Manhattan America).

The ethical issues seem to me so obvious, but the fact that agents often say things like “list with me because I have a lot of potential buyers for your property” proves that they are not.

not slamming that agent
I did not use the agent’s name from TRD because it is possible that she fully informs all of her clients in a completely ethical manner and would have explained how she does that if only TRD had been interested.

There may be other ways to do this in a completely above-board manner, but I can think of only two:

  • the agent has already told that roster of buyers that if she gets a listing, she can only act as a dual agent if she also gets the informed consent of seller, of course
  • the agent has already told that roster of buyers that if she gets a listing, she will only act as agent for the seller (or will do so if the seller does not consent to dual agency), so the buyers will have to be prepared to either work with another agent or agree not to be represented

In the first case, the agent faces the challenge of persuading the seller that the seller does not want the full fiduciary representation that the seller would otherwise get (a topic I addressed when I talked about the Warburg president’s epiphany that dual agent is not a good thing for consumers, or agents, in my May 16, the Warburg guy wants to take the Dual out of Agency in Manhattan residential real estate).

In the second case, the buyers are the ones who ‘give something up’ for the benefit of the agent: either they agree to dual agency if the seller also agrees, in which case, neither party has the full fiduciary representation they would have otherwise; or they agree to be unrepresented and understand that the agent (thought to be ‘theirs’) will act only on behalf of the seller; or they agree to work with another buyer agent, giving up whatever benefits they thought they had by working with the original agent in the first place.

(There is a whole ‘nother level of agency fog here that I will just mention: many lawyers [and possibly a court, or the Secretary of State] would take the view that once an agent worked with a buyer as his/her agent, and has shared information that the buyer would not normally share with the seller, it is impossible for the agent to give up that buyer to work with a seller who may do business with that buyer; the concept is “once a fiduciary, always a fiduciary” unless both agree to dual agency. But let’s not go there....)

In that second case, why would any fully informed buyer agree to this arrangement? And, if the agent has to ‘give up’ the buyer, what is the utility to the seller of retaining an agent who has that roster of buyers?

meanwhile, back in the real world...
Remember the seller conversation I mentioned up top? The fact that all sellers typically ask “do you have a buyer?” of agents they are interviewing as potential listing agents, and that they often comment that “so-and-so told me that she has a roster of people looking to buy in the building.”

The dirty little secret here is that sellers say these things because they have been conditioned by the Manhattan residential real estate industry to think that it is in their interests if the agent whom they want to be 100% in their corner also has some relationship with buyers. The shame of the Manhattan residential real estate industry should be that sellers (and buyers!) think this way. The challenge of the Manhattan residential real estate industry is to change these perceptions, though this is rarely acknowledged (which is why The Warburg Guy’s public epiphany was so welcome).

If you were a seller and a potential listing agent touted all the buyers they have who might be interested in buying your property, wouldn’t you worry about who that agent would really represent if you signed an exclusive listing agreement? Shouldn’t you??

To put it in colorful terms, beware agents in pajamas (so long as you understand that ‘pajamas’ is a metaphor for divided loyalty).

© Sandy Mattingly 2012

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Jun. 14, 2012 - do some seller incentives threaten the buyer - agent relationship?

or, can disclosure cure at this level?
Not to go full MalcolmBlogger High Road on ya, but I was flabbergasted by a marketing gambit that recently went out through the inter-firm data-base. I am sure it is a legal way to motivate agents for buyer, but I have real concerns about how it would play out in the real world.

I will approach this by talking about the ways sellers typically motivate buyer agents to find buyers for their properties, some creative ways that sellers do this, and the potential consequences for the buyer - agent relationship. Briefly, in this case the seller is offering to double the buyer agent’s fee if a buyer signs a contract within a specified period. Might that outsized incentive poison the buyer - agent relationship? Can it be ameliorated, even cured, if the buyer is fully informed?

co-brokering is a way that sellers motivate buyer agents
Of course, the typical residential real estate sale in Manhattan and elsewhere involves the seller deciding that the sales fee for a successful sale will be x%, to be split evenly between the broker whom the seller exclusively engages to market the property and the broker that represents the buyer. Indeed, it should be a source of shame for the Manhattan residential real estate community that only in the last 6 or so years did mandatory sharing (“co-brokering”) become the standard, long after this practice was common in America (I am looking at you, REBNY).

Since the sales fee is subject to negotiation, the same buyer agent working with the same buyer may discuss candidate listings in which the agent’s compensation will vary. Depending on the fee for specific property the buyer ends up buying, the broker for the buyer may be offered 2%, 2.5%, 2.75%, 3%, or more. (I am going to gloss over for this discussion the fact that “broker” in this situation means brokerage firm, and that that “agent” compensation depends on the split between that agent and that brokerage firm; for discussion, assume it is a 50/50 split.) On a million dollar sale, to use round numbers, the agent may end up with $10,000, $12,500, $13,750, $15,000, or more (again, assuming a 50/50 split).

Here is one structural conflict of interest between a buyer and her buyer’s agent: if the buyer buys Apartment One for a million bucks, on which the co-brokering compensation to be split between the two firms is 5%, as opposed to Apartment Two, on which the co-brokering compensation is 6%, the agent for the buyer gets either $12,500 or $15,000.

  • in a perfect world, the buyer knows that her agent provides advice and analysis without regard to the agent’s compensation, so the buyer is indifferent to the compensation arrangements
  • in an imperfect world, the buyer hopes that her agent provides advice and analysis without regard to the agent’s compensation, but it is indifferent to the compensation arrangements because the buyer senses that the numbers are not big enough to impact that loyalty

In a sense, the system is built on the fact that both buyer and agent recognize that the agent’s long-term financial interest is in making buyers happy rather than in exploiting an opportunity for a one-time $2,500 ‘extra’ compensation.

Of course, there is another structural conflict of interest between a buyer and her buyer’s agent because fees are based on prices: the more the buyer pays, the higher the fee to the agent. I will ignore this in this discussion, as it is a conflict that is obvious, relatively trivial (the 50/50 agent will put another $750 in her pocket if the buyer overpays on a 6% deal by $50,000), and irrelevant to the main point of this post.

special incentives can create special problems
It is hardly unusual to see a seller offer a bonus to a buyer’s agent for a contract signed by a certain date (sometimes, for a full-price contract); I recall offers of iPads, scooters, and (in a case that got a lot of publicity, i.e., was relatively effective marketing) airfare to the 2010 World Cup with a pair of tickets. A seller’s goal is to attract attention and interest from the population most likely to produce a buyer: co-brokering agents. A buyer’s concern might be whether “her” agent is talking about a particular listing because the agent will get an iPad or because the agent really thinks it is in her interest to consider that listing. But most agents can sincerely maintain a relationship based on trust with a buyer client that is more than strong enough to deal with goodies that an agent might qualify for if the buyer makes a deal.

But when the goodies are dollars, and lots of them, that is a difficult relationship to maintain. Let’s get down to particulars, without identifying the property, the agent or the firm involved, before considering how hard it might be to maintain a relationship based on trust in this instance.

Ballpark the current asking price at $800,000. At around a full-price contract, the buyer’s agent would be looking at around $12,000 in her pocket on a 50/50 split with her firm. The property has been on the market for a some months, and the seller has decided to try to motivate buyers by dropping the price a material amount (about 9%) and to motivate buyer agents by offering an additional non-trivial cash bonus for a contract signed within a specified period (roughly $24,000 to the buy-side firm, doubling the buy-side compensation to the firm and to the agent).

Now the landscape looks like this: the buyer will compare the property to other properties priced around the new price, but the buyer agent is looking at being compensated as if the buyer were spending twice as much as the buyer will be spending, and twice as much as the buyer agent would be compensated for any of the competing listings.

In theory, so long as the agent tells the buyer about the bonus being offered, the buyer and agent can maintain their relationship of trust. A prudent buyer would think twice about the comp analysis between the Bonus Apartment and a competing listing at the same price, but disclosure of the unusual compensation could cure the conflict by bringing it into the open. It remains, as always, the buyer’s decision as to which property to buy, and at what price to negotiate.

While I believe this is do-able for any professional (i.e., ethical) agent, I see it as a situation in which to step carefully. In my view, disclosure is mandatory, even if I do not generally discuss with buyer clients whether the co-broke compensation is 2%, 2.5%, 2.75%, 3%, or more.

I assume that the seller agent and firm discussed this dynamic fully before going ahead with the cash bonus, but it is not their ethical problem.

like a direct deal on the sell side
There is actually an analogous situation for sell-side agents that is more common in a busy market than in a slow market. A seller presented with multiple offers may find that one of the competing offers is from a buyer who is not represented by an agent, on which the entire sales fee will go the selling and listing firm (if that buyer is deemed ‘best’).

One reason I am not bothered as much in this sell-side situation is that it is anticipated in all exclusive listing agreements, and certainly should be the subject of discussion before a listing agreement is signed. Often, in fact, an agreement may provide that the sales fee is (say) 6%, but will be 5% if the fee is not split with a buy-side firm. (Put aside for this discussion whether this is a ‘windfall’ for the agent; the agent will certainly do more work on a deal if the buyer has no agent than if there is a buyer agent doing all the purchase application work .) The seller knows up front that the agent’s compensation will vary depending on whether a buyer is represented or not.

Also, the seller is in a very good position to compare the competing bidders without regard to the impact on the agent’s compensation. Seller will see each bidder’s financial qualifications, and can easily ask pointed questions to rank the bidders on both the net cash to the seller (different for an unrepresented buyer if the seller ‘saves’ 1% on the sales fee) and on the financial strength (cash vs. mortgage, mortgage contingency vs. non-mortgage contingency, assets and income vs. assets and income).

This conflict between seller and seller agent troubles me not at all, assuming a relationship of trust and full disclosure. The one with the buy-side double compensation worries me, and would keep me up at night even after disclosure and full discussion. I suspect I would always wonder if my buyer client was worried if my loyalty would be impaired by the double compensation offer.

Interesting …. Troubling ….

© Sandy Mattingly 2012

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May. 16, 2012 - the Warburg guy wants to take the Dual out of Agency in Manhattan residential real estate

I applaud Fred (if I may be so familiar)
Long-time Manhattan Loft Guy readers know that the subject of New York State agency law and required disclosures is near and dear to my heart (links below). Not many agents share that passion, but @MalcolmBlogger is one. He launched into my corner of the twitterverse a link to the blog of the head of Warburg Realty, who also seems unusually interested in discussing agency. More interesting still, in his May 14, What We Talk About When We Talk About Disclosure, Frederick Peters seems very interested in having his agents not use a form of agency “permitted” under New York State law that some of his agents may think helps put money in their pockets.

Read the post for the details of Fred’s admitted evolution, but here is the (ahem) money quote:

straight dual agency, while a convenient idea in theory, is laden with possible conflict in practice. So I make the same recommendation to consumers and agents alike: don’t do it!

(The “straight” dual agency that he does not like is clearly one agent “representing” both seller and buyer in a transaction, rather than the Dual Agency With Designated Sales Agents situation, in which buyer and seller are represented by different agents from the same brokerage firm.)

Smart guy, obviously been around the Manhattan residential real estate block more than a few times, who admits to having doubts about mandatory agency forms when they were first required in Manhattan. I have seen his blog before (mostly, when linked to by someone in my corner of the blogosphere) and admit to liking it. Either he is a good writer who writes (and thinks) in His Own Voice, or he hires a good writer to translate his thoughts into a voice that is both informal enough to be appealing and credible enough to be from the head of a Manhattan residential real estate brokerage. As anyone who has slogged through most CEO-level “personal” blogs can attest, that is not an easy needle to thread.

As I said up top, I love that Fred has evolved in this way, and now recommends to agents and consumers that no one use that form of “straight” dual agency. But I wish he had filled out some of his analysis, starting with the wonderful example he uses for the dangers of straight dual agency. It is his blog, of course, and his voice. Not everyone is as linear (“anal“ comes to mind) as Manhattan Loft Guy, but I want to focus on a (missing) step in his analysis.

an unintended pitfall
Most analysis of straight dual agency that I have seen in the REBNY world has to do with a single agent representing buyer and seller in the same deal and the deal is consummated. Not to minimize those possible problems for all 3 parts of that threesome, but Fred’s example highlights a different one, a difficulty I had not previously considered. What happens after a seller rejects the buyer, with both having been represetned by the same agent?

I am going to add some [numbers] to Fred’s example to make it easier to break apart in a minute:

[1] a buyer came to her directly with interest in one of her exclusives. [2] Both the buyer and the seller signed the Disclosure Form acknowledging her as a dual agent. They made a deal. The next day, [3] an agent from another firm brought my agent a higher offer, which the seller chose to accept. So how could my agent be fair to both sides? Representing the buyer, [4] she should have thrown all her weight into persuading the seller to stick with the offer he had. But representing the seller, [5] she had to acknowledge that he was getting considerably more money and might be swayed by that. In the end, [6] the seller took the additional money from the new buyer and [7] the original buyer was angry at my agent, claiming that she had not really represented him. And the buyer was right! She simply could not be an advocate for both sides.

Fred may have chosen to include the sequence he did (and not my preferred sequence) because that is all he needed to make his point. (He may understand the value of brevity better than I do ;-) He points out a problem that probably comes up a lot, but I don’t think his explanation is detailed enough.

If I were the head of a firm I would be sure to point out that my agent followed the law by inserting [1.5] before [2]:

[1.5] My agent explained carefully to both the buyer and seller that the agent is acting for the other party as well, including that the buyer and seller are giving up their right to undivided loyalty.

That is, nearly verbatim, what the NYS Agency Disclosure Form published by the Secretary of State says about Dual Agency. Sadly, Fred’s story implies that this careful explanation never occurred, because if it had the buyer at point [4] would never have expected the agent to persuade the seller to accept her bid, only to present it.  And the buyer at point [7] would have been disappointed rather than angry.

I am sure Fred understands agency law in this context better than I do, but his language in the concluding sentence above might confuse some consumers. He is right that his agent “simply could not be an advocate for both sides”, but the unstated reason is that the buyer was angry is that the buyer did not understand that the agent could not advocate at all as dual agent. (Possibly, because this was not carefully [enough] explained to the buyer up front.)

Fred does not get into the details of what this means, including that the agent is just a messenger between “her” buyer and “her” seller, relaying numbers back and forth. Without violating a duty to one, she cannot serve the other by answering a question such as “do you think there is more room in the last bid?”, or “why doesn’t the buyer/seller understand that the comps say …?”, or “my final number is $xxx, how do we manage the process to get there?”. The agent can’t advocate, and can’t advise, and can’t interpret.

If the angry buyer understood all that up front, she would not have been angry with the agent; she would have been angry with herself.

“So how could my agent be fair to both sides?”
The answer to this question in the middle of Fred’s fact scenario is actually pretty simple: treat both sides honestly (do not say anything other than the truth) without revealing facts unknown to one side that the other side prefers be kept secret. Don’t lead one party to think that you are going to advocate for them. At all. (Of course, if that surprises anyone at the end of the day, the right conversations did not happen at the beginning of the day.)

Of course Fred is right that this may be legal but ill-advised. Especially for a seller, who is the one giving up important rights to representation. (At the point at which the proposal is made that the same agent represent both, the buyer is unrepresented.)

You have to go back to point [2] for the agent to have the ability to be fair to both sides. Instead of asking for a Dual Agency acknowledgement, the agent could have presented the buyer with a form identifying her as agent for the seller (only). The agent can then be “fair” to the buyer by not telling the buyer anything that is not true. The buyer would know not to ask for advice, or (if asked) the agent would say simply “I work for the seller; I do not represent you”.

There is some money at risk here for the agent, of course. If the buyer decides that a buyer agent would even up the negotiations, under REBNY rules the buyer could bring in that agent to make the bid and the sales fee would be split. I can’t think of any other reason (without getting into ridiculous hypotheticals) why an agent would want to try to persuade the seller whom they already represent to give up some of that representation, other than that the agent will not have to split the fee.

greatest hits
Previous Manhattan Loft Guy posts on agency disclosures (caution: these babies are long; I will think of Fred as I try to be more brief in the future [promises, promises!]):

September 1, 2010, new real estate agency law disclosures coming to Manhattan in 2011, about the to-be-effective-January-1 changes requiring written disclosures, not just verbal disclosures, with links to the forms, the statute, and REBNY’s rather curious spin on the changes

September 1, 2009, (bad) quote of the day / lawyer stumbles in NYT real estate Q&A, with an extended analysis of why a lawyer quoted in the Old Grey Lady sounded (for lack of a better term) like an idiot; again with actual disclosure form language and extended (very extended) commentary about how it "worked" in Manhattan and elsewhere before January 1, 2011

For some reason I did not write about agency on September 1, 2011, perhaps because I thought I had left that horse on the side of the road.

© Sandy Mattingly 2012
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Apr. 1, 2012 - "price floors": the staggering stupidity of some coop boards

a good topic for April fools
It is not an especially fresh story, but some Manhattan residential real estate stories are timeless in a I can’t believe this comes up again kind of way. The New York Daily News ran a piece a couple of weeks ago that succeeded in getting my blood boiling. In Price floors leave many New Yorkers stuck in apartments, reporter Tripp Whetsell talks about coop boards that bravely go where no sane person would: they reject proposed sales that violate a mythical price floor in order to “protect” shareholder value. The article puts a human face on a problem I have (wrongly) tended to think was more theoretical than real, focusing on a particular accidental coop seller who had been trying to sell his dead sister’s coop for over a year at “the co-ops sales minimum”:

There’s no way to say for sure how many of the city’s over half-million co-op owners are in such straits, as no one tracks these figures. While the practice is technically legal and has been around for decades, its ethical dimension is open to debate.

What real estate attorneys and co-op experts do say overwhelmingly, however, is that the issue has become more prevalent and harmful since the recession.

“On an anecdotal basis, I’ve definitely seen this happen with a lot more frequency since 2008,” says Jerry Feeney, a Manhattan real estate lawyer who is unfamiliar with McCluskey’s plight.

Whetsell focuses on one Queens coop, but also cites a manhattan example, and quotes credible sources like attorney Feeney, as above. He also quotes the president of that poster child coop, who seems not to realize that he has gone through the looking-glass:

“We’re very sympathetic to the plight of the people who can’t sell, but the board has as much if not more of a responsibility to the ones who remain. The harsh reality is that what my neighbor sells for affects what I can sell for, and that’s something every co-op owner has to take into account.”

We’ve been here before, of course. I hit this same topic when New York Magazine “went there”, in my October 26, 2011, NY Mag goes there: do coop boards reject prices as 'too low'?, which relied on a nice big block quote from my earlier June 19, 2009, power of a coop board to reject a deal as "too low"??, which was provoked by a mention in The Real Deal of a Habitats magaziner piece.  You will see that block again soon.

delusions of grandeur, or mere delusions?
That Board president seems to think that the coop board has some actual power to determine market value, stumbling into the territory of destroying any chance a shareholder has to sell a coop. As I said in that post last October, “Seriously: you should read that whole post if you have any interest in the topic. I will quote myself only once, at some length, in part because I love using the Canute reference”. Here is that big block from June 2009:

coop boards protect value like Canute protected beaches

Having been a coop board president in a small Manhattan loft building for ten years, I can't think of any other 'reason' for the board to reject a deal because of price than that articulated by the sighing lawyer: the board absolutely has "an obligation to protect the property value for the rest of the people." My considered judgment is that the solution (rejecting a shareholder's application to sell and get out because remaining shareholders will be struck with a bad comp) has nothing to do with the purported problem (fear that units will be worth less after the sale than before it); even putting aside for the moment the harm the board would do to one specific shareholder and the risk that other shareholders will be left dealing with a fellow shareholder who may be financially strapped (after all, is selling at a 'distress' price) and will be emotionally pissed.


For a board to insist that market value contracts will not be approved actually says this about units in the building: they have no value because they are unsaleable; any price that is low enough for The Market to accept is too low for us to approve.

I do love that King Canute analogy.

I also wonder about the sanity of a board that thinks it is protecting any shareholder by preventing even desperate sellers from selling, at the risk of backing those sellers into the ugly corner of having to default on their maintenance obligations. Not to mention, the sanity of the shareholders who elect board members who will “protect” them in this way. Democracy can be ugly.

© Sandy Mattingly 2012
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Feb. 8, 2012 - nightmare scenario for lofts at 7 East 13 Street, as New School construction allegedly destroys building

another small building risk, embodied
What if you paid $8mm for two Manhattan lofts in a new 7-unit condo conversion in 2007 and with a 16-story university building under construction next door, found that the building was settling and your walls were cracking and pulling away from the floors? In the case of the owners of those units at 7 East 13 Street, The Real Deal has the story about the lawsuit they brought on January 30 against The New School, the Durst Organization, architects Skidmore Owings & Merrill, construction manager Tishman Construction and the unidentified project engineer involved in The New School’s 16-story new building on Fifth Avenue between 14th and 13th Streets (“354,000 square feet of space ... including new classrooms, an 800-seat auditorium, a library and a 612-bed dormitory”), on which excavation began in December 2010 and construction is expected to be complete in fall 2013.

The allegations in the lawsuit are a laundry list of heavily soiled garments (per TRD):

from uneven and cracked floors, to distorted and jammed metal doorframes, bathroom shower stalls that have pulled apart, crumbling tile grout, buckling interior doors and windows that no longer close properly, and misaligned cabinetry, among other things.

Will the lofts at 7 East 13 Street be habitable when The New School opens the new building?

The plaintiffs Michael and Glorimar O’Hara bought the “2,458 sq ft” #2 and the “3,687 sq ft” #3 on January 9, 2007, paying $8,212,185 for the pair. (Sadly there is no loft #2 description or floor plans for either loft on StreetEasy and out data-base has only a bit more information; it is hard to envision how these two units fit together, but #2 is a duplex with a private garden and #3 is a triplex with private roof space.) Per Property Shark, together these two units own 24.49% of the building common interest.

risks are shared, but only by a few
I will come back to the specific allegations of damage to the lofts adjoining the construction site, but I want first to focus on this scenario as only among the most horrible things that can happen in a small loft building. I touched on the most likely kind of risk owners in small buildings face in my coverage of the epic unpleasantness widely reported in a Soho loft, April 12, 2011, 95 Greene Street, deadbeat condo owners, and small building risk. I outlined the general typical problem there, with a doff of the cap to other typical potential problems in small buildings:

when I talk to buyers who would consider lofts in small buildings about the different kind of risks in owning in a small building (coop or condo), I don’t mean to include 26-unit buildings such as 95 Greene Street. I mean buildings small enough that one’s share of a sudden repair bill (roof, new boiler, elevator) is relatively high, so a 5% share in a 20-unit building is not (generally) significant, but a 20% share in a 5-unit building is a different scale of risk. I also mean that one’s share of a cash short-fall from the bad luck to have an owner stop paying maintenance or common charges is of a different scale in a 5-unit building than in a 20-unit building. (Put aside for the moment that small buildings may be more likely to stint on capital improvement and repairs, or may have unaudited financials; either of those topics would digress from the main point here.)

The main point here … is that 95 Greene Street’s cash flow problem is not the result of the bad luck to have an owner stop paying common charges, it is that the single owner of four units comprising 20% common interest has stopped paying common charges. That’s a concentration problem, not a small building problem.

The parallel problem is not what is happening at 13 East 7 Street, of course. If it were, the fellow unit owners would be concerned because the O’Haras contribute nearly 25% of the common charges, so if they stopped paying the remaining unit owners would have a big cash-flow hole to fill.

The problem at 7 East 13 Street is that it is “small enough that one’s share of a sudden repair bill (roof, new boiler, elevator) is relatively high”, whether you are the O’Haras at 24.49% or the other owners who split the remaining 75% interest.

The fact that the O’Haras own the largest piece of the building suggests why they have sued first, without the condo board or any other unit owners (as of now). Obviously, there have been many discussions within the condo about the construction next door and conditions at 7 East 13 Street, but for reasons so far unknown there are no other plaintiffs (yet). Unless the O’Haras are delusional (not at all likely, but these are still formally allegations), the other unit owners will have noticed cracks in their walls, doors and windows that no longer close, buckling floors.

Maybe the O’Haras sued first because they have the most to lose; perhaps the other owners are still in the discuss-and-consider stage. But remember: this was a new luxury residential loft condo conversion completed in 2006, one that must have been gutted to the exterior walls and floor plates. In other words, this should have been high quality craft and materials, with shower stalls that should not, by themselves, pull apart.

a prediction about how this ugly litigation can get uglier
One way this could go is that the New School team is reasonable and is persuaded that the cause of the 7 East 13 Street structural problems are caused by their project. Engineers confer, the loft building is shored up, and at an appropriate time in the construction process, remediation measures restore the lofts to their former glory. There are insurance companies involved, of course, so this is by no means guaranteed to go down a reasonable path, but the fact that The New School has a neighborhood reputation to maintain may help.

But (cynic that I am) I can see this going down a very different path, in which the New School team asserts that the O’Haras problems are caused by shoddy work by their developer and construction team. And that their work has proceeded in a professional and safe manner throughout. Perhaps they even have tests and data to support that position. Add dueling engineers to a litigation that already has dueling attorneys and insurance companies, and this could easily get ugly.

The unfortunate dynamic is that the New School team has deeper pockets than even the $8mm loft owing O’Haras and their unit owners, and that the pain of continued lack of resolution falls entirely on the loft residents. Construction firms have been known to play hardball. D’oh!

8 million stories
Not all of the eight million stories in the naked city involve real estate, and even fewer involve building construction. But I touched on a similar issue way back in Year One of Manhattan Loft Guy, in my Nov. 1, 2006, will Zinc sink the nabe? / trembles & tribulations reported in Tribeca Trib, dealing with (wait for it) cracks in a loft building adjoining a construction site in northwest Tribeca.

I don’t know exactly how that movie ended, but the Manhattan loft on the 5th floor of 472 Greenwich Street (the building under attack by Zinc) traded last year, presumably with no structural problems uncovered during due diligence.

It would be nice if the New School team fixed the problems at 7 East 13 Street as quickly as possible.

© Sandy Mattingly 2012
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Sandy Mattingly is Manhattan Loft Guy; now with The Corcoran Group (http://corcoran.com/ ; but see the disclaimer at the bottom of the page), he can be reached most easily at Sandy@ManhattanLoftGuy.com or 917.902.2491, and followed on Twitter @ManhattnLoftGuy (note "mis-spelling"). After 7+ years, the blog has moved. Links here on RealTown will work for the foreseeable future, but new posts (and all the old content) has migrated to ManhattanLoftGuy.com.

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