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Oct. 26, 2011 - NY Mag goes there: do coop boards reject prices as 'too low'?


real sources, with real stories
I am tempted to try to find that Soho loft that leads the short S.Jhoanna Robledo October 23 piece in New  York Magazine that is making the rounds of the blogosphere and twitterverse (The Dealbreakers / If you discover a real bargain, the co-op board may not let you get away with it.), but actual work (and blogging) may prevent that. I am often critical of media pieces on the Manhattan residential real estate market, but not this time: she quotes real people who claim to have observed the phenomenon she writes about, while acknowledging the difficulties in finding hard proof.

The fear is that some coop boards are rejecting some purchase applications for the sole reason that the purchase price is uncomfortably low for the board and other shareholders.

Some of this is simply the result of a bad economy, which causes banks and boards to scrutinize buyers more closely than ever. Sometimes, though—and boards will rarely say so—they’re loath to approve sales at low prices, fearing that other apartments in the building will be devalued by association. “No board will ever confirm it, but I do believe that I’ve seen cases where deals were rejected because the price was not high enough,” says Barak Dunayer of Barak Realty. “If the price is too low, that becomes a comparable,”....


been here, chewed that
I can’t do this better than the last time I noted this issue, way back in 2009 in response to The Real Deal having linked to a Habitat magazine piece exploring this in more detail. My June 19, 2009, power of a coop board to reject a deal as "too low"??, went into this issue at length, as I am wont to do.

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:

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 go through an extended analysis there about how it is really not in the remaining shareholders’ interests if a board tries to interfere with market transactions, even if it might not be ‘illegal’ for a board to do that. Again: read the whole thing.

© Sandy Mattingly 2011
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Oct. 9, 2011 - diligence due + negligence committed as West 15 Street lofts + East 15 Street apartments lose views


NY Times tells tales of intrigue, hubris

Terrific piece by VToy in today’s Sunday real estate section of the New York Times, Is That A Bulldozer I Hear? The subtle take-away is that New York City apartment or loft owners who are concerned about the potential ramifications of development sites nearby should remain vigilant (not just diligent).

Her overall advice is probably appropriately general:

for anyone trying to buy or sell an apartment near a development site, knowing what’s being built is a must, since property values can be affected. Public records and real estate Web sites can reveal a great deal of information. Real estate blogs sometimes trade in rumor, but they can also offer reliable research conducted by real estate-obsessed New Yorkers across the city.

Her examples hint at a key source for information (the local Community Board) and for help, when things appear to be going badly after the train has left the station (the local City Council Member). As it happens, two of her real world examples concern development on the first block of West 15 Street and the first block of East 15 Street.

In the case of the planned school to be built behind an East 14 Street coop, the coop appears to have been asleep at some critical times, but marshaled some legal talent and political support to (gasp!) reduce the size of the planned public middle school and high school. This sounds to me the very embodiment of ‘entitlement’ (my use of bold):

The School Construction Authority recently bought and demolished a two-story building behind the co-op and plans to build a middle school and high school in its place. The co-op did not learn about the planned school until officials approached the board in February for permission to come onto the Victoria’s property to start demolition.

... the co-op board secretary, said residents had felt blindsided by the school project. But it was in May 2010, at a public hearing that the local community board supported the School Construction Authority’s plans to buy the 15th Street site.

Victoria co-op board members said they had not known about the meeting and felt they should have been notified directly, since the school site abuts their building.

The
community board had posted notice of the hearing on its Web site. It had also sent an alert via an e-mail blast to its general list and put up flyers around the neighborhood.

Somehow, board members neglected to get on the local Community Board’s list for email alerts. Somehow, board members failed to notice the flyers posted around the neighborhood. As a result, they failed to mobilize before the School Construction Authority even bought the two-story building behind them that will be replaced by a middle school and high school.

And not just the coop board. What about the large number of coop owners who have looked out over a two-story building for years and years and years?

As many as 40 percent of residents will lose views or light by the time the school is finished, [a board member] said.

That building has 495 units, per StreetEasy, so “as many as 40%” means as many as 198. I can imagine that it might take a special civic interest for a common shareholder to get on a Community Board’s email list, but up to 198 people walking around the neighborhood failed to see the flyers posted about the May 2010 meeting.

morals aside
I will leave for another day the particular dynamic of coop shareholders retaining lawyers and enlisting the aid of their City Council Member to reduce the size of a new public school. Let’s just say that I hope I would find it difficult to agitate to shave enrollment from 866 to 733, especially as that reduction will ‘benefit’ only a small fraction of the 198 shareholders in the coop, and that I would hope that other residents of that Council District will remember the Council Member’s efforts to reduce school enrollment before she gets term-limited out.

meanwhile, west of Fifth Avenue ...
The other 15th Street story involved a bit more diligence. VToy’s account focuses on an agent trying to sell lofts at 30 West 15 Street:

Late last year, [the agent] sold a two-bedroom apartment at 30 West 15th Street that had views of the Empire State Building, but also looked across to a planned 25-story condo that will be much taller than any of its neighbors. [My bold; I will come back to that.]

She searched real estate Web sites and public records to find out everything she could about the development. Sites like PropertyShark and the city’s finance department can reveal who owns a building, while the building department site can provide building permits — even ones that have not yet been approved. Online, Curbed and Streeteasy provide running commentary from local residents.
 

In the case of 31 West 15th Street, other nearby buildings had tried to block the construction, so the co-op board at 30 West 15th was well versed on its progress. [Agent] said she disclosed what she knew to potential buyers and eventually found one who did not mind the fact that the living room view “was going to be compromised, because the bedroom view was going to remain open.”

Unfortunately, VToy did not address how those “other nearby buildings [that] had tried to block the construction” found out about that project, which is a shame, because that would have given one example of a proactive approach. And the limits thereof (“had tried to block the construction...”).

Attentive readers of Manhattan Loft Guy will remember this project. I wondered in my January 9, loft that missed The Peak at 30 West 15 Street comes back to sell, modestly but successfully, whether a buyer across the street knew that the view was about to be lost. That buyer was probably the one who was “eventually found … who did not mind the fact that the living room view ‘was going to be compromised, because the bedroom view was going to remain open’.”

Back in my May 29, watching the new construction at 31 West 15 Street, I linked to the bird’s eye view of that construction (d’oh! Bird's Eye View NYC) from a building across the street. That building across the street is the Grosvenor House, 22 West 125 Street, which was built much taller than any nearby buildings, at 22 stories. Now look again at the VToy description of the new building at 31 West 15 Street, bolded above: “a planned 25-story condo that will be much taller than any of its neighbors”. Actually, not so much taller than any neighbors, but I blame VToy’s sources for that, not VToy.

the general problem is a problem, generally
I did a fairly long and comprehensive review of what it can mean to live near a new construction project, before, during, and after. That was my March 16, 2010, what about that (not yet) New Construction across the street?, which concluded:

It is THE BIG CITY. Nothing stays the same. Deal with it.

Or not. As you prefer. It is your choice.

But I also offered a framework for thinking about the issues involved, which I still think is a useful addition to the literature.

This very topic came up on Manhattan Loft Guy as recently as August 18, in my much diligence due over planned hotel in West 37 Street. That concerned plans to build a hotel on a parking lot that (used to!) protect views from some classic loft buildings. I started that one this way:

Part of the charm of living in loft neighborhoods (in Manhattan and elsewhere), for me and I suspect for many people, is that they may be ‘developing’ neighborhoods, with a certain vitality missing from more staid (mature) residential areas and (often, at least early) a discount from the overall market because the ‘developing’ neighborhood may be a little more gritty than mature residential areas.

Part of the risk of living in loft neighborhoods (in Manhattan and elsewhere) that are ‘developing’ neighborhoods is that they … uhhh … will continue to develop.

stop me before I link again!
I will add just one more Manhattan Loft Guy link, one that shows that this issue of development in developing areas has been a concern of mine since … (well) … forever. My July 11, 2006, Now you see it (and pay for it), now you don’t / what are views worth?, was occasioned by an article in The Real Deal that directly bears on this risky-views-in-developing-nabes issue (hint: “development ... can both destroy views and increase real estate values”).

That is life in the Big City. Especially life in the kinds of ‘developing areas’ that residential loft conversion tend to occur in. If you are concerned about potential development near you, do as VToy implies you should:

  • get on your Community Board’s email list (go to meetings!)
  • read the notices on lampposts in your neighborhood
  • ask your coop board what they are doing to stay current on these issues

You might even want to read Manhattan Loft Guy.

© Sandy Mattingly 2011

 

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Oct. 7, 2011 - nominee for dumbest 'analysis' by the media of a Manhattan real estate sale


I think we have a winner
I hope that regular Manhattan Loft Guy readers realize that I appreciate the coverage of the Manhattan real estate business in The Real Deal; they often cover things other local media do not and seem (to my eyes) not obviously beholden to the money in the industry in ways that other members of the local Real Estate Industrial Complex are (I am looking at you, Sunday New York Times real estate section). As an example, I was very impressed with the reporting they have done on the Rushmore litigation over condo owner rescission rights, a complex topic that they covered well. (See my April 10, 2010, the case of the curious "typo" / 41 Rushmore buyers get to rescind, for the full story behind this: “it is a story that The Real Deal (proving that it is not just an industry rag) covered better than The Old Grey Lady”.)

With a doff of the cap like that opening paragraph, you know we are about to make a sharp turn, right? Buckle up!

This sentence in a TRD piece this morning will be hard to top as the dumbest statement by a reporter about a Manhattan residential real estate sale:

It wasn't immediately clear why the asking price was so similar to [the] purchase price six years ago as [agent] did not respond to requests for comment.

I sincerely hope that there are no more candidates for the ‘award’.

a personal failing (of mine)
I find it very difficult to respond to this gently, but I begin by trying....

What is there that is not “immediately clear” about the (last!) asking price, other than that (is it possible??) TRD does not use StreetEasy? Here is the full price and recent listing history of the Robin Roberts condo unit at the Heritage at 240 Riverside Boulevard:

Aug 18, 2005 sponsor sale $1,915,583
Sept 29 BIG flip $2,575,000
     
Oct 24, 2010 new to market $2,995,000
Jan 25, 2011   $2,795,000
July 23   $2,595,000
Sept 28 contract  

(The flip to Roberts at +$700k after 6 weeks is missing from the StreetEasy history of the unit, but is on Property Shark.)

If it is not “immediately clear” why the final asking price is similar to the 2005 flipped (BIG!) price, then you should not be writing about Manhattan residential real estate. I can’t explain this without shouting (see the sub-head, above): the last asking price looks like the prior purchase price BECAUSE HIGHER ASKING PRICES DID NOT WORK over 9 months.

If the author did not know the long history of failure to sell off of $2.995mm and $2.795mm, then I have him in the wrong award category; he might then win the award for most ignorant ‘analysis’ by the media of a Manhattan real estate sale. In which case his editor would be up for an award, as well, for not having asked “gee, if the agent did not return your call, did you take 11 seconds to check StreetEasy?”.

Not knowing is ignorant. Not knowing after looking at the publicly available sales history is dumb. Not knowing and not looking at the publicly available sales history is malpractice. Also malpractice: getting a comment from the buyer’s agent but not asking about the price history.

Which award does the guy qualify for?

what is not immediately clear
I am curious (but not interested enough to do a market analysis) about that Big Flip. It is not immediately clear to me whether Roberts got snookered in September 2005 as badly as other flipped buyers. But that is not a sexy story.

how does The Media find these ‘stories’?
Speaking of the Real Estate Industrial Complex, where did this story idea come from? Not from the seller’s agent, who did not respond to a request for comment. Apart from condo management, only one other firm would know about this celebrity contract, and that firm would not be identified publicly anywhere at least until it closed, so would be invisible to TRD … until that firm reached out to TRD?? I will bet you a quarter that the Blu boy reached out to media, and was conveniently put behind the smokescreen of “would not comment on [buyer’s] identity”. Can’t blame Blu boy for TRD’s failings, as he likely had no idea that TRD would drift into the fog about why the price was dropped when it did not work, and again dropped.

I guess I have lost that sentimental feeling I had yesterday (October 6, everybody is talking about cancer today) ....

© Sandy Mattingly 2011

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Jun. 28, 2011 - throwing a coop board interview can come with a high price


the Barbara Corcoran experience
There is a fascinating AP interview with Barbara Corcoran on-line yesterday, which The Real Deal excerpts (badly) this morning. TRD picks out some nuggets, which started me in a different direction this morning in thinking about a blog post (mostly, in the [lack of] ethics in intentionally failing a Manhattan coop board interview). The full interview is more interesting, especially on that point, than the TRD excerpts. I read The Barbara in the full AP version as really regretting “intentionally fail[ing]” that interview.

First, let me say that I have never met The Barbara, we never worked for the same firm at the same time, and I have signed no contracts limiting in any way what I can say about her. In the past, I have squelched any temptation to comment about her because I see her more as a consummate self-promoter than anything else these days; someone who does not need any ‘help’ from Manhattan Loft Guy to achieve her purposes in life, thankyouverymuch. In my personal view, she is almost necessarily publicly cynical, as any consummate self-promoter must be, though I need to give her props for one genius gesture that -- self-promoting or not -- had a veneer of public spirit to it: after September 11, she canceled the firm holiday party and instead gave each agent money ($250?) to go out to dinner, but only if the agents went downtown, to restaurants whose businesses had been devastated. Serious props. But I digress.

The TRD excerpts left me with the mis-impression that The Barbara was cynical about having failed that board interview on purpose, as if she were suggesting that as a handy tool for buyers with cold feet:

… the Corcoran Group founder failed her first-ever board interview. On purpose. Corcoran told the Associated Press that she fell in love with a $35,000 Greenwich Village one-bedroom in 1977 but later "chickened out" and threw the interview. She advises buyers today to simply dive in and "buy with your heart, not your head," because "you can't sharp shoot the market and pinpoint when it might peak." Other tidbits of wisdom....


But I don’t read the full interview that way, at all. Instead of recommending that as a tool, I hear regret in this full sequence:

Q: How about the first time you bought a place. What was the most important lesson you learned?

A: I tried to buy in 1977 when prices were just beginning to go through the roof. I fell in love with this top story, one-bedroom apartment in Greenwich Village. The price was $35,000, and I had saved $4,000.

But I got scared and intentionally failed the co-op interview. I chickened out. I was just too frightened to make a commitment. They said they didn't want me in the building and refused to return my ($3,500) deposit.

After that, the prices ran away from me. It took another eight long years to save enough money to buy my first New York City apartment.

That taught me an important lesson. The first home is the most important — it gets you into the game.


no oxymorons allowed: ethics in Manhattan real estate for another day
I could digress into a discussion of why it is wrong to behave badly in a board interview to get out of a coop purchase contract, but I will leave that for another day. I will skip to the downside of that strategy, a downside that The Barbara personally experienced: if you do it too baldly the seller will find out that you did it on purpose and hold on to your deposit as the remedy for your breach of contract.

In her case, look again at the numbers. You might feel that the $3,500 deposit is not a lot of money (even in 1977 terms), but that was nearly all of her savings of $4,000. She panicked, and she paid a huge price for it. It took her “another eight long years to save enough money to buy my first New York City apartment”, cost her that $3,500 in cash, and kept her out of “the game” for those 8 long years.

Funny thing is, in her telling, she had timed the market very well (“I tried to buy in 1977 when prices were just beginning to go through the roof”). When she panicked, she gave up that good fortune. She builds on that experience in the next section of the interview, in which she warns that “you can't sharp shoot the market and pinpoint when it might peak[,] If you do that, life will always get in the way”.

I was prepared by the TRD excerpts to hear some cynical bragging about how smart The Barbara was in figuring out how to get out of a coop purchase contract. In truth, the full AP interview admits that this was a huge mistake for her.

Perhaps I have low standards (am too cynical myself??), but it feels like a good day when an expectation of cynicism is unmet.

© Sandy Mattingly 2011
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Jun. 19, 2011 - TYAToMLG / the power (or wisdom) of a coop board rejecting a buyer because of price


Two Years Ago Today on Manhattan Loft Guy
About the legal authority of a coop board to reject a purchase to ‘protect’ shareholders, and whether that makes any sense: power of a coop board to reject a deal as "too low"??  

There’s a difference of legal opinion (surprise!) but my opinion is simple (dumb!)..

© Sandy Mattingly 2011
 

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Mar. 16, 2011 - can a condo board remove a member??


discrimination article, revisited
Christine Haughney’s March 7 Appraisal feature in the New York Times (East Side, West Side, Bias Claims Abound) made a big splash in the inter-tubes, with many comments about the merits (or lack thereof) in the claims by unit owners at Manhattan condominium Trafalgar House that the condo board discriminated against them because one of the couple is Hispanic; there was even some commentary about the mustache on the “investigative” reporter who figures in the story. All that is very interesting, of course (even the mustache), but one aspect of the story jumped out at me:

Speaking with Mr. Diaz apparently cost Ms. Bruni her seat on the condo board, which removed her on the ground that she had brought negative attention to the building, according to court papers.


The condo board “removed” a member for doing something the board did not like?? That is clearly what Ms. Haughney reports, citing “court papers”, so I have to assume that the plaintiffs made that allegation in the lawsuit.

2 things:
  • I did not know that condo boards had that authority
  • condo boards don’t (usually) have that authority
  • (okay … a third thing) the condo board at Trafalgar House does not have that authority
Section 4 of Article 2 of the By-Laws of Trafalgar House (in the condo declaration, which is available on ACRIS, page 22 of 52) describes the process for removing a board member:

Any member of the Board of Managers may be removed with or without cause by a Majority in Common Interest of the Unit Owners …. Any member of the Board of Managers whose removal has been proposed by the Unit Owners shall be given an opportunity to be heard at the meeting.


I believe that this is a standard condo declaration clause in Manhattan; certainly under this clause, the power to remove a board member is not vested in the board but in the unit owners. It takes a majority of owners to get elected to the board; it takes a majority of owners to get removed from the board; and the election and removal need both be done at meetings of the unit owners.

I don’t know whether Ms. Haughney got the facts wrong, as alleged in the complaint, or whether she got the allegations right and the board ‘did’ something it did not have the power to do (‘remove’ a board member). If a condo board had this kind of power, that would be something unit owners would want to know, I suspect.

should that be a removable act?
I suspect that in almost all situations in which a unit owner does something that the press finds interesting, some other unit owner is going to be mad that the building got the publicity, for fear that it (a) subjects the condo to unwanted scrutiny, that (b) reduces the value of condos in the building. In the case in the NY Times Appraisal, the shareholder talked to a news reporter about a dispute with another shareholder, a form of airing dirty linen outside the ‘family’. Personally, I don’t see a problem with these folks defending themselves in the press, as they are the defendants in a lawsuit filed by the neighbor, but I guess other unit owners were more sensitive about that.

I have touched on this dirty linen problem before, in two posts about 9 months ago: June 3, 2010, suing, shaming + publicizing your problems / a fraught cost-benefit analysis, and June 1, 2010, the politics, wisdom or inanity of airing dirty linen about your coop or condo. One of those posts dealt with a considered decision by a condo board to go very public with their complaints that the developer had built a building with a lot of defects; the other dealt with what seemed like a very childish dispute between board members in a coop.

In both cases, the publicity could be anticipated to reduce market value of everyone’s unit in the building, but in the case of the considered board decision the board hoped that going public was bitter medicine that might help cure the problems. In the other case, at least some board members acted like idiots, by exchanging emails,

that dissolved into name-calling and taunts about board members’ height, spouses, intellect and virility [,]

behavior about which the Board president said "personal attacks and profanity continued at a May 25 [board] meeting".

Nothing like a pissing contest in the New York Times to prove to potential buyers that your coop is run by some idiots!

But I would not think that the remedy for such behavior is ‘removal’, but (electoral) defeat: the time-honored remedy of throw the bums out!

© Sandy Mattingly 2011
 

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Feb. 3, 2011 - REBNY does good! flip tax problem resolved


my dues at work (yay team!)
Regular Manhattan Loft Guy readers know that I have a somewhat ... (shall we say) … conflicted perspective on our trade association, REBNY. Basically, I feel that residential agents (and especially consumers) are the poor relations for a powerful group that seems most interested in the plight of the Macklowes, Malkins and Trumps of the world. Some of my whining is of the use your power for good, not for evil variety, and is linked below.

But give REBNY due credit (today, at least), because it mobilized to change a regulatory rule that would have made coop transactions in Manhattan more difficult, a rule that apparently makes perfect sense in the real estate world in "America", but that would have bad unintended consequences here.

The nugget of the issue about flip taxes is set out in my August 28, save our flip tax! are coop flip taxes in danger from Fannie Mae?, which has more of the story:

Apart from being a shady way for developers to reap revenue from a home long after they have sold it, one problem with these covenants out there in America is that they may not be fully disclosed; another is that they make comp analysis more difficult. It is not heard to see that these are legitimate issues in America.


Nor is it hard to see that these issues have nothing to do with coop flip taxes. A builder who wants an income stream from future sales is (by then) a remote party with no legitimate interest in the future transactions; a coop that uses a flip tax to generate operating revenue or to increase a capital fund when its own shares are transferred is a direct party in interest to the sale. In addition, flip tax information is routinely shared in coop marketing (at least among REBNY firms), so the non-disclosure issue should be a non-issue here.


The happy result is set out in a REBNY press release from yesterday. I don't know that REBNY deserves the credit they claim, but I am willing to assume that they do.

Nice work, team!

the coin has two sides
For two instances in which I beat up on my trade association, see

© Sandy Mattingly 2011

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Jan. 28, 2011 - Lion's Head loft foreclosure sale postscript: an unusual 4-letter word for b-u-y-e-r?


start with 3 letters: WTF??
(No, I am not goin’ all Palin on ya; I’ve been using that locution for years.) This postscript to my January 22, Lion’s Head penthouse loft closes out of foreclosure (121 West 19 Street) with a 7-figure bank hit, might be called the Agents Misbehavin’ Edition. I am (nearly) speechless over this, scratching my head about why an agent would use this language in print to describe a party to a transaction, especially a party that paid more than the asking price for that agent’s listing (indeed, since this agent seems to have had so much direct contact with this buyer, especially with a buyer that was not represented by an agent with whom the listing agent would have to share the commission).

"I wouldn't call him a diva, I'd call him a dick," the broker said. "And you can quote me on that."


This was reported in the New York Observer on line Wednesday night (h/t Nearsay). Much as I try, I cannot imagine any scenario in which this comment is justified.

For background, check out that January 22 post. For whether this is professional behavior, ask your mother.

© Sandy Mattingly 2011


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Dec. 20, 2010 - residential Manhattan square feet called "elusive" by NY Times, "fraudulent" by loft buyers at 1200 Broadway


haven’t we been here before? recently??
The big real estate story is Sunday’s New York Times was The Elusive Measure Known as the Square Foot, by Marc Santora, which everyone is linking to this morning (Curbed, The Real Deal, Brownstoner, True Gotham, UrbanDigs, and I will stop there). Manhattan Loft Guy hates to be left out of a party, so here is my contribution.... To me, the most interesting new fact from Santora is that specific buyers of an identified loft sued a seller, PruDe and an agent after their own three measurements (of 1,634, of 1,741, and of “nearly 1,800” sq ft) did not … errr … measure up to the number in the listing description (apparently, “2,170 sq ft”).

Of course, Manhattan Loft Guy readers are ahead of the game here, having read my rant against REBNY’s failure to lead on the issue of quoting square feet that REBNY knows is important to consumers but only advising REBNY members on how to protect the industry members from legal liability when (not if) consumers rely on the quoted numbers. That was my November 3, the square footage dilemma: REBNY “leads” by protecting brokers, not buyers, which I will refer to again after I hit the highlights from yesterday’s Times piece.

funny shapes are awkward, but not as awkward as lawsuits
I am not going to apologize for the way square feet are used in marketing Manhattan residential space (quite the contrary, as you will see), but these buyers had many ways to avoid the problem they now claim.  The lawsuit was over #5B at 1200 Broadway (in the storied Gilsey House), bought on April 5, 2010 for $1.65mm by two guys who were mad enough to sue over the square feet quoted in the listing. (There is no measurement in the StreetEasy old listing, which is hardly surprising for something that went to litigation, and no dimensions whatever on the floor plan from that listing.) I will take it as a given that the original listing said “2,170 sq ft” as the buyers alleged.

I can’t find an Offering plan for the Gilsey House, so I don’t know if there is a Schedule A that allocated the original maintenance obligations for each unit by square feet (some coop OPs have square footage in the Schedule A, some don’t). StreetEasy thinks that another “B” line unit here was “2,000 sq ft” when it did not sell in 2007, but I don’t know what source StreetEasy uses. Our data-base has a maddening number of different sizes for “B” line lofts at 1200 Broadway. In addition to “1,900” for #5B, we show different “B”s at “1,800”, “2,000”, “2,170”, and “2,200”. Some of that variety might be due to additional lofted mezzanine space that takes advantage of the high ceilings at 1200 Broadway, but I can’t account for this embarrassing mix.

The “B” line would present any geometry simpleton (such as myself) with a measurement challenge, as it is roughly a triangle, but with five sides instead of three. But someone with the motivation and patience could box it up and cut it up enough to figure out the space inside the exterior dimensions if s/he wanted to. That would give you the interior-wall-to-interior-wall volume, which is not necessarily what the developer did when the building was turned into a coop long ago. If that measurement started from the middle of the walls, for example, that could add 6” or more along the two sides that are exterior building walls, and 4” or so along the three sides that abut other lofts or common space within the building. I am going to guess that counting some of that “inner-wall” space could add at last 75 sq ft or more to #5B.

those unhappy buyers (who love their loft)
I have some sympathy for the two guys who bought #5B, but there are limits. I bet they were in the loft multiple times before they closed. I bet the show sheet they used to (probably) plan out their furniture scheme in the loft had the nifty REBNY disclaimer about “deemed reliable but not guaranteed; bring an architect/engineer to measure”. I bet their lawyer knows if the Offering Plan says anything about square feet (with another fancy disclaimer, if it does).

But here is the kicker: not only were they in this loft, they were in “40 or 50 apartments” that their agent thought met their criterion of “more than 2,000 square feet”. They knew how big “big enough” was, and this is the one they bought. If there was another loft somewhere that was bigger and/or better for less money, they would not have bought #5B. They saw “40 or 50 apartments”!

If the loft is really only 1,634 sq ft and if they really counted on it being 2,170 sq ft, that is a huge spread -- 33% of the smaller figure. But they also knew (at some point) that an architect thought it was “nearly 1,800” sq ft, so their own numbers vary by as much as 10%. And, the PruDE lawyers no doubt pointed out that they were invited to make those calculations and measurements at any time.

They felt as though they had been cheated, but their legal case was so difficult that they dropped it. The good news is that “they say they love the apartment, [the bad news is] they are still bitter about the experience.” I bet all their furniture fits, just as they planned. I hope they continue to love the loft.

Note to self: check back when these
guys sell (in five? seven? years). I wonder if they will use “1,634 sq ft”.

in which I disagree with True Gotham...
My November 3 post linked to the True Gotham video series on measuring square feet. Doug Heddings of True Gotham has always been a proponent of transparency and customer service in the business, and he has a strong statement in the Times article:

“I think all the weight that is put on price per square foot, especially in Manhattan, is ludicrous.” He is particularly skeptical of comparing apartments in different buildings based on their listed square footage.

“Very rarely can you compare two units unless they are units that are in the same building and were measured using the same standards,” he said.


I don’t think it is “ludicrous” but it is difficult, and it could be made easier if REBNY cared to take a consumer-friendly step that would make life (a little) more complicated for the brokerage industry (which is the only constituency in the residential resale business that REBNY seems to care about; unlike the commercial real estate industry, where many constituencies are REBNY members, and where REBNY has enforceable standards; see that November 3 post for more).

why square feet?
As I mentioned in that November 3 post, my Manhattan loft-centric view colors my approach, and is different from the perspective of agents who deal mostly in “apartments”. Indeed, I had Doug (and others) specifically in mind when I wrote this on November 3:

There are long-time honest agents who market traditional Manhattan apartments who find this whole topic distasteful and/or irrelevant. They believe that the pain caused by these measurements is simply not worth it. ....


I have heard such people often enough that I believe that they are sincere and knowledgeable about their market niches. But it is unfathomable to me that one could work with classic Manhattan lofts and not talk about square feet each and every time. Not just unfathomable, but impossible.


Every Manhattan loft is a set of exterior walls within which is x,xxx square feet, and a host of possibilities. Bathrooms and kitchens need not be where they are on a given floor plan. Interior walls need not exist (for the most part). Lofts should be compared across buildings on whether they are ‘big enough’ as is, and/or on whether they can re-configured to more sensibly fit a buyer’s lifestyle and needs on a reasonable budget. A loft square foot has as many square inches as an apartment square foot, but there is more flexibility in a loft square foot.

I also think that from a market overview perspective, it is important to have useful data based on square feet, an approach like The Miller’s. I concede that inaccurate, flaky numbers are not (very) useful data, but if we could get there, that would be great. But there is very little interest that I see among the powers that be to insist on standardized data. Sigh.

the magic bullet
There is no magic bullet! When I am king, I would enact this approach from my November 3 post, a rule that King REBNY could easily enact:

So perhaps REBNY would avoid that problem by requiring that agents either measure themselves, or pay someone to measure. ....


Use the exact Offering Plan number (if there is one), and disclaim that there are issues, and you have satisfied the (new) REBNY standard and are (likely) home free of any legal liability so long as you use the (no doubt, REBNY crafted) nifty disclaimer.


If you want to use a different number, justify it. If you do it yourself, save your drawing and pencil calculations (check the math, twice!). If you pay someone else to do it, save their work.


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.

Wouldn’t that be a better world?

© Sandy Mattingly 2010

 

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Dec. 19, 2010 - Manhattan Loft Guy, 1 - Wall Street Journal, 0, as WSJ posts 4 bedroom correction


pardon me for boasting
I am reliably informed that my December 14, Wall Street Journal oversells a Manhattan 4 bedroom “boom”, was forwarded to an editor at the Wall Street Journal, resulting in the Corrections & Amplifications item posted Saturday on the bottom of that article, More at Home in 4 Bedrooms.

a much more muted ‘boom’
Reading it now, with that paragraph essentially neutered, shows how spare the ‘data’ in support of the 4-bedroom boom thesis is:

According to the U.S. Census's New York City Housing and Vacancy Survey, apartments with four or more bedrooms represented more than 12% of owner-occupied units in New York City in 2008, compared with 12.8% in 2005.

BFD, right? This is what it used to say:

According to the U.S. Census's New York City Housing and Vacancy Survey, apartments with four or more bedrooms represented more than 12% of owner-occupied units in New York City in 2008, up from 1% in 2005.

no hurt feelings, but …
I have no idea what the appropriate journalistic standards are for running a Corrections & Amplifications item like this, and Lord knows this blog cannot be accused of journalism, but it would have been nice if the Journal had given this blog credit for the correction (assuming that my post was what provoked the C&A). Nice, but not necessary, of course.

I am pretty sure that blogging standards would have required a hat tip to Manhattan Loft Guy, had this been a blog-to-blog issue.

Whatever.

© Sandy Mattingly 2010

 

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Dec. 15, 2010 - not news, data: Manhattan coops outnumber condos 3:1, but rentals outnumber both 3:1


pinning a Manhattan real estate data point: distribution of housing in Manhattan
That Housing and Vacancy Survey by the U.S. Census Bureau I relied upon yesterday is the source for some simple data nuggets that answer these oft-asked questions:

  • how much of Manhattan’s housing stock is coops, and how much condos?
  • how many people in Manhattan rent compared to how many who own?

The answers are curiously symmetrical:

  • there are 3 coop households for every condo unit in Manhattan
  • there are three rental households in Manhattan for every owner-occupied unit

These answers are graphically represented (with colors!) in a Miller post that I noted about 6 weeks ago, which I put aside for a future post. Especially in the wake of yesterday’s post that relied on that same Census Bureau survey (December 14, Wall Street Journal oversells a Manhattan 4 bedroom “boom”), today’s a good day to cross that off the Manhattan Loft Guy to-do list.

The Miller’s October 27 post pulled a (colorful!) chart from a press briefing by the Federal Reserve Bank of New York about housing, using data from that U.S. Census Bureau survey. Go there, as you will see the data more quickly than reading it here if I repeated it.

I can add that the total number of Manhattan households in that U.S. Census Bureau survey is 761,554 (see Table 14 from the 2008 survey), so the rough numbers for types of Manhattan residential units back out like this (applying the integer percentages in the chart to that “n”):

total townhouses coops condos rentals
761,554 7,616 137,080 45,693 571,165

Again, these overall ratios have been part of the informed Manhattan residential real estate conversation for years, so the ratios are not ‘news’. But as I did in my December 7, pinning a data point: national real estate peak was July 2006, I wanted to be able to post a credible source for a bit of Conventional Wisdom. Done!

© Sandy Mattingly 2010

 

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Dec. 8, 2010 - shredding the fabric: a building's culture is endangered when financial treason is discovered


long ago Manhattan Loft Guy promise, fulfilled
When last I touched on the low-life property manager who cheated at least 19 buildings (including “high-end coops and condos” in Manhattan, at least a few of which I know to be lofts) out of at least $2.3mm, The Bad Guy had just pleaded guilty. I said then (September 19, thieving coop and condo property manager pleads guilty) that

The middle of the end of the story will be when Bassik is sentenced on October 12.   


I will briefly note that middle of that end of that story and circle back to the middle, but then will use this scenario to talk about how fragile the social fabric is in coops and condos (indeed, the smaller the building, the potentially more fragile) and how much damage can be done when something like this happens to a building.

In continuing to use the stages of this financial fraud story, the end of the end of the story -- the next stage for the victimized coops and condos if their culture is endangered -- may not happen without a rippling process of recrimination, learning and (if things go well) … recovery.

In the middle of the end, he was sentenced to 5 to 15 years on each of 7 counts of second degree grand larceny, shorter periods on 6 counts of third degree grand larceny, and a still-shorter term for a single count of ‘scheme to defraud’. The sentences are to be served concurrently, not consecutively, so the net effect of the sentencing is that he will serve between 5 and 15 years, I suppose subject to the proverbial time off for good behavior.

to the beginning of the middle, for a minute
For those readers who need to catch up, I picked up the maturing story somewhere in the middle of the facts that were occurring in the real world:

I started the story at the beginning of the middle, with my January 30, post, why hire a low-life as property manager? 'cuz you didn't know, after a NY Daily News article from January 24 about property manager Richard Bassik of Downtown Properties being accused of scamming his coop and condo clients. Later, my July 2, low-life property manager INDICTED, continued the story in the late middle, when Bassik was indicted, and quoted from the District Attorney’s press release about the charges.


the promise
Note to self: be better at keeping promises such as this (from that September 19 post, now in italics):

This sorry story won’t finally end for quite a while. I will need to deal with this in another post, but the story won’t end until the cascading effects of Bassik’s crimes get worked cleanly through the social fabric of the coops and condos that were victims. Here’s a preview: that rippling process will likely take years.


the problem, in general terms
Remember that I am using the Bassik scenario to say something (sorry) basic about coop and condo life, and how a trauma such as being ripped off by a building manager can cause more than dollar problems. The specific facts don’t matter as much as the outline, and I am not interested in airing dirty laundry about some of the buildings that were victimized or in making their work harder, going forward. So, if you happen to know some of the buildings that were involved, you should not assume that I am speaking about any one of them in particular.

Assume a coop with a “reserve fund” more than one quarter of the operating budget that finds out that the reserve fund account is empty, because (they soon learn) the property manager had siphoned it off for his own purposes. Shareholders (and especially shareholders on the board) run through a series of emotions and -- especially while the information is fresh and subject to uncertainty as facts are uncovered -- varying levels of panic, wondering:

  • what happened?
  • how bad is it?
  • how can we get our money back?
  • can we get our money back?
  • what if we can’t get our money back?
  • how did this happen?

In all but the most secure, congenial, confident, and mutually supportive coops, that last question can take some ugly turns:

  • how did this happen?
  • WTF?
  • why didn’t the board prevent this?
  • who is to blame?
  • who can we sue?
  • WTF???

In the real world, the early stages of this crisis take weeks to unfold, as the board realizes that the records they need are in the hands of the guy who (it seems) stole from them. Meanwhile, shareholders have varying levels of information, of confidence in the board, of confidence in their personal capacity to handle their proportionate share of any unrecovered losses, and, yes, of anger. Not all communications in the first days and weeks turn out to have been fully accurate; not all board members are adept at communicating in a crisis; and not all shareholders are comfortable being told “we don’t know everything yet”, especially if they are also told “the DA thinks there’s no money to ‘recover’”.

Even (especially!) before anyone has any concrete idea of exactly how this low-life property manager stole from them, or how (whether!) they can get any of it back, rumors can fly around the building, tempers can flare, relationships among shareholders can fray.

Hurried math is done, such as, if our 40-unit coop took a $500,000 hit, I can find $12,500 that I wasn’t planning to spend … but can my neighbors? If my share of the hit is $50,000, what then??

stress is harmful to coops and other living things
If you put a social system under stress, things happen.

If you erase a coop’s reserve fund, or (worse) take away operating funds, that is a lot of stress. If you need time to bring a new property manager up to speed, get records from your bank, consult your lawyer, talk to the District Attorney, there is a lot of time for panic, misinformation and General Bad Feelings to develop.

Would you be surprised if some shareholders in some victim buildings begin to second-guess the board? Consult lawyers to see if they can sue the board? Organize other shareholders to replace the board?

Would you be surprised if some shareholders don’t have ready access to funds sufficient to make up their proportionate share of losses? Would you be surprised if some volunteer board members regret having volunteered? Would you be surprised if (before any of this happened) some shareholders just did not like some fellow-shareholder board members?

What do you think all that does to elevator conversations?

some facts about this stress
In at least one of the Bassik victim buildings, unrecovered losses per shareholder were more than $100,000.

In at least one of the Bassik victim buildings, the coop sued the bank to see if the bank did anything wrong with the accounts, so far unsuccessfully, perhaps throwing good money after bad.

In at least one of the Bassik victim buildings, much of the (paper) wealth of long-time shareholders is represented by their coop shares, some of whom are on fixed (or low) incomes.

In at least one of the Bassik victim buildings, the board determined that there was no insurance or bond or indemnification source for any funds lost to Bassik.

In at least one of the Bassik victim buildings, the board initially determined that they had suffered no losses, but ended up filing a Victim Impact Statement when Bassik was to be sentenced.

paging Cyndi Lauper, or do we need The Brains?
Sometimes tempers flare in a coop over conflicting ideas about how to decorate a lobby. (See the lively comments to the November 12, did the NY Times just write the obituary for the Soho real estate market? for some evidence of that.) Sometimes nerves are frayed because of (you will believe it if you read it) smells in the elevator. (See the classic put-down by Brick Underground’s Ms. Demeanor on that one.) Sometimes neighbors don’t like what their neighbors put in the hallway outside their door. (Brick Underground channels a discussion from Urban Baby, here.)

But it is just different when money is involved.

That is as true with potential losses (as with the Bassik thefts) as it is with potential gains. This New York Times piece is such a classic, that I was surprised to find that it is five years old. Written by Josh Barbanel (now over at the Wall Street Journal), The Evolution of Reluctant Capitalists examines life at the West Village Houses in what used to be a fringe area of the West Village (think: prostitution and muggings) in 2005, with many long-time residents conflicted and in conflict about the opportunity to become owners.

the unity that helped bond the tenants has begun to crack. Former friends pass each other on the street without making eye contact. Dissidents are bitterly angry about election rules that they say were stacked against them. Supporters of the plan are worried that the deal of their dreams could be derailed at any moment. It's a "pot of gold at the end of the rainbow," said one message on the tenants' Web discussion group. "No Deal is Perfect, Get a Grip, Stop Bellyaching and Start dancing in the Streets." Although the plan is likely to be approved, there is still dissension. Renters occupying three-bedroom apartments, most with private gardens or cathedral ceilings, have threatened to sue, saying their proposed allocation of co-op shares - and thus their (below-market) purchase price and maintenance - is too high. And a rump group of tenants, some of whom are uncomfortable joining the ranks of owners of luxury apartments, fret about the way negotiations were conducted, the details of the deal and whether the purchase price could have been lower, allowing more tenants to buy, as well as what will happen to those who can't buy.


One tenant, described as a psychologist, former downtown poet, and "a red diaper baby," raised by socialist parents,


... yearns to keep the old sense of community ....


"We started out trying to keep this viable, friendly middle- and working-class community intact," he said. "It has pretty much split around four or five different factions, mostly based on the money you can make owning your apartment."


*** "But you are seeing a bunch of people who have gotten a windfall, and people are tearing at each other."


Let’s review what happened when different people had different views about the opportunity to go from renters to owners, getting that “potential windfall”:

  • “Former friends pass each other on the street without making eye contact.”
  • "It has pretty much split around four or five different factions....”
  • “...people are tearing at each other."

Any of these Bassik victim buildings is at risk of a similar disunity dynamic, depending on how big the hit is (a very subjective item), on how well integrated the building was before hand, on how well the board communicated as the crisis developed, on whether the board had taken reasonable steps before (and has tightened up financial controls since), and on the totally unpredictable and highly variable matter of how various … errr … idiosyncratic personalities interact (collide?).

Best of luck to them all.

© Sandy Mattingly 2010

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Nov. 2, 2010 - the square footage dilemma: REBNY "leads" by protecting brokers, not buyers


leadership? not so much
It’s the day after Election Day* so you will read a lot about Leadership today all over the inter-tubes. But you won’t find any other “pundit” talking today about Leadership in the context of REBNY and one of The Great Irritations In Manhattan Residential Real Estate: square footage. Re-fill your coffee; this is going to be one of those long ones....

Everyone seems to acknowledge that the use of square footage measurements in residential real estate listings is problematic at best, and a bad joke all too frequently. Indeed, REBNY (which bills itself as “the city’s leading real estate trade association”) sent an all-hands memo in September about this important problem, acknowledging the obvious (my bold makes parts even more obvious):

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.


But instead of proposing a solution to help buyers deal with “one of the key factors”, REBNY acted exactly as a self-interested trade association would, and advised its members how to avoid legal liability when quoting square footage. Here is the core of the advice given by REBNY to its members (again, with my bold):

The Board of Directors of the Residential Brokerage Division believes that it is important that all brokers and salespersons make clear to potential purchasers that all square footage measurements that are provided through the RLS are usually just estimates, and are not certified or deemed reliable by either the listing firm or a participating co-broker.  In addition, a buyer determined to have a square footage measurement should consult or retain their own professional, and have that professional explain the methodology for the measurement.  Moreover, all firms should include some sort of disclaimer on the materials they provide to their buyers that all square footage estimates are not to be relied upon, and are certainly not verified or certified accurate by the brokerage firm.


the commercial model, not applied
If REBNY wanted to, this problem could go away. As with many things that might improve the buyer or seller experience at the cost of changing the way agents behave, REBNY seems not especially interested.

Note that REBNY has taken a different approach since 1987 in promulgating guidelines with “definitions and methods as the Standard Method of Floor Measurements in office buildings”. While I have seen commentary on the web that the REBNY commercial standards are not as stringent or as detailed as the accepted 25-page national standard from the Building Owners and Managers Association (such as here, or here) my simple point (for now) is that there is and has been since 1987 a set of written guidelines for measuring commercial space that REBNY is prepared to enforce.

I am going to guess here, and offer the theory that REBNY has such a guideline because it has members on both sides of commercial rentals; even more critically because the many people professionally involved in developing, building, and renting renting commercial space find it useful to have a basis for comparison of commercial space on the basis of size. I.e., it makes life easier for many REBNY members to have “a Standard Method”, especially when dealing with major companies as tenants. As REBNY is fond of pointing out,

The Real Estate Board of New York is the city’s leading real estate trade association

with more than 11,000 members. REBNY represents major commercial and residential

property owners and builders, brokers and managers, banks, financial service

companies, utilities, attorneys, architects, contractors and other individuals and

institutions professionally interested in the City’s real estate.


If the “financial service companies” who are REBNY members include mortgage lenders such as Citibank and Chase, those members often find themselves on the tenant side of major rental negotiations. I am sure they find it useful to compare apples and apples.

opportunity knocked, but REBNY was out
There seem to be four ‘sources’ for square footage numbers I see in listing descriptions:

  1. Offering Plans for coops or condos
  2. actual measurements by agents, architects, or others
  3. city tax records (based on condo Offering Plans??)
  4. some undisclosed ‘estimates’

There are many ways that a consumer-friendly trade organization could go here.

The simplest way (from the broker perspective) would be to say that if you use a number, say where it came from. If you say it is from the Offering Plan, end of story. If you say someone measured it, say so, with a disclaimer that other people might measure the same space and get a (somewhat) different number. If you say there is another basis for the number, identify the basis (with funky shaped lofts, for example, one might say that the total building footprint has been divided among X lofts in proportion to their common charges or maintenance ratios, after deducting for common hallways, stairwells and elevator shafts).

A consumer-friendly trade organization would not do these three things at the same time:

  • acknowledge that the square foot measurement is very important to consumers
  • accept that REBNY members routinely use such numbers
  • but insist when they do that they footnote that consumers may not rely upon them.

Of course there are problems with the measurements given in coop and condo Offering Plans. Not all Offering Plans contain square footage data, and among those that do the methodology is inconsistent. Do they include all interior space from the outside of the exterior walls? Do they exclude structural elements, such as flues, columns, walls? Do they apportion some percentage of common space on the floor (public hallways, stairwells, elevator shafts)?

So perhaps REBNY would avoid that problem by requiring that agents either measure themselves, or pay someone to measure. Forcing agents to do this might provoke mass hysteria among firms, which is why my first suggestion is to offer a choice.

Use the exact Offering Plan number (if there is one), and disclaim that there are issues, and you have satisfied the (new) REBNY standard and are (likely) home free of any legal liability so long as you use the (no doubt, REBNY crafted) nifty disclaimer.

If you want to use a different number, justify it. If you do it yourself, save your drawing and pencil calculations (check the math, twice!). If you pay someone else to do it, save their work.

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.

But won’t this prove that measurements are not standard? Yes, I suppose so. But it is better than at present, when everyone already knows they are not standard and there is a great deal of (warranted) cynicism about where these numbers came from.

it takes a rule
Based on conversations I have had with agents, there are many people who would give the consumer more information (such as, identifying that the apartment that has sold twice before as a “1,200 sq ft” apartment really only measures to “985 sq ft”), but they would be at a competitive disadvantage if other bozo agents marketing the same apartment on a different floor would continue to claim that their listing was “1,200 sq ft”.

So this would take an industry wide rule, to protect the agents who would do the right thing from those agents who use information that is ... errr ... (trying to be gentle here) ... without an apparent basis in fact. Would the brokerage firms be happy to confront the agents who have been claiming “1,200 sq ft” for the 985 square foot apartment? Probably not happy, but they need to see that there is an important customer service here. IMHO

there are contrary views
There are long-time honest agents who market traditional Manhattan apartments who find this whole topic distasteful and/or irrelevant. They believe that the pain caused by these measurements is simply not worth it. For them, and for their sellers and buyers, it is all about the room count. Of course, for such people, they could use the alternative of not quoting a number after (ha!) REBNY adopts the Manhattan Loft Guy Rule.

I have heard such people often enough that I believe that they are sincere and knowledgeable about their market niches. But it is unfathomable to me that one could work with classic Manhattan lofts and not talk about square feet each and every time. Not just unfathomable, but impossible. Personally, I prefer a credible number, especially to the current world in which the incredible numbers corrupt the impact of the reasonable (and sourced!)  numbers.

To read one informed commentator’s opinion on this, which is different from mine, read This Smart Guy from October 20.

to go to school on square feet in Manhattan residential real estate: the True Gotham series
If you’ve stayed with me this far and you really want to see a discussion about measuring space, master blogger Doug Heddings did a video series way back in 2007 with an appraiser (The Miller!, natch), a draftsman, and an architect. Each video is about three minutes, with some overlap from one to the next.

Spoiler alert: the offering plan for the subject unit (which has been combined) added to 1,506 sq ft; the 3 pros measured and got 1,475, 1,506, 1,479 of interior square feet, with the comment that the same person could measure the same space twice and get different measures each time, by a factor of 5 or 10%.

True Gotham video series from October 7 - Nov 1 2007 3+ min each
http://www.wellcomemat.com/video/84885249B7
http://www.wellcomemat.com/video/7BFFFDE4D8
http://www.wellcomemat.com/video/4D848799DE
http://www.wellcomemat.com/video/4CBD0540B6
http://www.wellcomemat.com/video/6A93FD7E5F
(I hope I have these in chronological order.)

Wouldn’t it be nice if we could count on our leaders to ... you know ... lead?
_____
* It is still Election Day in places like Nevada, Colorado and Washington, so I am staying up just a bit longer to see if Reid, Bennet and Murray can hold on in the Senate, but as you read this, I am sure it will be daylight on the day after Election Day.

© Sandy Mattingly 2010

 

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Oct. 15, 2010 - old story of new building ruining view: a cautionary tale with rules to protect yourself


there goes the view!
Twice this week I have used the Lexington Avenue local station at 28th Street & Park, observing that the parking lot on the southwest corner is boarded up and that the building to the south on Park Avenue South is shrouded in mesh and is also a construction zone. I remember visiting a loft listing nearby a few years ago and asking about the view, a story that leads to today’s Manhattan Loft Guy Cautionary Tale. It is a timely story, at least in the sense that it is scary, if not quite scary enough for Halloween.

starting at the end
I will begin with The Moral Of The Story, then work backwards. The moral is Reaganite simple: when it comes to questions about possible future development that might impact the light or view of a Manhattan loft, Trust But Verify.

We could even shorten the rule, and use all caps: VERIFY.

No one will be surprised at the suggestion that a buyer should not take at face value anything important that a listing agent says about the loft, but here’s my story, followed by Some Rules....

nice view + nice agent = ???
The loft we saw had an angled view south and east over the parking lot and across wide Park Avenue South. A “city” view rather than an iconic view, but it was open and light. Certainly part of the charm of the loft (and, therefore, part of the price) was that open view and light. As one should always do when looking at parking lots, we asked “are there any plans to develop that parking lot?” The answer was something like “none that we know of, but if you look at the FAR for that lot there’s not much that could go there.”

Turns out that my buyers were not interested in the loft for other reasons, so we never considered whether that was the right answer about the parking lot.

I am not going to out the guy, but he remains one of the loft agents in Manhattan, with a lot of listings. And he is a nice guy. So far as I have known, he is honorable. But....

lovely renderings, circa 2005
When I searched on-line this afternoon, having been by that now-busy intersection twice this week, I was a bit mortified to note that Curbed had a story on June 3 about development of this parking lot (how’d I miss that on Curbed?). Worse, the story notes that a work permit had been filed way back in 2005. Much worse, the plans were for a 40-story building on the parking lot and the adjoining lot to the south, where there is (for a little while longer!) an 8-story building.

The listing agent for that loft we visited a few years ago was wrong. Possibly he knew about the planned tower, possibly he didn’t. I’d like to think that he didn't lie.

I'd also like to think that we’d have found out about the planned development if my buyers had been interested in the loft. This story makes it all but certain that from this day forth I will make sure we find out about any publicly filed plans (or even public discussions) involving any parking lots “of interest”.

FAR = FA Schmar
Let’s assume that the agent did not know about the plans, and that he answered our question truthfully, if inaccurately. In this case, the FAR for that parking lot was just one piece of the puzzle, because (as Curbed notes) the developers bought “mucho air rights along Madison Avenue” and had the 8-story 396 PAS envelope to also work with.

what to do?
The only way I know of to give a buyer confidence about plans is to (a) contact the local Community Board and Council Member and (if no ‘bad news’ there), (b) pay an architect to review the actual building envelope available to the site, including a review of whether air rights nearby have been transferred. That first inquiry is a low-cost way to find out controversial news, but the second inquiry is essential if nothing bad has already turned up. (You might fid a real estate attorney who could do a title and air rights transfer review as an additional part of due diligence, but you’d need an architect to review ‘real’ FAR potential.)

Of course, this is not fool-proof. Your best efforts might miss some subtle evidence of (often subtle) lot assemblage and, of course, things change! A year after moving in, your buyers might discover that A Massive Project is going in as of right, taking away their precious light and/or views. There’s always that risk with parking lots or other under-developed properties. And in the right economic environment (circa 2006), some very aggressive envelopes get pushed.

a blight or a beauty?
In the case of this corner of 28th Street and Park Avenue South, there is an architect news website (nyc-architecture) that claims as of July 13 that the Community Board and City Planning Commission have already signed off on a 40-story tower to contain 439 rental apartments. Curbed dubs it the Fortress of Glassitude, while expressing skepticism that the renderings on line will actually be built.

As rendered, the tower is rather ... different from anything else on PAS. Worth a try to me. If it comes out nice, whoever bought that loft we looked at a few years ago will lose am open "city" view but (perhaps) have an interesting slice of a beautiful building across the street.

to recap The Rules about ‘interesting’ parking lots

  1. ask the agent (if they know, they have to tell you [legally])
  2. ask the Community Board and/or City Council Member (they probably know about firm plans, if big)
  3. pay an architect to review potential development envelopes for the site
  4. pay an architect or lawyer to look for property and air rights transfers nearby

some related links


© Sandy Mattingly 2010

 

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Oct. 7, 2010 - the puzzle of pop-up contracts, signed long after Off The Market at 144 West 27 Street and 24 East 21 Street lofts


odd sequence
What is missing from these sequences?

144 West 27 Street #9R:

June 26, 2009 new $2.2mm
Sept 17    $2.295mm
Nov 10 off  
     
May 20, 2010 contract  
July 22 sold $2,428,700

 
24 East 21 Street #5 (Infinity Flats):

Feb 12, 2008 new $5.5mm
May 6   $5.125mm
Sept 2   $4.85mm
Sept 4
  $4.7mm
Jan 27, 2009   $4.5mm
May 14 off  
     
April 13, 2010 contract  
July 29 sold $3.975mm

Hint: “back on the market”.

In both cases, these lofts had been marketed, then taken off the market (when exclusive listing agreements expired?), then revived as an active listing already in contract. (In both cases, the information on StreetEasy corresponds to the inter-firm data-base, so this is not a situation in which StreetEasy failed to scrape some data.) Two data points do not make a trend, but these situations are off enough that they caught my eye (it helped that they closed a week apart). They remind me of something I should keep in mind, especially when working with realistic buyers with very specific criteria about the Manhattan loft they want.

what is going on?
I have actually have noted about a half dozen recent Manhattan loft sales in which there is little or no listing history; some are “no listing associated with this transaction on StreetEasy”; others have something like this bifurcated history as with #9F at 144 West 27 Street and #5 at 24 East 21 Street. These are the only two that I could conclusively establish as sales involving the same listing agent as when the loft had been taken off the market; the others
may be successful For Sale By Owner transactions.

in one of these cases I have confirmed that a buyer re-emerged during the “off the market” period and the seller negotiated through the ‘former’ agent; in the other case I assume this is what happened. In one case, the seller was firm enough to achieve a 6% premium over the last asking price; in the other case, the seller took a further 12% discount off the last asking price, which itself had been a discount of 18% off the original (nearly year old) ask. In one case, the contract was signed 6 months after the loft had been taken off the market; in the other case, the gap was 11 months.

a silent market
These two Manhattan loft transactions caught my eye precisely because they are unusual; I don’t mean to suggest that this phenomenon is common. Not that it could ever be tracked, but it is nothing like the so-called ‘shadow inventory’ of new development condos that have not yet been released for sale.

note to self, when working with buyers
These two odd transactions remind that when working with so-far-unrequited Manhattan loft buyers with very specific criteria, I should include in a search Off The Market lofts. You never know if they might really be available, without asking.

© Sandy Mattingly 2010

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Sep. 19, 2010 - thieving coop and condo property manager pleads guilty


we were speaking of crooks...
A soon-to-be-former-NYS-senator was the foil for Friday’s post about a cynical lack of morality within the Manhattan real estate industrial complex (September 17, the (low) morals of the Real Estate Industrial Complex, politics division); today I will revisit a (now) convicted bad guy who has done some serious damage to many Manhattan coops and condos, including at least one loft building.


I started the story at the beginning of the middle, with my January 30, post, why hire a low-life as property manager? 'cuz you didn't know, after a NY Daily News article from January 24 about property manager Richard Bassik of Downtown Properties being accused of scamming his coop and condo clients. Later, my July 2, low-life property manager INDICTED, continued the story in the late middle, when Bassik was indicted, and quoted from the District Attorney’s press release about the charges.

As I said in the July 2 post, the January 30 post:

included the story of one Bassik-managed Manhattan loft building that had escaped without a financial problem (so far?) and talked about what coops and condos can do in these situations (after the fact, not much; before hand, a lot).


closer to the end
There I was, this past Thursday evening, learning that we are at at least the beginning of the end of the story ... I had just finished reading
The Real Deal’s Thursday night piece announcing that Bassik pleaded guilty on Thursday to 14 counts when I got an email from a shareholder at one of the victimized coops with the same news. I wonder to what extent the inter-tubes were humming Thursday night, passing along this news among Manhattan coop and condo owners and boards....

The overview of the guilty plea, from TRD:

Property manager Richard Bassik has pleaded guilty to 13 counts of grand larceny and one charge of scheming to defraud, the Manhattan district attorney's office announced today. Through his company, Downtown Properties, Bassik stole upwards of $2.3 million from the 19 properties he managed, including several high-end co-ops and condominiums, cashing wrongfully issued checks and diverting funds from building bank accounts for his own personal use. The fraudulent activity took place between January 2005 and August 2006 ....


The middle of the end of the story will be when Bassik is sentenced on October 12. Apparently, the District Attorney’s office has told victims that the judge is likely to sentence Bassik to between 5 and 15 years in prison.

This sorry story won’t finally end for quite a while. I will need to deal with this in another post, but the story won’t end until the cascading effects of Bassik’s crimes get worked cleanly through the social fabric of the coops and condos that were victims. Here’s a preview: that rippling process will likely take years.

an (open) question of scale
Here is one troubling thing evident from the sources cited in my two prior posts: there are probably more victims, with more damage, than Bassik has pleaded to.


The January 24 Daily News article talked about 4 buildings that had lost "nearly $2mm"; the June 30 DA press release talked about $2.1mm stolen from 13 properties, between January 2005 and August 2009 (note that the TRD article says “January 2005 and August 2006”, a much shorter period; I haven’t seen the official document about the plea, so can’t tell if the right end date is 2006 or 2009). That is 9 additional victims and something more than $100,000 in additional losses discovered between January and June this year. The TRD piece last Thursday notes that Bassik “stole upwards of $2.3 million”, so the loss number grew another $200,000 or more since June.

Part of that increase is probably from the loft building that I mentioned in my January 30 post, which turns out not to have “escaped unscathed”, as they first thought. They filed a Victim Impact Statement stating that they had documented more than $30,000 in losses ... and suspected that there was more that they had not uncovered. I suspect that this is true of other Bassik-managed buildings as well; there are probably some who do not know they were victims, and probably others that suspect they lost more than they can know prove. The DA worked from numbers that could be proven in court; who knows what the real numbers are?

back to the late middle of the story
My July 2 post contained this bit of advice that is useful enough (and short enough) to repeat:

The things that coop and condo boards can do to protect their fellow owners are simple, limited, and effective:

  • pay attention
  • require multiple signatures for non-trivial checks, including a board member signature
  • check your property manager's bond and insurance limits, and compare those limits to the amount of money they manage
  • create a culture in which detailed scrutiny by the board is perceived as professional and a sign of good management instead of a sign of suspicion
  • and (first, last, and not least) ... pay attention

I won’t repeat the useful story about (Not) Out-running The Bear (too long for a too-long post), but that is there, too.

Manhattan Loft Guy note to self: write about how that rippling effect may cause lots of problems between coop shareholders / condo owners and boards, and among shareholders and owners. Soon.

© Sandy Mattingly 2010

 

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Sep. 17, 2010 - the (low) morals of the Real Estate Industrial Complex, politics division


the (non) Quote Of The Day
If there’s a word “antidote”, should there be a word “antiquote”? I feel as though we need that word today, in looking at this quote in last night’s piece,
Espada, an ally of the real estate industry, mourned in defeat, from The Real Deal:

"Regardless of what you thought of Espada personally, his defeat was not good for the real estate industry,"


I have nothing personal against the guy who made that statement (we’ve never met, though I was disappointed when he cut off his pony tail). You do see him quoted a lot about Manhattan real estate, perhaps because he is a ‘good quote’: colorful, glib. But cute has its limits: I had to wash my hands after clicking through the TRD article.

My premise, obviously, is that I believe not-soon-enough-to-be-former-State-Senator Pedro Espada probably did the bad things he is accused of doing, and so is guilty of gross mis-use of his office (and probably of felonies). See, for example, this April 20 article from the Old Grey Lady about the Attorney General’s civil suit alleging that Espada wrongfully diverted $14mm from a non-profit he set up, whose board was controlled by his staffers and family associates. While these remain “allegations”, my sense is that the specific allegations about money being moved (or “diverted”) are likely to be true, and that any defense will rest on a claimed lack of personal knowledge, or careless book-keeping. No moral exculpation is likely.

My premise, obviously, is that I believe that unless someone is pretty convinced factually that Espada did not do these bad things, it is a shameful act to have voted for him. Worse, it is a shameful act to have donated money to him in the narrow belief that He Is Good For My Business, The Fate Of The State Be Damned.

As in, it is perfectly OK to have crooks in Albany, so long as those crooks keep my business interests in mind. It is important to note that this is not (in my opinion) a close question about Estrada. At a minimum, there is enough ‘smoke’ about him to suggest that anyone interested in Good Government would prefer a more-likely-to-be-honest senator to one with such smoke.

In other words, it is the height of cynicism to support this likely-crook because he helps you make money.

While the one guy who made the (Non) Quote Of The Day may have been less “circumspect” than other members of the Manhattan real estate industrial complex, the others are no less to be shamed for putting their money where our government dysfunction is:

Espada was clearly supported by New York's development community. A look at state financial disclosure forms from recent months turns up names like Stellar Management, which donated $5,000; Brookfield Properties ($2,500); Jack Rudin ($2,500); and Greenberg Traurig, the real estate law firm ($1,750).

Yes, yes, I know I am “naive” and I “don’t know How Things Work”. Boo! Hiss!

© Sandy Mattingly 2010

 

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Sep. 7, 2010 - visualizing The Market / Manhattan real estate fun at Urban Digs


more to come, he promises
Noah Rosenblatt over at Urban Digs has long been working on data sets, and is getting ever so much closer to being able to publish what will be unique information about the Manhattan real estate market. His latest teaser (The August Lull) looks at monthly data for contracts signed and new listings, back to 2008. What he's focused on is the Very Slow Summer we've had (for both contracts and new listings, both starting to slow down in May this year), but what struck me visually was The Lehman Effect.

Look especially at the way contracts signed fell off the cliff from October 2008 through January 2009, then slowly (very slowly) increased during February through April 2009. Nuclear winter, indeed. Of course, you may find other things here that will grab you.

You will see that he says these kind of charts "will be launched very soon". Yes, he's been saying that for a while now, but stay tuned....

© Sandy Mattingly 2010

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Sep. 1, 2010 - new real estate agency law disclosures coming to Manhattan in 2011


REBNY announcement of A Major Change is a little weird

Manhattan Loft Guy is going into the weeds of New York agency law and disclosure a bit, but before I force you to that I will give you the bottom line:

as of January 1, the written disclosure about agency must be given in all real estate transactions, which I take to mean that all buyers in Manhattan (sellers too, but the real change impacts buyers more) will be told in writing whether the agent they are talking to represents them, represents the seller, or (might) represent both of them.

This is a huge change for the (few??) people who will care, and I look at it as essentially closing a loophole through which agency disclosures in Manhattan did not have to be in writing and any oral "disclosures" were ... err ... confusing for consumers. My (fascinating?) between-the-lines read of the REBNY announcement is that (among other things) REBNY claims credit for this change that will "increase transparency of the real estate process and offer increased protections for consumers and real estate brokers", while neatly avoiding how we got the loophole to begin with.

The full REBNY announcement is below; the official memo from the State Assembly about the bill is excerpted below, and can be found with the full text of the bill and the new disclosure forms here. As I will explain below, it is difficult to explain the difference between the way that REBNY summarizes the bill and the way the Assembly has. But for civilians, the more important stuff is what the new law does, so let's start there.

the disclosure
I went on (and on, and on) about agency law and real estate agent disclosure in my September 1, 2009 post, (bad) quote of the day / lawyer stumbles in NYT real estate Q&A, so I am not going to repeat that extended analysis here. See that post for the actual disclosure form language and extended (very extended) commentary about how it "works" in Manhattan and elsewhere. One very important element of the whole regulatory framework is the requirement that certain things be carefully explained.

Under current New York State law, every real estate agent working with a buyer and every agent working with a seller had to provide a written disclosure to any seller or buyer they came in contact with about who they really worked for ... except in the five boroughs of New York City for coop or condo units in buildings with 4 or more units. Keep that exception in mind.

Under current NYS law, every agent in New York City working with a buyer and every agent working with a seller had disclose to (i.e., have a conversation with) any seller or buyer they came in contact with about who they really worked for. Keep that required conversation in mind.

If the same individual agent wanted to "represent" both a buyer and a seller in the same transaction, a special "dual agency" disclosure was required and (outside the City) a specific written disclosure and consent was required. If different agents at the same firm wanted to "represent" both a buyer and a seller in the same transaction, a special "dual agent with designated agency" disclosure was required and (outside the City) a specific written disclosure and consent was required. It is this Dual Agency and Designated Agency stuff that has always been required to be carefully explained, whether it was explained in writing or not.

I will note again that these requirements of "disclosure" have always been state-wide but the requirement of a specific form was different in the five boroughs (not required for a coop or condo in a 4+ unit building).

what is new?
There are two main changes to the law: one is housekeeping (a change in the written form that permits consent to Dual Agency in advance); the other (the big one) makes it a uniform state-wide requirement that the disclosures that have always been required now be confirmed in writing (i.e., ending the exception for NYC coops and condos with 4 or more units).

Here is how the Assembly officially describes the new law, in a pretty straightforward manner:

PURPOSE OR GENERAL IDEA OF BILL: The bill would amend the agency
disclosure form to allow advanced consent to dual agency and require the
use of agency disclosure forms in real estate transactions for condomin-
ium and cooperative housing.


Even REBNY seems to think that there has been some ... err ... "confusion" about who represents whom in the current world in which buyers and sellers were not entitled to written disclosures as a matter of law (my bold for emphasis):

In a move that will facilitate residential real estate transactions and alleviate any confusion about which party is represented by a real estate broker, New York State Governor David Paterson today signed into law amendments to the state’s real estate agency disclosure law to take effect on January 1, 2011 that will increase transparency of the real estate process and offer increased protections for consumers and real estate brokers. The amendments, fully supported by The Real Estate Board of New York’s (REBNY) residential leadership, will impact real estate brokers by requiring that agency disclosure forms be completed for all residential transactions and permitting consumers to give their advance consent to dual agency representation.


so what?
Life for Manhattan real estate agents is going to get more complicated. A lot more complicated if they have not been used to making these agency disclosures at all; less complicated if they've already been having these conversations; much less complicated if they have also been using the disclosure form. (Agents in other boroughs are much more likely to have done business involving single family to 3-unit buildings, so the changes should be much less radical for them.)

Life for buyers (especially) and sellers in Manhattan (especially) is also going to get more complicated. Sellers will probably just get used to signing a different form (with advanced consent for Dual Agency with Designated Agents), but buyers should begin to notice that they have more paperwork to deal with than they had before.

Recall that there was always supposed to be a careful explanation of certain things. Now there will be the additional requirement that the paperwork be completed in NYC that has always been required in NYS.

making sausage in Albany
I can't help but suspect that the reason the new law makes two principal changes is that one is a trade-off for the other, and that the heavy hand of REBNY insisted on that trade. Call me cynical, or paranoid, but note the oh-so-pregnant conjunction "but" in this REBNY description of the two things the new law accomplishes:

“REBNY, through its Residential Brokerage Division Board of Directors, worked closely with the state legislature and NYSAR to negotiate amendments that would increase transparency of the real estate transaction process, but also would be realistic for brokers to implement.”


That pregnant conjunction implies that there is (at a minimum) some tension between the Transparency goal and the Realistic For Brokers goal, no?

Why would that be? Well, it may be that REBNY ("work[ing] closely with the state legislature and NYSAR") was concerned about how "realistic" it would be to "implement" a requirement that (essentially) only changed the form of disclosure in Manhattan from oral to writing, so insisted that the careful explanation of Dual Agency and Designated Agents could at least be begun in advance, and signed off in advance. It seems that REBNY, in the interest of "offer[ing] increased protections for consumers and real estate brokers" (my bold) was concerned that brokers would not be so well protected if the only change in the law was to require a uniform written agency disclosure across the State.

future tension
I have been candid in the past about the difficulties in really giving a careful explanation to a buyer or a seller of what Dual Agency and Designated Agents means (I will quote one section of that September 1, 2009 post below). Obviously, there is training required, as REBNY promises us members, on the "nuances" of the new disclosures. I very much hope that the nuances include the fact that the sign-in-advance form not be the only careful explanation that a buyer or a seller gets about Dual Agency and Designated Agents.

Here is how I described the typical scenario for a potential conflict of interest in Manhattan in that September 1, 2009 post:

The seller of Beautiful Loft represented by a Brokerage Firm (let's call it "Corco"; although you could equally well call it "Prude"). The buyer has been working with a different Corco agent, and becomes interested in the Beautiful Loft. As a firm, Corco has a conflict in that setting unless the buyer knows (agrees) that s/he is unrepresented for purposes of the Beautiful Loft (in which case only the seller's agent participates). If that buyer wants to be "represented", both parties must agree that Corco is a Dual Agent and that the seller's agent is "designated" to work with the seller, while the buyer's agent is "designated" to work with the buyer.

a bit of a swamp
As the disclosure form says, this is another opportunity for a "careful" explanation. I have seen precious little practical guidance here over the years, but this is what the form says (in part):

A designated sales agent cannot provide the full range of fiduciary duties to the buyer or seller. The designated sales agent must explain that like the dual agent under whose supervision they function, they cannot provide undivided loyalty.

I take this to mean that the two "designated" agents can go at each other on behalf of their respective principals, but if they choose to get guidance from their supervising broker, everybody knows that the supervising broker will give advice to both "sides" equally. I admit that I am a bit fuzzy about the "designated sales agent ... like the dual agent under whose supervision they function, ... cannot provide undivided loyalty" part.

Frankly, I would love to hear more specifics about what "designated" agents can and cannot do, but each time I have asked a lawyer or association executive I have gotten boilerplate responses that are not very useful in the real world.

What is clear is that there has to be a "careful" explanation of this. While NYS law does not require that the disclosure form be provided in most cases in Manhattan, I will use it and get my "client" to sign it.

We Manhattan real estate agents will need very practical advice (I guess REBNY would call it "realistic" advice) about the "designated sales agent ... like the dual agent under whose supervision they function, ... cannot provide undivided loyalty" part. That's what REBNY is for, isn't it?

that REBNY verbal weirdness
I hinted up top that something strikes me as weird about the way that REBNY announced this major change in the law. As I said many paragraphs up, this is how the Assembly officially describes the new law:

PURPOSE OR GENERAL IDEA OF BILL: The bill would amend the agency
disclosure form to allow advanced consent to dual agency and require the
use of agency disclosure forms in real estate transactions for condomin-
ium and cooperative housing.


To me, the REBNY spin on this curiously avoids making the simple statement that now (as of January 1) Manhattan coop and condo transactions are covered by the same disclosure laws as the rest of New York State real estate transactions (my language in [italicized brackets] should help illustrate my point; if not, read again the simpler language in the Assembly memo about the General Idea of the bill that has passed and been signed):

Previously, verbal consent for agency disclosure was accepted for multifamily buildings over four units [i.e., nearly all New York City coop and condo units ]. The new law specifies that a written agency disclosure form must be used for all residential transactions. In addition, the amendments have created a section on the agency disclosure form where consumers can give their advanced consent to being represented by two agents from the same real estate broker in the same transaction.


I am going to speculate that REBNY did not want to draw attention to the (likely) fact that way back whenever New York State law was changed to require the written agency disclosure for any real estate transactions in the first place, REBNY, through its Residential Brokerage Division Board of Directors, worked closely with the state legislature and NYSAR to negotiate amendments that would exclude nearly all NYC coop and condo transactions from that transparency and consumer protection effort.

Now, apparently faced with the likelihood that the NYS Legislature would do away with that loophole, REBNY wants to take credit for amendments that "would increase transparency of the real estate transaction process, but also would be realistic for brokers to implement.”

Gotta be realistic about how much transparency REBNY members can handle!

Sept 1 synchronicity

Is there some weird harmonic convergence in the Manhattan Loft Guy universe involving today's date? Today's post is only the second major discussion I have had about the critical topic of agency disclosure, with the first being (of course) one year ago to the day. Is Rod Serling still available? Perhaps I should make a note for another Agency post for September 1, 2011.

addenda, and detail
Here is the full text of the REBNY announcement yesterday:

REBNY STATEMENT REGARDING

NEW AGENCY DISCLOSURE LAW

New law increases transparency, protects consumers and brokers

NEW YORK, Aug. 31, 2010 – In a move that will facilitate residential real estate transactions and alleviate any confusion about which party is represented by a real estate broker, New York State Governor David Paterson today signed into law amendments to the state’s real estate agency disclosure law to take effect on January 1, 2011 that will increase transparency of the real estate process and offer increased protections for consumers and real estate brokers. The amendments, fully supported by The Real Estate Board of New York’s (REBNY) residential leadership, will impact real estate brokers by requiring that agency disclosure forms be completed for all residential transactions and permitting consumers to give their advance consent to dual agency representation.

Previously, verbal consent for agency disclosure was accepted for multifamily buildings over four units. The new law specifies that a written agency disclosure form must be used for all residential transactions. In addition, the amendments have created a section on the agency disclosure form where consumers can give their advanced consent to being represented by two agents from the same real estate broker in the same transaction.

Neil Garfinkel, REBNY’s residential counsel, who was involved in the negotiations and drafting of the disclosure law amendments said, “These amendments will ensure that brokers and consumers are legally protected by requiring written disclosure in all residential transactions. We also sought to ensure that the advanced consent measure be included so that brokers, who show numerous listings to potential buyers, would not need to have separate agency disclosure forms prior to showing each listing. This is an important distinction, particularly for New York City brokers who frequently represent buyers and who may show dozens of apartments before a transaction happens.  The advance consent provision reflects the realities of the marketplace and will ultimately facilitate transactions.”

“The revised agency disclosure law provides additional safeguards for sellers, buyers, tenants, landlords and brokers to ensure that transactions move forward fairly with all parties understanding who is representing whom,” said Steven Spinola, REBNY President. “REBNY, through its Residential Brokerage Division Board of Directors, worked closely with the state legislature and NYSAR to negotiate amendments that would increase transparency of the real estate transaction process, but also would be realistic for brokers to implement.”

REBNY will be holding multiple seminars in the Fall to educate its members to the nuances of the revised disclosure form before it goes into effect.


From the Assembly memo:

PURPOSE OR GENERAL IDEA OF BILL: The bill would amend the agency
disclosure form to allow advanced consent to dual agency and require the

use of agency disclosure forms in real estate transactions for condomin
-
ium and cooperative housing.


SUMMARY OF SPECIFIC PROVISIONS: Section 1: Real property law section
443, subdivision 1, is amended to add "associate real estate broker" and
"real estate salesperson" to the definition of "agent".

The definition of residential real property is amended to include condo-
miniums and cooperatives with respect to the provisions of this section.

New definitions for "advanced consent to dual agency" and "advanced
consent to dual agency with designated sales agents" are also added to
sec. 443 of real property law.

Section 2: The real property law section 443, subdivision 3, is amended
to add a new paragraph (f) that allows sellers, landlords, buyers and
tenants to consent in advance to dual agency.

JUSTIFICATION: A statutorily required agency disclosure form is used to
provide consumers with information regarding their representation in a
real estate transaction. "Dual Agent" is currently recognized in real
estate license law as a valid form of agency relationship in which the
buyer and seller are represented by the same real estate brokerage
company.

This bill will allow consumers to select and allow a "dual agency"
relationship in advance of it actually occurring. In many cases, buyers'
agents will bring their clients to multiple properties in their search
for an appropriate property for the buyer. They will often rum into
situations where the seller is represented by the same brokerage company
for whom the buyers' agent works. Currently, the property could not be
shown until a new agency disclosure form was signed by the seller and
buyer. This delays these activities and sometimes prohibits the property
from being shown. The revised agency disclosure form would streamline
this process by allowing consumers to provide advanced consent to this
"dual agency" relationship. The selection by the buyer or seller of dual
agency in advance of it occurring is completely optional.

The bill will also require real estate licensees to provide a written
agency disclosure form when working with clients purchasing or selling
condominiums or cooperatives. Current law requires licensees in these
types of transactions to provide verbal disclosure of the agency
relationship. Requiring written disclosure in condo and coop trans-
actions will ensure these consumers are afforded the same disclosure of

agency representation information that is provided to buyers and sellers
of residential real property.

If you have read this far along, THANK YOU. You now know more about agency law than 64.32% of REBNY members.

© Sandy Mattingly 2010

 

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Aug. 28, 2010 - save our flip tax! are coop flip taxes in danger from Fannie Mae?


odd ducks make for odd rules
Interesting catch by The Miller on his blog on Thursday, [Fannie Mae] Proposed FNMA Rule Change Could Damage Co-op Prices. I had been vaguely aware from national real estate sources that there has been some controversy brewing about the practice of home builders in some parts of the country adding covenants to deeds requiring that resale buyers pay a kick back to the builder when the house is sold by the original buyer. One real estate ListServ I am on has been buzzing about the practice, and the possibility that federal regulators may seek to limit it, but I had not paid attention to this thread in the (mistaken) belief that it was just another real estate practice out there in America that had nothing to do with Manhattan.

As The Miller points out, that is wrong. As with so many laws and rules that have to do with "real estate", life on our peculiar little island is so different from life as practiced in America that general rules that make sense elsewhere can create real (and unintended) problems in New York County (special rules permitting coop shareholders to take advantage of tax deductions for coop expenses are one example of a work-around). God bless the folks at REBNY (for once!) for being on top of this.

See The Miller's blog for the whole story, but the Long Story, Short version is that the feds are looking at ways to discourage builders from adding these kickbacks by prohibiting Fannie Mae from buying mortgages on homes with that kind of covenant. Apart from being a shady way for developers to reap revenue from a home long after they have sold it, one problem with these covenants out there in America is that they may not be fully disclosed; another is that they make comp analysis more difficult. It is not heard to see that these are legitimate issues in America.

Nor is it hard to see that these issues have nothing to do with coop flip taxes. A builder who wants an income stream from future sales is (by then) a remote party with no legitimate interest in the future transactions; a coop that uses a flip tax to generate operating revenue or to increase a capital fund when its own shares are transferred is a direct party in interest to the sale. In addition, flip tax information is routinely shared in coop marketing (at least among REBNY firms), so the non-disclosure issue should be a non-issue here.

my REBNY dues [finally?] at work!
So kudos to REBNY for being on top of this issue. This is one area in which the political clout and government affairs efforts of REBNY work in favor of everyday coop owners. Nice catch by The Miller, who includes in his post a link to the 2007 treatise he co-authored (much recommended!) about coop and condo valuations, which found (among a great many other interesting things) that coop flip taxes are associated with (mild) increases in coop share value.

© Sandy Mattingly 2010
 

 

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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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