Your NYC buying, selling, and ownership questions
Emily Myers: (00:01)
I'm Emily Myers, and this is the Brick Underground podcast covering everything you need to know about New York city real estate, whether it's buying, selling, renting, or renovating. In this episode, we are going to answer some of our reader and listener questions. Our last episode with this format was weighted more heavily on rental questions and with the sales market picking up, it's time to get into your questions on buying and selling and owning in New York city. I'm joined by Allison Chiaramonte, an agent at Warburg Realty, and attorney Shaun Pappas, partner at Starr Associates. So it's great to have you both on the podcast and as you might expect, we're getting lots of questions about buying and selling, uh, as the vaccine rollout proves successful, and the city's revival gets underway. In fact, I suppose the city's return, I think is giving some buyers a real sense of urgency. Uh, they want to strike now, and there's the feeling the bottom of the market might've been back in December. It's a perennial question, but one our readers and listeners want to know, you know, where are the deals right now? Allison?
Allison Chiaramonte: (01:07)
So I think the deals are properties that have been on the market. Things that are coming onto the market now that are well priced are moving. We're in a very liquid market right now. But I think that there is a lot of opportunity in properties that came on a few months ago when the future was looking a little more dicey or uncertain and for whatever reason, whether they were overpriced or there's something specific about that property, they haven't moved. And at this point, I think there's real opportunity in trying to find deals amongst those properties.
Emily Myers: (01:42)
If we're being more specific, can we say that it's perhaps smaller apartments or apartments in need of renovation are the ones that are going to be priced where you might get a deal as such?
Allison Chiaramonte: (01:56)
Yes. I think there's a few sort of opportunity zones. The first one is size. We've been seeing people gravitating towards bigger apartments, that extra room for a gym or a home office. So there is less demand for studios and one bedrooms than there have traditionally been. So there's definitely opportunity in those smaller listings. Um, I also think that areas that were typically very heavy for international or more pied-a-terre users or really serviced the office community, are hurting. So whether that could be Midtown East, um, or Nomad or parts of the Financial District, those are interesting areas. And then I also think that an area where people are sort of overlooking are co-ops where retail spaces have been empty and affected maintenance. I think this is a temporary phenomenon, and I think that it scares people, but if you sort of believe in the coming back of New York, there is adjustments to be had for those apartments and they can represent a really great deal when the maintenance goes back to normal in a year or two.
Speaker 1: (02:59)
Okay. Well, that's interesting, Sean, I'm sure you've got things to say about that. What do you, how do you advise clients when it comes to the due diligence on a co-op with a retail space?
Shaun Pappas: (03:09)
I think Allison hit the nail on the head. Sometimes it's concerning to people if they see that the retail is vacant, but ultimately there's not only potential for retail, obviously to come back and come back extremely strong, landlords are starting to really price rents at an attractive rate, but there's also a lot of potential zoning changes that are happening, um, where retail spaces are going to be converted to residential in certain parts of New York city. So all of those changes coming down the pike, I think make, uh, should make buyers more comfortable knowing that even if it's vacant for now, the city and the developer or the co-op, no one has an intention or, or has some sort of incentive to keep it vacant. So, um, over time, you'll see a lot of those retail spaces leased up and leased up for long-term periods.
Emily Myers: (03:58)
So that's encouraging for co-op boards and co-op owners who have suffered as a result of the pandemic in these kinds of apartment buildings.
Shaun Pappas: (04:08)
Emily Myers: (04:09)
Is it accurate to say that the bottom of the market was perhaps at the end of last year?
Shaun Pappas: (04:13)
I think so. I think the market certainly bottomed out, um, a few months back probably, you know, December, January, maybe a little before then, but I find this market very interesting. It could be a topic of another podcast in and of itself because it's, it feels like the prices are priced for a buyer's market, but then it kind of comes back to a seller's market when the bidding wars start and you might end up being right around where the apartments probably should be priced at the end of the day, because there seems like there's some discounts coming in and then they almost get bid back up. To me it's a very strong market for a buyer. If I was in the market I would be extremely aggressive right now because I do think there's a lot of good product out there. One of our biggest concerns before the pandemic was surplus and we were seeing a lot on the market and a lot of new, new development and resales on the market that were just really kind of drowning the market in a way. And what the pandemic did is it halted a lot of the, the new development and the new things coming in and allowed the market to catch up and really purchase some of that surplus. So I think that's going to continue, um, throughout the summer. And I absolutely think it's a great time to buy.
Speaker 2: (05:29)
Normally we advise sort that now is peak market. And then once we hit, you know, early June, things would slow down, but I don't think we're going to see quite the same seasonality this year. I think that June is going to continue to be an incredibly active month. I'm not sure about July and August, which are usually slower, but we saw, we're seeing sort of a whole shift of what is the traditional sales calendar due to the pandemic.
Emily Myers: (05:56)
You're saying it's a very interesting market with the low prices and then the bidding putting the prices back and perhaps ending up where they should be anyway, is it, can you compare it to any time in the past?
Speaker 3: (06:07)
People go back to 2008 and I think that's a very different animal and the banks weren't necessarily lending on these properties. Here, we have banks that are willing to lend rates are historically low. And if, if you're a buyer that has job security and has some savings, if you have the money to put down, you can get a very attractive rate and really be paying, you know, about what you pay to rent and you're building equity. So, uh, for me, maybe 9/11 was probably the closest, um, comparison I can draw just from the standpoint of where the city was and this fear of maybe not going back, um, or how long it's going to take to go back to the way that it was. And we saw a few years with nine 11 where after 9/ 11, where it was not necessarily the same New York city from, from that perspective. But here, I mean, we already feel that the city is back and better than ever, and it's not in fully open yet. So we're hoping it's going to get even better over the summer.
Speaker 1: (07:06)
Alison, what's the sense you're getting from your buyers and sellers?
Speaker 2: (07:10)
We're getting the sense that we're the city is back, as Shaun said, and we're getting the sense that there's a lot of buyers now who are excited about buying. And what's interesting and different, I think, than before is the people who are buying now, a lot of them are native new Yorkers. So I think that there's the potential as things open up even further for there to be more buyers entering the market, because we haven't really seen as many of the international buyers come back. And it's really a lot of local people sort of reinvesting in their own homes or the city and sort of recommitting to New York. So I think that that's very exciting. Um, and I think that that's going to continue and it's a, it's a good time in many ways.
Emily Myers: (07:53)
Yes, we were hearing that some international pied-a-terre owners were selling even at a discount because of course they haven't been able to access their properties. Obviously people in New York are able to buy quickly and ideally trade up, you know, get somewhere bigger where they can work from home, uh, which has been obviously such a, such a demand for bigger spaces, hasn't there?
Allison Chiaramonte: (08:16)
And there's still a newness coming on the market. I think for a while there was this feeling that buyers had that wait, is this all that's on the market? But last week was actually one of the first weeks where, um, new listing out paced items going into contract, which is a big deal because that means that this week buyers actually have more options. And I think that that has to do with some people being like, "all right, it's time, it's time to sell," and not holding back anymore, which speaks to the confidence in the market.
Shaun Pappas: (08:43)
Alison, I think your point on the foreign buyers was a great point that we, um, you know, I didn't even think about until you brought it up and we are, we represent over 200 buildings in the city, and typically in a regular world, it's 30%, 40% foreign buyers. And now it's, you know, 5%. So if I'm a buyer I'm saying, wow, it's a strong market and we have this whole pool of people that are going to come back and flooded it in the next, say six months to a year, maybe I price is probably going to go up if I buy. So
Allison Chiaramonte: (09:16)
I think it's a pretty good bet.
Shaun Pappas: (09:18)
So I think that's a great point.
Emily Myers: (09:20)
So actually the absence of those international buyers in a sense puts, uh, puts a buyer in a good position because, uh, they're not competing with, with those buyers?
Allison Chiaramonte: (09:32)
Not currently, but I think it's also like they're going to come back. We're seeing bidding wars and we don't even have the full deck of buyers at our disposal.
Shaun Pappas: (09:40)
Yeah. And they come back in droves typically, like even after the financial crash, it was, you know, once we got through that, everybody comes back because Manhattan and New York city in general, it's almost like a stress test. You know, if, if it survives then, uh, everything, you know, at some point will turn out okay. And once the foreign market is able to come back and see New York, I can't imagine the amount of deal flow that's going to happen just based on that alone. So if I'm a buyer I'm saying, wow, I'm potentially going to be at a place where I bought my apartment and now there's going to be all these additional buyers coming into the market. My value is going to go up.
Allison Chiaramonte: (10:19)
A lot of the areas where I actually think they're opportunity right now are these areas that traditionally were office annexes, but also appeal to more of a foreign buyer, whether that was sort of like the heart of Midtown, et cetera. And, and they're not here right now. So I think some of the areas where we're seeing the price recovery lagging, it's going to change.
Emily Myers: (10:38)
Brooklyn and Queens have perhaps tipped into a seller's market. Is that the same in Manhattan now?
Allison Chiaramonte: (10:48)
That really depends on where in Manhattan and what sort of price point units you're talking about. For example, I've experienced firsthand that Tribeca is definitely becoming a sellers market for good product in Northwest Tribeca. Um, it's not the same everywhere, but it is certainly, there are pockets of Manhattan that are moving and things that are priced correctly are moving within days of coming on the market. It's really the first time I've seen that in multiple price points and throughout Manhattan, there are real areas that appear to be hot.
Emily Myers: (11:21)
Okay, Well we have lots of reader and listener questions to cover. So someone reached out to Brick Underground, actually with a question about bidding wars. We're hearing that these are on the rise obviously for specific apartments. I mean, is that the case and, and how do you handle the process as a buyer?
Allison Chiaramonte: (11:38)
So they're definitely on the rise. Um, I think I hadn't seen a bidding war for a solid year, year and a half. And now I feel like I'm seeing one almost every other week, how you prepare for a bidding war is by really doing your due diligence in advance. So that means shopping for properties before you actually are ready to make a bid. So looking at lots of properties, getting your financial ducks in a row, whether that's a mortgage pre-approval, having a real sense of what the comps in the building eor area are and sort of having your team assembled for lack of a better word. So that's having someone like Shaun, who you've already met and talked to it sort of can hit the ground running, mortgage brokers or bankers and having everyone ready to go.
Emily Myers: (12:23)
Shaun, do you have thoughts on the kind of bidding war?
Shaun Pappas: (12:26)
Yeah, so obviously a lot of that starts from the brokerage side and we're getting, as attorneys we're getting involved, um, after offers are really starting to go out to the individual buyers on a development deal from a sales perspective, we're involved when a sponsor is negotiating different deals with different purchasers, but like Alison said, I mean a lot of times speed is everything. And some, some buyers will even, some sellers will even forego, you know, the highest price and that's, you know, not necessarily to get the highest price, but will forgo it to get the fastest deal. So having a, you know, a team that's assembled that actually can just already know the building, have the due diligence ready. I mean, we've reviewed so many different condos throughout all of New York city that a lot of times, you know, you're not reinventing the wheel, so you can really have, uh, speed and efficiency as one of your main tools to getting the best price.
Allison Chiaramonte: (13:23)
And I also think sort of having your buyers understand how a bidding war works. I think people are sometimes surprised, you know, they think when you have an accepted offer, that that offer is somehow binding and it is very much not in the current environment.
Emily Myers: (13:39)
Yes, that's interesting. In fact, in our last podcast, we were talking about exactly that, about how an offer can be used as leverage, uh, to increase the purchase price for the seller. So we actually have a question about buying strategies. A reader says, uh, you can put in an offer on a place below asking at full price or above asking—if you offer full price, what are you signaling as a buyer? And what should you be aware of about the strategies the seller might use next? I mean, that's pretty much what you were were saying there Allison...
Allison Chiaramonte: (14:15)
Well, I think that generally speaking, the median discount where things trade to ask is 8%. So if you're coming in off the bat with an offer at ask, you are signaling that you really want this apartment. Um, most people don't start at ask and also most people don't step forward with their best and final offer. And most sellers won't stop the process, uh, for just one buyer's offer. It's very hard to sort of ensure that you're taking something off the market right away. So you have to be prepared that someone could swoop in.
Speaker 1: (14:49)
So where are we on pricing? "Price discovery," seems to be the phrase being used. What does that mean for buyers and sellers?
Speaker 2: (14:57)
So to me, "price discovery" has to do with the fact that there are, as of last week, there were over 5,200 pending sales, um, which is an outstanding number. It really hasn't been above 4,000 in pending sales—those are deals that are in contract, but haven't closed—since 2011. So there's all these deals where we know what the last ask was, but we have no idea what the deal price is. So we're in this period where we're waiting to see where this glut of deals, where the numbers are coming in, is the median discount to ask going to tighten our prices going up, or is it just about liquidity? And the price is going to be sort of flat with where they have been at just showing that there is demand. So I think that's what people are referring to when they're talking about "price discovery," it's all these deals that we're waiting to close and see what the numbers bring.
Speaker 1: (15:49)
Shaun you get, you're dealing with the actual contracts. So do you have thoughts on this?
Speaker 3: (15:54)
I knew I would go back a little bit to the bidding war question because I would draw a distinction between the typical resale apartment, where you're buying from an owner who's owned there, lived there, or, you know, an investor who's renting versus a developer who might have more inventory to move. So typically what we see is in the development market, strong offers go a long way and you don't necessarily have to go back and forth with a low offer and then come back and negotiate up. Because at the end of the day, if the developer has inventory, the next buyer that might come in and match your offer, they'd move to a similar unit. And they're trying to sell as many apartments as they possibly can. So, I encourage our clients who are doing development deals on the purchaser side to go in with, you know, prices that they're comfortable and that they feel are, you know, actually reflect what they believe and what their brokers are telling them is the value of the apartment.
Speaker 1: (16:51)
Yeah, Shaun, I mean, you handle a lot of new development deals. We have one question. Susan came across brick Underground's article on Certificates of Occupancy. She says the sponsor gave us 30 days notice for closing, which they scheduled for the end of the month, but they still don't have a Temporary Certificate of Occupancy and when I checked with the department of buildings, they have failed multiple building inspections this week. Our lawyer and lender can't move forward without the Temporary Certificate of Occupancy, amongst other items of which they're lacking or haven't shown up on public records. Can they keep us waiting and show up at closing with a Temporary Certificate of Occupancy in hand. Shaun, I mean the TCO and the CofO, they explain how a building can be used. What's your advice here?
Speaker 3: (17:42)
This is unfortunately a little bit more common than, um, uh, we would like, because the developers are generally trying to close apartments as soon as they possibly can. Um, obviously most of them have outstanding loans, interest rates that are being paid, you know, that it's accumulating daily and they're permitted under the Offering Plan to send out those 30 day notices without the Certificate of occupancy, or the TCO, even though they're required to produce it at closing. Um, what I will say is failing building inspections prior too, that's all part of the process with DOB. It's just, you know, par for the course, but developers are in the market of selling apartments. And if your bank is requiring a TCO at closing, which every single bank does, the developer's not going to hamstring you and say, here it is, close tomorrow because at the end of the day, there's trade requirements, there's notice requirements for lenders, which state that they need 10 days to review everything. So I wouldn't be too concerned about, um, being stuck with a TCO and being forced to close because the developer needs you to close and they want you happy. They want you to be in a position to close with your lender and everything to be running smoothly. So that notice is really starting the clock, but it's not necessarily a fine or, um, firm date it's kind of fungible at the end of the day.
Speaker 1: (19:07)
Okay. So a sponsor who schedules the closing before it has the TCO usually does so on that basis that they will have it by closing. And if they have failed multiple building inspections, that's not actually a red flag or although it might seem to be, is that what you're saying?
Speaker 3: (19:21)
It absolutely seems to be, you know, from a layman perspective, when you're looking on the DOB website and you're saying, wow, how could they have fell this or that? But I've done thousands of these, and I've never seen some, a developer come in and just pass every inspection with flying colors on the first try. There's always going to be something that DOB picks up and they require a re-inspection. So when the developer sends that 30 day notice, they're typically saying we have a good faith understanding that we'll be able to close and give you that TCO in that 30 days, but they also know that they have to cooperate with your lender. They have to make sure that, um, your lender has enough time and notice. So that notice isn't necessarily fixing what it looks like as a firm date, because at the end of it all, they want to make sure that you're closing. So what we do is we have, we give rights to adjourn to purchasers so that they have, you know, 10 or 15 days more time. We give cooperation clauses that say that the developer's going to cooperate with your lender and give them everything that they need. So that's usually enough to get everybody comfortable.
Emily Myers: (20:28)
Okay. Interesting. One thing I have heard recently was that the buyer's love letter—this is a letter that sort of outlines how much a buyer loves the apartment, they're bidding on—these are coming back. Obviously not so relevant to new development. Is this something that you're seeing in New York right now, Allison?
Speaker 2: (20:49)
We are, you know whenever the market tightens and there's more than one buyer interested in a property, things like love letters can start to make a difference because for the most part, sellers are emotional. They've put care and effort into their homes. And a lot of these deals are not investment property deals. This is a, the seller is a real person. And sometimes those love letters can really strike a chord where they feel that the new buyer appreciates what they did or there's some sort of common elements. So I encourage people if they want to write a love letter, there's really very little downside to it.
Emily Myers: (21:27)
I should point out that we have articles on every aspect of buying, selling, and renting in New York city at Brickunderground.com, including comprehensive guides to closing costs and a timeline for selling your apartment. Our market reports also take a look at data on deals and leases, which can help you navigate your housing goals, whatever they are. And we also love answering your questions so please do get in touch either by the website or @BrickU on Twitter and @Brickunderground on Facebook. I'm talking to Allison Chiaramonte, an agent at Warburg Realty, and attorney Shaun Pappas with Starr Associates. Actually on the timing of deals...what is the current timing on closings? Are they taking longer now that the market is picking up?
Speaker 2: (22:11)
I think so. Managing agents both on the condo and co-op side on resales seem to be bogged down by the deal flow, which when you think about all those pending sales, I was talking about earlier, it's, you know, historic highs and a lot of these managing agents aren't fully back in the office 100%. So there, there seems to be some delays.
Shaun Pappas: (22:33)
Yeah, absolutely. I think that's been the biggest issue. Historically, residential closings, unlike commercial have been sit down where you show up and you spend an hour or two hours, depending on if you have a bank or not, and you sign your documents and you leave with keys. And it's a great experience. And now everything has been moved to remote, which, you know, we, some, sometimes you still require original signatures. So there's messengers or FedEx envelopes going back and forth. And managing agents are certainly bogged down with the amount of emails and the amount of flow that's coming through their office. Lenders as well typically were not used to having to pick up, you know, loan documents the night before that are pre-signed and then deliver them to the closing attorney's office the next day. So, um, it's certainly gotten more efficient over the last year plus, but generally, you know, 60 days is around when you sign a deal, you can expect to hopefully have everything wrapped up and sometimes it's even longer.
Emily Myers: (23:34)
Um, actually on the issue of sort of virtual components to the buying process, one reader asks are co-op board interviews still virtual, or should I expect to schedule an in-person interview? What's the latest on that?
Speaker 2: (23:48)
So far, we're still seeing fully virtual. And it's actually been the first week where I've noticed a few other brokers asking, uh, managing agents where we're expecting interviews, or we just submitted a board package, you know, do you think this will be virtual still? Um, I think they're going to be virtual for quite a while, especially over the summer.
Emily Myers: (24:07)
Yeah. Um, here's a question about co-op ownership. Veronica says, my husband has been attempting to add my name to his co-op in Rego Park, Queens, which he bought 35 years ago and it, and it seems impossible. Lawyers and co-op members are leading him to believe that it will be as troublesome and costly as selling and rebuying the property. Is this true? Shaun, do you have thoughts here? Is, is refinancing an option or is it submitting a board package?
Shaun Pappas: (24:39)
Refinancing is certainly an option. I don't necessarily think that that would streamline the process at all. Unfortunately it really does depend on the co-op and their underlying proprietary lease and what it says about adding additional people to that lease. Generally, if it's a spouse, um, they're a little bit less stringent with the requirements. There will be a fee. Absolutely. You'll probably you'll pay your, your board fee and application fee and you should hire an attorney to help with the process just to help streamline it. But, um, it's doable. It's, you know, unfortunately like certain things with co-ops, there's just additional hurdles that you have to overcome.
Emily Myers: (25:20)
Yeah. We actually do get a lot of questions about co-ops and who is responsible for what. Leroy asks, uh, I own a co-op apartment and the windows need repair and replacement. Whose responsibility is it? I think this is probably a bit of a Pandora's Box. Shaun...do you have thoughts on that? I mean, obviously we don't know more detail, but, um, typically are there some clues about who is responsible when it comes to window repair and replacement?
Speaker 3: (25:53)
Yes. So your first line of defense is always contacting the managing agent. They should be able to guide you as far as who's responsible. I'll say that responsibility as far as repair and replacement would most likely fall on the co-op. Payment on the other hand, and who's paying for it sometimes is a little bit more murky. They don't necessarily want you as an owner coming in and putting in your own windows. Of course they want to manage that process, but they also don't want to pay for it. So, um, it really does depend on, again, the underlying lease, you won't be the first person that I've had has had to make this repair or replacement. So they should have pretty good standards and procedures as to how to get it done.
Speaker 2: (26:35)
Exactly. And it really does vary. I've seen, you know, co-ops where it's, they'll repair it, but they won't replace it. I've seen the, reverse and I think it's also really important when you're purchasing. If you are purchasing something to be aware of what the window rules are, because sometimes upon purchase, there is a stipulation that the windows must be replaced by the new purchaser. And that usually is a buyer expense.
Emily Myers: (26:59)
So first stop is to check the lease really, and then take it from there.
Shaun Pappas: (27:04)
Always, you always want to read those documents that you kind of bought to adhere to. So that's the first stop.
Allison Chiaramonte: (27:11)
Allison what questions are you being asked by your buyers and sellers right now?
Allison Chiaramonte: (27:16)
I think the biggest question that I'm being asked is really how to price, because I feel like in the pre pandemic market, you know, it was pretty...pricing has always an art and a science. Let me say that. But there was a lot of sort of science to back up pricing and things were generally trading within a certain percentage of asking. It was steady. Now people are taking all sorts of different sort of market strategies. Some people are pricing high with the expectation that bids are going to come in low, which was very common. We were sort of a few months ago and people were still not sure what was going on. You were seeing people come in 20%, 30% below ask. So people were building in buffer in their price. Now you see some things priced to sell, some things priced high, and it's hard as a buyer to sort of understand value. And it's hard on the flip side as a seller to know what's the best way to get the highest price for your apartment,
Emily Myers: (28:11)
Any solutions there?
I think seeing things with your own eyes is one of the best solutions. I think that, um, smart buyers, when they see construct to recognize value after seeing enough properties, especially if they have a good broker with them who can say, you know, historically this is traded here's so this is a high price for this building or this isn't. Um, and then there's also the, you know, we used to formulate that outdoor space depending on how great it was, was a certain percentage of the per square foot of the interior. I think that probably has shifted up now. So how you value those properties is a little bit different than it was before COVID.
Emily Myers: (28:45)
Yeah. I feel like we have come to the end of our time there. Um, but thank you very much for sharing all those, all that information I've been speaking with. Allison Chiaramonte, an agent at Warburg Realty and attorney Shaun Pappas with Starr Associates. I'm Emily Myers. Thank you for downloading the Brick Underground podcast for more information, head to brickunderground.com. The podcast is produced by myself and Jenny Falcon. Terry Rogers is our executive producer.