Property Grunt

Sunday, September 24, 2006

The Cost of Construction

Below is an email from a reader regarding construction.

I just ran across your blog and have been enjoying your writing and take on things.

I ran across while searching for some information which I thought you might be able to point me to...

I’m shopping for a 1st apartment and am trying to get a handle on what it might cost me to redo a kitchen, put in new floors, rewire, etc. As I see apartments, I’m having trouble getting serious about places that I know will need work since I have little idea of renovation costs.

Short of establishing a relationship with a contractor so early in the game, are there any online sources that give rough estimates?

Any help you could give me would be appreciated!

Keep up the great writing.

Below is my response which I developed further for this entry.

Thank you for your kind words. I have touched upon construction before. Unfortunately I do not know of any
sources of where you could find rough estimates. My experience with construction is limited, however from interacting with contractors and seeing screwups there are certain rules you should follow.

1. Definitely get an early estimate.
2. Don't start any work until a contract is signed.
3. Talk to a lawyer about the contract and decide what incentives or penalties to
5. They will go over budget so figure how much you will need in reserve. Just don't
let them know how much you have.
6. Every job is subjective, so you might not pay the same price someone else has
even though it might be the same job.
7. Expect high prices with the high cost of parts and materials. Thank you China.
8. Negotiate wisely. If you pay low, you might get low quality. However if you pay
high, you have the leverage to scream at your contractor.
9. Talk to your super or doorman. Building staff are always doing freelance
construciton work. Just make sure they know what they are doing. The key
advantage of keeping renovation in house is that that the condo/co-op board will
most likely be more lenient or better yet may turn a blind eye.

The best group of people that know how to keep their construction costs down are real estate developers. It is imperative that they keep those costs down because any cost overruns will eat up their bottom line. Therefore they intitiate a request for proposal where they contact at least 3 construction companies and present a line by line item spread sheet of what they need and the construction companies who will return that spread sheet with their prices.

Upon receiving the spreadsheets, the developers will look over each item and determine whether the numbers are reasonable or unacceptable. A good developer will have a firm number in mind and will negotiate with anything that is objectionable in that spread sheet. A developer needs to be beyond meticulous with this item and not only question the high prices but also ones that are very low.

The average person can utilize the same principals in their own renovations by determine what materials and skills need to be utilized in completing the renovation. A simple excel spread sheet will allow you to organize that is needed.

Remember. Take your time and don't do anything stupid.

Wednesday, September 20, 2006

Real Estate Chatter: Theft and other fun things.

The Grunt has heard on the wire that an elite real estate firm has been having kleptomaniac issues with one of their offices. Apparently there were some thefts in the office and one of them occurred in broad daylight. Items that were stolen included a cell phone, credit cards, cash and a strap on.

I am kidding about the strap on. I had to throw it in after I read this.

These incidents reminds the Grunt of the good old days of his first office where larceny hijinks were a daily occurrence. Thefts in that office ranged from cash, blackberries, a Nextel phone and enough bikes to outfit the Tour de France. No one was safe. Not even the manager.

It appears they are hiring at the Schvo Group. They seek the following.

Vice President, Marketing

Marketing professional with 7 to 10 years experience to guide day-to-day. Knowledge of the entire luxury marketing mix including advertising, collateral, website development, media planning/buying and production is necessary. Candidate should have strong managerial skills, per timeline and budgets, and be ready to enter an entrepreneurial environment that has helped raised the creative bar industry wide. Fashion, luxury and retail backgrounds are perfect fit.

Salary 115,000.00 - 125,000.00

So either someone was fired or someone decided to get the hell of dodge. Either way it is going to be somone’s else clusterf**k, I mean duty to sell those luxury apartments in this luxury unfriendly market.

Zillow has a rolled out a new feature allowing owners input in their own estimates of their property which real estate agents and appraisers are probably cursing. On the flipside this will probably provide more data for these professionals to put together a better set of comparables. It will also allow municipalities to get a better pulse on their tax base and make property taxes more profitable.

And while I am on this buzz kill of a rampage, I would like to talk about the Fed. Yes, they did not raise interest rates for a variety reasons. This of course provides more ammo to the anti-bubble chorus despite the fact that new homes sales are dropping quicker than summer vacations to Baghdad. There is one key factor that hasn’t been addressed which is the election. My suspicion is that Bernanke is pulling a Greenspan by trying to keep things as clam as possible because of the upcoming election. Greenspan did the same during the last presidential election and when Bush got approved for another term, he began to force feed the Fed with enough Viagra so it had a severe enough hard on to f**k the housing market.

My prediction is that the Fed will lay the interest rate smackdown once the smoke clears and we see who is left standing. And I applaud Bernanke for this move because things are just too f**ked up right now.

Monday, September 18, 2006

Peasants with money

A recent article in the New York Times discusses the influx of new condos in the Manhattan market which is nothing new considering the amougn of inventory that is hitting the streets. However what is significant for these particular condos is that they are being delivered into the Chinatown area. I found the following points are quite interesting.

Luxury Condos Arrive in Chinatown
AT one corner of Mott and Hester Streets, sidewalk bins at a Chinese grocery overflow with dried shrimp, and a bakery sells sweets filled with red bean paste, while across the street, lunch menus at the Original Vincent’s Restaurant promote the day’s linguine specials.
But there is a new sign at this intersection, which many people now consider to be the heart of Chinatown. It reads: “Hester Gardens, Luxury Condominiums.”
In an area that has been defined for more than a century by densely packed tenements that have been home to working-class immigrants, Hester Gardens is proof that Chinatown is finally sharing in Manhattan’s housing boom, and as a consequence, the neighborhood is opening to a much broader slice of New York City.
“There is a lot of new construction in Chinatown right now, and it’s being built by Chinese and non-Chinese investors,’’ said Lisa Chin-Tostes, a vice president of Manhattan Apartments Inc., who is very familiar with Chinatown real estate. “It seems like everywhere I turn, I see a new building going up.”
At least five high-end condo buildings have opened in Chinatown in the last two years, and at least eight more are under construction or being planned. The different developments offer a wide range of amenities, and prices are often at or above $1,000 a square foot, the average for all Manhattan apartments.
Some of the buildings have penthouse apartments selling for as much as $3 million, and they come with luxuries like whirlpool bathtubs and built-in flat-screen televisions. Other buildings cater more specifically to an upscale Chinese-American market, which prizes luxury but also places a higher premium on features like well-ventilated kitchens to accommodate Chinese cooking than on shared amenities like a fitness center or an elaborate lobby.

The developers were smart enough to realize to focus on the area they were building rather than simply making some type of cookie cutter piece of crap.

Either way, the new buildings are attracting buyers who previously might have never considered living in Chinatown. There are non-Chinese New Yorkers looking for an alternative to SoHo or the Lower East Side, including creative types who want to be near art galleries or young families who want to enroll their children at top public schools in Lower Manhattan.
But there are also Chinese-Americans who in the past would have been more likely to spend their real estate dollars in trendier parts of Manhattan or in the suburbs, including professionals who work in Chinatown and are looking for pieds-à-terre.
Trust me. The developers in the Chinatown could care less about those art boys and girls. The people who work in restaurants as bus boys and waiters are their clientele

The new construction will blur Chinatown’s boundaries, but there is little fear of Chinatown’s being completely overrun, since many of the projects are geared specifically to the Chinese market. Still, local community groups fear that the new development could lead to an erosion in affordable housing for new immigrants.
Some of the fuzziness on boundaries can be attributed to marketing campaigns.
The Web site for 123 Baxter Street, an address on the cusp of Chinatown, markets the area as “SoHo South,” even though the building sits directly across the street from Public School 130, where the student population is 88 percent Asian. The building has scheduled its grand opening next month.
Lisa Maysonet, a senior vice president at Prudential Douglas Elliman, the 7-story, 23-unit building’s exclusive broker, said its location and special features like Brazilian cherry-wood floors and wine refrigerators would appeal to people “who want luxury but want to stay under the radar and who think SoHo is too trendy already — I think trust-fund babies with ripped jeans is the profile we’re looking at.”
William Fegan, a partner in TriBeach Holdings, which last year finished turning a 12-story garment factory building at 129 Lafayette Street into 27 luxury condo lofts, said: “It used to be that Little Italy felt threatened by Chinatown, but now SoHo is pushing over, and Chinatown is receding and feeling threatened. The whole corridor is getting gentrified.”
Even as SoHo pushes in on the western edge of Chinatown, the Lower East Side is doing the same to the east. The building at 173 East Broadway, which originally housed The Forward, the Yiddish newspaper, and more recently the Chinese Alliance Church, has been converted to 29 high-end condos marketed as being on the Lower East Side.
Michael Bolla, the exclusive broker for the 10-story building, said that many of the apartments sold for $1.5 million to $2.5 million and that one buyer spent $4.5 million for an entire floor.
“A few years ago, who would have ever imagined these kinds of condo prices in Chinatown?” said Charles Lai, the executive director of the Museum of Chinese in the Americas. “This is either a renaissance or gentrification to the hilt.”
But he said he believed Chinatown would survive despite its shifting borders. Lafayette Street may be a new frontier for SoHo — Cathay Bank opening its “SoHo Branch” on the first floor of 129 Lafayette — but Mr. Lai noted that the street was still home to many institutions catering to the Chinese, like the Chinatown Dialysis Center.

Chinatown is not like Harlem, the Bronx or any parts of the city. There is always going to be some form of affordable housing in the area because if that dries so does their labor market. Also Chinese aren’t stupid. An example of that would be Confucius Plaza, which is a rent controlled building that is made cheap. There are people there who have lived there all their lives. I know one guy who got a sweet deal of paying 500 bucks a month and all he had to do was share a two bedroom with a senior citizen. When he decided to go get an MBA on the west coast, the senior citizen told him he was always welcome back.
But let’s say affordable housing disappears in Chinatown, it doesn’t matter, the proletariat will simply pick up stakes and mover nearby, already in Brooklyn there is a Chinatown that has been incubating for years and considered superior to its predecessor, also Chinese people are moving to Philadelphia in en masse, raising their families and commuting the Manhattan, despite the fact that Philly doesn’t have the greatest face for race relations when it comes to their cheese steaks.

Mr. Fegan, the developer of 129 Lafayette, said the building was originally not marketed as being in SoHo “because we didn’t want people to be disappointed when they discovered they had really ended up in Chinatown.”
But the apartments at 129 Lafayette have a SoHo aesthetic since they are in a converted industrial building, and asking prices rose from $650 per square foot when they went on the market about two years ago to $1,000 per square foot within a year.
Michael Chapman, a broker at Stribling who sold most of the apartments and bought a two-bedroom there himself, said the building attracted photographers and designers, investment bankers and a few Chinatown professionals.
“Some people who looked initially didn’t move forward because they thought the neighborhood was too Chinese,” he said. “But I just love it because it’s much less crowded than central SoHo, and it’s quiet in the evenings.”

Those idiots who feel that the areas are too Chinese don’t get it. These building were never for them so developers could care less if they don’t get some trust funder or some kid who is a producer at MTV. This isn’t their market.

Ed Rawlings, one of the architects involved in the restoration of 209 Hester Street, at Baxter Street, said his project’s investors “really appreciate its being on simultaneous and overlapping boundaries.”
The six-story building, a former police stable later used as a warehouse, will have a floor added to it and will be converted into 14 high-end condominiums, including several triplex maisonettes with private entrances.
Mark DuBois, the other architect on the project, said that special zoning in the area protected the scale of the neighborhood by limiting heights to seven stories. “I think that ensures that this whole stretch of land that used to be a no man’s land is going to be a transition zone that’s different from the crowds and heavy retail in SoHo,” he said.

As I said before, Chinese people aren’t stupid. They are very aware of what is going on in their environment, and they take measures to protect their environment in order to ensure their survival.

Hester Gardens, at 158 Hester Street, is just two blocks east of Baxter, and has penthouse apartments priced as high as $1.67 million and offers granite countertops and hardwood floors, but it gives itself away as a development geared to the Chinese-American market because it lacks what would otherwise be a basic amenity in a building of its kind — a gym. The 8-story, 61-unit building has attracted a mix of young professionals and retirees, as well as Chinatown professionals looking for pieds-à-terre close to work.
Irene Eng, who is in her late 20’s and grew up in Queens, works in advertising in Midtown and shopped for apartments in Queens and elsewhere in Manhattan before buying a one-bedroom in the building. “I probably didn’t envision moving to Chinatown while I was growing up, but times have changed,” she said.
Peter Poon, the architect who designed Hester Gardens, bought an apartment that he will use as a pied-à-terre to avoid the long drive home to Scarsdale after a late night at work. But he eventually plans to turn the apartment over to his parents, and he was surprised when he found others just like himself.

This guy lives in Scarsdale. Scarsdale. Do you know how expensive it is to live in Scarsdale? The taxes alone can put some people into financial coma. There is more than meets the eye to this particular demographic.

“I think this was a market that not too many people were thinking about when we started, but all Chinese somehow want to be involved with the welfare of their parents,” he said.
George Chung, a 74-year-old retired real estate investor and one of the first buyers to move into Hester Gardens, said he watched as the building went up and called for an appointment as soon as he saw a phone number posted outside the building.
He traded in an apartment in Flushing, Queens, he said, “because I belong here in Chinatown.” He said he could get the best Chinese food, have easy access to Chinese newspapers and videos and still get anywhere else in the city quickly since he’s near nine different subway lines.
Shing Wah Yeung, the vice president of Well-Come Holdings, which developed Hester Gardens, said that many buyers learned about the building by word of mouth and added that the rising inventory of apartments across Manhattan had made it a little harder to sell. “But Chinatown is a different animal compared to the rest of Manhattan,’’ he said. “In many ways it’s an easier market to target than the mainstream.’’
Well-Come Holdings’ last big project in Chinatown was an 11-story, 81-unit condominium completed two years ago at 148 Madison Street, right next to the Manhattan Bridge.
Mr. Yeung said the finishes there were more basic — carpeting instead of hardwood floors and tile instead of marble in the bathrooms. Condos at 148 Madison sold for about $450 a square foot originally, and many buyers were Fujianese immigrants, including some who live outside Chinatown and rent their apartments out to fellow immigrants. (Chinatown’s population historically has been Cantonese, but most new immigrants in the last 10 to 15 years have come from the southeastern province of Fujian.)

Notice there is no mention of monsoon showers, Jacuzzis, Viking kitchen stoves and luxury items? Do you know why? Because the buyers could care less about a monsoon shower and they probably have no idea how to use a Jacuzzi. This demographic just need a place to hang their hat, have a nice meal and to be able to watch their TVB in peace.

Philip Lam, who owns Green City Realty and manages many of the apartments offered for rent at 148 Madison, said many of his clients run Chinese restaurants in places like Ohio and Pennsylvania. “But they buy the condos as an investment, and so when they retire they can move back to Chinatown,” he said.

This does not surprise me at all. Those restaurants make money had over fist because of the low overhead in parts and labor and also those people work like dogs. So that waiter that just served last night might have a 5 bedroom house and has already put 5 kids through medical school on tips alone.

Apartments there have appreciated significantly, with asking prices now hovering at $850 per square foot, or $560,000 for a studio and $698,000 for a two-bedroom.
Another new project on the eastern end of Chinatown that will probably appeal to the Fujianese market is a 13-story condominium planned for 136 East Broadway. Mr. Lam, who is working with the developer, said that since most Chinese immigrants tend to prefer washing their dishes by hand instead of using a dishwasher, “we’ll save that space for a washing machine.”
He added that the building’s designers have been told to find top-of-the-line exhaust hoods for the stoves, “because Chinese cook a lot of fish, and that requires good ventilation.”

Dishwashers are considered a luxury for these immigrants since they are so expensive and they fact they eat up a lot of electricity. They rather save their money by washing the dishes themselves. However I think the next generation will have dishwashers in order to not appear like F.O.Bs.

Then again frugal habits die hard. A friend of mine one told me about me this one Chinese family that was not allowed to use the dishwasher during the summer because the steam from the dishwasher would raise the temperature and make the air conditioner work harder and raise the electricity bills. Another activity the family did during the summer was to take sponge baths rather than using the shower or tub. Not only to save money from the water bill but also, you guessed it, to lower the electricity bill for the air conditioner.
Sounds like a weird family right? Well not only are the parents millionaires but the kids are all doctors. Weirdness pays.

Mr. Lam said that even as apartment prices have risen in Chinatown, they are still low for Manhattan. “The prices have gone up, but compared to the Village or Midtown or TriBeCa, these are still very good prices,” he said.
In a four-story walk-up on Market Street recently renovated by Mr. Lam’s company, relatively low rents have attracted non-Chinese tenants. Tom Vitale recently moved into a one-bedroom that he rents for $1,600. “I looked everywhere below 14th Street, and Chinatown is pretty much the only place I can still afford,” he said. Three immigrant families shared the space that he now occupies, he said, “so the tide is definitely turning.”
But it is often hard to forget that his street is deep in the Fujianese part of Chinatown. “You can walk down the street and not see another single white face for 10 minutes,” he said. “I feel a little like an outsider, but that’s O.K. because everybody in New York City is an outsider.”
All the new development, which includes at least five hotels, may be a sign of the area’s healthy real estate market, said Mr. Lai, the museum director. “But the big question is how it will impact the historic core of Chinatown and whether the lower-income people who live here and the industries they work in can also continue to survive.”
Because most of the new projects are on undeveloped land or in buildings vacated by garment factories, few working-class Chinatown residents have been directly displaced. “But the concern is that as the prices continue to go up, there will be more pressure to push tenants out,” said Robert Weber, the director of public policy at Asian Americans for Equality, a nonprofit agency that works for affordable housing.
Mr. Weber’s group helped persuade the Lower Manhattan Development Corporation to set aside $16 million for acquiring Chinatown buildings to maintain them as low-income housing. But finding apartment buildings to buy has been harder than anticipated, Mr. Weber said.
“Landlords want a lot more for these buildings than what they should be worth,” he said, citing a 20-unit tenement building on Henry Street where the owner asked $3.8 million but the building’s rent rolls suggested it was worth only half that much. Rents in the building ranged from $47.77 a month for a rent-controlled apartment to about $1,000 a month.

Buyers who are thinking of purchasing this type of building in Chinatown have to factor the time and money it will take to vacate these apartments. And trust me, these people will not go silently into the night. Which costs more money for legal affairs.

Mr. Lai said SoHo’s growth at the western edge of Chinatown was also sure to be a continuing concern for the area. The museum has plans to move from its current home in a converted school building on Mulberry Street to an old warehouse building on Centre Street, on a block that is ripe for condo conversion.
“Some people say to me, ‘Charlie, you’re a traitor for leaving the heart of Chinatown,’ ” he said. “But then others recognize that Centre Street is in fact in Chinatown, and they say, ‘You’re going to be our fortress, and this way we can stop SoHo from encroaching further.’ ”

There was a girl in my year at high school who’s family owned the local Chinese take out place. She was a very nice girl and was quite studios and ended going to Columbia. After graduating she ended at Goldman Sachs where instead of taking order for fried rice she’s giving orders as an investment banker.
I know one broker who signed an exclusive with this eldery Chinese woman who owns several condos in Battery Park. As he described her, the woman is quite old and her wardrobe is quite simple. However she is sharp as a tack and as he puts it she is a peasant with money.

This is the type of person that the developers of those condos are looking for. These are their buyers that they really want. Chinese people are notorious for being vicious at bargaining. I know this from experience. However these developers understand that this particular population is willing to pay a premium as long as the property has all the amenities they seek.
Not to be crass but Chinatown is an acquired taste. From Mott , Elizabeth to Canal it reeks of fish and garbage, the streets are always congested with not just Chinese people but tourists spilling in from Little Italy looking for knock off hand bags.
But if you are used to that and are more interested in what the area offers, well then those condos are suited for you.

I can’t implore enough how one’s understanding of the culture plays a key role in real estate. Besides the Chinese there other ethnic groups who have established patterns in real estate. For instance the Orthodox Jews have been over Gravesend. Not because of the movie but due to the fact that there synagogue nearby and Orthodox Jews are required to walk to the synagogue on the Sabbath. Any real estate developer worth their salt needs to determine who is their sales market.

Wednesday, September 13, 2006

DeposIt Douchebaggery

I recently got a letter from a reader who is seeking to buy a place in Queens. She was very frustrated because Queens is a different animal than Manhattan and as she pointed out most of the real estate information that is about New York focuses on the Manhattan market.

So basically any information I had was uselss. However one thing really pissed me off. The reader stated that she was interested in putting in an offer for an apartment but the exclusive broker stated a $1000 good faith non-refundable deposit was needed to prove that she was serious buyer.


Tuesday, September 12, 2006

The Walk-Through closes its last deal.

I was perusing the real estate blogs yesterda when I came upon this at the Walk-Through.

In Closing
Categories: General
As you may have noticed, The Walk-Through has been awfully quiet lately. It had a good run, but we’ve decided to turn our focus to other parts of our real estate pages. We recently expanded the site with two new sections:

Great Homes features a searchable database of more than 30,000 listings in popular second-home destinations like Manhattan, Napa and Sonoma, the Hamptons, Cape Cod, Martha’s Vineyard, Miami and Florida’s Gulf Coast, as well as some European locations.

The Home Finance Center includes tools and guides to help you navigate the process of financing a home. The site features weekly columns, mortgage calculators and mortgage and home equity charts.

You might also enjoy the first issue of Key, our new real estate magazine. And, of course, our other fine blogs.

Thanks for reading and commenting.

It was fun while it lasted. And you are always welcome to come back.

Monday, September 11, 2006

September 11, 2006

Today is September 11th. Let us remember the fallen.

Saturday, September 09, 2006

God save the queen!

This link was sent to me by master appraiser Jonathan Miller of the Matrix which is an article from The Times from England giving the run down of the Manhattan market.

Miller Samuel, a Manhattan residential real estate appraisal company, says that the number of homes on the Manhattan market — including both resale and new development — is 54 per cent higher than it was at this time last year. At that time the average Manhattan property was on the market for 102 days before it sold. Now sellers are having to wait 144 days before they get a sale and they are being forced to accept lower prices for their homes.

Miller Samuel’s figures show that the average discount from list price is now 3.5 per cent, more than double the 1.6 per cent discount seen this time last year. Real estate brokers say that sellers are much more willing to negotiate than they were a year ago.

It's not suprising that the British are interested in our arena since they are experiencing a similar situation.

The real kicker of that article was at the end where they presented a set of blogs to watch, listing the usual suspects of Curbed, the Matrix and the New York Times. But also yours truly, the Property Grunt was also mentioned.

It's these little moments that affirm my efforts and I am grateful for that. To the readers of Great Britain this is a link to my greatest hits featured on Curbed.

Wednesday, September 06, 2006


I got this from Kelly Kreth Communications.


New Company Created by CENTURY 21 NY Metro’s Acquisition of

CENTURY 21 Kevin B. Brown and Dwelling Quest

NEW YORK (Sept. 6, 2006) – CENTURY 21 NY Metro, formed from the acquisition of CENTURY 21 Kevin B. Brown and Dwelling Quest to create a powerhouse New York residential firm, announces its official launch today. The new company, owned and operated by RealStar Realty LLC., will have two offices which are located in Manhattan and Harlem, with more than 150 sales and rental associates. CENTURY 21 NY Metro will provide services that cover the complete range of residential categories including condos, co-ops, lofts, townhouses, and rentals. The company will also carry the CENTURY 21 Fine Homes & Estates® designation, an honor given to a select group of CENTURY 21® offices worldwide that service the luxury homes segment.

We are thrilled to see the CENTURY 21 name expand even further into the Manhattan market, which is a market that embodies the diversity, energy and drive that has come to be associated with CENTURY 21 System members,” says Tom Kunz, president & CEO, Century 21 Real Estate LLC.

With the full support and backing of Century 21 Real Estate LLC, the largest and most recognized residential real estate sales organization brand in the world, we are confident in our ability to offer the unparalleled service New Yorkers demand – service that is synonymous with the CENTURY 21 name, says Michael Simon, president and chief executive officer,

The irony is that they are now Kelly's newest clients.

Tuesday, September 05, 2006

What's next?

The end of the labor day weekend is considered the start of the sales season, however we are entering a very uncertain period. Recently the New York Times present 3 possible scenarios of where the market will go.

Regardless of whether we are facing a soft landing, a prolonged slump or a crash, there are certain realities that will reveal themselves as the market proceeds to go the the downward spiral.

6 percent Swan Song

My perspective on brokers and the 6% commission is no secret, as far as I am concerned is an artifact of days past in the residential real estate industry.

Damon Darlin's recent article The Last Stand of the 6 Percenters gives an update of the current developments in online and discount brokerage and the building tension with traditional brokers and those who utilize non-traditional.

“If you give people freedom, you can’t take it away,” Mr. Kelman said. “A consumer force has been unleashed.”

This situation has been brewing for quite awhile but it is in my opinion that this could be the end of days for the 6% fee. Buyers and sellers are more open to other options that do not rely on the traditional broker. Particualrly in our current market, people will be more apt to cut their costs in any way possible. Even it means cutting out the selling agent.

“You have to play by their rules until the value to the customer drives the change,”
Mr. Fox, the chief executive of BuySide

Brokers, particularly Manhattan brokers, will not yield one inch to these developemtns. But it's not up to them. It's up to the customer.

Sticking to their guns

There will be a significant number of sellers in New York City who will sit on their property until a buyer meets their price. These sellers have built up a tremendous amount equity in their homes and even though they have missed their window, they refuse to believe they will not cash out as well as their fellow sellers.

Unlike the distressed buyer these sellers can afford to hold their own because they have the income or they have passive income coming in from their investments. Who are these sellers? They range from business owners, soldiers in the army of FIRE (Finance, Insurance and Real Estate) or simply the super rich that are described in 740 Park Ave. These people are not going to play hardball. They don't need to. So meet their demands or f**k off.

Because they are sitting on the catbird seat, I wouldn’t be surprised if they decide to pull their homes off the market until a later date.

Circling the drain

The distressed seller will be more distressed than ever. With interest rates rising and the uncertainty of our economy, the people who took the approach of buy now pay later are really paying for it. With higher monthly payments and taxes, there will be a growing number of distressed sellers who just want out of the game.

These desperate sellers will do everything they can to move their property and to cut their overhead they will enter fsbo territory putting up signs and using craigslist.

Canon Fodder

There will be massive amounts of turnover in the real estate brokerage community. From floor to ceiling no one will be left unscathed whether it is voluntary or involuntarily. Obviously those people who are not making deals will simply decide to pack it in and look for another gig. Instead of focusing on the green they will be looking for the bennies. There will be those who decide to stay in real estate but enter the administrative arena as secretaries or assistants. Its not glorious nor is it a lot of money but at least they won’t have to worry about medical insurance. And if that doesn’t work there is always Starbucks.

Even good earners will be affected by the turnover and I am not talking about agents but managers also. Brokerages will engage in an internal review to determine who goes and who stays. Obviously the main reason is to cut people loose is to lower the overhead of their operations.

The second reason is to create momentum. In real estate brokerage stillness is death. Agents need to be constantly hustling. Considering that brokers are no longer propelled by the current market it is crucial that they do not become stagnant. If it means whacking a couple of agents, shutting down an office and consolidating agents or even replacing a manager who has an impeccable record, then so be it.

The philosophy of the broker is that the deals are out there and there is money to be made but current market conditions demand that brokers need to work harder for those deals. So by taking a couple of successful brokers and placing them in offices that are waning in sales the logic is that the infusion of winner circle's blood will infect the pack. Or at least scare the crap out of the flock to get do their jobs.

All of these factors are going to put a ton of pressure on agents. So expect more incidents of brokers ripping off other brokers, buyers and listings being stolen. Tension among brokers who have their own groups could possibly become very high as assistants may ask for advances on future deals or demand more compensation for their work.

There will be a ton of broker switching among buyers and sellers and to make it worse, sellers will attempt to negotiate the 6% commission.

I urge everyone during this time of change to relax and roll with the punches. Yes it will be rough. For some it will be a complete nightmare. But getting our emotions involved will only make things worse for ourselves.