Archive for the ‘Working With Real Estate Brokers’ Category

11 Mistakes to avoid when buying a New York City Co-op

Wednesday, December 14th, 2016

11 Mistakes to Avoid When Buying a New York City Co-op

The New York City co-op buying process may have you wondering if the principals of honesty, integrity, and good faith exist in the real estate market. They do, we can assure you, even though you may be feeling doubtful. To understand why so many wannabe co-op buyers are jaded you need to see that it’s often the real estate game, and not the players, that are causing problems. In our experience, many buyers seem destined to make the same 11 mistakes—again, and again, and again:

Mistake #1: Apartment hunting without the help of a broker.

When apartments in Manhattan change hands, sellers typically pay 5 to 6 percent commission. And what do you, a buyer, pay your broker to represent your interests? Nothing. That’s because the seller typically pays out half of the commission to your broker as compensation for finding a willing and able buyer.

Warning: If you don’t have a broker then you interface directly with the seller’s broker, a seasoned professional (usually) whose fiduciary responsibility is to do anything legally in their power to skew the deal in favor of the seller and against you. It’s a sad irony that many buyers don’t seek broker representation for themselves, especially when there is no cost for doing so.

A competent buyer’s broker will help you to navigate the complicated process of buying a co-op while protecting you from the common mistakes outlined in this article. Don’t be shark bait. Get a professional on your side—at no cost. (more…)

For Sale By Owner (FSBO) Myths (And a Couple of Facts)

Friday, June 17th, 2016

Updated in 2016…

With more than 90% of prospective buyers beginning their home search online and multiple web outlets for listing publication, it seems that more sellers would be bucking the broker’s commission and listing their property for sale by owner (FSBO). Cutting a commission by 3-6% could save thousands of dollars, but it would also put some real estate brokers out of business. At RealDirect, we recognize that the traditional method of selling real estate needs to adjust and embrace a new way of doing things in order to stay relevant. However, to many brokers who are wedded to a standard commission, the easiest way to keep money coming in is to use fear. Fear that selling with anyone but a traditional broker is hard. Fear that buyers’ brokers won’t show homes that are not listed with the big brokers. Fear that sellers won’t know how to price their property. While the list goes on and on, most of these fear tactics are inaccurate at best, and outright lies at worst. If you’re thinking about selling your home without a traditional broker (or a FSBO), we’d like to debunk some of the for sale by owner myths (and share a couple of facts).

Myths

Myth: If you don’t list with us, we won’t bring our buyers.

Fact: Buyers’ agents want to earn a commission. If their client says they want to see a property, agents will typically try to work out a deal. However, getting brokers and owner to agree to a deal can be tricky, with many of the large brokerages refusing to show homes where they do not have agreements in place. But by working with an FSBO like service such as RealDirect’s Owner Managed service, we take care of the agreement, so it will be easy for brokers to show your home. Plus we are members of the Real Estate Board of NY – which is the de facto MLS in NYC. Being a member of REBNY requires that you co-broke with all other REBNY brokers.

Myth: You’ll get more money if you sell with a traditional broker.

Fact: That’s just plain fuzzy math. First, this does not take into consideration that the net proceeds could be higher with alternative sales models because the closing costs are lower (i.e. commissions) even if the sales price is lower. But even if you do not take that into consideration, if the property is marketed to every possible buyer, as done with RealDirect, the sale will be highly competitive, and you will get the highest possible price.

Myth: It’s too much work for you to handle on your own.

Fact: Maybe. It depends on how much time you’re able to devote to showing and answering questions about your home. That’s why RealDirect offers different listing options which allow you to handle your own showings and open houses or have a licensed agent do them for you. Our platform has baked in marketing that covers all the mediums a traditional broker would use (and several they don’t). We’re available to negotiate for you, or you can handle it yourself. Because every situation and every seller is different, we don’t prescribe to a one-size-fits-all real estate model and we don’t believe in one-size-fits-all pricing. You shouldn’t have to, either.

That said, there are some scary things brokers will tell you that are actually accurate.

Fact: People won’t find you unless you’re in the MLS.
Your local MLS is what most buyers’ brokers use to find properties for their clients, and also where sites such as Streeteasy, Trulia, Zillow and others get some of their listing info. While it’s certainly possible to find a direct buyer by doing your own advertising, if you want to appeal to the widest buyer base possible, it is critical that your listing appear in the MLS. And being in the MLS (or REBNY database in NYC) will also help you with the next one…

Fact: You have to offer a buyer’s broker commission.
While you can forego paying 2.5-3% to a seller’s broker by listing your home “for sale by owner (FSBO)”, if you want brokers to bring buyers to your home, you have to be willing to pay their commission. You can opt to only show your home to direct buyers with a strict “no brokers” policy, but in doing so, you eliminate every single buyer who wishes to work with a broker instead of representing themselves – and that is the majority of buyers. And eliminating buyers from the buyer pool can result in a lower purchase price, and work against your sale.

So the key to successfully selling your home as a FSBO is to do your research, understand how the process works, realistically evaluate your level of time and willingness to do work, and make a decision you’re comfortable with. Scare tactics are just that. Don’t believe the “for sale by owner” myths.

How Do Real Estate Commissions Work?

Friday, January 15th, 2016

Here at RealDirect, our goal is to work with our clients in the way that suits them the best. Sometimes that means they use our free services (RealPrice). Other times we work on a monthly fee basis (as in our Owner Managed program). And still other times, we earn a commission Agent Managed and Buyer Service). However, not all commission based real estate brokers are the same, and to best understand our commission structure, you need to understand how the typical brokerage is compensated. (more…)

Three Helpful Tips For a Stress-Free NYC Apartment Closing

Thursday, October 11th, 2012

Relax and enjoy a stress-free nyc real estate closingIf you are unfamiliar with the New York City housing market, closing on an apartment can be an intimidating process. However, a little bit of preparation can go a long way toward making your purchase as simple as possible. Buying real estate need not be a daunting task if you follow these three helpful tips for a stress-free NYC apartment closing.

1. Hire a good attorney.

To make negotiating a contract on an apartment easy in New York, you need a real estate attorney that can take the time to explain to you what is in the contract and how it affects you.  This is a legal and binding document so you need to be sure you understand what you’re agreeing to. Try to find an attorney who understands your preferences and communication style, as he will be your primary point of contact during the negotiation process. (more…)

Running Comps in Park Slope

Friday, May 11th, 2012

I sat down with a new client in Park Slope yesterday to talk about listing his townhouse for sale. When we meet our clients in person, we do a thorough walk through of the home, and then sit down and discuss pricing with an ipad, looking in real time at comparable properties (comps) – sold, in contract, and what is currently on the market. We don’t leave our clients a stack of fancy brochures – I never thought it made sense when everything we discuss is on online and on our web site. However, most brokers do leave packages, and in this case, our competition had left a package of what they considered to be comps. And the conclusion they reached based on the comps, was that the home should be priced about 20% higher than we said it should.

We warn sellers not to go with the broker that simply suggest the highest price. Instead, we recommend they spend the time to really understand the comps they are looking at, and price their home accordingly. However, brokers know that sellers often consider a high listing price to be an important factor for choosing who to list with, so the temptation is often too great for brokers to resist comp inflation.

In this case, the brokers that came before us put a comp set in front of the seller that did not include sale price. They merely had a single photo of the front of each house, the addresses, and the price per foot. They failed to explain that larger homes carry higher cost per foot than smaller, narrower homes like this seller. They also ignored condition, and how that impacts price. And they didn’t take into account the block – a park block in Park Slope typically sells for more than a townhouse near 5th Avenue. Finally, they failed to take into consideration whether the house was a 1 or 2 family home. Buyers will often pay a premium for a renovated 1 family home when compared to a multi-family dwelling that has had or currently has tenants in place.

After we walked through each of the homes that were listed as “comps”, it became very clear that nearly all of the comps that were in the shiny packet were not, in fact, comparable to the seller’s home, and that the price was completely unrealistic (although very attractive). We were able to produce several good comps – even one on the same block in a nearly identical house, that was left out of the other report. When we took some time to go through them in detail, I believe the owner had a much better view of the market and where his home should be priced. It will be interesting to see where he prices it, and who gets the listing…

Investing in NYC – A Guide for Foreign Real Estate Buyers

Monday, March 26th, 2012

From understanding building types to passing a board review, buying an apartment in New York City can be a harrying process even for locals who have months to make a decision. For buyers who aren’t based in the United States and who may only have a few days to view properties and make an offer, the purchase of NYC real estate can seem like an overwhelming process. But, with solid guidance and an understanding of the market, investing in New York City real estate can be a rewarding experience for foreign buyers. We’ve pulled together this comprehensive guide for foreign real estate buyers who are interested in investing in NYC.

Building types
Condos, co-ops, cond-ops and more, our guide to New York City building types covers all the bases. We also have a list of classic apartment layouts and some tips for the pied-a-terre buyer. While it is possible for international buyers to purchase co-op property, most prefer to purchase a condo in order to avoid any difficulty that may arise with obtaining approval from the co-op board. Buyers who wish to use the property as a rental need to make sure it is allowed by the building’s rules prior to purchase.

Mortgage
While purchasing a property with cash can simplify the process and eliminate some fees, it is also possible (although not easy) for foreign buyers to obtain a mortgage for as much as 75% of the purchase price of their property. Look for a lender that specializes in programs for international buyers and plan to provide documentation such as proof of employment, a proven history of mortgage or rent payments (at least one year), proof of funds available for closing and credit references.

Expenses
Monthly maintenance / common charges – these monthly fees vary from building to building and can range from hundreds to thousands of dollars. As a general rule, the more amenities a building offers, the higher the monthly fee will be. These charges go toward maintenance of common areas such as the lobby, gym, or pool and to pay building employees.

Property tax – this is a tax assessed by local and state governments. Check for tax abatements and available deductions to try to minimize the amount of tax you will need to pay. In co-ops, the property tax is built into the maintenance fees.

Assessment – in some instances a building will charge a special assessment. This is an additional fee on top of the monthly common charges or maintenance and can be the result of a shortage of building funds, necessary repairs, or to pay off a law suit. Buyers can ask sellers to pay off any special assessments as a condition of purchase.

Working with brokers
As a buyer in New York City, you are not responsible for paying any fees to a real estate broker. Sellers have pre-arranged with their listing agent to pay all fees for both their agent and the agent representing the buyer of their property. When you work with RealDirect as your buyer’s agent, you receive up to 1% cash back at closing.

Contract & Attorney review
Once a property is selected and a purchase price agreed upon, a contract will be negotiated and agreed upon by the attorneys for both parties. This process usually takes 1-2 weeks. Until the contract is signed by both parties, the sellers can continue to show the property and entertain other offers. So even if the sellers have accepted your offer, neither party is bound to the transaction until the contract has been signed.

Deposit
When an offer is accepted and a purchase contract completed, buyers will be required to transfer a deposit equal to 10% of the property purchase price to an escrow account managed by the seller’s attorney. This insures that the buyer will act in good faith during the transaction.

Closing costs
When you purchase property in New York City, there are an assortment of costs that go along with the transaction. Some of these costs are paid by the seller and others are paid by the buyer, including:

New York City transfer tax – this tax ranges from 1-1.425% of the property purchase price.
New York State transfer tax – in addition to the city transfer tax, the state also charges a tax equal to 0.4% of the purchase price.
Mansion tax – on properties of $1 million or more, New York State charges a mansion tax equal to 1% of the purchase price.
Attorney’s fees – attorney’s fees can be ~ $2,500.
Title search – This process verifies that the seller has a right to convey the property and once the purchase is completed nobody other than the buyer will be able to claim ownership. Cost of title search is $450 per $100,000 of the purchase price.

It is also common to encounter a host of other smaller expenses such as document fees, mortgage application fees, building application fees, recording fees, appraisal, credit report and bank fees. Many of these mortgage related fees are avoidable by purchasing with cash instead of financing.

A Technology Culture in Real Estate

Thursday, January 26th, 2012

As mentioned in a previous post, I attended the Real Estate Connect conference earlier this month. During one of the sessions, the Inman News staff revealed the results of a survey they took of over 1000 real estate agents. There were many interesting findings, but the one that resonated with me was that 61 percent of top real estate agents in the US are considering leaving their brokerage. The top 3 reasons were:

1. Disatisfaction with technology
2. Company culture
3. Lack of confidence in the vision for the future of the brand

This was particularly interesting to me because looking at the real estate business from the outside, I marveled at these 3 items, and they became the impetus behind starting RealDirect.

We believe that by embracing technology, the culture and confidence in the vision of the company will take care of itself. Here at RealDirect, we consider ourselves as much a technology company as we are a real estate company. We chose to locate in the heart of New York’s tech community, and have more web developers than sales people. But it’s our approach that is our true differentiator.

Quite simply, technology is a part of our DNA. We constantly look at our business and ask what we can do better by utilizing technology and data. Some things, like board packages for co-ops, are still stuck in the 1980’s, and no matter what we want to do, we still find ourselves killing trees to make the hundreds of sheets of paper needed for these antiquated forms. However, when a client asks us how long it will take to sell their apartment, we attack the problem like scientists and not salesmen. And the great thing about real estate is that most of the questions that come up every day have real data driven answers. A home is just a composition of space, rooms, amenities, condition, views, and location. When you break down these data points, there are tons of answers in them that make the process of buying and selling much less of a mystery. And by making the process transparent, we have the opportunity to change the perception of the real estate pro from a pushy salesman to a trusted consultant.

That is our vision of how a culture of technology can change real estate. If you share our vision, we encourage you to join the team!

Can I Be My Own Agent and Collect 3%?

Tuesday, January 17th, 2012

For newcomers to the real estate market, there can be confusion about who is responsible for paying the agents involved in the transaction. As a general rule, the seller pays both their own agent and the agent who successfully brings them a buyer (the buyer’s agent). When a seller signs a listing agreement with a real estate agent, they establish how much the agents will be paid. While there is no set rate for real estate agent commissions, 6% is standard practice in a lot of places, with 3% going to the seller’s agent and 3% going to the buyer’s agent. This commission split is called a “co-broke.”

Among New York City real estate buyers, there is a train of thought that says “If I represent myself, the seller won’t have to pay a commission to a buyer’s agent. Therefore, I can expect to get the property for 3% less than what I would have paid if an agent represented me.” Or, “If I represent myself, I should be able to collect the 3% commission that would normally go to the buyer’s agent.” Unfortunately, there are some logistical and legal issues that prevent this from actually happening in practice. (more…)

10 Things to Consider When Making the Leap from Renting to Ownership

Monday, January 16th, 2012

With a strong buyer’s market, reduced property prices and low interest rates, it’s a great time to think about making the leap from renter to home owner. Before you decide whether or not to sign on the dotted line, here are ten things to consider:

1. Home ownership is a long term commitment. Unlike renting, which allows tenants to move every year at the end of a lease, homeowners should plan to stay put for at least four years. Factoring in closing costs, taxes and real estate fees, selling a home any sooner than four years after purchasing is likely to result in a financial loss. This number will vary from region to region and is dependent upon market conditions, but the days of buying a house and then flipping it six months later for double the purchase price are long gone.

2. Taxes. You have to pay property tax when you own a home. Your property tax is calculated by multiplying the assessed amount of your property (as determined by your local municipality) by the prevailing tax rate (also known as the “mill levy”). As a renter, you’re technically paying property tax as well, you just don’t see it because it’s built into the cost of your rent. When you own your property, you can choose to pay into an escrow account with your mortgage company and let them take care of paying the property tax, or you can pay your taxes directly to the city. You will be billed twice annually, and the cost of property tax varies dramatically from town to town and region to region. The upside to the tax situation is that home ownership is heavily subsidized by the federal government, meaning that your property tax, interest paid on your mortgage, and points paid at mortgage origination are all acceptable tax deductions. Renters do not see any tax benefits from their monthly payments, even though, as mentioned, the cost of property tax is usually built into their rental price by the landlord. For many people, their mortgage interest constitutes their biggest tax deduction. Additionally, capital improvements (permanent structural improvements or renovations which make the property more valuable) made to your property, can be added to the basis of your home to reduce any capital gain implications when you sell.  Co-op owners pay taxes as a part of their “maintenance” payment each month. (more…)

Should I use a broker when buying in a new development?

Monday, December 5th, 2011

Data gleaned from RealDirect’s survey of New York City home buyers shows that only 17% want to have a real estate agent negotiate their transaction, while 45% of buyers wish to handle negotiations on their own and 38% had no preference. While today’s savvy buyer can often handle a real estate transaction without assistance, buying in a new development is a situation in which working with a broker can add significant value.

To get the most out of this type of purchase, buyers should:

1. Look for experience: Be sure to find a buyer’s broker that has extensive experience with new developments. They know where developers will typically have some flexibilty based on the amenities, trajectory of sales and market conditions. Some of the things an experienced agent may be able to negotiate for you include upgrades, price and transfer tax. (more…)