Take Advantage of Today's Real Estate Market

Top brokers and a developer share tips for getting the best deals

By Jillian Blume

It seems that every time you check the real estate market, it's even more puzzling. Pricing is all over the charts, and it's increasingly harder to price your apartment. Buyers have radically different concepts of value and sellers have no idea whether the market will dip lower or begin to rise. There are even brokers expressing confusion.

Of course, why there's all this confusion is no mystery. The economy is still falling, and the job market remains dismal.

"We are definitely going through a market correction as far as prices," says Jacky Teplitzky, a managing director at Prudential Douglas Elliman. "We have more inventory on the market, and we have definitely shifted from being a seller's market to a buyer's market in a very sudden way. In New York, we thought the whole sub-prime crisis was not going to touch us, but basically, after Lehman Brothers failed, we definitely saw a big change in the Manhattan real estate market."

But the truth is not black and white. According to Dottie Herman, President and CEO of Prudential Douglas Elliman, there are buyers who are selling their apartments at a lower price, but they're also able to upgrade at a better price. So for buyers, this may mean it's a great time to purchase a property. For sellers, this may be a time for patience. "A lot of people give you their opinions, and they act like it's a fact," says Herman. "So a lot of misinformation gets out there. I think what The Observer is doing is great because they're putting together a panel of expert people who are not there to sell anything and can give people information about what's really going on, actual facts, and that's going to help them take advantage of opportunities."

What brokers and developers do agree with is that the current market is going through a market correction as far as prices. "The market that we were in for the last six or seven years was not a real market because nothing in the world that I know of can go up 20 or 25% a year forever, and there's not too many lenders that lend money, and you don't even have to have a job", says Herman. In a recession, there are people who make a lot of money, and it's a good environment for first time homebuyers because they will get mortgages at the lowest rates in 30 years, according to Herman. "It's a price sensitive market. If you have cash, if you have good credit, you're going to be able to make very good deals."

Kelly Mack, President of Corcoran's Sunshine Marketing Group, an industry leader in residential developments, is optimistic about the real estate market. "Transaction volume, from what we've seen, reached its low in the fourth quarter of 2008," she says. ''First quarter 2009 numbers, in terms of transaction volume, were up about 13%. However, a majority of those increases were actually in the resale market versus in new developments. We're not seeing that same trend of increasing transactions in new developments quarter to quarter just yet. A lot of that has to do with the fact that new development is really a different animal."

In this section, The New York Observer asks some of the industry's experts to share their knowledge and tips with our readers interested in the resale and new development real estate market.

New Developments

This is a complicated market that runs the gamut from impressive deals with developers lowering prices or negotiating on other costs to catastrophe when funding has run out before a building is complete. So how does a buyer negotiate this market?

Andres Hogg, General Manager of Operations in the United States for Espais Promocions Immobiliaries knows something about new developments. He's the head of development of the newly completed Twenty9th Park Madison. He reports that sales slowed down in September 2008, but have been picking up since February 2009.

"Twenty9th Park Madison started at the end of 2006. We were lucky enough to be a little bit ahead of the curve when we started closing units. We closed enough units so we weren't at risk in terms of paying the balance with our lender." Hogg says. "We sold 70% of the apartments at the price we were requesting, but in the last six months I would say the prices have dropped 10-15%." His take on the new development market? "It's a great time to buy into a new development that can deliver, meaning it's finished, and you can move in tomorrow."

Kelly Mack advises buyers to do their research before they contemplate buying into any new development. "There's a lot of great product out there but there's also a lot of inferior product out there. The most important thing to look for in a new development property right now is the credibility of the developer, the design of the product, the quality of the construction, and the amenities and lifestyle offerings that come with it," she says. There's a lot of new development inventory on the market right now, but it's not going to last forever, according to Mack, because of the credit crunch and the financial markets that are basically frozen.

"What's happened now is that the entire pipeline of new development has in fact shrunk considerably," says Mack. "As a result, we're not likely to see a lot of those developments with world-wide recognition, by wonderful architects, with fantastic amenities and premier finishes, coming to market in the next five to eight years. So some of the new developments on the market right now are truly a unique opportunity."

Brokers agree that there is some room for negotiation on new developments, but it's a very different case than a resale apartment on the market. ''You have a big problem with the new development because when they established their pricing, they did it with their lenders, so lenders basically have certain expectations about what the prices should be," says Jacky Teplitzky. "So they cannot lower prices because they need to amend the offering plan from the Attorney General and they need approval from the lenders to do so. However, the consumer is looking at the published rates, let's call it retail rates, but those are not the real prices. The real prices are going to be when you go to the sales office of those buildings with a broker and you sit down and you negotiate."

People have to understand what exactly they can negotiate. It's much easier to negotiate on everything else but the actual price because the developer wants to keep the prices high, according to Teplitzky. They can negotiate on closing costs, or getting credit on construction costs, and in some cases on the price, but it depends on the the developer and on how much inventory they have left. "Which is another problem because the consumer doesn't have any way of knowing the true number of units that are still for sale in the building. Because when you go to a sales office and they tell you 70% has been sold, well, 70% of what? Of the units that have been released for sale? Or of the total number of units that the building has?"

Brokers agree that it's risky to buy into a new development where the construction hasn't been completed. "It depends on how deep the developer's pockets are:' Teplitzky says. ''Always take a broker with you. There are a lot of problems right now in new construction, and you really need guidance. Unfortunately I see a lot of buyers going to sales offices on their own because they actually think they can get a better deal if they don't take a broker with them, and they end up basically burning themselves. I'm not saying it because we get a commission, but I'm saying it because there's a lot of information about the developer and the building that the consumer does not have."

The Resale Market

There generally tends to be more room for negotiation in the resale market, and there's more information available. "It's not like it used to be 10 years ago when co-op information was not public information, where condo information, by the time it got registered, it was five or six months after the sale:' Teplitzky says. In the era of the Internet, with sites like Property Shark and Street Easy, everything gets recorded immediately, and everybody knows what's going on. "Even in the posh buildings on Park Avenue, where it was very hush hush and nobody knew what apartments were selling for, everything is now an open book."

Sellers need to understand that if everything is an open book, the buyers know exactly how much an apartment traded for 5 years ago, and most of the buyers actually know how much a seller bought that apartment for. "Because the consumer has a lot of information at their fingertips, sellers need to do a lot of homework;' Teplitzky says. ''You can't really price an apartment by the traditional way of pricing, which used to be to take six months of sold and closed. Well, guess what? It doesn't work anymore. Because six months ago, we were in a different market. So you have to do much more research, and in order to do that, you have to work with an extremely savvy broker who can put together a whole analysis, and not only for 2009. You have to go back in time. You have to go back to 2005 and 2006 prices!"

As you read this, the market is changing, and if a seller doesn't keep up, they will price themselves out of the market. They may have people coming to see their apartment, but it will be unlikely they will sell it. And whether you are seeking to sell an apartment, buy a resale apartment, or buy into a new development, working with a broker is essential.

''You absolutely need a very good broker, and I want to say seasoned broker," says Reba Miller, president of RP Miller &Associates. "Seasoned doesn't always mean over 20 years in the business. Seasoned could be someone who has a great passion for the business and will work their utmost to guide and hold the hand of a buyer and a seller. We're trained, we know how to negotiate, and we have recommendations about what makes a good deal and what doesn't make a good deal." There's always information you can learn from a good broker.

"It's a matter of value shopping today," says Miller. ''Everyone definitely feels that they want to have more value than ever before, and of course we all value things differently. So for each individual, it's about what it is that they value the most and what they want to pay for the least."

We're in an economy right now where everyone is expecting to negotiate, whether it's a new development or a resale. Buyers are savvier than ever before, and brokers are more important than ever. With enough research, a broker who can skillfully negotiate, and a little luck, this market is filled with opportunity.