Properties are worth only what buyers will pay

Two buildings with 21 units total are on the market for $6.975 million.

Of course, the headline is a truism. But it has a double meaning, as you will see below.

“What do you think it is worth?”

The question to brokers is as predictable as a cold day in . . . winter. And the answer is invariably frustrating to buyers: “What is it worth to you? You are the one who has to live there.”

Still, the question is a fair one if it is themselves they also ask. To get a good answer, they need to have explored the market themselves, making their own judgments of the value of the various properties they see. To be sure, they need as well to rely on both the experienced eye of their broker – their own broker, not the listing broker – and on the comparable sales that broker has been able unearth.

In the end, though, the assessment must fall in the lap of the buyer, whose personal needs may well outweigh an abstract calculation. Buyers might decide to pay a premium for a property that reminds them of their youth. Maybe it is in a building where close friends will be neighbors, makes walking to work a possibility or possesses an ineffable and arresting charm, among other attributes that the individual treasures.

Often buyers cannot even articulate why a particular apartment or house tugs at them so compellingly. Only infrequently do buyers fail to say they are in love with a property on which they wish to make an offer, easily perceiving its possibilities.

The decision to make an offer is almost always emotional, and rare are the buyers who end up happy after talking themselves into a property that requires them to bend their expectations and make excessive compromises. (“Excessive” is the key word here since literally every buyer is forced to accept tradeoffs.)

The emotional component of real estate sales is a variable that makes it impossible to predict with certainty the price for which any one property will sell. That’s a critical factor in what makes pricing a property as much art as quasi-science and negotiation as much inevitable as essential.

Enchanting garden of a Manhattan Avenue townhouse listed for $2.29 million.

When it comes judging the worth of a property and setting an asking price, apartments are much easier than townhouses. One reason is that there are thousands more condos and co-ops and thus thousands more comparable sales.

In fact, townhouse sales make up only a single-digit percentage of all property sales in the Big Apple and readily can consume a year or more prior to finding buyers.

How, then, to evaluate a townhouse as seller or buyer?

Many characteristics of a townhouse such as those that follow also apply to an apartment, but every variable is magnified when applied to a townhouse.

Among the common issues are location, condition and size. The aesthetic of a block appears to be of somewhat more importance in a townhouse than in an apartment as does the appeal of the exterior. The greater the width of a townhouse (yes, size), the bigger the cost. The number of terraces and working fireplaces matters a great deal. Also important is the rear garden and its surroundings.

Inside, a townhouse with an elevator always fetches top dollar. One in which original details enjoy a synergistic relationship with a modern renovation is bound to attract buyers. Indeed, a completed renovation is especially desirable these days since a gut renovation easily can range up to $2 million and last two years. Other qualities are the number of stories, the number of bedrooms and baths and, more than anything, the practical use of space.

Interior of an Upper West Side townhouse listed for $4.95 million.

As for the infrastructure, have the plumbing and electrical systems been updated? Is there an effective burglar alarm system? Are the flooring and joists in good shape? Is there zoned air conditioning and heating?

Carrying costs, too, need to be taken into account. These include property tax, insurance and utilities.

Another consideration is whether the townhouse already has been converted to single-family use. If there are tenants, what is their ability to remain and at how much rent? If the property is to be purchased, rented or partially rented, what is the current and potential income? Could there be use problems with the city?

Limestone mansion at 26 W. 76th St.: $19.5 million.

Finally, there are questions surrounding the townhouse market itself. A few years ago, such dwellings commanded even more exorbitant prices than they do now when families with children were looking for four and five bedrooms.  But the influx of new large condos has given them options that were relatively rare in the past.

An example of the market’s flux is a limestone mansion at 26 W. 26th St. (left), originally listed for $25 million.  Now it is offered for $19.5 million.

Whether townhouse prices are off the wall today is a matter of opinion – are you the buyer or seller? – and the debate is reflected in the ones that I critiqued in the latest free e-newsletter that I write.  It is issued on alternate Fridays around noon.  In it you’ll find said critiques in the “Out and About” section, plus a range of information on the U.S. and New York housing markets, mortgage news, celebrity transactions, household tips, economists’ predictions and relevant research, among other topics.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201
Web site

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