The price is right, isn’t it?

Do sellers understand that. . .

. . . prices have. . .

. . .fallen?

I’ve written in the abstract about sellers who don’t grasp the true value of their properties.

Welcome now to the real world.

A former client of mine–twice!–has been telling me she wants to trade for another place on one level the duplex co-op that I sold her almost three years ago.  She and her husband paid $2 million for the two-bedroom, two-bath unit on Manhattan’s Upper West side, and they have invested another $100,000 in improvements to what already was a lovely apartment.

If the housing market has declined only 20 percent since the middle of 2007, then wouldn’t you expect the market to value the co-op at no more than $1.6 million?  Although it’s pointless to include the cost of renovations, despite what virtually every seller maintains, the apartment should be worth perhaps $1.68 million if that expense is added.

I had been thinking we should list the place for

It costs $1,000, but for you, dahlink, no tax!

A friend of mine who asked to go nameless decided not long ago that he wanted a new bathroom sink.  After searching for a bargain online and in person, he reluctantly picked a model by Toto.  With new fixtures, the Toto total (say that five times) came to $1,000, including sales tax.

By the time the job was finished, however, his outlay had climbed to $3,700 as one thing led to another, about which more below. But the only tax he paid was for the sink, even though his plumbers and glazier were legitimate businesses that presented him with official receipts.

It can come as no surprise to you that contractors often offer their customers the opportunity to save money on the sales tax by paying cash. Yet I was surprised to learn that established companies–not just independent contractors such as your super–engaged in the risky practice of defrauding the government.  (However, I do recall that a respected business such as Saks or Tiffany was snared for doing so decades ago, and prosecutions are pursued with some regularity now.)

For both parties, it’s win-win.  But if you include financially strapped governments, it’s win-win-lose. I was unable to find the estimated total of funds lost, but I’ll wager that the money could pay for a significant amount of special education, transit maintenance and legislator perks (as if Albany needs even more of them).

According to New York City’s government, examples of sales tax evasion abound, including the following one:

A New York City retailer offers to let a customer pay cash and provide a false out-of-state address to avoid paying the City’s sales tax 8.75 percent. He offers to ship an empty box to the customer’s mother in another state as a precaution, so it looks as it the purchase is going out of state.

Now back to my friend’s situation.  Aside from the $1,000 he laid out for the sink, he paid $1,175 to have his tub and tiles reglazed and a grab bar installed.  (How could he live with tiling that looked shabby next to the sink?)

Because of the usual unforeseen complications, plumbers set him back a whopping $1,400.  In addition, he tipped the plumbers and glaziers $85 plus $40 to his building super, who hauled away the old sink.

Given the total he spent, my friend saved 8.75 percent of $1,400 plus $1,175, or $148.06.

For argument’s sake, assume that’s the only tax-free work he has done this year.  Then, assume that, say, only half of the city’s residents (call it 4 million) achieve the same personal benefit annually.  By my calculation, residents are saving and the city is losing a wildly approximate estimate of $600 million a year in revenue.

I don’t know about you, but I could live pretty comfortably on that amount of money.

As for my friend, who resides in a co-op on Manhattan’s Upper West Side, the original octagonal floor tiles in his pre-war apartment look kind of scruffy to him.  Maybe he’ll get a deal for them too!

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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

Malcolm@ServiceYouCanTrust.com
Web site

Who do you trust? Probably not me, right?

What kind of world would we have without trust?

If you are anything like the typical consumer, you very likely don’t believe what a real estate broker tells you.  Do you trust information from a broker on such matters as:

• The square footage of an apartment in the event that the listing broker is rash enough to commit to a number, daring a subsequent lawsuit.
• Ceiling height.
• When any renovations were completed.
• How much it will cost for any improvements you have in mind.
• A board’s approach to potential buyers.
  
• The seller’s flexibility on price.
• What the market value is of the place you’d like to sell.
• How much you can depend on the broker to be responsive and professional.
• Whether other offers are expected, in already, accepted or almost in contract.
• The perfect time to buy or sell.

Of course, you don’t trust a broker whom you don’t know pretty well.  Nor should you.

Case-Shiller: Prices off from quarter, up from year

Case-Shiller’s National Home Price Index fell 3.2% in the first quarter of 2010 while remaining above its year-earlier level.

In March, 13 of the 20 Metropolitan Statistical Areas (MSAs) covered by the indices and both monthly composites were down, yet the two composites and 10 MSAs showed year-over-year gains.

Housing prices rebounded from crisis lows but recently have seen renewed weakness as tax incentives are ending and foreclosures are climbing, the company said. 

Buyers greet balcony safety issue with a big yawn

Nice balconies and views, but the city demands, "Keep off."

A woman I know called me in great distress last week to ask whether there was some way she could back out of her contract to buy a $560,000 one-bedroom co-op in a building that the city has cited for having potentially unsafe balconies.

Of course, I told the woman, who is not my client, to consult her attorney since the contract would provide the last word and it is not my habit to jeopardize my license by practicing law.

At the same time, I expressed doubt that there was any way out.  Because the defect was unknown at the time that she went into contract, it could not, by definition, be considered an undisclosed defect. So, whether the balconies might materially affect the value of any apartments in the building is beside the point.

In the event you missed the New York Times story on March 17, the piece began this way:

Thousands of residents in 16 buildings across New York City have been ordered to stop using balconies that were found to be unsafe by the Department of Buildings.

Referring to (but not specifically identifying) Sherman Square, a 42-story apartment tower at 201 W. 70th St., the article noted that the 1972 building is studded with concrete balconies with metal railings. Such is the case with dozens of buildings in the city constructed in the same decade.  The Times continued: 

Residents of the tower were surprised when they arrived home last week to find notices from the city telling them they were forbidden to use their balconies. They were also warned that if inspectors from the Department of Buildings saw anyone on a balcony, they would seal off the outdoor space, residents said.

The article went on to quote a Department of Buildings officials as saying that inspectors had visited more than 530 buildings across the city, except Brooklyn, since a 24-year-old man fell to his death when a railing of his rental apartment gave way last March at 330 E. 39th St. in Manhattan.  Those in which the city closed down balconies also were rentals–1675 York Ave., 300 E. 75th St. and 1365 York Ave. in addition to 330 E. 39th St.

I got to wondering

Sales of previously owned homes top forecasts

The National Association of Realtors reports that existing-home sales in the U.S. climbed 7.6% in April above March’s level.

Economists surveyed by Dow Jones Newswires expected sales last month to climb 4.7%, to a rate of 5.60 million.

The increase was 22.8 percent over one year earlier.

At the same time, inventory rose to 8.4 months at the current sales pace from 8.1 months in March.

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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

Malcolm@ServiceYouCanTrust.com
Web site

Condos slated for auction in Manhattan, Brooklyn

On Wednesday, a two-bedroom unit in this Canarsie condominium goes on the block. As for the Manhattan units, June 27.

A foreclosed 1,063-sf apartment that has two bedrooms and one bath in the 1989 Brook Club Condo, which has a pool, is to be auctioned on Wednesday.  At 1229 E. 80th St., unit 180 will go on the block with an opening bid of $50,000.

Monthly fees of $185 include  common area maintenance and insurance, exterior maintenance and insurance, lawn care, snow removal, trash and water.

An outfit called Williams & Williams is conducting the auction at 4:30 p.m. on May 26 at 127 Craig Ave., Freeport, which is a four-bedroom house that also will be for sale that day.  You can bid online, too.

Inspection of the Canarsie property is by appointment only.  Just call 718-998-1700 x200.

You won’t have to travel as far as Long Island to bid in person for the auction of five two-bedroom, two-bath units plus a three-bedroom penthouse that have remained unsold since 127 Madison Avenue was completed in 2007.

Caution: Ain’t nothing like a sponsor apartment

When co-op buyers see the words “sponsor apartment” in a converted building, their eyes invariably light up with anticipation.  In fact, some buyers will specify that they want both to live in a co-op and to buy only a sponsor apartment.

A decent sponsor apartment with minimal closet space.

For readers who are not in the know, the reason is that sponsor apartments will allow buyers to avoid having to undergo the tedious, time-consuming task of assembling inches thick of a board package, the rigors of a board interview and all the attendant anxiety.

Virtually all that sponsor wants to know is that you have the cash for a deposit and the means, including certainty of lender approval, of having the funds to close.

In other words, purchasing a sponsor apartment is a lot like buying a condo – smooth sailing.  (Buyers of both condos and co-ops would be well advised to get into the weeds by reading the advice that lawyer Ron Gitter provides.)

But . . .  (There’s always a “but,” isn’t there?)

Which is more important, broker or brokerage?

Annette Bening played a real estate broker in this film. Do you remember the name of the film? See the answer and link below.

As readers of this blog well know, there is no shortage of bad brokers–those who are some combination of lazy, incompetent, unprofessional, unethical or nothing more than avaricious.

Of course, there are lots of good brokers in New York City and elsewhere as well.

The question at hand: Is there a clear connection between the quality of the broker and the reputation or size of her/his firm?  The answer: An unqualified yes and no.

Guest: 5 ‘secrets’ that board minutes might reveal

Some board minutes can be a challenge to decode. (Flickr photo by studentofrhythm)

If you’re buying a co-op or condo, don’t fail to have the minutes of the respective Board of Directors or Board of Managers examined by your attorney.

In his advice below, lawyer Ronald Gitter–whose Web site is an essential resource for his clients and anyone else contemplating a sale or purchase–writes that the minutes can provide critical information about the physical and financial condition of the building, plus insights into its personality, or “DNA.”

Below, he outlines the five areas that demand a buyer’s attention.  Only by reading the minutes as a key component of all the due diligence that your attorney performs can he or she be confident that you likely will avoid nasty surprises in the near and distant future.

It is up to you, says Gitter, to ensure that your attorney covers the following issues:

1. Reserves, maintenance and assessments. Although the old real estate mantra was “location, location, location,” now it’s “value, value, value” in the new economy. The minutes often describe a building’s cash position, the history of maintenance increases and the imposition of assessments. The Board’s ability to keep expenses in check and to avoid annual maintenance increases or assessments is always a sign good management.

2. Capital expenditures.