Out and About: Renovations explain price differences

A broker at his open house recently shared with me what he believes is an effective pricing subtlety. Frankly, I can’t disagree with him.

For Blaise, the pitch better be low. (Flickr photo by clappstar)

When it comes to pricing apartments that don’t demand renovation, about which more below, Richard has learned that buyers are none too likely to lowball their offers.

However, with apartments that need work, said he, they invariably cut their offers significantly below the asking price.

The listing he was holding open that Sunday was a prime example. In the mid 70s on the Upper West Side, the co-op had a price of approximately $2 million.

The place needs work–new flooring, updated baths and such. While the kitchen is not a horror and boasts Viking, Sub-Zero and the like, it cannot easily be opened up to the dining room and certainly could use some cosmetic improvement.

Given its deficits, Richard conceded that he thought the unit would sell for some $1.8 million, or around $1,000 a square foot. In his view, the way that buyers approach such listings justifies an offering price that he knows is too high and that will produce a sale price acceptable to the seller.

I think the eventual price will be lower, but I also believe that his observation is worth keeping in mind when pricing a property or making an offer on one.

Of course, the other side of the coin is a question that sellers frequently ask: “Should I renovate my _______ (fill in the blank)?” That’s a topic that a broker friend of mine, Paul Zweben, answered in a blog post a little while back.

His response, and mine, is this: It depends. Is the owner going to live in the property for several years? Then, install only appliances that are in demand (e.g. SubZero, Viking, Bosch, Miele) and use top-end fixtures, but don’t be overly elaborate.

In other words, most of us recommend going for the lowest common denominator and the highest-end improvements. What will appeal to the biggest proportion of the market?

There are exceptions, of course. You don’t want to put a silk cozy on a sow’s ear in the hope of distracting buyers from the pigpen in the courtyard outside the living room window. Don’t call attention to crumbling crown molding, warped floors or, say, a lilliputian living room by inviting contrast to the huge kitchen that gleams with polished granite and six-burner stove.

Buyers are just as smart as sellers. Maybe more so. You can’t fool them, but you sure can tempt them with the right price and the most stylish and sensible upgrades.

Below, recently visited properties that are listed by various brokers:

  • An 1,100-sf two-bedroom co-op with dining room and a single bath on Riverside Drive in Morningside Heights.  With 10-foot ceilings, original marble surround gracing the decorative fireplace, bright exposures north and east with side views of the Hudson, washer/dryer and ornate molding, this apartment in a 1918 building makes a strong positive impression.  However, the handsome kitchen open to what is called a dining room has both granite countertops and laminate cabinets; the bath also is burdened by laminate.  And the entire unit, on the market since May, suffers from its asking price of $1.125 million with monthly maintenance of $1,386.
  • In the low 80s between Amsterdam and Columbus avenues, a weirdly configured one-bedroom co-op featuring ceilings with more height than the rooms are wide.  The bedroom is nine feet wide and the living room, not quite eight and a half feet.  The open kitchen has been improved, but not impressively, though it includes a combo washer/dryer.  It is no wonder that this apartment, which was listed in August at $499,000 with maintenance of $1,049 a month, in a building with virtually no amenities or appeal, lingered on the market even after a price cut to $455,000 in October and, finally, to $419,000 last month.  Although the owner is said to be “motivated,” it was obviously not enough so until January. 
  • A two-bedroom, two-bath condo described as a “diamond in the rough” in a 1986 high-rise with limited amenities in Lincoln Square.  More like an unpolished diamond than one in the rough, this east-facing unit has a 460-sf terrace with open exposures, partially updated open kitchen with white granite countertops and half-size dishwasher, standard-height ceilings, warped hardwood floors and the option of adding a washer/dryer.  The terrace notwithstanding, the unit has been offered too optimistically at $1.29 million , then $1.25 million and then at $1.195 million with common charges of $978 and real estate taxes of $924 a month. 
  • In the mid 60s on a corner of Amsterdam Avenue, a sprawling 1,850-sf three-bedroom, three-bath co-op into which the new owner will want to sink $150,000-200,000.  The major rooms face south, the living/dining space runs nearly 35 feet long; the high-end galley kitchen is behind both the third bedroom and a bath, making it difficult to open up; and closet space borders on excessive (not that there’s anything wrong with that).  In a 1924 Rosario Candela pet-friendly building that has a live-in super, this apartment evidently is priced for negotiations at $1.995 million with monthly maintenance of $2,371 plus a special assessment of $294 through October. 
  • A thoroughly unlikable condo with its loft bedroom counted in the apartment’s 820 square feet.  Demanding cosmetic improvements and a new pass-through kitchen, this unit in a 1986 full-service building that has a swimming pool and other amenities west of Broadway in the very low 90s provides 16-foot ceilings, a balcony, a wall of windows with open northern exposure, and one and a half baths.  Any buyer who pays the twice-reduced asking price of $824,000 (cut by a pointless $10,000 New Year’s Day) with combined monthly costs of $1,608 is very wealthy, very foolish or both.
  • In the mid 80s on Broadway, a 1,000-sf condop that has the rare benefit of its entrance on a floor that is otherwise unused and sky-high maintenance.  With two separated bedrooms, two well-designed original baths, lovely views west through oversize windows,  smallish modestly improved kitchen, custom closets and a washer/dryer, this apartment in a 1989 building rich with amenities had a wishful listing price of $1.359 million, just cut to an unlikely $1,289 million.  Monthly maintenance is $2,284 plus two assessments totaling $194.

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Malcolm Carter
Licensed Associate Real Estate Broker
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Charles Rutenberg Realty
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<p style=”text-align:left;”>A broker at his open house the other day shared with me what he believes is an effective pricing subtlety.  Frankly, I can’t disagree with him.</p>
<p style=”text-align:left;”></p>

When it comes to pricing apartments that don’t demand renovation, about which more below, Richard has learned that buyers are none too likely to lowball their offers.
<p style=”text-align:left;”>With apartments that need work, however, said he, they invariably cut their offers significantly below the asking price.</p>
<p style=”text-align:left;”>The listing he was holding open on Sunday was a prime example.  In the mid 70s on the Upper West Side, the co-op had a price of approximately $2 million.<!–more–></p>
<p style=”text-align:left;”>The place needs work–new flooring, updated baths and such.  While the kitchen is not a horror and boasts Viking, SubZero and the like, it cannot easily be opened up to the dining room and certainly could use some cosmetic improvement.</p>
<p style=”text-align:left;”>Given its deficits, Richard conceded that he thought the three-bedroom, three-bath unit would sell for some $1.8 million, or around $1,000 a square foot.  In his view, the way buyers approach such listings justifies an offering price that he knows is too high and that will produce a sale price acceptable to the seller.</p>

30px

;text-align:left;”>I think the eventual price will be lower, but I also believe that his observation is worth keeping in mind when pricing a property or making an offer on one. 

Of course, the other side of the coin is a question that sellers frequently ask: “Should I renovate my _______ (fill in the blank)?”  That’s a topic that a broker friend of mine, Paul Zweben, answered in recent blog post.

His response, and mine, is this: It depends.  Is the owner going to live in the property for several years?  Then, install only appliances that are in demand (e.g. SubZero, Viking, Bosch, Miele) and use top-end fixtures, but don’t be overly elaborate.

30px

;text-align:left;”>In other words, most of us recommend going for the lowest common denominator and the highest-end improvements.  What will appeal to the biggest proportion of the market? 

There are exceptions, of course.  You don’t want to put a silk cozy on a sow’s ear in the hope of distracting buyers from the pigpen in the courtyard outside the living room window.  Don’t call attention to crumbling crown molding, warped floors or, say, a lilliputian living room by carving out a huge kitchen that gleams with polished granite and six-burner stove.

<p style=”text-align:left;”>Buyers are just as smart as sellers.  Maybe more so.  You can’t fool them, but you sure can tempt them with the right price and the most stylish and sensible upgrades.</p>

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