One reason many buyers are willing to pay the premium prices commanded by new construction is for the convenience of moving into a freshly minted home built with top-of-the-line materials and systems.
Yet there is another category of buyer–a rare, determined and fearless type looking to create a unique space that speaks to his own sensibilities and needs. This is the buyer in search of a renovation project. If you are such a buyer you will come across many properties in need of work, requiring anything from a mild makeover to a full blown gut renovation. With 25 years of experience, I feel strongly that knowing what you are getting into from the start is a crucial first step in the renovation process. I strongly recommend that you should not commit to a renovation until undertaking a thorough assessment of the condition and the scope of work required to realize your vision.
So, what are the first things that you should take into account BEFORE you begin the process of renovating?
Top 5 Planning Phase Tips:
Number 1: Conduct a bank reference on everyone on your design team.
The architect. The contractor. Everyone. No matter how creative or inspiring the team members are, no matter how many recommendations they produce, or magazines and reality TV shows they have been featured in, at the end of the day this is a business transaction. As the saying goes, “funding makes the rocket ship fly to the moon,” and without proper financial backing—with their money, not yours– I guarantee the job will never get done. Under-funded architects and contractors are the single greatest reason why projects drag on, and ultimately don’t get done.
Number 2: The change order.
Imagine going into a fine restaurant, ordering a steak for $50 and while you are eating, the waiter comes back to your table over and over again to explain that the chef didn’t realize his cost for the steak was higher, the cost of gas for the stove went up, and the busboy asked for a raise–so the $50 steak will now cost you $110. Sound ridiculous? Well, in the design and construction business this goes on every day. There is nothing that strikes fear in the hearts of those about to renovate than horror stories about change orders derailing budgets and schedules. Change orders are very unwelcomed surprises and they kill projects. The easiest way to avoid change orders is to be sure to work with an architect/design/contracting team that prohibits them unless you, and only you, change your mind on a specification.
Number 3: Planning ahead pays off.
A successful renovation project is all about thoughtful design, sourcing and specifying BEFORE the hammers start swinging–not after. In the absence of exacting specifications, placeholders for materials will always result in change orders, additional costs, project schedule overruns and unnecessary contention. Resist any temptation to work with someone willing to start a project without exact specifications and pricing in place with the expectation that once things get going everything will miraculously “figure itself out.” This never happens.
Number 4: Numbers don’t lie.
In a market that is highly competitive for architects and contractors it is not uncommon to receive an unrealistic initial price for a project, only to have the budget double, triple and sometimes worse. It happens every day and it turns what should be a creative and enjoyable process into a true nightmare. Be aware that quality materials and workmanship cost reasonable amounts of money and low budgets from the outset never pan out. Don’t be seduced by a lowball estimate – it never turns out well.
And the final and potentially most important tip?
Number 5: Be realistic and manage expectations.
Simply stated, a 4,000 square foot apartment cannot be gut renovated in 3 months for $250/square foot, no matter what an architect, designer or contractor might tell you. If you start with a realistic timeline and budget you will avoid the feeling that everyone you meet is telling you a different story once work begins. While each project is different and budgets vary, a good estimate for a gut renovation at the basic level starts in the mid-$300/square foot range and climbs from there. Unless you aspire to have your new home featured in Architectural Digest the high end of a gut renovation tops out at around $725/square foot. After that, it is less about the value of the engineering and more about very specific designs and unique finishes and materials that surpass even the high end of the spectrum.
Many thanks to Lee J. Stahl
President, The Renovated Home
A question that I am often asked is, “Should I undergo renovations or make kitchen, bathroom or system upgrades before I list my home?” The answer to this question is not the same for everyone and depends on many factors including the condition of the property and the current market as well as personal dynamics.
There are typically three types of buyers in the market: 1) those who want a completely renovated property, 2) those who are willing to make limited stylistic changes to personalize the home and, 3) those who are open to a partial or full renovation to accommodate their own needs and preferences. In any market I find that most buyers are interested in renovated properties that ‘show well’ and these are the listings that, if priced right, sell quickly and for the best prices.
Purchasing real estate is an emotional experience and most buyers are easily swayed by properties that are well-designed, renovated with high-end finishes and appliances, and decorated beautifully. Even in a market with limited inventory, a home that shows well and does not require a buyer ‘with vision’ will have a significant advantage over comparable listings that do not show well. That being said, a buyer who is willing to undertake a renovation may not want to pay for someone else’s choice of design and finishes which is something to keep in mind.
Let’s review some basic scenarios:
- Renovating now for future added value.
Renovating with a potential resale in mind means selecting designs and materials that will appeal to the widest range of buyers. If the renovations you are contemplating fit that description, and you will be happy living with these upgrades, then it could be a very good idea to renovate. However, if you want to do a high-end renovation, but to a very specific taste or style, it may not be the best investment. Also, keep in mind that if you are not planning to sell for several years, certain designs and finishes may go out of style by the time you are ready to list, although certain upgrades, such as high quality kitchen appliances, have enduring appeal.
- Renovating kitchen and baths.
Kitchens and baths are typically rooms where you can add the most value. When buyers see tired or original bathrooms or outdated kitchen appliances and old cabinetry they see a property that requires work, and this perception can significantly impact value in their eyes. Sometimes a $10,000 – $20,000 investment in renovations can yield a higher sales price of $100,000 – $200,000 or more. If you decide to renovate before listing, make sure you seek advice on finishes, fixtures and appliances to be certain your renovation will have the widest appeal for buyers.
- Estate condition properties.
Properties that are in ‘estate’ condition (typically not upgraded or renovated in decades) often yield lower sales prices based on the amount of renovation work required to make them ‘move-in’ ready. These properties require buyers who have vision. There is also a perception among many that they can negotiate a deal. It is best to shift that view by investing to properly prepare the home for sale. Some of the most basic tasks might include applying a fresh coat of paint, fixing anything that is broken, re-grouting bathroom tile, re-glazing original tubs and refinishing floors. Modern upgrades such as new appliances, counters, cabinetry and backsplash, flooring, fixtures and vanities can make all the difference. If furnishings in the home feel tired or dated it is a good idea to empty the home and have it staged.
Seeking the Best Guidance
When you are ready to sell, an experienced broker will be able to guide you on how to prepare your home for showing and discuss optional steps that may be taken to achieve the highest possible sales price.
I recently sold an estate condition apartment on Central Park West that was in need of a complete facelift. The executor of the estate did not want to undertake a full renovation so my team and I helped the seller arrange to make basic repairs, install new kitchen counters, appliances and fixtures, paint walls and cabinetry, and refinish floors. Then we staged every room. Even without major renovations, with a relatively small amount of work you can make a major difference in the property’s appearance and sales price. In this case the apartment sold quickly, and near the asking price.
Many brokers do not have the breadth of experience in design and renovation that my team has, nor would they be able to provide all the services that it takes to assist a seller in achieving the best possible sales price. A recent example of our work involved staging a seven-room apartment, including taking on the role of designer and liaison with contractors to renovate the kitchen with attractive finishes and high-end stainless appliances. We had a signed contract after only 10 days on the market, and for $100,000 above the asking price.
Whether you are thinking about the future resale value of your home or you are preparing to sell in the near term, I am happy to answer any questions you may have on what it would take to create the best first impression and highest sales price for your home.
From my experience, a seller who works to improve the appearance of a property that doesn’t show well will almost certainly be rewarded in the end with a higher sales price.
If you have any specific questions about your property or if renovation would increase the value, I would be happy to help. Click here to contact me directly.
One of the most important qualifications of a real estate broker is his/her ability to negotiate effectively. Buyers and sellers ought to seek out brokers who have high level negotiating skills and use them to buy or sell their property. What makes a broker a skillful negotiator is not only understanding the negotiating process and navigating through the multiple issues that a real estate transactions entails. The broker’s effectiveness as a negotiator rests on a number of other critical areas of expertise, without which the broker cannot effectively negotiate and conclude a deal successfully.
Knowledge of the Market
Comprehensive knowledge of the market is sine qua non to effective negotiations, as the broker is much better equipped to deal with their counterpart to achieve better results for their prospective buyer or seller. The broker must have deep knowledge, especially in the area where a would-be buyer or seller needs to buy or sell a property and must know about every property that was sold and closed in the same category, apartments currently available on the market, current market trends (i.e. whether it is a buyer or a seller’s market), the demands for the property being sold or sought after. In addition, it is critical for the broker to know the price of comparable units in other areas of the market to provide the buyer or seller a wider range for comparison.
Understanding the Buyer’s or Seller’s Needs
Regardless of how critical knowledge of the market is, the broker must have a clear understanding of the buyer sand the seller’s requirements and needs. They must be certain that their understanding exactly reflects that of the prospective buyer/seller. This includes: 1) the motivation behind selling/buying, 2) the readiness, willingness, and ability to transact, 3) buyer’s/seller’s time frame, 4) prior experiences in the market, 5) understanding of the market’s trends, 6) flexibility a buyer/seller may have on pricing, 7) what their ideal deal would be, 8) how sensitive they are about their finances, and 9) how forthcoming they are in their dealings. To be sure, the more the broker knows about their cleints, the better they can negotiate on their behalf.
Appreciating the Buyer or Seller’s Psychological Disposition
Whereas understanding the buyer’s and seller’s requirements and needs is central to negotiation, understanding their mindset, emotions, concerns, anxiety, prior bad experiences, disappointments, need to safeguard sensitive information, and finally, their expectations must all be carefully considered to satisfy the buyer’s and the seller’s needs in these areas. Discerning their feelings and mindset are of paramount importance to the negotiating process because often buyers and sellers do not wish to disclose such sensitive information or feelings, because they may feel it works to their advantage throughout the negotiating process.
Developing a Negotiating Strategy
Before commencing the negotiations, it is critical to ascertain that a buyer is qualified financially to buy should he/she find the desired property consistent with their budget. It is also important to determine that that the broker for the seller and broker for the buyer are committed to working toward a successful sale.
Needless to say, without having all the information above, the broker cannot possibly negotiate effectively. But once the broker is satisfied that he/she has gathered and absorbed all the information they need, they will now be in a position to develop a negotiating strategy. To do so, the broker must first and foremost establish in his/her mind the fair market value of the property in question and how consistent that value may be with the buyer’s or the seller’s expectations.
It is critically important to establish a strategy at the outset in order to achieve the highest possible price for the seller or lowest price for the buyer. To that end, a skilled broker would sketch on paper the whole give and take of the negotiating process from the moment the initial offer is made. This basically provides a road-map that allows the broker to guide whomever they represent on the steps they should take along the way. All this must be generally consistent with what the buyer wants to pay and taking into account the price the seller is willing to accept.
There are dozens of twists and turns in any negotiation. What buyers and sellers need to know is that the broker representing them fully understands the intricacies of negotiations and shares with them the general strategy to give them a clear picture of the negotiating process. In the final analysis, buyers and sellers do not want a broker who simply carries messages from one party to the other. They want a broker who strategizes and has a keen sense on how to bridge the gap between the two sides while ensuring that both buyer and seller emerge mutually gainful. Indeed, this is the key that will help smoothly facilitate the signing of the contract once there is an accepted offer.Read More »
In a market that is generally perceived as strong and favorable to sellers, why do some properties continue to sit on the market? The press loves to highlight spectacular sales and market trends because it makes exciting reading. While it is true that we have seen one of the most active markets to date with considerable price gains in many categories, I want to examine some realities of the market and pricing that are not commonly discussed by the real estate media.
Some sellers believe that because there is high demand and limited inventory, their properties will sell quickly and at high prices, possibly even generating multiple offers. Many of these sellers erroneously overprice their apartments by 5 to 10% or more. Even when their properties sit on the market for months, sellers are reluctant to attribute the situation to their own desire for an unrealistic price.
It is important for sellers to understand why many properties sit on the market for extended periods of time, with a large number not selling at all. By way of example, as of this writing there are 47 Upper West Side listings on the market priced from $2 million to $5 million (which has been a very active category). Twenty listings have been on the market but remain unsold for over 100 days, and 7 have been on for over 6 months. In an incredibly active market, the reason behind this phenomenon is that sellers have overpriced their apartments, thus creating a negative dynamic that is nearly impossible to rectify, and resulting in sales prices almost always lower than if the units had been initially priced appropriately.
Below are the main factors that should be taken into consideration when establishing proper pricing. It is important to note that there may be other factors that influence a property negatively as well.
Location: This is the number one factor to consider when pricing. Properties in prime locations sell for higher prices. Fifth Avenue, Park Avenue, Central Park West, West Village and the Gold Coast of Tribeca are all top locations and record sales happen in these areas almost exclusively. Conversely, a second or third tier location negatively impacts a selling price. Some examples of lesser locations include neighborhoods without proximity to public transportation, residential enclaves in largely commercial or industrial areas, and homes overlooking heavy traffic thoroughfares or looking out onto future construction sites.
Views: Second only to location, views are another main consideration when establishing a price. A spectacular view (overlooking a park, river or city skyline) can command a significant premium. On the other hand, a beautiful apartment with windows looking into a building or walls will not sell for the same price as a similar unit with open views.
Ownership: It is well known that the buyers generally consider condominiums to be more desirable due to ease of purchase and re-sale as well as for the ability to rent with few, if any, restrictions. For these reasons condos trade at higher prices than co-ops as purchasing and selling require board approval and rentals are not freely allowed.
Layout: An apartment that has a gracious layout will sell for more than one with an awkward layout. Additionally, a bedroom count that is in line with the square footage can be a major selling point for many people. For instance, it is normal to see three bedrooms, or 6 rooms, in an 1,800 square foot apartment. However if an 1,800 square foot apartment has only one or two bedrooms, and it cannot be easily converted to a three bedroom, the buyer pool will be limited, and if not priced accordingly it will languish on the market. Other elements of a layout that can limit desirability include a low number of bathrooms, a tiny kitchen or small living room.
The Visuals: Purchasing real estate is an emotional undertaking and most buyers are swayed by properties that are decorated beautifully. An apartment that shows well will have a significant advantage over comparable listings that do not, even in a market with limited inventory. Clean lines, bright rooms, colorful accents, absence of clutter and furniture placement that provides a nice flow are important components creating a favorable first impression. Conversely, an apartment that does not show well will sell for less and take a longer time to sell.
Monthly Charges: When monthly maintenance, common charges or real estate taxes for a property are significantly higher than average, value is affected. The asking price must reflect the high monthly charges. On the other hand, if the monthly charges are below average this can translate to a slightly higher price.
Amenities: For a growing segment of buyers focus has shifted to buildings that have a wide array of services and amenities. For many buyers, buildings that lack certain amenities are less appealing and of diminishing value.
The highest sales prices are achieved when several of the above factors are positive. What happens when one or more of these features are less than ideal? The real estate agent and the owner need to evaluate the property taking into account these factors in relation to comparable recent sales in order to arrive at a proper price. The price must reflect the negatives as well as the positives. In some cases, it is possible to offset certain less desirable features of a property – mostly with staging. From my experience, a seller who works to improve an apartment that doesn’t show well will definitely be rewarded in the end with a higher sales price.Read More »
If you are planning to sell in the fall, there are a number of things you can do now to prepare in advance of listing. Timing is key and it’s always better to be ready for marketing your property at the most optimal time.
Prepare your home to show well. Make sure your apartment stands out and is well-received by buyers by creating the best possible first impression. This can mean different things for different properties but an experienced broker can advise you. Preparations can include everything from replacing light bulbs and/or getting windows cleaned to de-cluttering, staging, painting or even appliance or finish upgrades.
Make sure everything is in good working condition. It is advisable to make any repairs necessary in advance so all is in good working order when you list and ultimately sell.
Get a head start on marketing materials. Start working with a broker early to get a jump on all of the marketing materials (photography, floor plans, brochures, ads, etc.) so that everything is ready to go on schedule.
Engage an attorney. Connect with your attorney to make sure all of the paperwork you will need for closing is in order.
As always, please feel free to reach out at any time for a confidential valuation of your home.
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One of the great things about living in New York is the spectacular history it holds. Uncovering these unique morsels of interest around every corner is truly fascinating. 52 East 64th Street, a grand townhome on the Upper East Side’s Gold Coast which is currently on the market holds an exciting past. Not only was the architect, Frederick Sterner one of the country’s leading architects, but one of the houses residents was America’s most famous actress of her time, Ethel Barrymore!
During the time she lived at 52 East 64th Street, Ethel Barrymore appeared in three plays at the Empire Theatre on West 42nd Street: “The Lady of the Camellias” by Alexandre Dumas fils, “The Off Chance” by R.C. Carton, and “Belinda” by A.A. Milne.
Read more about the homes’ intriguing past dating back to the 19th Century, researched and written by acclaimed architectural historian, Francis Morrone here: 52 East 64th Street Architectural HistoryRead More »
Ready to buy or sell and looking for the best representation? Here’s what you should look for when selecting your broker.
The top real estate brokers:
- Are up-to-date with market conditions, inventory and comparable sales. Your broker should be totally familiar with the latest sales activity and market trends in general and also for your specific market segment. If you plan to buy or sell a 2-bedroom prewar coop on the UWS, a broker who deals mainly with downtown condos may not be the best fit for you.
- Think tactically and know how to take advantage of market conditions. Whether the market favors buyers, sellers or the status quo, you want a broker who knows how to make current market conditions work for you.
- Understand your needs and goals. Be sure to select a broker who understands what you expect to accomplish with your sale or purchase.
- Act in your best interest. The only agenda a broker should have is yours.
- Create a relationship of trust. Look for a broker who is a good communicator and adheres to the highest professional standards.
- Provide guidance and offer options. Work with a broker who you are certain has an appreciation of your particular circumstances and will take the time to help you through the decision-making process.
- Are respected by their peers. You need a broker that other brokers want to work with.
- Have a resource network of professionals. A broker who has solid working relationships with stagers, contractors, lenders, appraisers, and attorneys is in the best position to facilitate your transaction.
- Anticipate potential problems. Reduce the risk of losing a deal by engaging a broker who strategizes to avoid, or contain, problems that can ruin a deal.
- Skillfully negotiate to bring both buyer and seller together for mutual benefit. A savvy broker knows that the most satisfying deals are those in which both parties feel gainful.
Although many buyers in the past have shied away from townhouse living in favor of full-service condos and co-ops, a variety of factors have converged that many believe is creating a major shift in buyer interest. In fact, it has already occurred in the very active multi-family category. Investors see these properties as attractive investments but they also appeal to buyers who are looking to use rental income to offset mortgage and tax bills. The on-going low level of inventory has created a third category of buyer interested in multi-family homes that can be converted to single-family status.
Another group of buyers who would normally gravitate to condominiums are turning away from them to protect their privacy. More condos are requiring a level of financial disclosure that many buyers find objectionable. Many condos also have rules restricting short-term rentals, live/work arrangements, and sometimes use by friends and family members. Townhouses on the other hand offer total privacy and are without restrictions on personal use.
For all types of buyers, value is a major factor that now favors single and multi-family townhouses. With new development condos reaching an average of $2,178 per square foot, and for re-sale condos $1,382 per square foot, townhouses look to be bargains with a market-wide average price per square foot of $1,162. Condos’ monthly common charges can also be a consideration—some part-time residents would prefer not to pay hefty monthly common charges that include the expense of high-end amenities that they seldom, if ever, use.
One of the main drawbacks of townhouse ownership has been the regular upkeep associated with these buildings, especially for those owners who don’t reside in the city full-time, or at all, in the case of investors. This aspect of ownership is becoming easier thanks to management companies that are springing up to keep an eye on single- and multi-family townhouses and condominiums for absentee owners. The Internet and other high-tech solutions are also available to those interested in monitoring their property via Twitter and in-house sensors and cameras. Owners can also use websites like TaskRabbit to connect with local people willing to run errands and do odd jobs as needed.Read More »
Prewar apartments have long been prized for the quality construction and charming details that are absent in most postwar buildings. Along with plaster walls, hardwood floors and gracious layouts, prewar buildings are associated with impressive lobbies, desirable locations, and landmark status. The finite quantity of these buildings has only made them more desirable in the minds of many buyers.
But times and tastes change. The view that postwar buildings, with uninspired layouts and inferior materials, were second-rate started to change once developers began to offer amenities reflecting lifestyle trends such as gyms, party rooms, roof decks and garages. These amenities proved so popular that soon they became the norm. Eventually, prewar co-ops began to create gyms and roof decks of their own for the convenience of their residents but also to enhance the value of their buildings.
But keeping up with the marketing muscle behind new development projects isn’t so easy. Condo developers raised the bar again by offering an array of up-scale amenities to attract buyers to slightly out of the way locations, to set their buildings apart from others on the market, and/or to justify higher prices. Since buyers already expect gyms and roof gardens, many developers now offer a multitude of newer features such as wellness and spa facilities, media rooms, wine cellars, pet spas, basketball courts, bowling alleys, rock climbing walls, and golf simulators.
Some boutique condos have a smaller selection of facilities but offer amenities with a more personal touch, for example shopping perks at certain high-end stores, educator-designed children’s playrooms, and art curators for the buildings’ public spaces. For super lux developments the newest wrinkle in marketing to high-end buyers is to offer concierge services on par with five-star hotel living. With a quick call to the downstairs desk residents can order up a birthday party, last-minute anniversary gift, or walk around the block for Fido.
What does this mean for prewar coops? It means that for many buyers, prewar buildings are no longer so special. Along with new condo developments’ buyer-friendly and more flexible purchasing options, their large menu of amenities has helped shift attention and sales to the newer buildings and the mid- and downtown neighborhoods where so many of these developments are located. The prime “Parkside” environs of the Upper East and West Sides and their prewar cooperative buildings will always have appeal but now have to compete for attention from the many buyers now drawn to amenity-rich buildings in formerly non-traditional areas of the city.Read More »
OPPORTUNITIES FOR BUYERS
Even though we are headed into one of the strongest seller’s markets we’ve seen, I cannot stress enough that there is still strong potential opportunity for buyers right now. That opportunity comes in the form of “stale” listings. When a property sits on the market, a perception is created that something is wrong with it. Most of the time this is not true. Properties must be perceived as a value proposition to sell and more often than not, the owner of a “stale” apartment simply overpriced the apartment in the beginning and turned off most prospective buyers. This is a predictable outcome. All of the apartments currently on the market that have been listed since the fall will likely sell sometime this spring so the window of opportunity for buyers is fairly immediate. Many of the perceived ‘flaws’ can be mitigated by a creative buyer.
There are several reasons why properties turn stale, in the following order of importance:
- An apartment is overpriced by at least 10%. (That’s right, even 10% can kill a sale!)
- It “shows” poorly – this holds true for renovated as well as un-renovated apartments.
- The apartment is not being marketed properly – either the broker is not showing the unit in its best light on paper or in person.
- There was a recent low sale that was truly an outlier and it affects the other sales in the building.
Often, an apartment that doesn’t “show” well is perceived as an apartment in need of a renovation. These properties are the opportunities that many buyers might not see. With properties that have flaws that cannot be changed, such as units with low light or bad views, a high maintenance or an inconvenient location, these apartments have usually been unrealistically priced and can be a great opportunity for a buyer willing to overlook flaws at the right price.
STRATEGIES FOR SELLERS
For sellers there are many ways to maximize the chances of selling quickly, and at a great price.
- First and foremost, do not overprice your home. Be realistic and don’t be seduced by agents who toss out a high price. Overpricing will work against you in the long run.
- Make sure your apartment shows the best it can. Get a great stager if necessary. I cannot stress this enough. An apartment that shows well, sells well.
- Make sure your apartment is available to be shown when people want to see it. Provide access for everyone, especially in the first two weeks.
- If you are fortunate enough to have multiple offers, seize the best offer and do not push the bidders to go higher. I have seen many sellers go through this process and actually come out with a much lower price than they would have if they had acted on the best offer.
- Have a good attorney lined up to send out a contract as soon as possible. Maintaining the momentum of a deal can be critical in any market.
There are plenty of buyers in the market right now and that number will likely increase throughout the spring. This is an amazing opportunity for owners contemplating the sale of their properties. If you are considering selling, I am happy to meet with you to discuss value and strategy specific to your property.
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