Page 33 - NY Cooperator Expo April 2019

COOPERATOR.COM THE COOPERATOR — APRIL 2019 33 Price and Value “A common question I’m asked,” says Miller, even before he sees a unit or does any research, is “‘So off the top of your head, what do you think it’s worth?’” That’s an impossible thing to answer for any appraiser, or for that manner any bro- ker, undertaking a sales pricing estimate. While the two are not the same they are predicated upon the same methodology, the comparable sales approach to value. The comparable sales or market data is one of three approaches to value em- ployed by appraisers to determine the worth of real property; the other two are the income approach and the cost approach. “Anyone valuing something that’s not an investment property will al- most exclusively use the market data ap- proach,” says Miller. He goes on to explain that “a comparable sale is something that a fully informed buyer would consider as an alternative to the subject property, actual competition. More often than not when someone sup- plies you with compa- rables, they are sales in the subject’s neighbor- hood that have little or nothing to do with the subject property. The nuances between the comparables and the subject then require adjustment.” These adjustments can re- flect improvements, views, light, etc. The comparables are adjusted to equal- ize these amenities and arrive at a value estimate. For appraisers, potential comparables can be broken into three groups: closed data, contract data, and listing data. Closed data lag behind the market, con- tract data are hard to verify, and listing data represent the upper end of value. “Generally speaking,” says Miller, “a list- ing price is structured to encourage ne- gotiation, so it’s usually a little high.” The difference between listing prices and actual values then reflects the art with which listing brokers seek to market property, as well as the science of the real- ity of the marketplace. Establishing a Price “We look at amenities,” says Marks. “Does the apartment have a doorman? Is it near the park? Amenities come into play in particular in elevator buildings. There is a cost associated with having amenities and monthly charges are higher. Transit access is also very important. Buyers like to be closer to the subway and close to multiple lines.” A thorough examination of these factors and comparison to recent sales, preferably in the same building, will help a listing broker determine an asking price. Like an appraiser, a listing broker must have an ear to the ground. “With an existing property,” says Har- dy, “in a condo or a co-op, typically there are tiers in the building and, for example, the unit on the eighth floor is the same as the one directly above or below it as far as square footage or basic layout. With that in mind, buyers look at the units above and below, if they have sold, to determine the value of the subject unit. When there have been sales, buyers go off that data.” They will adjust for things like views and condition. “That’s where the ‘art’ comes in. How much is the unobstructed view of the lake on the higher floor worth? With new construction, you compare other similar, newly constructed units in the area, rather than just the build- ing.” The “One-Buyer” Theory During the real estate recession of the early 1990s, a new theory of sell- ing real estate be- came popular. It was known as the “one-buyer” theo- ry. It is attributed to Barbara Corcoran, founder of broker- age firm The Corcoran Group and one of the cast members of TV’s Shark Tank. The theory maintains that rather than chasing a falling market by dropping your offer- ing price to get ahead of the slide, sellers should hold their price, because each unit is unique and there is a single buyer out there for each one, given enough time and exposure. This theory goes against every established method of valuing real estate or pricing for sale. “When a unit has a certain look or style that sets it apart,” explains Marks, “there might be a single buyer. But overall, buy- ers in New York won’t do that. New York City buyers are incredibly sophis- ticated and savvy. They can’t be played with. Selling ‘the emperor’s new clothes’ won’t work. Take a scientific approach. However, if you’ve done a unique, terrific renovation, and a similar unit has not had the same treatment, we can show buyers what they’re getting with that unit.” “If you have the luxury of time,” Hardy “Generally speaking, a listing price is struc- tured to encourage ne- gotiation, so it’s usually a little high.” —Jonathan Miller continued on page 47 24/7 ACCESS Life can be unpredictable. 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