Jacky Teplitzky of Prudential Douglas Elliman leads a REBNY discussion, “Pricing Property in a Changing Market”
Brokers heatedly discussed the pros and cons of sharing signed contract information at the Real Estate Board of New York’s Lexington Avenue headquarters today.
Jacky Teplitzky, a managing director at Prudential Douglas Elliman, who led a discussion titled “Pricing Property in a Changing Market” as part of REBNY’s monthly Breakfast Club series, advocated for the sharing of signed-contract information in the post-Lehman market, where frequent market fluctuations have made accurate pricing nearly impossible.
“The market is changing in such a rapid way that the only numbers we can use are contracts signed,” she said. Closed sales data — available months, or in the case of new development, years after a contract is signed — often no longer reflects current market conditions, she said.
But other brokers said they don’t feel comfortable disclosing signed contract data for fear it violates their responsibility to sellers, and it could be considered illegal if not handled correctly.
Neil Garfinkel, a partner at law firm Abrams Garfinkel Margolis Bergson who serves as residential counsel to REBNY, said that legally, a broker must get permission from both a buyer and seller before revealing contract information to other agents.
“Without permission, that information should not be shared,” he said.
In the current tenuous real estate market, brokers have to work together to keep the market healthy, Teplitzky said. Since the financial crisis in September of 2008, she said, Manhattan prices have fallen between 20 to 30 percent. But agents didn’t react quickly enough to the change in the market, she said, lowering prices only 5 to 10 percent in the first months after the Lehman collapse. Many brokers who wanted to chop prices more than that found their sellers wouldn’t let them, because they saw that they’d be priced lower than everyone else.
As a result, she said, sales volume transactions plummeted, with some agents doing no deals for months.
“Brokers don’t realize the damage we’re all doing to the industry, together,” she said, adding: “We should not have been in the situation we were in in 2008.”
Around January of 2009, motivated sellers began dropping their prices, while supply dropped as others took their homes off the market. Finally, the number of transactions rose.
Still, there remains a disconnect in the residential real estate market, she said. Some buyers continue to make lowball offers, but sellers think they can now raise their prices again because of the heightened activity. This is worsened by the fact that some overpriced inventory from 2008 is still on the market.
To combat this and price correctly, she said, brokers need to find the most recent comps available — and that means signed contracts from comparable units in the same building and neighborhood.
Finding this information isn’t easy for the public or even the agents. Elliman and some other brokerages are now providing contract-signed data to their agents, and Teplitzky recommended that agents call each other and ask directly for contract-signed prices.
Many agents in the audience reacted strongly to this suggestion, however, responding that they don’t feel comfortable revealing this information for fear that it might get leaked to the public.
One audience member said he felt disclosing price information could violate his fiduciary responsibility to the seller; another worried about what the co-op board would think if they heard the sales price through the grapevine before receiving a board package. Some sellers are simply more secretive about every aspect of the transaction than they have been in the past.
Teplitzky said sharing contract signed data for the purpose of pricing does not amount to disclosing it publicly, adding that some agents can be “a little narrow-minded” when it comes to sharing information.
Sharing the most up-to-date pricing is vitally important for the health of the market, she said.
“We don’t understand the responsibility that is lying on our shoulders,” Teplitzky said. “We can actively make or break a market.”
It’s common in the industry for agents to keep contract-signed numbers quiet, Kathy Braddock, a founding partner with real estate consultancy Braddock + Purcell and brokerage Charles Rutenberg Realty in New York, told The Real Deal by telephone.
“It’s not something that people tend to disclose until [the closing,]” Braddock said.
The reason, she said, is because of the concern that a deal might fall apart.
“Most people are calling to find out where the benchmark is on price,” she said. But “contract signed is not always the [best measure], because some of them don’t close.”
In order to price an apartment, Braddock said she uses “the next best thing” — a recent closed sale — and estimates what the price should be from there.
Garfinkel the attorney explained that disclosing contract information could hurt a seller’s negotiating power if the deal doesn’t go through — a particularly likely occurrence in the current market.
“It’s like knowing where the seller was living in terms of negotiating,” he explained.
Once a listing has closed, however, it becomes public information, he said.
Some brokers at the REBNY event said they compromise by telling fellow agents the approximate price, or the percentage off the asking price.