This Week in Comments

Cutting brokers out
There is no reason to bring your own broker to a new development sales office, or worse, have them take you. The sponsor will save on the outside commission and should be able to pass along a better price with the buyer, assuming the buyer knows what they’re doing and can negotiate. This assumes that the sponsor has an in-house sales team or a pre-negotiated commission structure with the selling agent.

Rents drop, transaction volume goes up, Citi Habitats report shows
Are they doing more rentals because the sales market dried up and now all their sales associates are now renting, or did their per-capita rental deal rate go up?

Are hotel owners undercutting themselves by lowering their room rates too much, rather than accept a certain amount of vacancy?
1. It is impossible not to cut rates. Let’s say Hotel X held on to rates that were prevalent 15 months ago, all Hotel Y or any other competitive hotel has to do is to offer rates that are 10 percent cheaper and Y is sold out! The cycle goes on till such time as occupancies reach 90-plus percent. The discounting will continue so long as there is even a sliver of profit (or even a small loss) available. Compound the foregoing with loads of new rooms coming on line — even now some dolt heads are actively planning new hotel projects in the city — and you have a recipe for serial bankruptcies. When the debt load is squeezed down in chapter 11 proceedings, things will improve along with an eventual resumption of normal business activity.
2. No one has mentioned that hotel room supply is going to increase by 15 percent over the next 18 months in Manhattan. The bloodbath in hotels is just starting.

Manhattan home featured on Bravo’s upcoming reality show “Design Sixx” sees broker switcheroo
[The story says,] “In a down market, it’s common for owners to switch brokers when a property doesn’t sell.” Yes, and it is also common for owners to drop their asking price when a property doesn’t sell.

Who do you think are the top buyers’ brokers in Manhattan right now, and why?
No such thing as a “buyer’s broker.” I have on occasion represented both sides of real estate transactions and it’s always the owner who pays commissions, therefore the expression “buyer’s broker” is meaningless. When the buyer pays a broker’s commission there is reason to use “buyer’s broker” moniker. However, I haven’t seen it yet.

Where are mortgage rates headed in the short-term and how will that impact the residential market?
In the short-term, rates will hold in the 5 to 5.25 percent range for conforming loans. Toward the end of 2010, assuming some positive job growth, the pressure on the government to raise rates and cut inflation before it gets started will put upward pressure on rates. I would assume 6 percent rates by early 2011.

B.F. Goodrich Building gets landmarked
Landmarking has gotten out of control in this city. Anything old is automatically deemed special. There are no standards.

Jersey City condo kicks off sales with auction
Yes, nothing like buying into a building where all the apartments are sold at auction; you get really great neighbors that way.