During the boom, New Yorkers increasingly relied on “price-per-square-foot” as a way to compare rapidly rising apartment values.
The metric is even more popular in the downturn, as discount-crazed buyers look for good deals.
But price-per-square-foot isn’t as reliable a measure as they think. Unbeknownst to many shoppers, it’s extremely difficult to determine the true square footage of a Manhattan property, experts say.
“When it comes to square footage in New York City, it’s the Wild West,” Bill Staniford, the CEO of real estate data Web site PropertyShark. “It’s measured in so many different ways.”
And in the current downturn, the difficulty of determining square footage is contributing to a number of other problems, from low appraisals to ruined deals.
Staniford, who constantly fields questions from brokers about inaccurate square footage data on file with the city, said using price-per-square-foot as a measure of value is “totally pointless.”
That puts “every single broker in a very difficult situation, unless they want to break out the measuring tape,” he said.
Even then, they might still be wrong.
It’s fairly easy to determine the square footage of a suburban single-family home: measure the footprint of the house, factor in the number of stories, and you’re done.
Manhattan apartments are a different story.
The square footage of an apartment is determined by measuring the space between the interior walls, including bathrooms, closets and foyers, explained appraiser Jonathan Miller, president of appraisal firm Miller Samuel. But Manhattan apartments, especially prewar co-ops, often have hard-to-measure elements like turrets, winding hallways and oddly shaped rooms. Miller said buildings like 455 Central Park West, with its its large, circular turret units, are especially difficult to measure, along with notoriously elaborate buildings like the Dakota and the Osborne.
In many apartments, “you could have different people measure and they’d get five different numbers,” said Douglas Heddings, founder of the Heddings Property Group at Charles Rutenberg Realty in New York City, who has written about square footage challenges on his blog, TrueGotham.com.
To make matters worse, there is often little or inaccurate square footage data on file with the city. When buildings were converted to co-ops in the 1980s, they were not required to list the square footage in their units in the offering plan, Miller said.
Condo offering plans are required to list square footage, but each developer measures it differently, which is legal as long as they disclose their methods in the plan, Miller said.
“Many developers, in order to drive down the price per square foot, include portions of common hallways or elevators shafts,” he said. “Some include a percentage of outdoor space.”
Moreover, when units are combined or renovated, changes to the square footage are often not updated in the public record, he said.
As a result of all these factors, brokers in the past often avoided stating the square footage in their marketing materials.
“Years ago, you really sold by the number of rooms,” said Diane Ramirez, president of Halstead Property.
In 1998, the buyers of a $2.5 million co-op at 983 Park Avenue backed out of their contract and filed suit against the seller and broker Stribling & Associates. The buyers claimed they were told the apartment was 3,300 square feet, but that it was actually closer to 2,800 square feet. The case was settled out of court for an undisclosed amount in 2000, according to the New York Times.
After that, some firms explicitly forbade their brokers from telling buyers the square footage, for fear of litigation.
“For years, we would not allow agents to put square footage [on their listings], because we knew it was fraught with danger,” Ramirez said.
But as more new condos sprang up during the boom, with their dimensions listed in the offering plan, buyers became more and more interested in square footage.
“They love hearing what the square footage is,” Ramirez said. “It became a number and an analysis that the consumer liked.”
These days, price-per-square foot is a popular measure of value, even in co-ops, because it’s the best way of comparing apartments with the same number of rooms but vastly different dimensions.
“Price-per-square-foot is really what drives the understanding of value for consumers,” Miller said. “It’s really the language of the market.”
That’s forced many brokers to start using square footage data again, but nearly all real estate companies now have disclaimers stating that representations of square footage are just estimates, said Pamela Liebman, CEO of the Corcoran Group.
Brokers, perhaps emboldened by this disclaimer, often round up or simply exaggerate square footage in their listings, experts say. Miller said that when he appraises apartments, he usually finds that the apartment is 5 to 10 percent smaller than advertised.
Co-ops, in particular, often appear to get larger each time they are sold.
“If you look at any given co-op, you will often find that it has grown,” Heddings said. “A 650-square-foot one-bedroom in 1980 may now be 900 square feet.”
Recently, Richard Hamilton, a senior vice president at Halstead Property, was marketing unit 16B at 201 West 16th Street (see accompanying image) in Chelsea, a one-bedroom apartment that, according to his calculations, was just under 700 square feet. He was displeased to discover that an identical apartment on another floor — number 4B (see accompanying image) — was listed at 800 square feet.
Hamilton’s floor plan said that the living room was 20 feet by 13 feet, while the brokers for 4B, Adrian Castillo and Glenn Minnik of Prudential Douglas Elliman, used a floor plan that put the room at 20 feet by 15 feet.
Hamilton said he used the building’s original floor plan and double-checked to make sure it was accurate. “It’s quite obvious that it’s 13,” he said. “Anyone could have looked in that apartment and known it was not 15 feet wide.”
Minnick said he used the square footage information that had previously been in Elliman’s system.
“That was what was in our listing system,” he said. “We just add photos to it.”
He disagreed with Hamilton’s assessment, saying the apartment is “definitely larger than 700 square-feet.”
He emphasized that square footage estimates are “very subjective.”
Hamilton said brokers who strive for accuracy are often penalized, because buyers want the apartment they believe is larger.
“I do my best to be as honest as I can,” he said. “But sometimes by telling the truth, you look bad, because they want to see the bigger apartment.”
To avoid that situation, he usually avoids listing the square footage, instead handing out tape measures at his open houses so buyers can measure for themselves.
Aside from potential litigation, differing interpretations of square footage have further ramifications in the current climate.
If the bank’s appraiser or attorney finds that an apartment is smaller than advertised, it could torpedo the deal, said Melanie Lazenby, a senior vice president at Elliman.
“The last thing you want when you think you have a deal is a surprise,” said Lazenby, who relies on the figure in the offering plan or, for older apartments, hires a professional to draw up new floor plans. “You don’t want that call asking why there is a discrepancy. It could change the price of the apartment.”
Lack of accuracy in square footage is one reason so many deals are falling apart due to low appraisals, Miller said.
To determine the value of an apartment, appraisers look at the prices of nearby apartments of a similar size. But if the square footage of those comparables have been exaggerated, that can hurt the value of the apartment in question.
“They may be comparing four 1,200-square-foot apartments, but only one is actually 1,200 square feet,” Heddings said.
Miller said most experienced local appraisers are aware of these discrepancies and use floor plans, not broker data, to compare sizes. But more and more out-of-town appraisers are now doing work in Manhattan thanks to recent guideline changes.
“When you see out-of-town appraisers, they’re just relying on the broker square footage because they don’t have the floor plans,” Miller said. “It unfairly penalizes the subject apartment.”
Against this backdrop, how should brokers proceed?
“The best thing to do is talk about it as, ‘this space costs x,’ and don’t worry about the square footage,” Staniford said.