Monday, April 30, 2012

Million Dollar Listing New York

As always, I’m attracted to yet another Bravo series – Million Dollar Listing New York is in its first season.  This is the second of a Bravo franchise – the first originated in Los Angeles.  I watch for a few reasons  -- I like the premise, I like decadence and I really love real estate.

Hand Model, Rich Kid, Porn Star
The premise of this show (and the franchise) is following young realtors and their very expensive house listings.  The show has only showcased young, male realtors so far.  In New York, we follow three guys – Fredrik, Ryan and Michael.  Fredrik is gay and a former porn star; Ryan is a former actor/hand model and Michael is just super wealthy thanks to a successful father.  They sell real estate in Manhattan, some of the most expensive property in the world.

I am in the process of selling my home as I’ve purchased a new one.  I thought I would take this opportunity to showcase the pro’s and con’s of learning about real life from a reality show.  Full disclosure, this is my third home purchase and I have a real estate license, so I’m not 100% stupid on the topic.

What to glean from Million Dollar Listing if you’re looking to buy or sell:
  • You really should listen to the agent regarding listing price.  The show highlights numerous buyers wanting more than what the agent first recommends.  While it appears the agents are greedy (and they kind of are), they really do know what the market will bear.  It’s their job to run comps and they know what is selling and for how much.
  •  Just because you think it’s great or special, doesn’t mean the buyer will have the same emotions.  Again, goes to what the market will bear.  If you put a ton of special features into a home, doesn’t mean you will get all of that investment back.  If you want your home a certain way, realize you’re spending the money for your comfort, and not necessarily for investment.
  •  If you have a low ball offer from a buyer, don’t get mad at the agent for presenting it…they have to.  It’s their fiduciary responsibility to disclose all offers, ever if they are slightly insulting.  That’s why you see scenes where agents get annoyed and dramatic with each other, it’s part of the dance.
  •  Staging matters.  If you are like me, you look at the bones of the house to see if it works.  Sadly, many buyers are into cosmetics and don’t always have a vision.  There are dozens of reality shows revolving around staging and home decorating and while most of the homes in this show are gorgeous, they still have to deal with clutter and décor.
  • These guys are cut throat when trying to get a listing.  If they appear to jump through hoops, it’s a good thing.  You want an agent who will be honest with you and work hard for the sell.  In other words, if the agent is hungry (even greedy), they should work harder on selling your home.

What not to absorb:
  • In the Midwest, I’ve never encountered some of the outrageous broker listings.  While the properties in Manhattan are stunning, most of us need to clean, declutter and just simple prepare to have the house listed.  Realtors will invite brokers, but for normal folk, it’s work just making the place look nice for the MLS photos.
  • Offers and counters.  On these shows, you’ll see two brokers exchanging offers with calls to the client.  We can see a deal close within 12 minutes of programming.  For my experience (and probably everyone else), a written offer is sent to your agent.  Your agent then calls you to discuss.  You then decide to accept or counter and more paperwork ensues.  Even then, you give people a certain amount of time to response.  In other words, it takes longer than 12 minutes and there’s lots of signing of paperwork.
  •  You don’t see earnest money exchanges on this show.  Real Estate is different in each state, but typically when you write an offer on a house, you need to give a check – earnest money, which then goes into escrow.  It’s basically saying you are for real and mean business.  The amount of earnest money is typically dictated by the price of the purchase. I recently wrote a $2000 check…not a lot, but in Indiana, you need to have some liquid dollars for this.
  • You also don’t see home inspections and loan financing on this show.  I guess we are to assume all buyers and sellers are flush and it’s too boring to go into these details.  However, in our current economy, it’s not as easy to buy a house for normal people.  Our economy crashed in 2008, largely in part to the housing market and people not being able to fulfill their mortgage commitments.  Lenders were too lax, sellers were too grandiose and the American Dream included home ownership.  In other words, people borrowed more than they could chew in a housing market bubble.

It’s totally fun to see the personalities on this show and imagine how much money they are making.  At the same time, we get to see amazing New York properties.  When we watch, we need to remember this is not the reality for most of us.  The American Dream is shifting, or it should.  Folks need to have some cash in the bank and good credit and a desire to own a home…it’s no longer an entitlement.  Renting should not be shameful for our fellow citizens.  Property values and tax revenues are vital to local economies, but we also need our neighbors to work, pay bills and not be overwhelmed with all that comes with home ownership.

I’ve done something I would NEVER recommend…buy without selling my current property.  I am doing this because I’ve done the math and know I can swing both.  This is not bragging as both investments are humble.  Here are my tips for home ownership:
  • Don’t buy until you can sell or can afford both
  • Don’t buy unless you have cash for a down payment which will cover mortgage insurance         – typically 20% down.
  •       As Suze Orman says, have an 8 month emergency fund, even after you’ve put 20% down. If you have a duel income home, don’t max out your debt.  In other words, make sure one salary will cover your expenses in the event one person loses income. 
  •  If you buy an older home, pay attention to the bones of the house, not the paint colors.  Paint is cheap, but new roofs, windows and plumbing are expensive.
  • Pay attention to the neighborhood and schools.  Even though I don’t have kids, I care about the school options (when you want to sell).
  • If you don’t like maintaining things – yards, home improvements, etc., make sure you’re not putting too much pressure on yourself.  If you don’t like it now, you won’t like it once you move in.
  • Don’t be greedy when selling and listen to your agent.  The longer the house is on the market, the more people will question why.
  • Even though you list and know you’ll negotiate, consider the expenses that come with an inspection report.  You need to build all of this into your budget.  Once the inspection comes back, you may have to fix things or offer money, so be prepared.
and jackets

Plainly stated, buying a house is a big deal for people.  When you watch the show, we see folks grumbling over millions or hundreds of thousands.  If you can remove some zeros, we’re all the same.  While our agents may not look like models or appear to be sharks, it’s important to work with trustworthy, hard working agents.  Even if they are friends, it’s business, so stay focused and try remove the emotion.  And when you do get stressed, watch Bravo shows for escape!

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