How are homes priced?

Whenever I meet with prospective sellers, they’re always anxious to get to the big question: “So what do you think we can get?” While location and square footage are obvious factors, similarly-sized apartments in the same area can sell for vastly different prices, and it often comes down to a handful of both physical and intangible factors. Take a look at the top five physical attributes that affect the value of a property:

Part 1: The Physical Space

1.) Layout

Almost as important as overall square footage is how that square footage is distributed within an apartment. Important layout factors that can add or detract from a home’s value include long hallways that eat up space but have no real utility, the number and usability of bedrooms, windows or lack thereof (think lofts that technically have no windows), the ability to convert to higher usage level (i.e. add additional bedrooms).

2.) Windows, Walls, & Floors

No, we’re not talking about the actual windows and floors, but rather views, exposures, light, and ceiling height which affect the overall feel and, therefore, desirability of an apartment. While there is no precise formula, again, it comes down to nuance. Whether an apartment is on the 5th or 6th floor may not matter much, unless the 6th floor clears a neighboring building and has wide open views. The number of exposures is a related but distinct consideration, as multiple exposures usually means more flexibility in layout, greater light, and can make up for challenged views from some rooms. Another major consideration is ceiling height, which can change the entire feel of an apartment, and make up - to some extent - for size/layout challenges.

3.) Condition

Renovations work a little differently in NYC than on TV shows like “Love it or List it” where $20,000 worth of work adds $35,000 in value to the home (not to mention what $20,000 gets you in NYC...). Renovation value is based more on overall condition than specific finishes or features — i.e. what matters most is whether a home is in mint, good, fair or poor (think estate) condition. That said, very specific finishes or style of renovation, even if costly or recently done, will not add the same value as one that appeals to a broad audience.

If a property needs extensive renovation it can still benefit from spiffing up before listing. Even buyers looking for a “project” (like our recent sale in Chelsea) may have trouble seeing the potential of a space that is cluttered, dingy, or dirty. A thorough cleaning, paint job, and some new light fixtures can make a huge difference, not necessarily in value, but in saleability. For our tips on small improvements that can make a big impact, see our previous post here.

4.) Outdoor Space

Not all outdoor space is created equal. A balcony is worth less than a terrace, deck, or yard. Access is also important. A box staircase inside an apartment leading to a roof deck or double doors that open directly from the living room onto an expansive terrace are going to be worth far more than a steep spiral staircase or when access is via a common staircase, elevator, or a bedroom. Also, marginal differences in size of outdoor space matter less than interior square footage; for example, a home with a 1000 sf terrace versus a 1200 square foot terrace is unlikely to command a materially higher price.

5.) Building Age & Period Details

Everyone knows that pre-war charm sells — high ceilings, original woodwork, crown mouldings, wood burning fireplaces are all at the top of many buyers lists — and, there are only so many pre-war buildings. However, not all buyers are in love with pre-war details. Some prefer floor-to-ceiling windows, brand new finishes, high-end amenities, and hi-tech offerings that are typically only available in new buildings.

Part 2: Beyond The Physical

Intangible factors can have a dramatic impact on home values. Here are five additional factors that can increase or impair the resale value of NYC apartments:

1.) Monthlies

There is a broad range for what is considered normal or “acceptable” for the monthly carrying cost on an apartment (common charges, taxes, and/or maintenance). A monthly that is above or below the “acceptable” range can have a massive effect on sale price. Not surprisingly, apartments with very low monthlies generally sell at higher values and are more resilient when market conditions turn sour. By contrast, apartments with very high monthlies -- or a track record of high increases in monthlies -- will often languish on the market before selling at a steep discount compared to similar apartments with more favorable monthlies.

Buyers tend to be highly sensitive to monthly carrying costs, and for good reason: Since most buyers finance the purchase price over 30 years, incremental increases in price have little effect on their bottom line. However, monthly carrying costs are felt directly by buyers, and for the length of ownership. (Ex. An extra $500 per month in carrying costs equates to the additional mortgage payments on a property that is priced about $140,000 more.)

2.) Required Down Payment Amount

A typical down payment for NYC co-ops is 20-25% of the purchase price, but it is not unheard of for some buildings to require a 40-60% down payment. A high minimum down payment will reduce the pool of potential purchasers and might negatively affect sale value, especially in areas where a higher minimum is less common. It could also prolong the amount of time an apartment sits on the market, exposing the seller to the risk that the market could worsen in the meantime.

On the flip side, some buildings have no down payment requirements at all. But in those cases the building’s financial condition may make it impossible or difficult to finance. When pricing such units, the lack of available financing may impact the price by 10-20% which could be a great opportunity for cash buyers who could resell later for great upside when the building’s financial condition has improved.

3.) Service Level

Amenities don't just mean high-end features like a roof deck, pool, or fancy new gym -- equally important are things like doorman service, a live-in super, elevators, a laundry room, storage bins, bike storage, etc. There are certain kinds of amenities, especially elevators and laundry, that matter a great deal to most buyers, and therefore will affect price. While inventory is different in every neighborhood - for example, most buyers looking in Park Slope are not expecting an elevator - keep in mind what the building offers compared to others in the area. If the building is in a neighborhood made up predominantly of doorman/elevator buildings, the absence of these amenities will probably deter some buyers, and ultimately lower demand when it comes time to sell.

4.) Building Policies

Of course, every building is going to have its own policies or rules. But if a building’s policies are especially restrictive or severe, potential buyers may be deterred. For example, restrictions on subletting are quite common, but some co-ops prohibit it completely which can limit the market and reduce value. While many co-op buyers do not go into a purchase with the intent of subletting their apartment, they may feel more comfortable with their purchase if the building permits some subletting in case their circumstances change.

Another area of concern for many buyers is a building’s policies on pets. A strict “no pets” policy might deter even a buyer without a pet since the policy will limit the market for resale since it means any potential buyer is committed to never having a pet.

5.) Building's Financial Health

Buildings with a history of hefty assessments, or sudden large increases in monthly charges, will usually be a red flag to prospective buyers, as they can indicate disorganization or poor budgeting on the part of the management company or Board. A building’s financial health could be indicative of whether or not a buyer can afford the unit in the long term, and is an important factor for any savvy buyer.

Whether you live in your home for 5 or 35 years, these considerations should factor into your bottom line both in terms of your monthly outlay and what to expect when it comes time for resale. Home values depend on much more than what meets the eye, so it’s important to have a complete picture before committing to such a significant investment.

What is staging?

The Isil Yildiz Team staged this listing for a studio which received an offer after the very first open house. For larger projects, we have a roster of top stagers that we can help you engage.

A few months ago, we sent out a newsletter with design tips — how to spruce up your apartment and prepare it for sale. However, one thing we didn’t cover was what to do when you have an empty apartment. Empty apartments, no matter how visually appealing, force potential buyers to use their imagination to come to a reasoned conclusion, rather than just react with emotion at the onset. While most of us think we are logical beings, the truth is emotion plays a huge role in many of the decisions we make, especially with something as personal as buying a home. Logic can re-affirm these emotional reactions, and presenting a beautiful “home” rather than an empty space can be a powerful marketing tool in selling a home. For empty apartments, this can mean full-scale (placement of actual furniture and decor) or virtual (digitally added) staging.

Full-scale staging can be expensive and is usually reserved for larger, more expensive properties where the return on investment makes sense. For example, a townhouse or 3-bedroom apartment may cost $15-$30K to stage for the duration of the listing, but this expense can be more than justified if it shaves a few months off the listing time or results in even a 2% higher price. For smaller apartments, even a minimal investment in staging can help prospective buyers get a better sense of scale since people tend to underestimate the size of an empty apartment. I’ve seen many people point to a 10+ foot wall and claim their couch wouldn’t fit, when in reality, it would, with room to spare.

In my experience, different stagers can produce drastically different results, and some agents are able to do a spectacular job on their own or can recommend boutique stagers or designers to create a truly unique and stunning apartment. I find that the larger, more commonly-used staging companies in the market produce results that look a little “cookie-cutter” (think the items the Ramada Inn got rid of during their latest renovation).

With effective and high level virtual staging, the Isil Yildiz Team difference captures what made this property unique, and helps bring the empty space to light. The listing sold at-ask with an offer after the first open house.

A more cost-effective option, and one we employ for many apartments and rentals, is virtual staging. Virtual staging cuts out the cost and hassle of full-scale staging by using advanced software to place items into the space digitally. Want an Eames chair in the living room and an antique mirror in the bathroom? No problem. Virtual staging can certainly transform a space, but again, there are huge differences between the good and bad. Bad virtual staging is quite obvious — e.g., no shadows created by the furniture — and looks like stickers on an image. Good virtual stagers pay attention to the smallest details; they understand the angles created by light and can simulate creases to drape blankets and linens realistically. While it is not quite the same as being in a space that is actually decorated to the nines, the first impression of the property — viewing the listing online — gives the buyer a glimpse into its potential, provides a sense of scale, and captures the imagination.

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What are small improvements to prepare for sale?

Interior design is highly personal - everyone has a slightly different idea of what a "beautiful" home looks like. However, when listing your home for sale, it’s important to make design choices that are as widely appealing as possible, to ensure that prospective buyers feel comfortable and at home in the space. While a major renovation for the sake of appealing to more buyers is usually not a sensible investments, small tweaks can mean the difference between multiple offers and hoping for the buyer who can see past your personal choices. When trying to connect with a larger audience, it’s best to stick with décor that is clean, modern, minimal, and cohesive. I often rely on mass-market brands like West Elm and CB2, who make a business of appealing to a wide and urban audience, for design ideas and inspiration. Here are my top five strategies for tweaking an apartment from niche to "nice" for the most people.

1. Use Cool Paint Colors: Cool tones (blues, greys, greens) create a space that feels calm and quiet. Lighter shades in these family are also the best at reflecting (thus maximizing) light. Darker shades in these tones make for interesting accent walls or a great wall to make strange nooks look purposeful.

​ 2. Furniture to Scale: Make sure your furniture is scaled to your home. This doesn't necessarily mean physically small items work better, it's all about the amount of visual space items take up relative to the amount of space. A tailored sectional is much larger than any single armchair, but an oversized, cushy armchair will dwarf most small spaces. I find this to be especially true with dining chairs. Even sleek chairs can take up visual space and appear like blocks, but sleek items, particularly those that are wire, caned, or acrylic recede from view. 3. Pinterest Worthy Vignettes Use specific furniture and accent items to highlight the best features of each room – if you have a large corner window, or a particularly beautiful kitchen island, create a vignette that will to draw people’s attention to it. My go-to vignette is a tall item (vase or candlesticks) next to a stack of design books, with an interesting object. 4. Decluttering Make sure there is “white space” in every room – clear surfaces, open space on shelves, etc. A room rarely looks good with every square inch filled. Bookshelves over-flowing with books, piles of paper, collections of random décor items – unnecessary clutter often makes your home appear overwhelming, and thus unappealing, to prospective buyers. 5. Impactful Minimal Décor: Rather than filling every inch of wall space with random art, thing about wall decor as vignettes. Whether it is an oversized painting or a cohesive gallery wall, your art work should create an impact.

These small improvements can make a big difference, but there are more than just simple design and decor items that affect a home's price. To see how we value a home's physical space, read about our top factors here.

Investing in physical improvements of a home can increase its sale price dramatically, but can be costly depending on the service. With the Compass Concierge Program, Compass will pay the upfront cost of select services that can increase a home's value. From deep-cleaning to cosmetic renovations, we'll elevate your home's appeal and create a tailored plan to maximize its potential on the market. When your home sells, the cost (and nothing more) will be added to the commission.

This apartment was cleaned, staged, and painted with funds from Compass Concierge. These services, supplemented with decor and styling by the Isil Yildiz Team, gave this Park Slope brownstone a fresh, modern update to maximize its appeal.

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