Sunday, February 24, 2008

Countering Above-Average Fees

The New York Times
February 24, 2008

AS higher maintenance and common charges become the norm these days, higher-than-average monthly fees have lost some of their tendency to curdle the blood of buyers. But pricing these apartments can be more art than science.

Many brokers recommend discounting the sales price so that the total monthly outlays (mortgage plus maintenance) equal that of a comparable apartment with average maintenance.

Douglas Heddings, a senior vice president at Prudential Douglas Elliman, recently sold a three-bedroom duplex with a terrace in a full-service building on West 86th Street. A high underlying mortgage on the building pushed maintenance on the apartment to $3,700 a month, $1,200 to $1,700 higher than average, Mr. Heddings estimated.

“If we had a maintenance that was more in line, it would sell for well over $2 million,” he said.

After initially listing the apartment at just under $2 million, Mr. Heddings lowered the price to $1.795 million, He came up with that figure by subtracting the amount of financing that could be bought for $1,200 a month at 6 percent interest. “If your maintenance is $1,200 more than average, that’s worth $200,000 of buying power,” he said.

The apartment sold for $1.775 million after four months on the market.

Some agents recommend even deeper concessions. Richard Grossman, the executive director of downtown sales at Halstead Property, suggested tacking an extra 25 percent on to the discount to overcome the psychological hurdle he believes buyers must leap.

“People feel like they can control the amount of mortgage they have and how much they’re going to pay for it,” he explained. “They can pay off or refinance their mortgage, but they can’t control maintenance. They think it’s just going to get higher.”

Yet he and other brokers said that all other elements being equal, an apartment with somewhat-high maintenance doesn’t necessarily need to be offered as a fire sale.

An oversize maintenance is a flaw like any other, said Deanna Kory, a senior vice president at the Corcoran Group. And a single flaw — with the exception of a bad location — does not typically affect price.

If an apartment “is gorgeous and renovated and beautiful,” she said, “other considerations fly out the window almost completely.”

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