I just saw that one of the townhouses we’ve been through is having an open house - 42 Hamilton Terrace. After everything we’ve seen I can honestly say that owner (or broker) is absolutely crazy for the price they’re asking - $995K (it was up at $1.1M when we saw it earlier this year). Let me explain why that’s a crazy price…

To be fair the upside to the property is that it’s a decent width and on a great block - Hamilton Terrace. It also has some incredible original details in it - mostly the fireplaces and baseboards on the ground floor. But there’s so much wrong with the place it’s not even funny - at least when you consider they’re asking a million dollars for it.

The big issue is that it’s falling down. Literally. The extension in the rear where the kitchen used to be is just walls - the floor in the extension has fallen into the floor below. The rest of the building is falling down as well. When we went through it was raining inside the building because snow was melting on the roof. If you know anything about buildings you know the building goes downhill very quickly if the roof is no good. I was literally scared to walk through the building. They have plywood down in some areas ’cause they’re worried people will fall through those parts of the floor. Personally I don’t think it’s safe to go inside that building. If anyone gets hurt I’ll feel really guilty ’cause I was tempted to call 311 and report it as unsafe (but I didn’t).

It’s not the first Harlem townhouse that’s fallen down and it won’t be the last. But right now, in this market, you just don’t pay a million dollars for something that’s falling down.

• 48 Hamilton Terrace a few doors down needs some work, but it’s completely livable and mortgageable and it’s going for $1.25M.
• There’s a place on Stiver’s Row (236 W 139th) that apparently sold for around $425K a few months ago and now they’re trying to flip and asking $699K. Someone started a renovation and didn’t finish, but it’s completely solid and it’s on Striver’s Row.
• Then there’s 506 West 142nd Street, which is a fully renovated, income producing property in move-in condition and it’s asking the same price as 42 Hamilton - $995K. Mind you, the renovation is soulless, the back yard is dark and small, and the block isn’t nearly as good, but compared to one that’s about to fall down on a better block it’s price to sell and 42 Hamilton clearly isn’t.
• And 470 West 148th was just reduced to $999K - it’s perfectly nice 12′ wide townhouse that’s move-in ready, but will need renovation in the not-too-distant future.

Personally I think 42 Hamilton should have a price drop of about a third - to $699K. With a $500K renovation that would put the total cost around $1.2M and it would be in better condition than 48 Hamilton which would compensate the buyer for the hassle of the renovation.

The other townhouse where people seem like they’re stuck two years back in a time warp is 532 West 148th Street. The pictures are amazing, but when you go through the house you realize how little substantive renovation has been done. It’s “shabby chic” in the ’80s sense of the word (before the term referred to a store) when people didn’t have money for renovations so they just make things that were falling apart look pretty. The floors aren’t redone - they’re just whitewashed and varnished. The ceilings aren’t redone - they’re ripped out and there’s exposed beams. Same with the walls - ripped out. What you have left is a shabby chic 3 story loft that’s one big open space plus a work space in the basement - a total bachelor pad. There are almost no walls, no privacy - some of the bathrooms are literally in the middle of the floor with no walls around them. It would have been hot 20 years ago, but now people are looking for genuine renovations - skim coated walls, recessed lighting, floors that are in good condition. The other thing about that property is that it’s 1/2 block off Broadway - not on a prime block.

All of that would be fine if they weren’t asking nearly $2M for the place ($1.895M to be precise). I think the comp for it is 48 Hamilton Terrace @ $1.25M - so they need to drop the price by a third to be in line with their competition. Both 48 Hamilton and 532 W 148 are in similar condition in terms of infrastructure. 48 Hamilton is on a MUCH better block and is landmarked. 532 W 148 has better interior design, but you’re buying the building, not the furnishings. Plus 48 Hamilton has walls and rooms, which most townhouse buyers want, so it’s more desirable.

I did like going through the place though - it showed how much you can do to a townhouse at a reasonable price. If you really don’t want to do expensive structural changes, you can still have a place that’s stylish (though to me shabby chic is pretty dated).

The Harlem real estate market has always been pretty speculative, but luckily much of the market is pretty realistic about how prices are dropping. There are some incredible bargains out there and a lot of people are quite flexible. We saw one property where the broker (whom we really liked) told us they were about to drop another 17% - and that’s after a price reduction not all that long ago.

But some people are afraid to be realistic. There are a few that are dropping the prices too far ’cause they’re desperate to sell in a bad market. But the problem is that when you drop really low people start thinking that’s what all the prices should be and then prices  really tumble. Hell, we’re sorta playing that game - hoping we can sell our place before that mentality takes hold in our neighborhood and after it takes hold in Harlem.

I’m not saying that most of the places that are livable and mortgageable should drop that much further, but the reality is construction loans are hard to get these days and people who buy places that need construction loans (like 42 Hamilton) should get rock bottom prices to compensate them for doing something that’s pretty risky in a falling market… At least we’re hoping a seller will see it that way when we go to buy a place. I’ve got my eye on a place and as far as I can tell it’s practically a shell. It also needs a one-third price reduction… Hopefully we’ll be able to sell our place and hopefully the seller will be flexible by then… We’ll see. First step is to sell our place…

In defense of the people who’ve over-priced is the fact that the market is rapidly changing and there’s not a lot of data to make informed decisions on. Things were dropping before the stock market went down in September, then only 2 townhouses had deals in Q4 of 2008. That didn’t give people a good idea of what they should be doing. In Q1 they say 10 townhouses have closed, but even that data isn’t all in yet. But the issue is how far do you have to drop in order to be “priced to sell” when almost nothing is selling?

There’s a reason why I named this blog “beating upwind” - it’s because beating upwind is the hard and somewhat dangerous sailing practice of trying to sail into the wind. If you have a good boat you can do it. If you have a crappy boat you might as well anchor and wait for things to change or pull down your sails and motor. To say the least real estate is dicey right now, but we’ve decided we want to take the opportunity and upgrade to something significantly bigger which feels like sailing into the prevailing real estate winds.

We’re lucky to have bought into a building that’s now considered “stable”. The prime apartments in our building (of which ours is one) have gone down about 10% from the peak, which is pretty good considering the market. Meanwhile what we want to move up to - a townhouse in Harlem - has done done about 50%. So if we’re ever going to do it, now is the time to get off the crest of our wave onto the trough of the bigger townhouse wave.

Harlem townhouses have been particularly hard hit in the downturn because they were always rather speculative. I remember years ago looking at them and realizing that it was the same price for a run down, but habitable townhouse as it was for a façade where everything had falled down inside. They peaked about 2 years ago and have gone down about 50% since then -at least at the lower end, which is where we’d be looking.

On top of that nothing is selling. We haven’t confirmed it, but one broker told us only 2 Harlem townhouses have closed since the stock market went down in late September. People who need to sell are getting desperate and there’s one townhouse that sold for $1.5M in July of 2007 that’s now asking $350K in a short sale. That’s 75% off, and the purchase price will probably be even lower. [That property does have "issues" in that it's a fully occupied SRO with a stop work order issued against it, just to name a couple of its problems.]

The problem is everything in our price range needs $500K in renovation. Nearly all the townhouses in Harlem were built around the turn of the century. Electricity was a new thing back then, so they’ve got crappy 100+ year old plumbing and electrical all of which needs to be replaced. Completely replacing all the plumbing and electrical means ripping out a lot of walls, ceilings and possibly floors. On top of that many of the ones in our price range became SRO’s (rooming houses) which mean heavy use. It’s actually amazing how many of the details survived, but to bring things up to “upper middle class” standards requires pretty much a full gut renovation, which is why everything needs $500K in renovation.

While everything needs a $500K renovation you pretty much can’t get a construction loan to do the renovations given the crisis in the banking industry. But we still have a few options…

Buy something all cash

A while back I didn’t think buying something all cash was even an option, but recently the townhouse you see to the right went on the market asking $350K in a short sale. We’d actually be able to buy that all cash and have enough left over to do basic fix ups, though not a proper renovation.

The thing is, properties like that come with a lot of strings. This is the one I was referring to earlier that is a fully occupied SRO (4 SRO units, 2 regular apartments), and has a stop work order on the building, and a ton of building code violations. Given the number of building code violations it would seem the tenants are mad and making life miserable for the owner by calling the City and reporting problems with the building. That’s not a great situation to get ourselves into.

It also comes with a pile of legal issues since we can’t just cancel people’s leases. SRO tenants are pretty well protected in New York since they tend to be the poorest of the poor. So we’d have to work with a lawyer and pay people to leave the building. But at $300K it may be worth the trouble.

If we bought something all cash it means we’d have to fix it up over time. That’s easier said than done since we go back to the fact that they all seem to need new electrical and plumbing and that rips the building apart when it’s done.

Have the current owner hold a mortgage

To get a mortgage on a building it has to be “mortgageable” which means no building code violations, working kitchen(s), working bathroom(s), etc. Quite a few of the place we see listed have been partly demo’d and then the owners ran out of funds and didn’t complete the renovations. We can’t touch buildings like that because there’s no way to finance them.

Since we’ll need a construction loan for many of these places, but can’t get one, one option is to go with a place where the current owner will hold the mortgage. This option is sorta win-win for us and the seller since it gets the seller out of a money losing proposition, they sell at a price that’s not the bottom of the market, and they get regular income. The townhouse to the right is one of the townhouses where this is an option, though it’s probably just out of our price range at the moment.

The way it would work is we’d put down 20% ($150K+) and then we’d have enough cash left over for a very minimal renovation. Some things just wouldn’t get finished. We might rough in bathrooms and then leave them essentially as closets until we have the money to finish them since we won’t have a full $500K left over once we’ve done a down payment.

If I had to guess I’d guess this is the route we’ll take. But for a lot of townhouses it’s not an option since the current owner often has a rather substantial mortgage on the building.

Buy one that doesn’t need immediate renovation

The problem with buying one that doesn’t need renovation is that they’re currently a bit above our price range. We can go up a little over $1M, maybe $1.1M. The one to the right is a good example - it needs some work, but much of it can be deferred and it’s going for $1.25M. I think it’s safe to assume prices will go down this fall, so this is still an option for us since we don’t want to buy until fall or winter…

Still, the one to the right is a good example of how everything really needs a $500K renovation. That one has had some of the plumbing issues resolved and the electrical was “upgraded” by running conduits on the outside of the walls, which is hardly aesthetically pleasing. The owner put in new windows, but they’re cheap pine windows that won’t last all that long. The rear exterior of the building looks like a mess and probably needs a lot of work. The floors have a thin parquet veneer on them that will be destroyed the next time they’re sanded which means it needs new floors in many places as well. And the renovations that have been done were done cheaply - and that’s just what I can see with a naked eye.

The bottom line is that if we can get one like that one it still needs a big renovation. Sure it’s mortgageable, but the long-term cost of the place is really high.

Wrap Up

There’s a lot more I could say about all this, but I’ll leave it for another post… By putting our place on the market we’re sorta taking a leap of faith and hoping that there will be something we like that we can afford when it comes time to buy. Our back up plan is to look at other parts of Harlem (we’re only looking in Hamilton Heights and Sugar Hill right now since we want to be near the 145th Street stop on the ABCD trains), and then there’s always Brooklyn. A couple months ago we went and saw open houses in Brooklyn and saw enough to know we can always find something there that will suit our needs and be in our price range. But we’d really prefer to be in Manhattan…

Dan and I are going to try and sell our apartment. Simply put we need more space. We both work from home and we have people coming in to work with us, and on top of that Dan needs an artist studio to do his artwork. That means we need at least 3 decent-sized bedrooms. We’ve also been thinking about getting a place upstate so if the new place had outdoor space it would mostly eliminate our desire for a place upstate.

Ideally we’d get a townhouse. Townhouses in Upper Manhattan are a much more speculative market that swings up and down a lot more than coop apartmentss. In the past two years townhouses in Upper Manhattan (in the lower end of the price range which we can consider) have lost about half their value. In comparison in our building the prime apartments (like ours) have lost 10% or less of their value, and smaller apartments have lost about 20% of their value. As a result, if we’re ever going to be able to get off our wave onto the bigger townhouse wave, this is the time to do it. People think the New York real estate market will get worse by the end of the year, so cashing out now and buying in the fall is the optimal way to do things.

So we’ve been trying to determine which broker to go with and we’re finding it’s surprisingly difficult to find a broker with a good balance of what we need. For starters let me show you what we’re working with - this is a picture of our kitchen…

When we did our renovations in 2005/2006 we sorta went all out - Wolf range ($3,000), Sub Zero integrated fridge ($4,500), Poliform/Varenna cabinets from Italy ($22,000), stainless counter with Franke sinks welded in ($5,000+ - just the sinks were something like $1,500), a KWC faucet ($600), and so on… This is not an Ikea kitchen.

Mind you, we did a lot of the leg work ourselves so we probably didn’t spend that much more than a hands-off person who did a “good” Ikea kitchen.  Still, there’s a fair amount of value in our renovations.

What we’re finding is that most of the agents just don’t understand the renovations. One stood in the kitchen thought it was nice, but was more focused on problems like whether there was enough cabinet space (despite the fact that Dan’s a great cook and has room for everything he needs), or the fact that some people might not like an eat in kitchen (looking at HG TV I thought everyone wanted eat-in / entertainment oriented kitchens). The more typical response is that they know the renovations are special, but they just can’t put their finger on what it is about them that’s special. Only one agent really seemed to get it, unfortunately he a junior agent and wasn’t from one of the “power house” agencies.

What we want in an agent is 1) someone who “gets” the apartment and can explain/sell it to buyers and other brokers. 2) someone who can give the apartment a lot of exposure and bring in a lot of qualified buyers. That last point isn’t easy in this market. It’s a combination of advertising and connections.

We’re really disappointed in what the brokers in the area offer. The two agencies who used to control the listings in our little neighborhood have a track record of exclusive listings and they just don’t have the relationships or reputations to work well with other brokers - in our opinion that’s deadly in this market. One in particular has listed/sold many of the high end apartments in the neighborhood, but the tactics that worked for them before aren’t working so well anymore.

Then you have the power house brokers from big corporate agencies. They bring a lot of marketing muscle to the table but their agents are a bit of a mishmash - some are so busy you feel like they won’t have time to concentrate on your listing, others only have experience with lower end listings (the bread and butter listing for the neighborhood), and none of them really seem to “get” our apartment. At best they know it’s good, but can’t quantify in words why it’s good or how that translates into a price.

And lastly there’s a quirky sorta scrappy agency where one of the agents does “get” the apartment and the other one (the more analytical of the two) comes close to getting it but so far has had problems putting it into words. At the moment they’re the ones I’m most hopeful of, but the issue is whether they have the marketing muscle to get the word out there and get the exposure the listing will need. But to their credit they did just sell one of the prime apartments in the building for less than 10% off the high price for apartments like that, and they got the offer in 2-3 weeks after listing.

So we’ll see, but so far none of the brokers is a clear winner.

You may have heard about the US Airlines plane that crashed in to the Hudson a bit over an hour ago. Dan actually noticed the roar of the plane as it flew low over us (which is a bit scary).

While you don’t want things like that to happen, if it was going to happen it couldn’t have happened in a better place. Passengers are reporting that by the time they had the front doors open on the plane there were NY Waterway ferries waiting for them with their front ramps down. Apparently they were able to walk out of the plane into the ferry. To me that’s absolutely amazing.

But it wasn’t just ferries, the NYPD and FDNY are one of the best trained emergency responders anywhere, and they’re equipped for water emergencies with fire boats, police boats, divers, you name it. And there’s the Coast Guard which always trolls the waterways here. The only downside about it happening in New York was how cold it was today - about 20°F when the crash happened.

The ironic part is that the jet was flotsam, not jetsam. [Flotsam are things that float in the water, jetsam are things that sink.] And the morbid part of me wonders whether US Airways is going to start advertising free ferry service when you get to your destination…

A couple years ago our dog Buddy was having problems with his eyes. We went to see our vet, Scott Luckow at Broadway Animal Hospital in Riverdale (Bronx, NY) and he referred us to an ophthalmologist. He told us to get a diagnoses from her, and then he could provide ongoing treatment.

It’s now two years later and Buddy’s condition is clearly chronic, but well managed by the drops the ophthalmologist prescribed for us to give him each day. A couple weeks ago Dan realized he was running out of the drops for Buddy and called the ophthalmologist for another prescription. The ophthalmologist wanted Dan to bring in Buddy since it had been a while since she had seen him. That was understandable, but since the condition is chronic, Dan wanted to have our regular vet, Scott Luckow take over the ongoing care and only go see the ophthalmologist if something changed.

So Dan called Luckow’s office, explained the situation to them (that he wanted Luckow to take over ongoing care for Buddy’s eyes as Luckow said he would), and scheduled an appointment. I took the dogs in for their annual checkup on Saturday. That’s when the problems started…

Let’s just say that they were familiar enough with what was going on that when I went in the receptionist asked how Buddy’s eyes were. They knew dealing with that issue was the primary reason for the visit. However Luckow refused to give me the prescription saying he wanted to talk to Dan first, and that Dan should call him on Monday during his authorized time for calls (it’s often difficult to actually get through at the designated times). He also indicated that he wanted Buddy seen by the ophthalmologist again.

The problem was we’d been close to running out of the drops for a week and a half and we needed at least a stop gap prescription to tide us over until we could have the issue resolved. When I got home and told Dan, he called his office and waited for a callback. Finally he figured he’d just drive up there and talk to Luckow in person. While he was in the car they returned his call and said, “no” - they wouldn’t give a stop gap prescription. Since Dan was already on his way, he continued up. In our eyes this was an urgent matter. If Buddy doesn’t get his drops, the next day his eyes are all red, and the day after that they’re oozing puss and he can’t open them fully. Running out of drops wasn’t OK with us.

When Dan got there the receptionist (Luckow’s wife) told him to wait - that Dr. Luckow was “reviewing labs”. He made Dan wait a full hour. It would be one thing if he were in the middle of seeing a patient, or if he were in the middle of surgery, but the fact that he wouldn’t step away from paperwork to talk to a customer for a couple minutes made Dan even more livid than he already was.

When Luckow came out he wanted Dan to sign a piece of paper saying Dan was not getting the proper medical care for Buddy and that Luckow would not be held responsible for anything that happened. This was completely baffling to Dan… We had gone to see the ophthalmologist Luckow told us to go see and now he wouldn’t take over the ongoing treatment when he had all of the paperwork with the diagnosis in his files.

Scott Luckow talks about being a country vet in the city, but when push comes to shove he apparently won’t do anything outside his narrow credentials. All he had to do when we called and explained the situation initially was make a call to the ophthalmologist (he told us to go to in the first place) to coordinate the handover of care. But he didn’t do that. He knew we had been trying for a week and a half to get the situation resolved and that we were running out of medication, and he knew how quickly bad things happen when we did run out of medication. Yet he played a game of telling us to call in, then saying “no” over the phone, and when pushed to the wall by an in-person visit he pulls out a liability waver form to give even a single stop gap prescription when he knows the diagnosis and knows what we’re asking for is an accepted treatment for the problem.

We have heard of other people who have had issues with Dr. Luckow. We knew he was a bit quirky and could be “opinionated” at times, but he seemed generally competent. However this puts a completely different perspective on things. When you really need him - he just won’t be there for you. That’s just not acceptable.

And how can a vet deny a stop gap prescription for a chronic condition and then blame the owner for not taking proper care of the dog when the owner’s been trying for a week and a half to deal with the issue? In a letter I received from him today he said Dan “made it perfectly clear that Buddy was ‘just a dog’ to him”. If Buddy were “just a dog” to Dan, do you honestly think he’d have tried so hard to get Luckow to write a stop gap prescription? IMHO, it’s Luckow who didn’t properly care for Buddy…

Dan considered a number of other vets that neighbors suggested, but in the end he took my advice and went back to the vets I had gone to for years with my previous dog, Sherlock - West Chelsea Veterinary Hospital. The vet at West Chelsea was wonderful. She took a look at the reports from the ophthalmologist and wrote the prescription without hesitation. They’re a bit more expensive and somewhat inconvenient for us to get to, but they’re good, competent, no-hassle vets and that’s worth the extra cost and hassle getting there.

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UPDATE: I’ve gotten some feedback on the post and want to clarify a couple of points…

First, this isn’t about money. The vet we’re going back to costs about 50% more than Luckow. Had Luckow given us a stop gap prescription we would have spent the money and gone back to see the ophthalmologist. The issue was his refusal to give us medication when we were running out and needed it urgently. And the secondary issue was his poor customer service.

Second, Luckow’s final claim that there were liability issues is ridiculous. The vet Dan went to see today did what we asked Luckow to do and did it without hesitation. Both are experienced vets in established practices. We simply can’t fathom why Luckow didn’t give us the same level of service as the other vet.