I really don’t get real estate brokers sometimes. They get listings and just never try to understand them. In this case a broker for Sotheby’s is telling our broker that 259 West 139th Street (in Harlem’s prestigious Strivers’ Row) is a 2 family home when it’s actually an SRO (a Single Room Occupancy boarding house). In fact they even state the lie inaccurate information clearly on their own website (click the quote below to see an image of the full page it comes from)…

If you know anything about townhouses in New York that statement looks very suspicious… A two-family “currently configured as a rooming house”? Rooming houses are never “zoned” two family. And zoning has nothing to do with the number of families anyway - zoning has to do with the height, bulk and general use of the building.

So what exactly is 259 West 139th?

Let’s start with what the NYC Department of Buildings says… The DOB’s property profile for the building says it is “SRO Restricted”. If you follow the link on that page to see the certificate of occupancy for the building you see there is a C of O for the garage that was issued in January 1950, but no C of O for the main building (which is typical of older townhouses). There is one other C of O linked to that property, but it’s an error - a temporary C of O for a completely different building.

Next, let’s look at what the Department of Housing, Preservation and Development (HPD) says…

The key thing to notice there is 0 “A Units”, 14 “B Units”. “A Units” are normal apartments, “B Units” are rooming house rooms. So 259 West 139th Street has no legal apartments and instead has 14 rooming house units. That means Sothebys is suggesting a illegal use of the space - you can’t rent an apartment that isn’t registered in some way with the City and DOB and HPD are the two ways to make an apartment legal.

So both DOB and HPD say the place is an SRO, ergo it’s an SRO.

When you head over to the Department of Finance you see a different story. There you see it’s building class C3 which stands for a 5-6 family home.

Now, it’s typical for Department of Finance to get it wrong and in this particular situation it doesn’t make much of a difference since 5-6 family homes and SROs pay the same amount in taxes. But the point is if it were a 2 family home the owner would have it classified correctly with DOF since 4+ family homes pay 7 times the property tax as 1-3 family homes. That’s not an error you’d let slide for very long.

I am SO tired of real estate agents giving false and inaccurate information on their listings. It’s really not that hard to find out the truth. But it’s common for real estate agents to answer the question “Is there a certificate of no harassment in place?” with “the building can be delivered vacant”.

If you’re outside New York you’ll be excused for not knowing the absurdity of that answer but in the 1980s New York City went through a real estate boom and low income people were being evicted from their apartments and becoming homeless. Rooming houses are where the poorest people in New York live. If you lose your place at a rooming house there just aren’t any cheaper options and you wind up homeless. So in 1985 a moratorium was placed on conversions of rooming houses (SROs). A year or two later that was reworked so landlords who wanted to do an SRO conversion were required to get a “certificate of no harassment” where the City verified that the landlord didn’t force out or intimidate any tenants in the prior 3 years. You could also be turned down if there was an open violation for an illegal conversion.

Certificates of no harassment are vital for anyone buying an SRO and wanting to use it for something other than an SRO. It really doesn’t matter if it’s vacant and any licensed broker selling a townhouse should know that. And lying and saying it has a C of O that it clearly doesn’t have is completely inexcusable.

Thank god Property Shark and the City of New York put all the info online and make it easy to tell brokers they’re lying. It’s amazing how quickly their story changes when you say you’ve looked up the property up on Property Shark. Still, it’s a huge hassle that is completely avoidable. I feel sorry for the poor buyers who don’t understand how to find the information and learn the truth. If you don’t do your due diligence and you have a crappy lawyer who doesn’t do it either, it can devastate you financially.

We’ve seen a lot of townhouses in the quest for the place for us to buy. I may have missed a few, but it seems to be 27 and counting - most of which have been in Hamilton Heights / Sugar Hill. We have seen a little in Central Harlem, but have mixed feelings about that area. Central Harlem has more and better services, but the area is much more hit-and-miss / block-by-block.

The longer we search the more we see see what really makes places valuable…

• Being in a large, established, historic district like Hamilton Heights / Sugar Hill
• Having a certificate of no harassment, or not needing one at all.

If you click on the blue dots you get a quick synopsis of what we thought about each place.

View Townhouses We’ve Seen in a larger map

We should have known better… You get what you pay for and Manhattan Mini Storage’s “free move” probably should have raised alarm bells, but we signed up for the free move anyway.

So these three guys show up. Manhattan Mini Storage had hired Moving Ahead for the job and it was obvious that Moving Ahead had sent their absolute worst team to do the move. It’s probably an instance of Manhattan Mini Storage buying the excess time of various moving companies and then the moving companies filling the order with the moving teams that are at the bottom of their list to send out on “real” jobs.

So these three guys show up. The leader was talking about how he’d been up until like 2am the night before. The fat guy on the team managed to rotate every box he picked up 90 degrees and then he’d drop it on the moving dolly. He was too lazy to do the bending required to set it down properly. They took out a bunch of boxes and Dan went outside to watch over them. I’m not exactly sure what he saw, but he had a bad enough reaction watching them that he called me. I was sitting in a chair exhausted praying we wouldn’t completely regret the move. As soon as he started with his misgivings I interrupted them and said I didn’t want them touching our stuff either and to stop them. Well, Dan is a feisty little thing when he gets mad and apparently he totally went off on them and everything ground to a halt.

I was already on my way down and then we had to get everything off the street and into the courtyard of our building to get the moving dollies back to the idiots doing the move. It was a huge amount of work on a morning that started with me waking up completely exhausted - so sorta a complete nightmare.

The team leader tried to justify their actions by saying he didn’t have any problems when he moved an art collection that one time. I told him Dan had run an art trucking company at one point and understood how to do moves properly. Then he went on about how he’s done moves for millionaires and not had a problem. There were a number of problems with that statement so I didn’t bother responding. But honestly, he should treat everyone like a millionaire and who was he to assume we weren’t millionaires? Plus, the one other time I heard a line like that was when a contractor was trying to justify putting greenboard in a shower by saying he’d done it in “million dollar homes”. People just don’t have a clue sometimes.

Needless to say I wanted nothing to do with Manhattan Mini Storage or Moving Ahead ever again. In fact, if it weren’t going to cost an arm and a leg I sorta wished we could get the stuff we have in storage with Manhattan Mini Storage out and to a different facility. In the end we’re going with Manor Moving who are recommended by our real estate agents and a neighbor. They’re going to pull everything from our place and Manhattan Mini Storage and put it in their warehouse. Their sales tactics are a little heavy handed for my tastes, but given their recommendations, I trust them a lot more than Manhattan Mini Storage.

And honestly, I should have known better about Manhattan Mini Storage was well. Last fall one of their owners was instrumental in having Animal Haven shut down two of their three locations which completely changed Animal Haven’s mission from animal rescue to a SoHo boutique pet store with a few “adoptable” animals available. The Manhattan Mini Storage person was on the board and one of the strongest advocates of the change (half the board resigned in protest over the change). That decision resulted in the killing of something like 50 or 60 cats and dogs many of whom were unadoptable and who Animal Haven donors had gladly supported for many years. In fact, the upstate sanctuary for unadoptable animals brought in more money than it cost to run - so there was no good reason to close it and sell when real estate prices were low.

On a more positive note, I’ll say Shleppers did our main move to our new apartment and they were wonderful. I’d highly recommend them.

I just want all this moving and selling stuff to be over. But it’s only the beginning… Hopefully soon we’ll find a townhouse in Harlem and then we’ve got a major renovation to do. Needless to say, a good contractor will be absolutely critical. And next move I’m hiring someone to do packing and starting the packing early. Unfortunately our personal assistant quit a month ago or so and we’ve been on our own through this whole ordeal.

UPDATE:

First, we had a very good move with Manor Moving. Given that we were in a rush they didn’t really understand how much they were moving and putting in storage they under bid the job. They could have messed with us once things were on the truck, but they were completely fair.

Second, Dan finally got to talk to Manhattan Mini Storage and they were really good about the situation. By that time we’d already moved everything out but they offered 8 months free on our current storage unit which was extremely generous and will actually come in handy since we’re short on closet space in our interim rental. So while I still have issues with their involvement in Animal Haven, they did handle the situation as well as they could. The fault then really lies with the movers - Moving Ahead - not so much with Manhattan Mini Storage.

Yesterday I saw this comment on Brownstoner and thought is summed up really well our experience trying to find a Harlem townhouse…

the prospect of buying in harlem was a much more harrowing process…many of the places were being sold by sketchy brokers, had sketchy situations, or were in sketchy neighborhoods….harlem is still very much house by house, block by block…even the much coveted mount morris park area still has many burned out buildings [...] many more of the places there have sro issues, or are in general worse shape.

“Harrowing” might be a little melodramatic, but honestly there are times when it feels like that. We’ve been looking for a place now for over 9 months (in earnest for 3+ months) and there are times when it’s just exhausting and depressing. Just when you think you’ve found a place you notice drug activity at the abandoned house next door, or it turns out to be an SRO without a certificate of no harassment, or the taxes are crazy high, or it’s close to projects, or you walk the block at night and seriously worry about your safety, or they’re asking 3 times what the place is worth, or it’s a short sale and they want all cash. We’ve literally seen all of those things and the list goes on and on…

All I want is a nice shell or wreck at a reasonable price, on a decent block, that’s not too far from express trains. That’s not as easy as it sounds. We’ve expanded our search area and are willing to deal with up to 10 minute walks to an express train. I don’t even mind a place where it rains indoors or there are soft floors or there’s a staircase that feels like it’s about to give way… I can deal with those things. But everything seems to have major complications. It really does feel like I’m beating upwind…

No wonder so few places are selling…

Harlem townhouses are a very strange market right now and figuring out a proper bidding strategy can be tricky to say the least. I thought I’d step through our thinking on one place in particular where our bid was just rejected to bring out some of the issues.

The townhouse we were bidding on was 54 West 130th Street which is one of 28 townhouses known as Astor Row in Central Harlem. There’s a good Wikipedia article on Astor Row, and the New York Times did an article on it recently as well. Astor Row townhouses are definitely not typical Harlem townhouses. They are brick with wooden porches and are generally narrower than their lots so they appear to be in pairs.

We had a really hard time coming up with a bid. At first glance, and on an emotional level, the place looks like it’s worth $800-850K, but the more thought we gave it, the lower our bid went…

Let’s start with what’s right with the place…

• It has wonderful karma
• Even though there are locks on all the bedroom doors (hinting it’s been used as a rooming house at some point), it appears otherwise to be an intact single family home, which is quite rare.
• There are lots of original details and they’re in pretty good shape for a 126 year old house.
• It appears to be in great shape overall.
• It has a unique layout with three large bedrooms per floor - so you get the space of a 5 story townhouse without the extra flight of stairs.

It’s rare to see things in that condition these days. You see shells, and you see things where the details have been ripped out, but that particular combination isn’t something you see very often so it’s hard to put a price on it.

But there are problems as well. I’ll go over them one at a time to prove my point…

Problem #1 - The next door neighbor

The house next door (#56) is quite dilapidated. When the Astor Foundation was giving away new porches and free façade restorations the owner at the time apparently said “no thanks”. It’s possibly the worst house on the block. Here are a couple pics…

When you look at the front you think it’s just a run down eyesore. It’s not boarded up and we think we remember seeing someone go in the first time we were around there. But when we saw the back of the building we realized it’s essentially a shell that’s getting rain into it’s interior through all the broken windows. Given the condition that’s evident in the rear, it needs to be boarded up. Either the person in it is living in squalor or it’s being used for drug activity. In either case it would be too easy for it to catch fire and spread to the buildings next door, so living next to it is a scary prospect.

And it’s not just the next door neighbor….

• The two at the end of the block are run down and owned by a Pentecostal church which is taking their sweet time renovating them.
• In the other direction 2 doors down there’s another that’s a shell
• Further down the block there are a few others that are run down SROs and/or shells.
• Directly across the street there are a couple that are shell-like. One seems to have been gutted and then had all work stop.
• There are a couple other run down SROs on the other side of the block.
• The back yard is small (since so much room is given to the front yard) and there are rather rough rental buildings directly behind the townhouse. This is not like Hamilton Terrace where you have people on Convent Avenue looking at you. Go take a look at who’s hanging out in front of those buildings and you may not be so comfortable with them seeing everything you do in your back yard.

All in all you can’t use prime locations as comps for this townhouse. No matter who says it (including the NY Times), there are definitely more than “a couple” problem buildings on the block.

Problem #2 - Plumbing and Electrical

While pretty much everything appears to be in working order, when you look closely you see a different story and realize that it needs all of the plumbing and electrical replaced. There are maybe two outlets per room. Most rooms don’t even have light switches. And looking at the electrical panel I’d guess it has maybe 100 amps of power going into the house. I think we have 200 amps in our apartment.

As far as the plumbing - it’s not up to code - it’s been done with PVC which is illegal in NYC. Given that plumbers can probably lose their license for using PVC I doubt the a licensed plumber did the work.

Now think about what it will take to replace all the plumbing and all the electrical in a house where you want to preserve the original details. The work is best described as “surgical”. If it were a gut renovation it would be so much easier, but this has to be done by highly skilled workmen and will wind up being quite expensive.

Problem #3 - Other Major Expenses

Given that all the plumbing has to be redone and the bathrooms are out of date (at best) that means all new bathrooms. Likewise the kitchens (there are two - the main one in the basement and a kitchenette on the top floor) both need complete overhauls. So you’re looking at 3 new bathrooms and two new kitchens - none of which come cheap.

Add to that all new windows if not immediately, then pretty soon. The windows on the front can’t be done cheaply - they have to be approved by the Landmarks Commission. The one in the living room is nearly 5 feet wide and 7 feet tall - there’s no cheap way do a window like that and get it past Landmarks.

And if you’re going to spend that much on the place, then you’ll probably want to put in things like central air conditioning, etc… So the costs will keep adding up…

By the time you’ve finished work on that house you will have spent about the same as a low-end gut renovation. You’ll have a great place (except for the neighbor), but you’ve got to factor all those costs into your bid.

So how do you bid on a place like the Astor Row townhouse?

Take what I’m about to say with a grain of salt - our bid was not successful…

First, let’s look at the comps… There aren’t any perfect comps for this townhouse. There aren’t that many sales and none of what is selling is in a similar condition, in a similar location. So all you can look at is a range and then figure out where it falls in that range.

At the low end you have shells (or ones that are essentially shells). 6 West 128th Street (two blocks down) sold for $144/sq. ft. on 7/22/09 which is 25% below what it sold for 5 months earlier. Also close by is 46 East 126th Street which sold for $98/sq. ft. on May 14th, but that one is affected by the rezoning on 125th Street. There are a few other comps but the ones in the low end average around $120/sq. ft. and never really get much above $145/sq. ft.

At the high end you have renovated ones that literally need no work and are in mint condition. The best comps there are 63 West 127th Street which sold for $214/sq. ft. on August 17th, and 133 West 131st Street which sold for $284/sq. ft. on June 8th. I would say mint condition townhouses in that area average around $250/sq. ft. If after renovations you’ve spent much more than those, then you’ve over invested.

54 West 130th has 3,525 square feet (officially, not including the English basement - there is no cellar, so much of the basement is mechanical). So, if it were a shell it would sell for around $425K. If it were in mint condition it would sell for between $875K and $1M.

It’s hardly in mint condition and needs at least $350K in renovations - probably more like $400K. If you start with the high end of the mint comps and subtract the minimum you’d spend on renovations you come to $650,000. That’s actually what we bid, but it got rejected because “there was a substantially higher offer”. But looking at it that way is a recipe for overspending since renovations will probably cost more and the market might fall. But we loved the place and were willing to spend more than the comps warranted to get it. Honestly, I think the person who put in the “much higher offer” is insane. We’d never go “much higher” on that place - not with those neighbors and in that condition.

$650K is also exactly half way between $425K and $875K (the low and the high), and the house is somewhere between those two conceptually as well - definitely not a shell, and definitely not mint.

On a price per square foot basis we bid $184/sq. ft. and it needs about $100/sq. ft. in renovations. So our final investment would have been in the range of $285/sq. ft. - actually higher since $650K was just our initial offer and we were prepared to go up. There’s just not much selling around $300/sq. ft. so it would have been an iffy investment especially if real estate values continue to go down and even if they stay flat.

I think it’s instructive to look at the top end of the market, since after renovations that’s where you’d end up… Here are all of the Harlem townhouses that sold for more then $1M in the past 6 months…

• 235 W 132 - 7/8, $1.05M, $291/sq. ft, 3 family
  I don’t understand this one - too close to projects, not close enough to subways
• 310 W 133 - 7/10, $1.06M, $212/sq. ft., 4 family
  Odd little 2 story building sandwiched between two apartment buildings
• 236 W 138 - 7/20, $1.693M, $277/sq. ft., 2 family
  Striver’s Row
  [edit: On closer examination the square footage of this house seems misstated. It's officially 6,060 sq. ft., but it's twins on either side are in the neighborhood of 4,500 to 4,700 sq. ft. At that square footage it sold for more like $360/sq. ft. - but it's a prime Striver's Row townhouse with recent renovations so that actually isn't all that surprising.]
• 48 Hamilton Terr - 7/27, $1.1M, $292/sq. ft., 2 family
  The one we know well. Needs work, but very much livable.
• 883 St. Nicholas Ave - 7/29, $1.04, $235/sq. ft., 3 family
  Recently renovated. Appears to be in great shape.

For being the high end of the market, that’s not all that impressive. Most of those are just over $1M and they averaged $261/sq. ft. Subtract $100/sq. ft. for the renovations needed to this townhouse and you have $160/sq. ft. or $564,000.

My other rule of thumb is that townhouses should be going for 40% of their 2007 comps - that’s just how much the market has come down. In 2007 a renovated Astor Row townhouse went for $1.875M and 40% of that number is $750K, but that was a renovated townhouse which only shows that one should use the lower end of the mint comps.

We put in what we thought was a very competitive offer and it was rejected. It will be interesting to see how their other offer progresses and what it eventually sells for. There is an emotional factor to buying real estate and this property definitely elicits that. I just hope the new owner doesn’t regret what they paid for it after it’s all said and done.

Postscript: As I was writing this our broker told us the selling broker told her that another offer had come in over the offer that was “much higher” than ours. So now there’s a bidding war. I just don’t get it…

UPDATE: It’s now early March and the top of the market is clearly going up. I’d now guess this place will be worth $375/sq. ft. after about a $100/sq. ft. renovation making it’s current value around $275/sq. ft. That means the value has gone up substantially - $950K is not unreasonable for this property now. You won’t be making money on it, but won’t lose your shirt either. Thing was, back when I initially wrote this the comps didn’t come close to supporting a number of $950K. After having our offer on this place rejected, we did finally buy a place and paid $122/sq. ft. for a total shell. After renovations we’ll have about $300/sq. ft. invested in our place and the current comps say it’ll be worth about $400/sq. ft. While I love the karma of the place on Astor Row, ultimately we were shopping for a deal and Astor Row wasn’t a deal… However, someone will be very happy living there and it looks like they won’t need to worry about having lost money on the deal, which means they’ll have no regrets.