Understanding Apartment Prices in New York City
The Nuance of Value
As a broker, I often find myself explaining why similar apartments in comparable buildings sell for drastically different prices per square foot. True to many aspects of life in New York City, the explanation is full of nuances. These seemingly small variables complicate attempts to understand “value” in New York City, which is why it’s such a tricky (but certainly always interesting!) endeavor.
Though it may surprise you, many of the factors that determine an apartment’s worth come from outside the apartment itself: the building in which it’s located. You might discover a seemingly great apartment trading below the neighborhood’s market premium or even below its market average. Consequently, you might reasonably assume the apartment has some hidden blemish. This isn’t always the case. The financial stability, physical upkeep, and social atmosphere (read: stodginess of the board) of the building can have just as great an impact on an apartment’s saleability as the quality of the apartment itself.
Let me give you one example: Imagine a building that is considered the best in its class. Then imagine that the owner of the penthouse unit begins to draw a bath and ambles off. They forget about the bath entirely, letting it overflow and flooding the three units below before realizing what they’ve done! Word gets out about the damage, and the building suddenly has a reputation for leaks, which naturally negatively affects the perception of the building. Now, incoming buyers who don’t know the original story will justifiably eye any apartment within the building warily, preventing an otherwise great apartment from garnering the amount of interest it otherwise might have. Even a trivial incident such as this one might hinder an apartment from selling at its maximum value.
Another example occurred during the height of the recent real estate boom. I worked with a buyer who paid $1,150 per square foot (which, for those of you who aren’t familiar, is substantially below the neighborhood average) in a doorman TriBeCa loft building. Was it a great buy? Absolutely! But in exchange for that price, he purchased in a building with a history of litigation, poor financials, and a negative administrative reputation.
Prior to purchasing, we discovered that the building had recently been making strides to better itself, so my buyer was able to catch the building on the upswing, and by every definition obtained a great value on the purchase. This is a perfect example of how knowing a building’s history and future trajectory can allow you to take advantage of the most aggressive market.
Though it may seem challenging, when you are buying or selling a home it is crucial that you take these numerous factors into consideration. Doing so requires you to look beyond the four walls of the apartment, think outside the box, and assess the value of the apartment’s building, in addition to considering the apartment itself. Only once you have a comprehensive grasp on all of the factors that play into an apartment’s saleability will you truly understand its value.