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New York Trivia

Broker-investors for walk-ups few in number

By Carl Unegbu
September/October 2004

Walk-up apartments make up 25 to 30 percent of the cityís residential housing stock, and new investors are trying to cash in on the tricky, but potentially lucrative segment of the market.

Still, real estate brokers Ė among the best informed members of the pool of potential buyers Ė arenít joining the ranks of new building owners in any sizable numbers, because the market is so hot. Maybe too hot.

"Itís just a small percentage because the prices have gotten so high," says Marc Lewis of Manhattan Apartments Inc. "The average broker doesnít have $5 million to buy property."

Bargains are so thin on the ground they are almost nonexistent, he says. The lower prices from a buildingís first sale are largely gone since most walk-ups have already been sold two or more times.

In addition to prices, probity is also an issue. Bob Knakal of Massey Knakal Realty thinks itís a bad idea for brokers to be buying these properties, citing potential problems down the line. "I donít think itís a good policy," Knakal says. "I think itís a conflict of interest and itís something that our firm doesnít do."

Knakal says a broker with a reputation for buying properties would make potential buyers wonder why heís not buying the property heís selling. Other brokers donít see a conflict of interest, especially if the listing isnít exclusive. They says problems are avoided if the broker fully discloses his interest to the seller.

"Why should real estate brokers not have the same benefit as everybody else?" said Eric Roth of Friedman-Roth Realty. "If they disclose [their interest], then itís not a conflict of interest." He readily admits that exclusives are a different matter. "Of course, itís different where someone is listing property with a broker as an exclusive."

Joel Radmin of Extreme Realty says Knakalís view stems from his firmís practice of dealing mostly with exclusives.

Georgia Malone, of commercial real estate brokerage Georgia Malone & Co., says brokers would be foolish to forego the upside of the current market. But she admits that conflict of interest is a real challenge.

Apart from full disclosure, Malone thinks a way out of the potential "quagmire" is for the broker to agree not to buy the property for himself if it isnít sold. This way, Malone says the broker will exert his best efforts to represent the seller and still collect his commission.

Marc Lewis
Wave Real Estate Group, LLC
111 East 31st Street, New York, NY 10016

Phone: (914) 420-4675   

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