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Looking for a Hamptons rental? Try winter.
As economy slides, East End owners pump their homes for off-season cash
A renovated farmhouse at Georgica Beach in East Hampton was rented for the winter.
By Christopher Faherty
Thought the Hamptons rental season was over? Think again. Brokers on the East End are seeing a curious new phenomenon this year. With the economy spiraling downward and Wall Street teetering on the edge, more Hamptons homeowners are looking to supplement their finances by renting out their houses during the winter months.
“There are a great deal more winter and year-round rentals on the market this year,” said Michael Daly, the principal broker at True North Realty Associates. “Home sales and the economy have slowed, and owners are looking for ways to get income out of their properties.”
Daly said there is no real data on winter rentals. But based on newspaper advertisements, he estimated that there has been a tripling of year-round rentals starting this September, and that rental prices have decreased 25 to 33 percent.
The nontraditional rental matrix seems to be paying off for some East End owners.
As the inventory of winter rentals has increased, so has the market for them, some brokers said.
The disproportionate prices between summer (which is high season) and winter can often be a difference between $2,000 and $20,000 a month for the same house.
Off-season rentals are luring renters for varied reasons. In some cases, the winter rentals are taking the place of more expensive vacations or allowing tentative buyers to get a taste of the Hamptons for a cheaper rate. In other cases, it allows those who are doing well in the down economy to escape the city.
“I’ve rented a summer house for the last five years. This year, I felt with the market being the way it is, I’d see what’s out there,” said Mary Miras, 33, a bankruptcy attorney who lives on the Upper East Side and is renting a home this winter in East Hampton for $1,500 a month. “I’m doing this with a girlfriend and another couple; when you split that, it’s like a gym membership, basically.”
Miras, who lives in a one-bedroom apartment in the city, said her business is busy at the moment. She said she’ll use the winter rental to entertain friends and family.
Miras noted that she rents a similar-sized house in East Hampton during the summer with the same friends she is renting with this winter, and they split a rent of $45,000 for the season.
Mary Slattery, an associate broker with Corcoran who has noticed an uptick in winter rentals, said those who are looking for houses in the post-Labor Day market are less interested in the Hamptons social scene than summer renters.
“They don’t come here so they can stand in line for an hour for a cup of coffee at the Golden Pear. They’re more of an outside person,” Slattery said.
Among Slattery’s winter rentals this year was a renovated farmhouse at Georgica Beach that she rented to a 30-something hedge-fund manager who grabs his dog and flees the city on weekends, attracted by the South Fork’s great off-season surfing.
The half-acre property, described by Slattery as “not fancy but really cool,” rents for about $2,500 per month in the winter — and roughly $65,000 for the full summer.
Brokers were in general agreement that year-round rentals, in which renters pay a small charge above the summer rate to keep the property for the entire year, are also on the rise.
George Fontanals, a broker with Brown Harris Stevens in East Hampton, said that many young people in the market to buy are renting year-round and waiting for the market to soften further before pulling the trigger on a purchase.
“It’s hard to say if it’s the right thing to do, because it’s a good time to purchase,” he said.
Karen Benvenuto, a broker with Hamptons Realty Group, said while the number of people searching for winter or year-round rentals may be growing, so is the inventory, because more sellers are renting, waiting for the market to rebound.
It appears that builders of spec houses are also turning to year-round rentals with the softening market. Laraine Hayes, a landlord who rents out six separate homes in East Hampton, said she met a Hamptons spec builder at P.C. Richards as he was buying 13 plasma screen televisions, as part of furnishing a $12 million spec house to rent.
Hayes, who has been renting homes in the Hamptons for 25 years and recently switched with the majority of her tenants to year-round rentals, has one of her properties on the market for $1.499 million but said it may make more sense to rent it rather than sell in the current buyer’s market.
“I’m not very negotiable,” she said. “I need to get this amount, or I make more money renting.”
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Realogy reports $50 million loss
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Negatively affected by $45 million of non-cash equity losses and impairment charges from its 49 percent investment in PHH Home Loans LLC, Realogy Corporation recently reported third quarter 2008 losses of $50 million. The company had third quarter 2008 net revenue of $1.3 billion, earnings before interest, income taxes, depreciation and amortization (EBITDA) of $129 million, and a net loss of $50 million. Realogy’s EBITDA was also affected by $15 million of restructuring charges. The net loss is after $152 million of interest expense and $54 million of depreciation and amortization expense.
“The current economic conditions of this country are weighing heavily on consumer confidence and thus on the housing industry,” says Richard A. Smith, Realogy’s president and CEO. “We’re not immune from the macroeconomic shocks to the credit and financial markets. In spite of these extraordinarily difficult circumstances, we have remained focused on reducing our operating costs and investing in the growth of our business.” In the third quarter, Realogy’s real estate business drivers experienced declines that were in line with the National Association of Realtors® and Fannie Mae. During this period, Realogy’s year-over-year home sale transaction sides declined by 15 percent at the Realogy Franchise Group (RFG) and were down by 10 percent at NRT, the Company’s owned brokerage unit. Likewise for the third quarter, RFG’s average home sales price decreased 7 percent and NRT’s average home sale price declined 12 percent compared to the same period in 2007. Price declines were driven by high inventory levels, the increased prominence of short sale and foreclosure activity and, particularly as it relates to NRT, a relative shift in the mix of business from higher price ranges to lower-and mid-range homes. As of September 30, 2008, the Company’s senior secured leverage ratio was 4.8 to 1. This is 0.6x below the maximum 5.35 to 1 ratio required for Realogy to be in compliance under its Credit Agreement. The senior secured leverage ratio is determined by taking Realogy’s senior secured net debt of $3.2 billion at September 30, 2008 and dividing it by the Company’s Adjusted EBITDA of $661 million for the 12 months ended September 30, 2008. |
Thanks to Beth Young and to The Southampton Press for covering this current and important real estate topic…md
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Publication: The Southampton Press By Beth Young |
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Most real estate transactions in the United States are conducted with someone representing the buyer in the transaction. On the East End, however, most buyers have gone into transactions without anyone acting on their behalf. That is changing rapidly as the market sours here.
Michael Daly, who owned the RE/MAX Beach Properties franchise that closed its doors in Southampton due to the credit crunch this past summer, is hoping to fill the void in buyer’s brokerages on the East End by opening his own buyer’s agency, True North Associates, out of his North Haven home.
“In the last 10 years, listing brokers have had control of the business. All you had to do was list a property, and it would sell,” he said. “The market’s changed, and appreciation for the buyer’s broker has grown exponentially.”
He’s not alone in his belief that the current real estate climate makes it an important time for real estate agents on the East End to become familiar with watching out for a buyer’s fiduciary interest in transactions, rather than the seller’s interest.
Rick Hoffman, a regional vice president at the Corcoran Group, said that agents at Corcoran are taking seminars in how to act as a buyer’s broker, and often partake of continuing education classes in the subject. Vice President of Operations Marty Gleason is also available to agents to discuss the nitty-gritty details of acting as a buyer’s agent.
While Mr. Hoffman said that a “nominal” percentage of Corcoran Group agents work as buyer’s brokers, he added that the company is very receptive to the concept. “It’s always good when we offer clients more options,” he said.
There is no extra certification required to become a buyer’s broker—a standard real estate license covers buyer’s brokers as well—but John Viteritti, who teaches continuing education courses in the subject at New York University and at Long Island University’s continuing education program offered on the Stony Brook Southampton campus, said that he’s seen “a tremendous increase” in classes on the topic.
Mr. Viteritti said that as many as 62 percent of the real estate agents in the country represent buyers, but in New York agents are just starting to represent buyers.
“I think it’s just a matter of, it’s the way it was always done,” he said. “Now a lot of New York purchasers come from other states that have buyer agencies.”
The concept of a buyer’s broker is a very simple one. Traditionally on the East End, while real estate agents spend most of their time with potential buyers, they are acting in the seller’s interest. Mr. Daly said that such a relationship breeds mistrust, perhaps rightly so.
“Part of the reason the public doesn’t trust real estate agents is that you would think my job was to help you find the house you wanted at the price you wanted,” he said. “In modern-day real estate, the public is starting to understand that it’s ‘buyer beware.’”
The financial arrangement with a buyer’s broker is no different than the one between listing brokers and sub-brokers who are seller’s brokers, meaning the commission is still split between the brokers and there is no additional cost to either the seller or the buyer.
Mr. Daly said that it is a buyer’s broker’s responsibility to do due diligence on the market on the behalf of the buyers, including helping to arrange inspections, and researching comparable sales and market prices.
As prices begin to sag, the number of houses sold here plummets, and buyers, wondering if this is the bottom of the market, begin seriously looking for properties. Mr. Daly said that another factor right now makes it important for buyers to have someone advocating on their behalf and asking questions about what they are buying. “We’ve become hyper-focused on the quality of homes,” he said. “Buyers are smarter about finishes, granite, hardware, fixtures. People know the difference between Waterworks and Home Depot.”
Though Mr. Daly, who said he is currently working with seven clients, said that he initially encountered some resistance from traditional real estate agents when he approached them as a buyer’s agent, said that brokers here are beginning to see the advantage of buyer’s agencies.
“Some agents say, ‘Let me talk to my manager,’ and the manager over-thinks it. It’s not adversarial. It’s about teamwork, like any negotiation should happen,” he said. “The buyer’s agent has with him a motivated buyer who has the objective to make a purchase.”
Mr. Viteritti said seller’s brokers are prohibited from refusing to work with buyer’s brokers by New York State law, and many of them are beginning to realize that buyers who are working with their own broker are far more likely to be serious—a big boon at a time when properties aren’t moving.
“He’s already dealt with the tire-kickers,” said Mr. Viteritti of the buyer’s agent. “Chances are, they’re statistically more likely to be real buyers. That vetting had already been done.”
Mr. Daly did caution that listing agents need to understand that if they share confidential information about a listing with a buyer’s broker, it’s the buyer’s broker’s responsibility to share that information with his or her client.
“People should be open and should be honest about transactions of this nature,” he said, adding that the culture of dishonesty in business transactions that led to the stock market meltdown has led the term “moral hazard” to become one of the buzzwords of 2008.
“I’m not saying that people have been dishonest, but locks are put on doors to keep honest people honest,” he said. “Buying a house is the largest purchase people make in a lifetime. To do that without representation, that’s not being responsible to yourself.”
What a great story and EXACTLY what the people want to see public preservation funds used for.
Very often, we don’t know what land/property is available for development until after it is too late and the developer brings down the bulldozer. Cheers to the parties that made this deal happen!! See story below.
77 Acre Cavett Property in Montauk, NY To Be Preserved
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East End Map
This info is for the two townships that make up “the Hamptons”, Southampton and East Hampton townships, on the south fork, from Eastport to Montauk.
Unit sales and dollar volume are way down.
Knock…knock. I think we have a buyers market here…
I remember results of a study done while I was at PDE 5 years ago that showed 50% of our business in the Hamptons came from the 5 boroughs of New York City, 25% came from Long Island (Nassau & Suffolk) and 25% came from everywhere else, both nationally and internationally. It would be interesting to break down how much of that business could be diectly attributable to Wall Street people…looking back, roughly one in three of my business deals have been done with Wall Street folks over the years…and while that might be ebbing at the moment, only Chicken Little thinks that will ever stop completely.
We are, naturally, so Wall Street focused here, after all, many of our friends, and clients work on Wall Street and, on the other hand, Wall Street is the very thing the cynics love to hate, out of jealousy or philisophical dissonance with living a life around money.
One of my dearest friends of 30 years was visiting from Syracuse recently and she reported that the market was somewhat flat there, but had not seen any major upheavals recently (I haven’t checked their stats, was just listening) and she asked me “What’s it like to live near Wall Street with all these big ups and downs and all these millions floating around?”
“Interesting”, I said. “Never dull”.
That’s for sure…
Noah Rosenblatt, UbranDigs.com, posted about projected tax and job losses in New York as a result of the financial sceanario we are in…check it out below.
Gasparino: $3.5Bln Loss Tax Revenue / 111K Jobs Lost
Posted by Noah Rosenblatt on October 27, 2008 at 7.05 PM
I think that 25% referral fees between agents is too high.
Sure, during the hey-day when you took ’em out, showed ’em a few houses or took the listing and waited for it to sell and went to the closing, no one complained. I have always had an issue with a 25% referral fee and have made it my own policy to only ask for 20%, as an incentive to the agent I was referring to. After all, if you have two referrals, one at 25% and one at 20%, what does human nature lead many to do?
Another thing that lead me to believe that 25% is too high, has been all the out of market agents who had put websites together, fishing for “Hamptons” buyers and sellers – JUST so they could capture them and turn them around and refer them to a Hamptons Agent. With an average sales price of $1,500,000, that turns into a referral fee of $11,250 JUST for passing on a name – no thanks…
Now, with business being more challenging and both buyers and sellers requiring more time and effort (and expertise) to put a deal together, I am going to be requesting a 10% referral fee. As an Exclusive Buyers Broker, the clients who have listed with me over the years are going to get assistance in finding the absolute best fitting listing agent for their properties, and I want that agent to be motivated to do a bang-up job for them – 10% is fair.
In addition, I always tell my referral clients that I am getting a fee for referring them – it’s part of transparency and full disclosure, folks. There have been a number of times where buyers or sellers (in the days I was a listing agent) were never told by the agent who referred them to me that they would be getting a referral fee. They JUST made it out like they were doing their relative, friend, etc a favor.
Let’s be open, honest and generous with each other.
What do you think?
Values, for the most part have held up fairly well, here in the Hamptons (and Manhattan) during this recent national real estate market meltdown. One of the problems is, that some homeowners have/had an unrealistic view as to the true “value” of their property to begin with.
1: a fair return or equivalent in goods, services, or money for something exchanged
2: the monetary worth of something : market price
Today, although as the attached article discusses, many sellers are holding firm on their prices, there are some terrific deals on the market.
My clients just closed on a property at $1.875M that was originally listed at $2.6M. The seller got motivated and decided to bring his price to market value. Sure, the buyer wanted to make a 10 – 15% discsounted offer, but I demonstrated to him that the house was prices properly and that, in this instance, offering at (or near) asking price was a smart move. He listened and is now happily in the home.
Today, an agent needs to know the status behind the offering prices. There may be 3 houses listed at $3M with one firm, another willing to sell for $2.8m and the third willing to let it go for $2.3M. Only getting behind the facade will tell you that. The days of “taking orders” for houses, showing five and having buyers pay full price for one is all but gone…it’s time to do your homework.
Check out this NYTIme article. It’s a little bit of the “Hamptons Hype”, but makes some interesting points:
…“This is a resort discretionary luxury market, so it doesn’t look and behave too much like the regular primary residential market,” she said. “Buyers don’t have to buy and sellers don’t have to sell. As a result of those two things you get a flat market, not necessarily a depressed market.”
Thomas Friedman
Op-Ed Columnist
Swedish Spoken Here
“I would also bet that more and more of the foreign investors who come our way are going to want to buy hard, tangible assets — skyscrapers, real estate and real companies — not just mutual funds, T-bills, bank stocks or other equities.” rest of article HERE
End of an Era on Wall Street: Goodbye to All That
Published: Sunday, October 5, 2008 at 5:21 a.m.
Last Modified: Sunday, October 5, 2008 at 5:21 a.m.
Last Modified: Sunday, October 5, 2008 at 5:21 a.m.
JUST before midnight 10 days ago, as a financial whirlwind tore through Wall Street, someone filched a 75-pound bronze bust of Harry Poulakakos from the vestibule of his landmark saloon on Hanover Square in Manhattan…
Over all, the past quarter-century has redefined the notion of wealth. In 1982, the first year of the Forbes 400 list, it took about $159 million in today’s dollars to make the list; this year, the minimum price of entry was $1.3 billion. see story here
Hamptons Real Estate Blog 