For the Right Price, the Right Fixer-Upper
 
IN THE ROUGH A large co-op at the Chateau in Jackson Heights has many desired prewar accouterments like high ceilings, a working fireplace and original detail, and it is priced to sell. But the buyer will need to redo the floors.

By ELIZABETH A. HARRIS | November 1, 2009

FIXER-UPPERS are not the darlings of the New York City real estate market right now. With so many well-groomed apartments for sale to choose from, why bother? But when there is a lot of inventory on the market, the price gap between the renovated and unrenovated often grows.

“What you see now,” said Jonathan J. Miller, the president of the appraisal firm Miller Samuel, “is more of a premium placed on renovated space because you have more supply, more choices.”

But some buyers look at a wrecked apartment and see an opportunity, not just a mess, no matter where the rest of the market is headed. Brokers say those buyers are digging through listings and searching for places that, in exchange for “tender loving care” or even “divine intervention,” provide an incentive to buy — a good price, a great location, a spot in a renowned building or an extra bedroom.

“There is more upside potential for something raw or unrenovated now, simply because fewer people want them,” Mr. Miller said.

A classic example of a fixer-upper is now on the market in Queens.

The apartment, in a 1922 Jackson Heights co-op building called the Chateau, has four bedrooms and three bathrooms and is listed for $490,000.

“This is the Grey Gardens of the Chateau,” said the broker, Michael P. Carfagna of MPC Properties. “Shabby chic,” he added with a smile.

The apartment has high ceilings, lots of light, a working fireplace, and nice original detail. But the floors need to be sanded and polished, the electrical wiring updated and the bathrooms and kitchen gutted. The walls, covered in a variety of elaborate wallpaper, also need work.

This apartment is on the second floor of the six-story building. The same size apartment in better condition on the floor below sold in May for $645,000.

According to Mr. Carfagna, who was the listing agent on that apartment as well, the higher-priced unit was renovated with high-end finishes about 10 years ago and has been well maintained since. The people who bought that place, he says, saw the cheaper one upstairs but decided against the hassle of a big project.

Rick Wohlfarth, the president of the real estate brokerage Wohlfarth & Associates in Manhattan, says most of his clients aren’t interested in renovating.

“There are those groups who are willing to pay a little extra to just move in and put out their toothbrush,” Mr. Wohlfarth said. “That is the easiest way to sell an apartment in New York City, the most expeditious way. Then you have the other group of buyers who really enjoy projects.”

He has a listing at 789 West End Avenue: a two-bedroom one-bathroom apartment, which will soon come on the market for $899,000. The unit, No. 12B, has views of the Hudson River and great bones, like high ceilings and solid prewar construction, but it looks as if it hadn’t been touched in decades and is badly in need of renovation.

The electrical system needs to be updated, the floors buffed, the walls repaired and the bathroom gutted. The kitchen, which also looks “prewar,” needs a total overhaul.

To price a fixer-upper apartment like this one, Mr. Wohlfarth said, you start the way you would price any home, by looking at comparable apartments.

A report generated by Streeteasy.com, a Web site that tracks listing data, shows that the average asking price for two-bedroom apartments on the Upper West Side is $1.1 million.

Then, Mr. Wohlfarth said, he deducts the renovation costs.

But those costs can vary significantly, and so can the discount that brokers factor in on apartments needing work. Buyers might break even — spending the same amount after renovations that they would have to purchase an apartment in move-in condition — or they might save some money.

Karen and Christian Brooks recently closed on a one-bedroom in Gramercy that needs a new kitchen, a new bathroom and perhaps new floors as well. Even with the renovation cost, they expect to spend less money than they would have if they had bought a home that was ready to go.

“When we were going to see apartments,” Ms. Brooks said, “the renovated ones were going at a premium. And they were nice, but it was always the case that I wouldn’t have picked that countertop, or it was a different type of style than I might go for.”
They are waiting to hear back on bids from contractors, but they have been given some quotations on cabinets, and, Ms. Brooks says, they were lower than she had expected.

“We were able to get a really nice place at a lower price,” she said. “And we were able to stay below jumbo numbers with the loan we got.”

According to the National Association of Home Builders, an index that measures the cost of many materials used in home construction was down about 4.5 percent in September from a year earlier for single-family homes and some 6.1 percent for multifamily homes.

Stephen Melman, the director of economic services at the association, said that at the beginning of the year, contractors’ phones simply were not ringing. “That has picked up dramatically,” he said, “but it’s still not where it was.”
Financing, it turns out, can be the trickiest part of buying a fixer-upper these days.

“Banks are much tougher on the condition of an apartment,” said Melissa Cohn, the president of the Manhattan Mortgage Company. “The banks want to see that the apartments are complete and habitable. And it’s impossible to finance renovation. You have to have the cash.”

Though they can be tricky to orchestrate, deals on fixer-uppers are still being done.

“It hasn’t completely stopped,” Ms. Cohn said, “it’s just much more difficult than it’s ever been. Then again, everything about the world of financing is more difficult than it’s ever been.”

In some cases, bank financing is simply not an option for apartments that are badly in need of renovation.

Lee-Ann Pinder, a real estate agent with Citi Habitats, has a listing in the Hamilton Heights section of Harlem that will require intense rehabbing and an all-cash deal.

The apartment, a 750-square-foot two-bedroom with one bathroom, has good light and a great deal of flexibility since most of the interior walls can come down, because they are not load-bearing. The building, a co-op on 152nd Street and Convent Avenue, is income restricted at $64,500 for an individual and $73,725 for a couple —which, combined with the all-cash requirement, creates a difficult formula.

To put the apartment within somebody’s reach, the co-op, which owns the apartment, is asking $150,000. According to Streeteasy.com, there is only one apartment available in Hamilton Heights for less: a one-bedroom listed at $125,000 a few blocks away.

But Ms. Pinder’s listing needs more than a little sprucing up.

The kitchen looks as if someone decided to get the necessary gutting started (where’s the stove?), and some of the walls in the apartment appear to have been on the business end of an ax — an impression advanced by the presence of a small red fire hatchet on the kitchen counter on a recent Wednesday morning.

“It is a glorious mess,” Ms. Pinder said. “It needs to be gutted. But then you can do what you want with the space.”
In some apartments, however, the configuration of space is exactly the problem.

There is, for example, a 2,600-square-foot duplex available for sale in the Osborne, a grand building on 57th Street and Seventh Avenue that went up in the 1880s. And it needs work.

The apartment was cobbled together out of three smaller units — a studio on the fifth floor and two one-bedrooms, one on the fifth floor and one on the sixth. It has three bathrooms, two small kitchens, the space for three bedrooms, and a deeply confusing layout.

The listing agent, Deborah Gimelson of Brown Harris Stevens, says that the seller bought it in its current configuration as a pied-à-terre. She does not know who the mastermind was behind the layout.

“I wish I knew,” she said, “because I’d really like to have a discussion with him.”

The apartment is listed at $1.675 million, down almost $1 million from the original price of $2.6 million last year.

That’s still a lot of money for a three-bedroom apartment, but the building tends to command a premium — the ceilings are almost 14 feet high in some rooms and there are large, elaborate fireplaces in the shared foyers outside the apartment entrances.

According to Streeteasy.com, active listings in the building range from $435,000, for a 600-square-foot one-bedroom, to $4.49 million for a 3,200-square-foot four-bedroom.

“People who come here really want this building,” Ms. Gimelson said. “But you have to like a project — this will be a project.”
When an apartment badly in need of renovation is for sale, the broker has to be up to the job as well.

“It’s a laborious task to sell unrenovated apartments,” said Jill Jordan, a broker with Halstead Property. “People will want to bring their architects and their mothers — and then they want to bring everybody back! It’s a long process.”

Ms. Jordan has a listing at 27 West 55th Street for a two-bedroom apartment with one bathroom, on the eighth floor of a co-op building.

At $600,000, the apartment is reasonably priced, though not a steal. A renovated one-bedroom one-and-a-half-bath unit is listed for sale in the same building for $649,000.

Carpeting needs to be torn up and the wood floors fixed or replaced. The walls and the ceiling need work, and the kitchen and bathroom need to be gutted.

But, she says, if done right, that work would be rewarded.
“The benefit is they get to live in a nicer apartment than they can afford,” she said. “They’re living in a better apartment than they paid for.”

Slideshow on NYTimes.com: http://www.nytimes.com/slideshow/2009/10/30/realestate/1101-cov_16.html