Who's Square Feet?
New York Times - Saturday, December 18, 2010
The tape measure does not lie.
But when it comes to measuring the square footage of New York City apartments, the tale told by the tape can be exaggerated, massaged, misrepresented and manipulated.
There are willful — and legal — tactics to make a space appear bigger on paper, like including common spaces and elevator shafts in the calculation of an apartment’s size. There are also honest mistakes that derive from historical inaccuracies, differences in how condominiums and co-ops are measured, advances in measuring technology, changes in measuring standards, and unusual layouts. Then there are outright misrepresentations.
It can all add up to confusion or worse.
Buyers may be saddled with an apartment that the bank finds to be less valuable than assumed, because it is smaller than was thought. Deals can be delayed or even denied if lenders calculate a square footage different from the one listed, which can lower the appraised value. And developers who grossly overestimate square footage in an offering plan may find themselves being sued or losing deposits if the attorney general finds they acted in bad faith.
“There is an implied precision,” said Jonathan J. Miller, the president of the Miller Samuel appraisal firm. He prepares the quarterly market reports for Prudential Douglas Elliman, which track prices per square foot, among other indicators. In reality, he said, the measurements are anything but precise.
Mr. Miller, who said he had calculated square footage for more than 7,000 New York City apartments, estimates that measurements vary by about 10 percent industry-wide. Dimensions are generally taken with a laser device, the latest in a long line of tools used to gauge the size of apartments. But the laser is only as good as the person wielding it. And sometimes the stated square footage is a willful exaggeration.
“I remember seeing a condo unit and being told it was 600 square feet,” Mr. Miller said. “And I immediately thought, if this is 600 feet, I am blind.”
Brokers are often accused of overestimating. Bank assessors, on the other hand, are widely thought to underestimate. Even when estimates are in agreement, owners are likely to resist any change that will decrease the size, and therefore the value, of an apartment.
Official oversight of square footage measurements is limited, real estate lawyers said. Condo developments are required to say how they calculate square footage in their offering plans, which are filed with the state Office of the Attorney General. But there is no similar requirement for co-ops. And even in newer condos, as the property changes hands over the years, small inflations may morph into architectural tall tales.
Brokers are often careful to say they take no responsibility for listed square footage, and owners may honestly not know how large their home is. So, often, there is no obviously responsible party when discrepancies are found.
Steven Wagner, a real estate lawyer, says he encourages anyone thinking about buying an apartment in a new building to hire a lawyer to read the offering plan closely in order to determine whether the square footage measurements include common space like elevator shafts and hallways — adding them in is legal in some cases, but that is not common knowledge. He said buyers of resales would be wise to have an architect or engineer measure the place before any contract is signed.
Mr. Wagner said it was more than two decades ago, when many buildings were being converted to co-ops, that he began noticing that the square footage numbers were being cooked.
“Some of the sponsors converting the buildings started measuring not from the interior wall, but from the exterior wall,” he said. “Of course, that does not work very well unless you plan on living inside the brick wall itself.”
While a certain amount of variation is tolerated, Mr. Wagner said, “the standard for fraud is a misrepresentation of material fact.”
“There comes a point where it is not O.K.,” he said. “But I can’t tell you whether it is 2 percent or 20 percent.”
One buyer, Glenn Evans, a senior vice president of Estée Lauder, is sure that he was defrauded. When Mr. Evans and his partner, Calvin Poon, moved back to New York from Shanghai in 2009, they told their broker that they wanted a place with more than 2,000 square feet.
“I must have showed them 40 or 50 apartments,” said Robert Beacham, a broker at the Real Estate Group of New York.
But it was not until they walked into a two-bedroom co-op apartment at 1200 Broadway, a former hotel built just after the Civil War, that they knew they had found their new home. The building’s mansard roof, ornate windows and high ceilings were all part of the draw. But so was the price per square foot. Mr. Evans said that the apartment was listed at 2,170 square feet.
“We did all our calculations based on the price per square foot,” he said. At the time, the broker representing the seller — who could not be reached recently for comment — insisted that the price per square foot was well below market value.
The seller was asking for $1.749 million, and Mr. Evans countered with an offer of $1.65 million, which was accepted. But as part of the loan-approval process, the bank did two appraisals, both of which flabbergasted Mr. Evans. The bank found that the apartment was either 1,634 square feet or 1,741 square feet. Admittedly, the place has an odd layout that makes it difficult to measure. But nobody was coming up with anything near 2,170 square feet. Mr. Evans hired an architect to check again. The third measurement came in at nearly 1,800 square feet, convincing him that he had been deceived.
When Mr. Evans tried to negotiate a lower price based on the bank’s assessment, the seller refused. Mr. Evans said he was told he would lose his 10 percent deposit if he backed out.
He sued the seller and the brokerage firm, Prudential Douglas Elliman. Mr. Evans claimed that the selling broker knew the apartment was not 2,170 square feet — a size given in past transactions — but continued to use the inflated figure.
“We just felt we were misled,” he said. “There was a deliberate, coordinated action by these people to rip us off.”
The case against the seller was dismissed when a judge determined that the seller had had nothing to do with the marketing of the apartment. Prudential Douglas Elliman contested the suit, which Mr. Evans recently dropped because it would have been too costly to continue, he said. A spokeswoman for Prudential Douglas Elliman said it never comments on litigation involving the company.
Mr. Evans and Mr. Poon went through with the deal. Although they say they love the apartment, they are still bitter about the experience.
“They were fighting this like a class-action suit,” Mr. Evans said of the brokerage. “It would open a whole Pandora’s box of liability.”
Because brokers are generally careful to list square footage as an “estimate” or “approximation,” there is often little recourse for buyers.
For that and other reasons it is unwise to place too much emphasis on square feet as a basis for comparison, said Douglas Heddings, the president of the Heddings Property Group.
“First and foremost,” Mr. Heddings said, “I think all the weight that is put on price per square foot, especially in Manhattan, is ludicrous.” He is particularly skeptical of comparing apartments in different buildings based on their listed square footage.
“Very rarely can you compare two units unless they are units that are in the same building and were measured using the same standards,” he said.
Frances Katzen, an executive vice president of Elliman, said a number of her clients had bought apartments that turned out to be smaller than they had been told. She counsels her clients to focus not on square footage, but on what similar properties in the same building have sold for in the past.
She is currently showing a duplex apartment at 468 West 23rd Street. The owners, who have moved to Australia, bought the place several years ago without the help of a broker. They paid $2.1 million, thinking that the apartment had 2,100 square feet. The size estimate included the 700-square-foot backyard.
When they went to sell, Ms. Katzen said, the owners were disappointed to learn that outdoor space is not typically counted as part of overall square footage. So instead of 2,100 square feet, the apartment is listed at 1,400 square feet, and priced at $1.85 million.
Renters are often swayed by square-footage figures, said Clifford Finn, the managing director for new developments at CitiHabitats.
“Renters don’t necessarily calculate the rent based on price per square foot,” he said. “But often, they will come in with a very specific idea of how much square footage they need.” However, more often than not, neither the renter nor the landlord in older buildings has any idea of the true size of an apartment.
“In more than half the walk-up apartments in Manhattan,” he said, “no one knows the true square footage. And renters will come in saying they cannot live in less than 750 square feet, but will have no idea what 750 square feet is. You show them something that is 640 feet and they are like, ‘This is great.’ ”
Even for professionals, square footage can still hold surprises.
Pamela Liebman, the chief executive of the Corcoran Group, said that when her company was renewing its lease on office space in SoHo, the landlord came to her with unexpected news.
“We were paying rent based on 12,000 square feet,” Ms. Liebman recalled. “He said, ‘Your space is now measured at 14,000 square feet.’ ”
The landlord wanted to charge more based on the new calculation. Ms. Liebman replied that the space had not magically grown 2,000 feet overnight.
“We had a war over it,” she said. The landlord eventually relented.
Although it was commercial real estate — which has a different set of rules when it comes to measuring square footage, as well as its own, often more egregious, variations in measurements — it offered a reminder of just how unreliable size estimates can be.
“I think we have all become too obsessed with dollars per square foot,” Ms. Liebman said. “Smart buyers should look carefully at the offering plans or have the apartment measured themselves.” And, she added, always keep in mind that “everyone seems to have a different tape measure.”
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