The queen of New York real estate once lived in a rent-controlled studio. Illegally.
Barbara Corcoran says the living arrangement was instrumental in helping free up cash for The Corcoran Group, which was still a struggling real estate firm at the time. The brokerage went on to become an industry powerhouse before she sold it in 2001 for $66 million.
Corcoran, 62, is now a contributor for NBC’s TODAY, where she comments on real estate trends. She's also an investor on ABC's reality show, "Shark Tank." She lives in a three-bedroom apartment on Park Avenue with her husband, their 17-year-old son and 5-year-old daughter.
In an interview with The Associated Press, Corcoran shared her experiences as a renter and first-time homebuyer. She also shared some advice for today's uncertain market. One tip for sellers? Your neighbors are your enemies.
Q: What was your most memorable renting experience in New York City?
A: I was renting a one-bedroom for $1,800 a month with my husband in the 1980s. It was after the stock market crash and my business was going through a tough period.
We moved out of our house and in to an illegal, rent-controlled studio that belonged to my husband's cousin. It was a fourth-floor walk-up, $343 a month. I remember the exact rent.
It was painted all lavender. There was a large free-standing tub, and every night, a huge water bug would crawl out of the drain. I knew what I was doing was illegal. But we lived there for over two years, and it helped with cash flow until the business got back on its feet.
Q: How about the first time you bought a place. What was the most important lesson you learned?
A: I tried to buy in 1977 when prices were just beginning to go through the roof. I fell in love with this top story, one-bedroom apartment in Greenwich Village. The price was $35,000, and I had saved $4,000.
But I got scared and intentionally failed the co-op interview. I chickened out. I was just too frightened to make a commitment. They said they didn't want me in the building and refused to return my ($3,500) deposit.
After that, the prices ran away from me. It took another eight long years to save enough money to buy my first New York City apartment.
That taught me an important lesson. The first home is the most important — it gets you into the game.
Q: So what advice would you give to first-time buyers given the state of the housing market?
A: Buy now. There's so much negative publicity, and uncertainty is the worst thing for the industry. But you can't sharp shoot the market and pinpoint when it might peak. If you do that, life will always get in the way.
You always have these cycles. And when it's down it can stay down for a while. But when it decides to turn the corner, it always comes back like gangbusters. And then you'll be waiting in line with all the other buyers.
Buyers have two great advantages right now — low, low prices and cheap money.
Q: What other essential tips should buyers keep in mind when shopping for a home?
A: Buy with your heart, not your head. You can look at all the aspects that make a purchase practical, but that kind of thinking makes it an investment rather than a home.
I've never seen anyone who bought leading with their heart ultimately regret it. If you love it, the next buyer is going to love it too.
Also make sure you go visit the neighborhood at night and on weekends. Most people return the same time of day, the same time of the week. Go on a Sunday and hang out at the local shops. See who your neighbors are. You'll know right away if it's a place you can see yourself and your kids living.
Q: Then there's the negotiation over the price. What are some mistakes first-time buyers make?
A: Don't pay attention to asking prices at all. What people ask for has nothing to do with the value of a property. You might see a listing for $300,000 and think you should make a $250,000 bid. But hyper-focus on what the house is worth. You should know what the house is worth by looking at comparable properties. Base your bid on that.
If a house is priced appropriately, make a bid 10 percent below that amount.
Q: On the other side of the equation, what should sellers be doing differently in today's market?
A: They have to have a different attitude. They have to remember that their neighbor is their enemy— they're the competition. When considering where to price it, it's not the kind of market where you price high and see what bids come in. Because the question everyone asks besides the price is: "How long has it been on the market?"
You want to have a good answer to that.
Q: Beyond setting a reasonable price, what advice would you give sellers?
A: Think of it as a beauty competition. You may not like the idea of putting money into a home when you're moving out. But it's demanded by the market. You need to show it off.
You don't have to rip out the kitchen and bathroom. But maybe replace the tiles or the countertops. Get professional advice. Maybe hire a professional home stager. It depends on the kind of budget you have. But there are many talented brokers out there who can give you advice too.
Q: Agents seem to have such glamorous head shots. Why is that?
A: Most people shop for a broker online. So the bio and photo are what hook people in. And buyers put a lot more stock in the photo than you think. It turns out people do judge a book by its cover.
In other professions, including a head shot is considered unprofessional. But for brokers, it's such the norm now that if you got a business card without a face, you'd probably think there's something wrong with the person.
That's why at Corcoran, there's never a shot taken without professional makeup and lighting.
Q: What else should someone do to vet prospective brokers?
A: Ask them what they've sold. The properties should be in your sweet spot in terms of your price point. Don't work with a broker who sells fancy homes if that's not what you're looking for.
Also ask to speak with one of the broker's past clients. Because once a deal is done, that's when the truth comes out. So it's a bad sign if the broker starts stuttering when you ask to speak with a past client. You might worry that making such a request will breed mistrust. But it will give you great peace of mind.
Q: What are other qualities are essential?
A: High energy is the number one trait. You want someone with wild enthusiasm for the business.
You also need someone with manners. Remember that brokers need the cooperation of other brokers. And brokers like to deal with other brokers who have good manners.
The ability to play the bad guy is important too, because ultimately you want the broker who gets the best deal for you. And that's the broker who could be as mean as you. Or if you're a sweetie-pie or pushover, then you really need your opposite.
And trust your gut. You end up spending much more time with your broker then you'd think, so you should like them. That's going to take away a lot of the pain and anxiety from the process.