Insulting Bids Are No Longer Insulting

Once upon a time, in a town known as Gotham, property owners reveled in a housing boom that saw ultra low inventory and a plethora of "well-qualified" buyers (thanks to lax lending standards).  Buyers found this environment to be incredibly daunting and downright frustrating as they almost always were just one of many bidders vying for the opportunity to own their piece of the Big Apple.  Can you imagine what it was like for these agitated buyers when they would have to bid over the asking price only to discover that someone more eager and qualified was willing to pay even more?  It seems like only yesterday that this was the case…oh…it was! 

But now things are different.  The past decade was challenging to say the least for prospective buyers of Manhattan real estate, but today is a new day and a different era in the New York City real estate market and requires a shift in psychology for buyers and sellers alike.  Back in the peak of the housing boom, buyers often feared that if they didn’t pay the asking price or better that they would not only miss out on the opportunity of buying that particular home but they also feared that they may insult the seller.  On the other hand, sellers were often insulted by and in a position to scoff at low offers all the while knowing that someone would come along and pay their price…or more!  Which brings me to my point: 

The days of insulting bids are over.

In today’s real estate market, both buyers and sellers must be mindful of changed market dynamics.  Buyers are no longer afraid to submit what were once deemed insulting offers sometimes as low as 20-30% below asking prices.  And sellers are no longer ignoring these once insulting offers.  The Manhattan real estate market has moved closer to one of normalcy where offers are made, countered by sellers, and negotiated to a level that is mutually acceptable.  The negotiation process no longer happens within 24-48 hours and almost never includes sealed bids or bidding wars.  Although many sellers are still selling for considerable profits, higher inventory and patience have become kings for buyers. 

So I leave you with this:

Buyers: Don’t worry about insulting someone with a low offer.  Due diligence regarding comps and market conditions is key.  Make your offer and defend it with hard data.  You must also remember to be reasonable (bidding $2M for a place asking $6M will get you nowhere whether or not you think it is overpriced)

Sellers: Consider all offers as serious and don’t take low offers personally.  Imagine yourself buying property in today’s market to help take the sting out of low offers.  Also have hard data at your fingertips to support your asking price but also be reasonable (ignoring a bid of 20% below your asking price may come back to bite you later).  Keep lines of communication open when negotiating in an effort to effect a deal.

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17 Responses to Insulting Bids Are No Longer Insulting

  1. avatar anna says:

    Great piece. Loved the “requires a shift in psychology for buyers and sellers alike”. It is so true and the more press on this topic the better.

  2. avatar Nika says:

    I don’t think “she shift” has really happened for sellers yet. I am looking at listings continuously and listing prices for lower-end Manhattan properties (>500K) have not really changed. That is very annoying. The seller may or may not accept a lower offer, but I have no way of knowing that. It would be nicer to see that the seller has an understanding of the market before going through this time-consuming process.
    How long do you think it will take for sellers to overcome this stubborn resistance?
    I am thinking that 6 month from now may be a better time to seriously shop in Manhattan. It may be a better idea to wait even longer, but I can’t know where the interest rates will be a year from now…

  3. avatar Steve says:

    Nika, you and every one else is thinking along the same lines. If you wait until the time is “right” you will be in with the herd again and who’s to say perception could’nt change positive tomorrow? I say buy when you can. Why not try to pick off a great deal from one of these desperate sellers that have to sell now.

  4. Thanks Anna. The “shift” is definitely happening as I type this.
    Nika, I agree that many sellers are resistant to accepting current market conditions but many are indeed coming around. With inventory uop almost 50% since last year, now is an excellent time to look and if you are fortunate enough to find a realistic seller you may even want to buy. That said, inventory has stabilized which likely means that all those who need to sell have put their places on the market and others are going to stay put.
    Steve, I tend to agree with what you are saying except that the curve I anticipate won’t be a V but more of an L once we hit bottom which I think is this year. The people who are buying now are buying at levels that they believe are close to that bottom, whatever it may be. I think there are some great deals out there now for people who have 7-10 year ownership timelines (meaning they will occupy the place for that long). People need a roof over their head.
    Sorry to all for the delay in respoinding. Had all 4 wisdom teeth extracted Thursday.

  5. avatar henry says:

    I don’t think that inventory has stabilized for long. While it is true that inventory on the streeteasy has stabilized (as per widget on urbandigs), I also see that new listings remain 3x+ as high as contracts signed in the last 30 days. In addition, I keep getting streeteasy updates that telling me that listings that I have saved have been “temporarily pulled” off the market. It seems like people are STILL pulling listings to list them as fresh, new listings for the spring season. Lastly, I don’t think that inventory can stabilize for long w/o the rate of contracts signed rising from current depressed level… especially with the never-ending job losses on wall street.

  6. Henry,
    Thanks for sharing your perspective. Only time will tell but many of the listings that I am seeing pulled off the market aren’t coming back on. Sellers have simply decided to stay put because they don’t have to move and they can’t profit from the market like they would have last year. BTW…any agent who is pulling listings off the market to list them as “fresh” in the spring is an absolute moron. This market gets worse before it gets better and they would be doing a huge disservice to their sellers.

  7. avatar Nika says:

    Douglas, I am looking at data for neighborhoods that shows median sale price is going down, but listing price is still climbing up, slowly but steadily. That makes no sense to me. (I am not a real estate expert.)
    But when I see a property that I think is overpriced by 50K(and it cost less a year ago!) I think that I just won’t be able to get a good deal on it because that seller is not likely to drop the price by 70K (while a drop by up of 10-20K on a reasonably priced property seems a little more likely). So I won’t even bother looking at the overpriced one, because I assume the seller has not “shifted” yet.
    I am not sure if I’m explaining myself clearly.
    I also sometimes see properties that have been on the market a very long time, but they actually INCREASE the asking price instead of decreasing it. After it has not sold for a year!
    As a patient young person trying to enter the market I find these points very confusing.

  8. The only possible explanation I have for list prices going up would be that those agents are padding the asking price to allow for major negotiations. Or perhaps those sellers don’t believe the media or their agents. I just had a conversation today with a seller who wants to sell her place for 30% more than she paid last year. No matter what I said to her, she was defending why she should get 30% more. Needless to say, I’m not working with her but another desperate agent likely will.

  9. avatar Graham says:

    I’ve seen a lot of the same sort of action. People have to be very mindful of the current market conditions. If you find yourself making any real estate transaction right now, assume something about the transaction is negotiable.
    http://www.nestseekers.com/Company/Agent/809

  10. avatar Amity says:

    I think one reason that people are waiting is precisely because the market still seeems pretty far out of whack. As you pointed out, it’s probably not going to get you far to bid “$2M for a place asking $6M.” If you think that’s the true value, it’s better to wait for the place to drop significantly before bidding $2M. In the meantime, that place may or may not sell, but other places will pop up. Best not to catch a falling knife.

  11. avatar Amity says:

    I think one reason that people are waiting is precisely because the market still seeems pretty far out of whack. As you pointed out, it’s probably not going to get you far to bid “$2M for a place asking $6M.” If you think that’s the true value, it’s better to wait for the place to drop significantly before bidding $2M. In the meantime, that place may or may not sell, but other places will pop up. Best not to catch a falling knife.

  12. avatar patient09 says:

    Doug: I don’t understand your comment about don’t bid 2mm for a 6mm ask. That makes no sense. Many apts that are listed for $6mm, will trade at or below 4mm. If I bid 2mm, we can meet in the middle at 4MM and print the deal. As I have posted on other threads, the high asks are what has stymied the market. most buyers believe in the concept of negotiation, however, if you believe value if 30%-40% under ask, where do you bid to get the negotiation started. You don’t, and that’s why transactions have cratered.

  13. You can of.course bid whatever you want but my experience in today’s market has been that a bid of $2M for something asking $6M is going to be met with silence from sellers. A more realistic opening offer (perhaps firm) may yield better results. Knowing market psychology and dynamics as well as seller motivation plays a huge role in determining if and and at what price point a place will sell.
    And BTW…no one person or group of people are responsible for a “cratering” of transaction volume.

  14. avatar julia says:

    if the price is so unrealistic, just let it go. there’s plenty of inventory to look. besides, the less offers the sellers receive, the faster they either adjust prices downwards or pull the listing. ie: best for everybody!

  15. avatar christine says:

    Hi,
    What a great blog!
    Just wanted to say I found it through the NYtimes piece and will continue to read it as I read Brownstoner!!. Am actually a seller looking to put my house on the market now and live in Brownstone Brooklyn where frankly the prices haven’t come down too much so I am hopeful.

  16. avatar Barbara says:

    Put down payment on apt at the Rushmore Riverside Blvd, 20 months ago. Within a few months, we are expected to close on that price we committed to 20 months ago. Come on, how can that be possible. Contract or no contract, I cannot imagine that other people in this bldg, are still committed to that original price…please comment

  17. Thanks Christine. Very happy to have a new reader! Be careful though regarding your expectations for the sales price of your home. Prices are down more than market reports are showing at this time because they don’t report signed contracts. Deals that are getting done today are anywhere from 15 to 40% below peak levels.
    Barbara,
    I hear you loud and clear and don’t know what you can do other than close or walk away from your deposit. I have clients who have done both. One of my clients just walked from a $245K deposit from another project because she believes the value has dropped more than 10%. I was not her broker for that sale and I advised her to proceed based on her 10 year ownership timeline and the pain felt when handing over a quarter of a million dollars. She’s decided to walk away anyway…OUCH!
    What are your options for housing? Can you stay where you are? Will you live in the new place for a long time? Did you buy as primary residence or a flip? A lot to consider but my advice would be to weigh all of these factors, speak to your attorney, and draw your own conclusions regarding what will work best for you.

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