As I have written many times before, the Manhattan real estate market sometimes baffles me. Yesterday was indicative of exactly the type of day that humbles me and reminds me that our local real estate market is indeed "twisted."
Highest, Best and Final
For those out there who haven’t been involved in a "bidding war" or have no idea what "highest, best and final" means, here goes. It is exactly what it sounds like. In the instance that a seller is fortunate enough to have multiple offers for their property, their broker will inform all prospective purchasers and their brokers that they have ONE FINAL opportunity to submit their highest offer. The best element refers to the terms of the offer such as flexibility with closing date and whether or not the purchase is contingent on financing. If an offer is contingent on financing, the buyer would be entitled to a refund of their 10% contract deposit if they failed to obtain a mortgage. If an offer is not contingent on financing, the buyer is still almost always permitted to get a mortgage but would forfeit the 10% deposit should they be denied financing.
So yesterday morning, I began fielding highest, best and final offers for one of the properties that I’m currently representing. One of the bidders held steady at a number about 5% below the asking price while others put their best foot forward. The offer that was accepted was approximately 8% above the asking price. Now a 13% spread between lowest and highest offer is considerable and puzzles me. The agent representing the lowest offer is advising her clients to be patient and that they will find something in their price range. The agent for the highest bidder indicated that she wasn’t surprised at the multiple offers, and that her clients really wanted this apartment. Both agents are providing sound advice based on their client’s current situations, but I’m curious to see how things play out for the lowest bidder and if indeed patience will pay off. Meanwhile, the highest bidder will be moving forward and eventually moving into a property that they look forward to calling home.
"We Really Want a 2BR for Less Than $500,000"
Me too!!! Within 30 minutes of wrapping up the second "highest, best and final" in as many weeks, I received a phone call from a potential buyer insisting that he wanted a 2BR for less than $500,000. Now this is someone whom I know, and I believe that if we were able to find such an animal, it would be just that…an ugly, cramped beast of an "animal" and probably not suitable for this buyer. But when he was informed that of this likelihood, his next comment was even more telling; "I’m thinking that since prices have come down, we should be able to get something that works for us in the $500,000 range." Has the market shifted that much in the past 30 minutes? Again, puzzling!
The Traditional Negotiation
So my day ended yesterday by assisting a couple in formulating an offer for a property for which I am representing the seller. For the record, it is a rare case indeed when a buyer comes directly to me without a buyer’s agent but this is the second time in the past 30 days that this has happened and to be perfectly honest, I much prefer when the buyer is working with their own agent. That said, I have found that providing buyers with all of the facts and accurate information is the only way to insure a smooth transaction without conflict. I also believe that as a seller’s agent, one should never ask the seller what their bottom line is. This makes the negotiation process honest and forthright: if neither side discloses their "deal" price, there is no chance of compromising the agent’s integrity. So after several emails of comparable units and phone calls to discuss market appreciation, price per square foot, premiums for such things as outdoor space and fireplaces, and discounts for walk-up buildings, the buyers formulated an offer they felt comfortable with. The offer has been submitted to the seller with a complete description of exactly how the buyers arrived at their offer (not always provided when another agent is involved). I’m awaiting the seller’s phone call to discuss a counter offer.
So What Does this All Mean?
- The media is confusing all of us.
- The real estate industry is of many mindsets and may be more confusing than the media.
- It is human nature to hear what you want and discard the rest, and the real estate industry makes a habit of usually providing you with what you want to hear.
- Making sense of current market conditions is no easy task for the professionals, much less for those who are putting their faith in these same professionals.
From multiple bids to a misinformed buyer to a more traditional transaction: the Manhattan real estate market continues to provide a little bit of everything. And all within a 24-hour period!