Adapt or Die! It is truly that simple. I have been writing here for months now about how challenging the current real estate market has become and just yesterday after a lengthy and intelligent conversation with my friend and fellow blogger, Noah Rosenblatt of UrbanDigs, it dawned on both of us that those who are fighting against market forces whether agents, sellers, or even buyers are experiencing significantly more challenges than those who are adapting to current market conditions. I have noticed in my own business that since I have accepted that I am no longer an order-taker as I often was in the past decade, but more of a mediator, I’m experiencing fewer "challenges."
Relative to the last decade, there is no denying that we are in a new era of real estate sales, marketing and negotiation. Having said that, we’re not in completely uncharted waters here. Most recently, the market of the late 80’s and early 90’s presented a similar set of challenges where inventory and time on market rose and buyers and sales prices descended. Again, I’m not trying at all to downplay the severity of what is going on locally on Wall Street, the nation, or the world. In many ways, we just can’t compare this time to the late 80’s/early 90’s. But in some ways we can and having sold Manhattan real estate since 1992, here is my personal experience with both from the perspective of buyer’s, seller’s and agents:
Buyers: Trying to guess the bottom of the market? Good luck. There will absolutely be a small percentage of you who successfully buy at the bottom. There always are and there were those who "stole" apartments back in the early 90’s (mind you I remember people saying to me that they would never pay $500K for a Classic 6). That said, determine your wants, needs, and time line for home ownership. Do you have to move? Do you want to move to a larger space? To a new neighborhood? How long do you plan to reside in this new home? Calculate what you can reasonably afford and take advantage of increased inventory with the understanding that only a small percentage of sellers are going to entertain ultra low offers. It is just psychologically too painful for most to sell at a loss and although some may indeed be in that situation, you will find that most will chase prices down before selling at a large discount up front or they simply won’t sell. Remember that your home is not a liquid asset but a place to hang your hat, perhaps raise a family, and prevent more shelter from the elements than a cardboard box. No one is going to talk you into moving…the market is what it is and if you want to move, you’ll move. If not, stay put.
Sellers: Determine your motivation. If you don’t have to or want to move anytime in the next few years then don’t. These markets are not the time to "test the waters" because buyers are leery and fearful of catching a falling knife. My experience has been that in order to sell in a market that is perceived to be declining, you must price ahead of the downward curve in order to give a buyer the perception of value. Fight this buyer psychology and you lose money…I promise. (Example: seller received bid last Spring for $1.85M on an ask of $1.995M and said "no way, we will wait for our asking price"…that same apartment is now receiving bids in the $1.2M range). Also be mindful that if you are trading up or across a market for larger space or change of location, you may actually benefit from a declining market. Find a real estate agent whom you trust with a proven track record and follow their lead.
Agents: Don’t compromise your integrity or be short-sighted by focusing on a single transaction. If we treat our clients like family who may sometimes need some ‘tough love" then we are doing them a greater service than simply promising them the world when we aren’t at all certain we can deliver. Do your homework and cooperate with your colleagues so that you have the best information to provide your sellers and prospective buyers. We all need to cooperate and share contract prices on things that haven’t closed or making sense of this market will remain a difficult task indeed. Buyers and sellers alike look to us to help them make sense of a very confusing marketplace and it is in their best interest to have us accurately analyze and interpret CURRENT housing data in a way that helps them make an informed decision, even if that decision is not to buy or sell.
So what I’m saying here is that once the parties involved (buyers/sellers/agents) accept the new market dynamics and embrace reality, the market will no longer seem so challenging but more like a normal housing market where offers are made, negotiations take place, and homes change ownership. We’re not there yet but the path doesn’t have to be such a complicated one.
Acceptance is the key!
I couldn’t help but be both flattered and humbled when I heard that I was featured in Samantha Storey’s New York Times piece And The Blog Goes On. I mean I knew that she was writing a piece on real estate blogs but I had no idea when it was being printed and to what extent she would report. And I certainly had no clue that I would be in such company as the powerhouses of the New York City blog world including Lockhart Steele’s Curbed.com, Jonathan Butler’s Brownstoner.com, Noah Rosenblatt’s UrbanDigs.com, and appraiser extraordinaire, Jonathan Miller’s The Matrix.
I feel compelled to thank Ms. Storey for including me in such an excellent piece on blogs, my fellow bloggers, my readers for their thought-provoking commentary, my client, Naomi Novik for her kind words and most importantly, Henry and Jessica Abbott for all of their help in making TrueGotham a reality (good grief this sounds like a cheesey awards speech).
In March of 2006 when TrueGotham was launched, I didn’t even know what a blog was. My friend Henry, author of ESPN’s TrueHoop blog, suggested that I could keep in touch with my clients by blogging. Once he explained what it would entail, I bit, and TrueGotham was born. Henry and Jessica were contributing writers and my administrators for that first year until Henry’s TrueHoop was bought by ESPN. At that point I took over all admin as well as 100% of the writing.
It has been a wild ride and a lot of fun and I look forward to blogging more frequently once again as I did at TrueGotham’s inception.
For those agents/brokers out there who are thinking about starting there own real estate blog; think long and hard before you take the leap. Evidenced by my lack of posts as of late (the last all the way back on January 6), the ability to blog in a complex and difficult to navigate market is almost an impossibility. There just has been no free time to spout my opinions about what is going on or the facts about a very bizarre market place. I’m a broker who blogs (not a blogger who occasionaly sells an aparrtment) and serving my clients remains my number one priority. That said, here’s a brief snapshot of what is going on in my business right now (anecdotal of course):
- Since the first week of January, I have brought 4 new properties to market for a total of 10 that I am exclusively representing at this time. I am pricing ALL new properties at levels of approximately 25% below sales prices of same or similar units this past summer (2008) resulting in a significant increase in buyer traffic.
- 2 contracts were signed just before the holidays and 3 have been signed in the past week.
- More "toe dippers" are testing the waters to determine if they are ready to buy.
- 2 of my buyers who were on the sidelines have entered the "looking" fray again and are liking what they are seeing in terms of prices versus last year.
- Appointment requests for our exclusive properties have seen an exponential uptick since pre-holiday market.
It will be interesting to see how things play out in the coming weeks and months but most of my colleagues are experiencing an increase in activity that I can only attribute to more realistic sellers paired with some easing in the credit markets. Cash still remains king and there are some incredible deals to be had for the fortunate buyer who is able to find multiple properties that suit their needs.
Complete Listing Info
Complete Listing Info
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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.
I have written here, quite infrequently as of late, about how difficult it has been to blog because of the amount of time and energy that each and every transaction demands in today’s residential market place. That said, there are some things that I’m seeing which further elucidate current market dynamics.
One change that I’m experiencing, which is a huge shift from conditions of the past decade are bidding wars. Now before you start screaming at me that I’m full of you know what, I’m talking about bidding wars orchestrated by buyers. I have been on both ends of this phenomenon lately and here is how it goes:
- As Seller’s Rep: I have a property that I’m representing that received a bid about one month ago. The seller countered but not to the prospective purchaser’s liking. While attempting to negotiate a fair price, another similar unit came on the market in the same building. Needless to say, the prospective buyer immediately informed us that he was bidding on that unit also. This morning I received a phone call from that buyer stating that he "wants to hear from each seller with their very best/bottom price before end of day Tuesday at which time he will decide which unit to purchase." Who woulda thunk it?…a buyer with leverage. Oh how things they are a changin’!
- As Buyer’s Rep: I recently submitted 3 bids on behalf of a buyer fully disclosing to all agents that three bids were being submitted. The offers were made with an expiration time of 5PM the same day they were made. The buyer received an accepted offer of $1,300,000 on a property asking $1,795,000.
Now this may sound incredibly optimistic for buyers who are considering taking the plunge into home ownership here in Manhattan. But not so fast! There are 2 major factors that determine the success of the bidding process in today’s real estate market:
- Seller Motivation: Although there are very few sellers in this market who are testing to see what they can get for their homes, there are many who just don’t want to accept how much the market dynamics have changed in the past 6 months. Sellers who can appreciate the shift in market psychology are much more likely to entertain low but "reasonable" bids making them also more likely to actually sell.
- Seller Agent Expertise: Unfortunately, some agents can’t handle the pain of being the bearer of bad news and do their sellers a disservice by giving them false hope that a better offer will come along. This is almost never intentional in my opinion but something happens in the communication that leads sellers to believe that they should wait for something better. Often times, the first offers are the best and something better may never arrive.
With all of that, as inventory is likely to increase further, the buyer with more than one property option is indeed sitting in the cat bird seat…unless of course the sellers or the agents of all of those options have their heads buried in the sand.
Happy New Year to all.
Numerous friends, family, and regular readers of TrueGotham have been asking why so few blog posts. My answer: I’m trying to stay positive and that has been a very difficult task indeed. I will not compromise my integrity. So rather than spew a lot of hot air about the health of our local real estate market, I have felt uninspired as I am working exponentially harder for significantly less reward. My job as a real estate broker has always been as consultant and often confidant and these days I am more frequently the bearer of bad news.
So as my days are filled with making low offers on behalf of buyers and negotiating low offers on behalf of sellers, I have lacked the energy to blog. I’m not in the mood these days to beat a dead horse.
Tomorrow morning I am heading out of town for the holidays and leaving the business behind in the hands of my team for 9 days in an effort to recharge and rejuvenate. I won’t be blogging while I’m away but I will of course be available to my clients should they need to call on me.
I will be back blogging again after the 1st. In the meantime, a very happy holiday and a healthy and prosperous New Year to everyone.
