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.