As media reports continue to swirl about our struggling economy paired with the likelihood that it is going to get worse before it gets better, some prospective, yet reluctant purchasers continue to circle Manhattan real estate just watching asking prices adjust downward. Case in point: A buyer with whom I have been working recently bid $3,000,000 on a property asking almost $3,800,000 only to be laughed at by the seller’s agent who likely persuaded the seller to ignore this all cash bid. Not even a counter offer.
That was about 6-8 weeks ago and that same apartment is now asking less than our original cash bid of $3,000,000. This would seem like great news for the buyer but for many who have had their eyes on specific properties just waiting to pounce, the psychological barrier of significant price drops is only serving to push them further from pulling the trigger. Now this buyer is thinking of bidding $2,500,000 or less which also isn’t likely to be well-received by the seller and is much more likely to prevent the seller from taking seriously any bid that my buyer puts forward in the future. Unfortunately, all too often, the bidding process becomes a p*ssing contest and emotions are evoked that make a business transaction a personal war of sorts.
I have written many times here on TrueGotham about how important proper pricing is to selling a home but I can’t express it’s importance enough when you are in a soft or declining market. A seller who takes an offer personally or is insulted by a bid needs to step back for a moment and evaluate "real" market conditions and what is actually going to contract in today’s residential real estate market place. For example, the above seller may have come back to the buyer with a counter offer of $3.5M and settled at a sales price of something in the $3.2M range. Certainly they would have been better off than their current ask of under $3,000,000.
Of course hindsight is 20/20 but my point again is that NO OFFER should be totally ignored in today’s market. That said, even if a seller chooses not to counter an ultra-low bid, they need to digest the bid and appreciate that the market is speaking to them. Perhaps a re-evaluation of asking price would then come sooner than later resulting in a higher final sales price than those who choose to totally ignore the "bottom fishing" bid.
So what about the buyers who continue to watch asking prices for some properties fall? When do these "bottom fishers" reel in the big one? I don’t believe there is an easy answer to this question as each buyer has a different financial picture, priority list, as well as time-line for ownership. I think each buyer must evaluate their comfort level making a purchase in today’s market based on their current living situation and the amount of time they intend to live in the new home. And one can’t overlook the comparison of property values from peak to now. If I told my buyer last year that a bid of $3,000,000 would yield him a home asking $3,800,000, he would have snapped that place up so fast. Now the speculation that the same apartment may be worth $2.5M or less in the coming months is a psychological barrier to him buying his "nearly perfect" home.
My point is when does the bottom fisher stop bottom fishing? Will they continue to underbid properties as prices decline never willing to pay the price at which a rattled seller is willing to sell? Will they ever buy something or will they wait until they perceive that the market is actually at it’s bottom? Only time will tell but as many wait for a perceived market bottom, others are buying homes for themselves and their families that they plan on enjoying for many years to come. For each buyer the "jumping in" threshold is different and for buyers and sellers alike, there is always hope that patience and persistence will pay off.
And to answer the question posed by the title of this blog…it is a rare event indeed where a buyer’s perfect property is owned by a seller willing to take a bottom fishing bid…but not impossible.